This Client Categorisation Policy applies to every existing, prospective and former client of BTG Pactual Portugal – Empresa de Investimento, S.A. ("the Firm"), in the provision of MiFID II investment services and activities, whether on an execution-only, advised or discretionary basis. It also applies to tied agents, branches, Introducing Brokers (IBs), white-label partners and any person performing client-facing or suitability-assessment functions on behalf of the Firm or under its outsourcing & delegation framework (Art. 30 MiFID II).
The policy implements:
- Art. 4(1)(9)–(11) and Arts. 24–28 MiFID II (Directive 2014/65/EU of the European Parliament and of the Council, 15 May 2014)
- Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 (RTS 14 – organisational requirements), Annex II
- Commission Delegated Regulation (EU) 2017/590 (RTS 16 — information to clients & investment services reporting)
- ESMA Guidelines 2018 ESMA35-43-520 on certain aspects of the MiFID II suitability requirements
- National implementation: Código dos Valores Mobiliários (CVM) — Art. 304º seq.; CMVM Instruction DSI 2/2020 on client classification and information duties of investment firms.
Objectives: (a) to ensure every client is classified correctly into the MiFID II category that reflects their knowledge, experience, financial situation, investment objectives and capacity to bear loss; (b) to ensure the appropriate level of investor protection and regulatory safeguards is applied at all times; (c) to ensure full transparency and documented audit trail of classification, opt-up, opt-down and reclassification events for CMVM inspection; (d) to avoid mis-selling, appropriateness failures, and behavioural or conduct breaches.
| Category (MiFID II) | Level of protection | Key characteristics & implications |
|---|---|---|
| Retail Client (Art. 4(1)(11)) | HIGHEST | Default category for every new client. Full appropriateness & suitability tests apply for non-simple & advised services. Full Negative Balance Protection. Full product governance & target-market checks. Full right of action out-of-court ADR/CIALL and arbitration. All ESMA product-intervention measures (CFD leverage caps, 76% risk warning) apply as binding. |
| Professional Client (Art. 4(1)(10)) | MEDIUM | Large corporates, undertakings, public bodies, investment firms, credit institutions, insurance undertakings, collective investment schemes & their management companies, pension funds, central governments, national central banks, supranationals, IFIs (Part I / Annex II MiFID II "per se professionals"). Also: natural persons / SMEs who elect opt-up (Part II / "elective professionals") and meet the quantitative + qualitative criteria of §4 and §5. Elective professional clients forgo by explicit written request some of the MiFID investor-protection rules. |
| Eligible Counterparty / ECP (Art. 4(1)(9)) | LOWEST | Category reserved exclusively for investment firms, credit institutions, insurance & reinsurance undertakings, UCITS management companies & AIFMs, pension funds & their sponsoring institutions, undertakings for collective investment and their management companies, central banks, supranational institutions with the capacity to invest in financial instruments (BIS, EIB, EBRD, IFC). No suitability, no appropriateness, no product governance target-market obligations (but best-execution, conflict of interest, and MiFIR trade-repository reporting remain). |
Only the categories above exist under MiFID II; BTG Pactual Portugal does not operate "intermediate", "hybrid", or "executive" tiers that do not map 1:1 to the legal regime. Classification is client-specific: a single legal or natural person may not hold multiple categories concurrently across different services; the most protective applicable category shall apply at any given time, unless a valid per-service opt-up election is in place and documented under §4.
On completion of the online application, each new prospective client is automatically initialised as RETAIL, irrespective of their self-declared expertise, assets under management elsewhere, or professional background. The Retail classification remains in place for the lifetime of the relationship unless a positive, documented, signed opt-up application is submitted, assessed and formally approved under §4.
Onboarding questionnaires and disclosures:
- Appropriateness questionnaire — delivered for all services involving non-complex instruments (FX majors, listed non-leveraged shares) when provided on an execution-only basis, pursuant to Art. 25(3) MiFID II. 10 standardised ESMA-aligned questions on knowledge, experience (number of trades, frequency, size, duration of investment history), and understanding of leverage & risk.
- Suitability assessment — delivered where the Firm provides investment advice or portfolio management (Art. 25(2) MiFID II & ESMA Guidelines). Three mandatory sub-assessments: (i) knowledge and experience; (ii) financial situation including ability to bear losses, liquidity needs, liabilities, income, net worth; (iii) investment objectives (time horizon, risk tolerance, return objectives, need for income / growth, ESG preferences, restrictions).
- Target Market alignment — for every financial instrument or structured product offered, a documented target-market assessment (TMA) is prepared by Product Governance under MiFIR Art. 9(5) (Reg. 600/2014 + PRIIPs Reg. 1286/2014 KIDs for packaged products). Client category, knowledge/experience score, risk tolerance score, capacity-for-loss and investment horizon are cross-referenced at order time to prevent distribution outside the target market.
A Retail Client (natural person or SME undertaking) may request, in writing, an opt-up election to be treated as a Professional Client for the purposes of MiFID II (Art. 4(1)(10) point (b) — elective professional client). The election is accepted by the Firm only if the applicant satisfies, on the balance of evidence, at least TWO (2) OUT OF THREE (3) of the following cumulative quantitative criteria, tested during a rolling 12-month period prior to the date of the request (RTS 14 Annex II Section II para. 2):
CRITERION 1 — Trading Frequency & Activity
The client has carried out, on a recognised market / MTF / SI / with a MiFID investment firm, significantly large transactions (≥ 10 trades of €50,000+ notional each per instrument class), at an average frequency of at least 10 trades per quarter, over the previous four quarters, in CFDs, FX, equities, listed or OTC derivatives. Evidence required: account statements from a regulated firm, trade blotter, LEI-matched FIX post-trade confirmations, with original brokerage letterhead confirming execution venue.
CRITERION 2 — Financial Instrument Portfolio Size
The client owns, directly or via a transparent holding / discretionary portfolio managed by a licensed entity, a portfolio of financial instruments (cash deposits, listed equities, bonds, UCITS ETFs / mutual funds, investment-grade corporate bonds, listed futures, options) exceeding €500,000 (EUR five hundred thousand) in consolidated total assets. Excluded: primary-residence real estate, luxury goods, artwork, crypto held in cold wallets without a licensed VASP custodian statement, illiquid private-equity holdings without independent third-party NAV. Evidence: custody bank statements, tax returns Model 3 / Annex G (IRC), regulated broker consolidated statements, pension-fund statement (non-guaranteed).
CRITERION 3 — Professional Working Experience in Financial Services
The client has worked, for a minimum of one continuous year, in a professional position in the financial services sector, relating specifically to transactions in CFDs, derivatives or structured products. Qualifying roles: certified financial analyst, portfolio manager, investment advisor, derivatives trader, risk officer, compliance officer, structurer, FX/commodities sales, with documentary evidence: certificate of employment + letterhead reference from the licensed employer. MBAs, economists, accountants, auditors, IT staff, HR, marketing, reception, and non-financial corporate roles are excluded as insufficiently specific.
Note on per-sector thresholds for natural persons in the insurance & pensions sector: an insurance intermediary holding Level 4 Diploma in Regulated Financial Planning (CFA / EFPA ESG / DFA / Chartered Financial Planner) AND an active, good-standing registration with CMVM / ASF / DNB / FCA register as investment advisor for ≥ 1 year is deemed to satisfy Criterion 3 on a standalone basis, subject to documentary proof.
Meeting the quantitative thresholds of §4 is necessary but not sufficient for opt-up. The Firm, through a dedicated Client Classification Review Committee (chaired by Head of Private Clients with mandatory CFA / MiFID-compliance certification), independently performs the following qualitative assessment and documents the outcome on the "Elective Professional Categorisation Worksheet":
- Standardised knowledge test: 20-question proctored, multiple-choice + 2 open-case-study MiFID-aligned exam (minimum passing mark 75%). Topics: derivatives mechanics, OTC vs exchange-traded, leverage and margin, price & cost factors of CFDs (spread, commission, swap/rollover, dividend adjustments), FX settlement T+2, option Greeks (delta, vega, theta), margin-call & close-out triggers, negative-balance-protection waiver implications, ESMA product intervention (RTS 27), conflicts of interest, order-handling priority, trade-reporting transparency (APA / CTP / APA data under MiFIR Art. 11–16).
- Written statement signed with a qualified electronic signature (QES, eIDAS Reg. 910/2014) or hand-signature witnessed by a Notary Public / Portuguese Consul / Lawyer registered with the Portuguese Bar Association (Ordem dos Advogados), in which the client:
- Expressly acknowledges the client-protection rules he/she is forgoing by opting to Professional, including loss of Negative Balance Protection, loss of automatic appropriateness test for execution-only non-complex instruments, reduced ADR access, application of higher default leverage margins (1:200 / 1:500 under documented agreement with LP risk committee), and reduced target-market review;
- Explicitly declares the ability to sustain, without undue personal or corporate financial hardship, losses of up to 100% of the capital invested in leveraged products;
- Declares that, to the best of their knowledge and belief, the evidence submitted for the quantitative criteria in §4 is true, accurate and complete and not misleading or fabricated.
- Final approval: Head of Compliance / MLRO countersigns the Worksheet; the Client Classification Review Committee minutes the decision. Refusals are documented with clear rationale and communicated to the client within 10 business days, without appeal to an internal appeal board (once only). A refused opt-up applicant remains Retail and may only re-apply after 6 calendar months, and only if they can demonstrate a material change in circumstances.
Irrespective of the client category, MiFID II imposes specific tests that BTG Pactual Portugal executes before executing orders or providing services:
Appropriateness (Art. 25(3) MiFID II)
Test performed for execution-only services for non-complex instruments. If the client fails the appropriateness standardised questionnaire (score below the 30th percentile calibrated on ESMA benchmark dataset), the Firm provides a clear written warning that the service or product may not be appropriate; the client can then elect to proceed on an "informed risk" basis only if the appropriateness failure is marginal (score 25th–30th percentile). Clients below the 25th percentile are prevented from trading the affected instrument class on execution-only basis, routed instead to a free demo educational plan with e-learning modules and mandatory retest after 30 days.
Suitability (Art. 25(2) MiFID II + ESMA GL 2018)
Test performed for advised and discretionary portfolio management. Three mandatory pillars: (i) Knowledge & Experience (K&E); (ii) Financial Situation (FS) – including ability to sustain losses; (iii) Investment Objectives (IO) – including risk tolerance / time horizon. Output: documented Suitability Report (SR), signed by both the advisor and client, containing the recommendation, rationale, all assumptions, all material risks, all conflicts of interest, and a record of any product outside the target-market that is being recommended with a detailed justification of client-specific circumstances. Unsuitable recommendations are prohibited by internal policy and flagged automatically via the compliance rules engine before the SR can be sent to the client for signing.
For Professional clients who electively opted up, the Firm may, per Art. 25(5) MiFID II, assume, for the purposes of the appropriateness test, that the client has the necessary level of knowledge and experience in relation to the specific products, transactions or services for which he/she is classified Professional — but the Suitability test for advised/PM services is never waived, and remains a fully documented process.
Any client may at any time, and without reason and without cost or detriment, request a reclassification to a more protective category (Eligible Counterparty → Professional Client → Retail Client). Request must be made via the dedicated eForm on the Secure Client Portal (or signed letter). Upon receipt, the Firm:
- Acknowledges receipt within 2 business days;
- Removes, immediately, all Professional-only privileges (higher leverage tiers, access to ECP-only products, reduced documentation, waiver of NBP) within a single business day;
- Re-applies Retail appropriateness/suitability tests as appropriate on new trades from the effective date;
- Issues a final Confirmation of Recategorisation Letter via registered email and secure messaging within 5 business days, listing the exact regulatory protections that have now been re-instated (NBP, automatic appropriateness, leverage caps, target-market enforcement, ADR access).
An opt-down does not affect the validity or enforceability of any trades executed in the client's previous category prior to the effective date.
The Firm maintains a living record of classification status and does not rely on a one-time snapshot. Reclassification events are triggered by:
- Periodic review: at minimum once every 24 months for Retail, once every 12 months for Elective Professionals, once every 36 months for per-se Professional & ECPs. Review consists of: (1) re-running the quantitative threshold tests on updated statements; (2) re-validating the appropriateness/suitability questionnaire answers against any new material life event declared by the client.
- Material life / client-change-of-circumstance triggers (client notification obligation, under §3). Automated prompts triggered when any of the following occur: withdrawal in excess of 50% of equity in a single month, change of base currency or residence, change of NIF / tax residency, marital status change (marriage, divorce, separation of assets), bankruptcy filing, inheritance ≥ €100,000, new employment in / resignation from financial services, regulatory sanctions or criminal conviction of the client for fraud / dishonesty / market abuse.
- Behavioural & portfolio-driven triggers: consistent losses over 2 consecutive quarters exceeding the client-declared maximum tolerable loss for their risk-tolerance bucket; consistent pattern of illiquidity; systematic placing of orders outside the declared target instrument classes; inability to meet margin calls on more than 2 occasions in a single quarter. In these cases, the default outcome is a mandatory opt-down to Retail, unless the Classification Committee, upon written reasoned submission from the client, decides otherwise and documents the rationale for departure from the default rule.
All recategorisations, whether upward (opt-up) or downward (opt-down), are logged in a tamper-evident, WORM-compliant "Categorisation Register" with immutable SHA-256 hashes & qualified electronic timestamps, including the date, authorising Compliance signatory, supporting documents, and a comprehensive audit trail of every data field used in the decision. The register is accessible to CMVM & BdP inspectors in real-time via a dedicated supervised API.
As required under Art. 24(2) MiFID II and CMVM DSI 2/2020, the Firm ensures every client receives, at the following points in time, a clear, fair, not misleading, plain-language, jargon-free statement in the contractual language (English; translated versions available on request):
- On onboarding before first trade — initial category assigned (Retail) with a full explanation of its meaning and of the protections afforded.
- On opt-up or opt-down before new status takes effect — a two-page summary of all rights gained / foregone.
- On every periodic review (§8) — the outcome of the review, the new category (if changed), and instructions on how to object.
- Annually, together with the general regulatory client communication & 76% CFD risk warning reminder.
Retention: Categorisation Register, opt-up forms, ESMA knowledge test, signed waivers, correspondence, audio recordings of Classification Committee meetings, suitability / appropriateness worksheets, all retained for five (5) years from the end of the relationship, in compliance with MiFID II Art. 25(3) + CMVM DSI 4/2015 Annex III.
Anonymised, aggregated statistics on classification volumes, opt-up approval vs refusal rates, opt-down reasons, suitability-failure and appropriateness-failure rates are reported quarterly to the Board Conduct & Compliance Committee, and annually to the CMVM within 60 days of year-end, as part of the MiFID Article 28 COREP / FINREP-like reporting package for investment firms.
Client complaints on categorisation (e.g., client refuses to accept mandatory opt-down, client believes they were incorrectly refused opt-up, client states they were not informed of the consequences of their classification): handled under the general complaints-handling framework of the Firm (CMVM DSI 4/2015), with escalation and response deadlines set out in the Terms of Service at Clause 13. As always, where the internal complaint-handling process is exhausted without agreement, clients retain the right to apply to the CMVM ODR mechanism, the CJP Arbitragem Judicial, the CIALL arbitration centre, or the EU ODR platform — all links & contact details listed under Terms §13. Reminder: This Policy is itself a regulatory public document; a copy on the date of your own classification decision may be requested, free of charge, by sending a written request to compliance@btgmarket.com referencing your account number.