Investment firm

What it means

An investment firm is a company licensed by the National Bank of Slovakia to provide investment services. It receives and executes client orders to buy and sell securities, manages portfolios, gives investment advice or underwrites issues.

The licence may be held by a standalone firm or by a bank providing investment services alongside banking. The firm must meet requirements on capital, organisation, staff competence and risk management and is supervised by the National Bank of Slovakia.

The rules for investment firms derive from the MiFID II directive and the Securities Act. Firms from other EU countries may operate in Slovakia under the European passport, in which case they are supervised mainly by their home-country authority.

How it works in practice

Before providing a service, the firm must categorise the client, assess their knowledge and experience and, when advising, the suitability of the investment given their financial situation and objectives. Clients receive information on all costs and charges both in advance and afterwards.

Clients' money and securities must be kept separate from the firm's own assets. Securities are held in accounts with the central securities depository or a custodian. If the firm fails, clients are protected by the Investment Guarantee Fund, which compensates for unavailable assets up to a statutory limit.

For a company investing surplus funds in shares, bonds, mutual funds or ETFs, an investment firm is a normal partner. Its statements serve as the basis for bookkeeping, valuation of securities at the reporting date and taxation of returns.

What to watch out for

Before working with a firm, check that it is licensed, in the National Bank of Slovakia's list of entities or the home-country register. Offers from unlicensed entities, often promising high returns, are frequently fraudulent, and clients have no protection.

The Investment Guarantee Fund does not cover losses from a fall in the value of an investment, only situations where the firm cannot return the client's assets. The investment risk always lies with the investor, so the product and its fees should be understood before investing.