Client Suitability Assessment
Rules of Arev Securities hf. on the Assessment of Client Suitability and the Appropriateness of Financial Services
1. GENERAL
These rules are made in accordance with Law no. 115/2021 on financial instrument markets, as amended. These rules apply to the assessment of client suitability and the appropriateness of financial services when providing investment services and engaging in investment activities by Arev Securities hf. (hereinafter Arev or the company).
The firm does not provide standalone investment services without advice where an appropriateness assessment pursuant to Article 45(2) of Act no. 115/2021 is at issue. Furthermore, the company does not make use of the exemption from the reasonableness assessment under Article 45(5) of Act No. 115/2021 in its operations.
These procedures apply when a client is classified in accordance with the procedures for the classification of clients as a retail investor, professional investor or eligible counterparty.
2. SCOPE OF THE SOCIETY'S SERVICES
Arev provides investment advisory and asset management services which fall under Article 44 of Act No. 115/2021.
Arev does not provide a non-advised (execution-only) service and does not rely on the exemption in Article 45(5) of the Act No. 115/2021.
The Company does not therefore accept independent instructions from general investors under an arrangement whereby the client makes an investment decision without the Company's advice and the Company then executes the transaction on the basis of such instructions.
Should the company's range of services be changed so that Arev intends to provide services falling under Article 45 of Act No. 115/2021, these rules shall be reviewed and appropriate procedures established before such services commence.
3. ASSESSMENT OF COMPETENCE
3.1. Obligation to carry out a suitability assessment
The suitability test refers to the obligation placed on a financial undertaking under Article 44 of the Act when providing investment advice or a service consisting of portfolio management. This places a duty on the firm to obtain information about the client's knowledge and experience in the relevant type of securities transaction, his financial situation and objectives for the intended investment, so as to enable it to provide the client with advice on which securities transactions would be appropriate for them. If this information is not obtained, the financial institution is prohibited from providing clients with investment advice and asset management services. Arev's duties vary depending on whether the client is a professional or retail investor. For all definitions, reference is made to Act No. 115/2021.
3.2. Criteria for assessment
The firm shall obtain from clients or prospective clients the information necessary for the firm to understand the client's situation and to be able to make an informed assessment of whether the specific transactions to be included in the asset management service meet the following criteria, taking due account of the nature and extent of the service provided:
- a) they meet the investment objectives of the relevant client,
- b) that they are such that the client is financially able to bear all associated investment risks inherent in his investment objectives,
- c) they are such that the client has the experience and knowledge necessary to understand the risk involved in the transaction or in the management of their portfolio.
The assessment shall take into account the nature and extent of the service provided and the nature of the financial instruments that are advised on or invested in.
When the firm provides an investment service to a professional investor in relation to products, transactions and services to which the client's classification applies, the firm may assume that the client has sufficient experience and knowledge within the meaning of paragraph (c) and is financially able to bear all associated investment risks consistent with their investment objectives, within the meaning of paragraph (b).
In order for the firm to obtain sufficient information about a client's financial situation and their experience in securities transactions, clients or potential clients shall provide the information specified in Annex I (legal entities) or Annex II (individuals). The information shall, as appropriate, cover investment objectives, financial situation, risk tolerance, knowledge and experience.
3.3. Knowledge and experience
When assessing knowledge and experience, the association shall take into account, among other things:
- a. types of financial instruments known to the client;
- b. nature, scope and frequency of previous transactions;
- c. the period covered by the previous transaction;
- d. client education;
- e. current and relevant previous work experience.
A client's self-assessment shall not, in itself, determine the outcome of the assessment when other information is available which suggests otherwise.
The firm shall ensure that information about knowledge and experience is sufficiently detailed to enable the suitability of a client to be assessed adequately.
3.4. Updating and reliability of information
Arev shall take appropriate measures to ensure that the information underlying the suitability assessment is accurate, sufficient and up to date.
If information is unclear, outdated or insufficient, further information should be obtained before the competency assessment is completed or a recommendation is made.
The client shall inform the firm of any material changes in their financial position, investment objectives, knowledge or experience that may affect the outcome of the assessment.
The company shall reassess information when changes in the client's circumstances or the nature of the service provide cause for it.
3.5. Suitability of financial instruments and investment policy
When determining whether a particular investment is suitable for a client, Arev shall take into account the characteristics, risks and complexity of the relevant financial instrument.
In providing investment advice, Arev shall also take into account whether the recommendation is consistent with the client's investment objectives, risk tolerance and loss-bearing capacity.
3.6. Warnings
If sufficient information is not available to carry out a suitability assessment, the company shall not provide the service that requires such an assessment.
If the outcome of a suitability assessment is that a proposed investment or service is not appropriate for the client's circumstances, the firm shall not provide advice on such an investment or carry it out as part of its asset management, unless and to the extent permitted by law.
The provisions of these rules concerning special warnings in the event of a negative outcome of the appropriateness assessment, in accordance with paragraphs 3 and 4 of Article 45 of Act No. 115/2021, do not apply to the company's current activities, as the company does not provide services without advisory services. The same applies to warnings relating solely to the use of the exemption under Article 45(5) of Act No. 115/2021.
3.7. Deviation
If an employee becomes aware that an assessment of competence has not been carried out, that information is insufficient, or that a recommendation does not conform to the assessment of competence, they shall immediately halt the relevant process to the extent necessary and report the deviation to their line manager and/or the compliance officer.
The association is prohibited, in connection with asset management, from recommending investment services or financial instruments to a client or potential client if it has not obtained the aforementioned information.
Coming into force
These rules shall come into force upon approval by the board of the association. These rules shall replace the previous rules from the year 2025.
Approved by the Board of Directors of Arev Securities hf. on 12 August 2026.