security
Investor Protection
Investment firms like LMA are subject to financial regulation. In the EU, this includes MiFID II and other applicable regulations. This supervision provides additional protection for investors by making sure financial institutions follow established rules and requirements.
We’re regulated by the Financial and Capital Market Commission (FCMC), the competent authority for investment services supervision in Latvia.
Financial regulation benefits investors
In a regulated environment such as LMA, investors benefit from additional layers of protection and transparency.
The financial system is an integral part of our daily lives. For example, we need banks to hold our money or make payments. Likewise, we need investment firms to invest our money to gain future returns. Poorly regulated financial institutions have the potential to harm consumers and undermine the stability of the financial system. The regulation establishes rules to stop things from going wrong, and in the case that they do, consumers and the financial system are protected by these rules.
The requirements of a regulated environment create real benefits for investors.
Applicable regulation includes
The Markets in Financial Instruments Directive (MiFID) is a regulatory framework that aims to increase investor protection and reduce systemic risk by setting common standards and rules for investment firms operating in the EU. It covers virtually all aspects of financial investment and trading in the EU. MiFID sets standards for key areas such as market transparency, transaction reporting, product governance, investor protection, and rules on inducements.¹
The Markets in Financial Instruments Regulation (MiFIR) complements the European Union’s second Markets in Financial Instruments Directive (MiFID II). It focuses on business requirements for investment firms, such as trade reporting and transaction reporting. MiFIR aims to increase transparency for investors, and requires investment firms in the European Economic Area to publicly disclose certain trades.
The Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation aims to increase the efficiency of EU markets by helping investors to better understand and compare the key features, risk, rewards, and costs of different PRIIPs, through access to a short and consumer-friendly Key Information Document (KID).
The Prospectus regulation creates a framework for the format, content, and approval of prospectuses that help investors make well-informed investment decisions. The regulation aims to make prospectuses shorter and more investor-friendly. It also establishes a unified format so that investors can more easily compare prospectuses for different investments.
The Investment Firms directive and regulation (IFD and IFR) introduce a prudential framework for investment firms. This framework includes minimum capital requirements, a liquidity buffer, and concentration risk limits based on the firm’s asset size and the riskiness of their activities, among other things.
Suitable and appropriate product offering
LMA is required to safeguard investors from taking on excessive risk by assessing their individual situations.
As part of being regulated, LMA must ensure that investors are aware of the risks of investing on LMA, and that their financial situation allows them to bear these risks. To meet this requirement, we ask investors to complete an assessment that checks whether our products fit their expectations and goals, and are appropriate for their knowledge and experience.
The outcome of this assessment determines which products and services will be available to the investor. Investing on LMA isn’t risk-free, so our offering, for example, wouldn’t be considered suitable for investors who wish to only preserve capital.
Investor-friendly presentation of information
To help investors make informed decisions about the investment, they are provided with standardized information in a consumer-friendly format. This information is designed to help investors understand the behaviour of investment products and compare them with other products. LMA has also published several disclosures, such as information on investment risk and fees, and Key Information Documents.
Safeguarding of investor assets
LMA must keep accurate records and accounts that distinguish all Notes and investor funds from any assets owned by LMA. As part of this, LMA reconciles its internal records and accounts regularly and takes steps to ensure it has adequate controls to minimize the risk of loss for investors.
Financial instruments belonging to the investors on LMA are held in the investors’ financial instrument accounts, separately from LMA’ own assets.
Investors’ funds are protected by holding them in safeguarding accounts in banks licensed in EU countries. These funds are only used to execute the investors’ orders to invest or withdraw the funds, or to cover fees and charges payable to LMA. They are held separately from LMA’ own assets, and creditors of LMA are not entitled to recover from these funds.