Execution of Orders

Upon the execution and forwarding of securities transaction orders issued by clients, SEB follows certain principles and rules that have been formalised as the following Best Execution Policy.

The list of execution venues specified in the Policy can be accessed here

Third party brokers

Best Execution Policy (valid from 26.02.2009 to 31.08.2011)

Best Execution Policy (valid from 12.11.2007 to 25.02.2009)

Best Execution Policy

1. Introduction
This document “Best Execution policy” (hereinafter the “Policy”) specifies the procedures, which SEB will follow when executing or forwarding transaction orders (hereinafter the “Order”) in financial instruments on behalf of its retail and professional clients. SEB will take all reasonable steps in accordance with this Policy in order to obtain the best possible results for its clients. Please note that although the procedures set out in the Policy are generally expected to produce the best possible result for SEB’s clients, there is no guarantee that circumstances will enable this to be achieved in every single transaction.

By giving SEB an Order the client agrees to the transaction being executed in accordance with this Policy.

Where a client requests a quote from SEB and accepts it or where the terms of a deal are otherwise specifically agreed between SEB and the client, the resultant transaction will for a client be considered to constitute Best Execution and in case of a RFQ transaction made on the initiative of the professional client the Policy will not apply.

A single order of a client can be executed in parts pursuant to rules specified in this Policy.

SEB may restrict trading with specific securities or certain types of securities or limit the types of orders to be accepted.

The bank is not obliged to immediately disclose to other market participants the order with the price set by the client in connection with a share accepted to the market for trading, which is not promptly executed on prevailing market conditions.

2. Specific client instructions
Where a client gives SEB a specific instruction on how all or part of its order should be executed, the relevant execution will be effected in accordance with such instructions. SEB would like to stress that providing specific instructions by the client may prevent SEB from implementing the measures and following the procedures set out in this Policy, which SEB has developed and introduced to obtain the best possible result.

3. The relative importance of different factors in execution
In executing a client’s order SEB will take into account the following matters:

• the price at which it is likely to be executed and the costs which will be incurred;
• the speed and likelihood of both execution and settlement;
• the size and nature of the order and its impact on the market; and
• any other factor which SEB considers to be relevant to the execution of the order.

At the time of execution SEB will weigh also such factors as client’s classification, characteristics of the client and his order, the financial instrument involved, characteristics of the execution venue, where the order can be forwarded and the prevailing market conditions.

Unless special circumstances apply, SEB’s priority in executing transactions will be to obtain the best possible result in terms of the total consideration to be paid or received by the client. In certain cases, e.g. execution of voluminous order, the speed and likelihood of execution may be more relevant factors than the total value of the transaction.

4. Execution of orders in financial instruments regularly traded on external execution venues
This section applies to financial instruments traded with sufficient liquidity on a regulated market (e.g. stock exchange), on an multilateral trading facility (MTF; e.g. First North) or on another execution venue (e.g. systematic internaliser of the client’s orders, provider or liquidity or the bank itself). Such financial instruments are inter alia:

• shares;
• bonds and other interest-bearing or discounted debt instruments, including index-linked bonds;
• standardised derivatives;
• Fund units (ETF) and certificates (ETC) traded at the stock exchange, and
• other financial instruments traded on an external execution venue.

SEB will execute its client’s order in such financial instruments in the following way:

• The order will normally be routed for execution to the execution venue SEB considers to provide the best result for the client taking into account the factors in section 3.
• Where the order is of a larger size, such that care is required in its execution in order to minimize the adverse impact of the order to the market, SEB will execute the order at such times, and in such separate parts in the market, as appears in its reasonable judgement to be necessary to produce the best possible overall result for the client under the circumstances as they develop.
• Should circumstances permit it, and provided that it appears to SEB that it will operate to the client’s overall advantage, SEB may choose to execute all or part of the order against either its own book or directly against a non-market counterparty or the order of another of its clients. However, SEB will only do this if it appears likely at the time of dealing that the result is at least as good for the client as would have been obtained in the regulated market.
• SEB may offer to take an order of a larger size directly onto its own book at a price, which may be less advantageous than the price prevailing in the market for small volumes, but is not likely to be worse than the price that could have been obtained in the market for transactions equal to the size of the order. Conditions related to such a transaction shall be agreed upon with the client before execution of the order.
• Where a client requests SEB to make a quote for a transaction off its own books, SEB will take reasonable care to ensure that the price so quoted is fair in all the circumstances.

5. Execution of orders in financial instruments not regularly traded on external execution venues

This section applies to financial instruments which are not traded with reasonable liquidity on a regulated market or on another marketplace. Such instruments include both standardised but non-exchange traded instruments and instruments created by SEB or another intermediary from one or more components (some of which may be listed or traded in their own right), for example in order to provide an instrument designed to meet specific exposure requirement. Such financial instruments are inter alia:

• bonds and other interest-bearing or discounted debt instruments;
• non-exchange traded derivative securities or derivative contracts (OTC derivatives);
• Financial instruments in which the return is linked to the performance of a specific index or reference rate;
• instruments based on or involving contracts for difference;
• shares, not traded on a regulated market, on an MTF or on other regulated market
• fund units (not ETF) and
• other financial instruments not regularly traded in MTF or on a regulated market or other marketplace.

SEB will execute its client’s order in such a financial instrument in the following way:

• SEB may execute the order against its own book, at a sound price. The pricing will take into account the prevailing market price available to SEB or level of the underlying asset, index or rate incorporated into the structure of the instrument, or other relevant market factors or events. The pricing will in addition take into account the risks and costs involved in SEB’s business model for the instrument in question. These are costs inherent in execution of the client’s order on SEB’s account, counterparty credit risk or risk position assumed in creating the instrument and making it available to clients – and SEB’s reasonable profit margin in the light of these. Upon execution of orders of financial instruments not regularly traded on the market, SEB proceeds from a principle that where a client requests a quote from SEB and accepts it or where the terms of a deal are otherwise specifically agreed between SEB and the client, the resultant transaction will for a client be considered to constitute Best Execution.
• To be able to provide execution in financial instruments for which there is no readily available market quote, SEB may execute the order on account of a non-market counterparty or the order of another of its clients.
• Specifically for fund units, SEB will execute its client’s order by transmitting it, directly or through an intermediary, to the fund management company (or equivalent) responsible for administering the fund in question.

6. Securities lending and primary market transactions
SEB will execute securities lending transactions against SEB's own book at a fair price and in accordance with special terms agreed with the client. SEB will execute primary market transactions in financial instruments by transmitting the client order to the issuer, or the agent of the issuer, in accordance with the client's instruction or marking the specific financial instrument on its own account, based on the order given to SEB by the client In both cases the terms and conditions of the specific issue must be followed.

7. Execution venues used by SEB
SEB participates in a variety of different regulated markets and MTF and in addition, has direct access to a number of other execution venues, chosen in each case (in addition to other reasons) because SEB assumes that they help to meet the requirement to execute orders to the best advantage of its clients, considering relative importance of execution factors. For a list of execution venues frequently used by SEB, please see link above.

Note, however, that SEB may execute client orders on venues other than those on the list when it considers that this is appropriate in the light of the circumstances at the time and unlikely to produce a worse overall result for the client.

8. Placing and transmission of orders to third party brokers
When providing portfolio management services and/or transmitting its clients’ orders, SEB will handle the placing of orders in the way it regards at the time as being in the best interest of the client, and, where it deems it appropriate, may use the services of a third party broker.

 

SEB will make a careful assessment of any third party broker it uses and will establish a relationship with it. When establishing a business relationship with a third party broker through which or by which client orders are executed, SEB will consider factors such as price, costs, speed and likelihood of both execution and settlement, as well as other factors that might be significant at the time of placement and transmission of orders. The list of third party brokers used by SEB can be found above on this website.

9. Execution outside a regulated market or in an MTF
SEB may execute client orders outside a regulated market or an MTF upon consent of the client. This applies primarily to non-exchange traded financial instruments, but could also be the case for exchange-traded financial instruments.

10. Client order handling
SEB will execute each client’s orders in a prompt, fair and expeditious manner and will generally seek to execute comparable orders in the sequence in which they are received, unless for example the characteristics of the order or prevailing market conditions make this impracticable and this exception is justified.

Provided that it is unlikely to work to the overall disadvantage of its clients concerned, SEB may aggregate a client’s orders with the orders of other clients, or with transactions that it is arranging for its own account. Whilst the purpose of such aggregation is to achieve the best possible result for its clients, it still does not give any guarantee that on other occasions it may not work to the client’s disadvantage in relation to a particular order. Where SEB aggregates a client’s order with other orders, the combined trades will be allocated fairly between that client and the other parties whose interests have been aggregated.

The bank will execute the client’s order promptly after receipt hereof, whereas the time sequence in receiving the orders may depend on the channel through which the order was presented. If the client’s order is received immediately before closure of the respective execution venue, SEB starts to execute the order on the next trading day.

11. Trading suspension and system failures
In certain cases, whether as a result of trading suspensions, cancellation of transactions by the execution venue, disrupted markets, system failures or otherwise, SEB may decide that it is in a client’s best interests to execute or transmit its order using means different to that normally used for the order in question. In such cases, SEB will take all reasonable steps to achieve the best possible overall result for the client under the prevailing circumstances.

If the events referred to above result in suspension of trading, SEB will make reasonable efforts to contact clients whose orders have not yet been executed in order to obtain additional instructions. If SEB is unable to obtain such instructions, it will take all actions that are to be in the best interest of the client, and the client will be bound by the result.

Where a market operator cancels or amends trades executed on its market, SEB and its clients will be bound by such steps, even if SEB has in the meantime confirmed that the transaction has been executed. SEB will take all actions to inform the client immediately of such circumstances, except if the circumstances do not permit such notification of the client.

12. Changes and updates to this policy
This Policy is subject to change. The Policy, the execution venues, third party brokers and execution arrangements referred to in it, as well as the results they produce, will be reviewed periodically in order to ensure that they are likely to provide the best possible result for SEB’s clients. This will be done as circumstances dictate, and at least annually. Any changes to the Policy will be published on this website.

Such change and updates will take effect from the day following the day they are published on the website.

Conflicts of Interest

The Bank provides its clients with a wide range of financial services, comprising several types of business activities. However, the very range of this offering is such that potential conflicts of interests may arise from time to time. The conflicts of interests include situations where the interests of the Bank (incl. its management, board, staff, etc.) and the interests of its clients or the interests of different clients of the Bank may conflict. Furthermore, potential conflicts of interests can arise between different businesses within the Bank, as well as between the Bank and other units of the Skandinaviska Enskilda Banken AB Group. The Bank has carefully analysed the areas where such potential conflicts of interest can occur. They include, for example, the production of market analyses, offering of financial advice and corporate finance activities. This has resulted in specific measures designed to minimise the risk of conflicts of interests affecting the Bank's clients in practice.

These include:

• ensuring that businesses between which conflicts of interests can arise are separated from each other and are not subject to inappropriate influence from other areas;
• requiring potentially sensitive activities to be kept confidential;
• adopting internal guidelines to ensure that staff (and their immediate family) cannot benefit personally from their employment at the expense of clients;
• avoiding reporting lines and compensation arrangements which could disadvantage clients;
• and, above all, requiring staff to handle clients' affairs at all times solely in the interests of the client, without taking into account any inappropriate factors representing the interests of others.

All of the above is covered in the internal rules of the Bank for conflicts of interests. The internal rules provide a detailed description of the various potential conflicts of interests, and set out how they will be handled in order to prevent them from having an adverse effect on clients' affairs. The aforementioned internal rules can be accessed here

Fees and Inducements
Generally, the Bank provides its services for a fee. The price list of the services provided by the Bank is available on the website of the Bank and in the Bank offices.

Furthermore, the Bank has also established internal rules covering the making or receiving of payments (such as fees paid for introductions, commission fees and other inducements) in conjunction with its provision of services involving financial investments. The Bank may only provide or receive such inducements when certain conditions are met. A fundamental requirement in this area is that the fee payable or receivable must be intended to improve the quality of the service provided to the client, and that it does not operate against the best interests of the client. In addition, inducements may not be provided or received if they are not in accordance with the Bank's obligation to conduct its business in a manner that is honest, fair and professional. Where an inducement (other than a proper fee necessary for the provision of the service) is provided to or received from a person other than a client or its agent in relation to a client's dealings, the fact will be disclosed to the client before the relevant service is provided.

Upon request, clients will be provided with additional information in relation to fees relevant to their business with the Bank, or with the Bank's relevant internal rules in their entirety. The following is a brief description of fees related to certain investment products paid to the Bank by third persons or payable by the Bank.

Fund units
The Bank may intermediate funds managed by different management companies and the relevant management company pays the Bank a fee for the fund units sold. The aforementioned fee is generally calculated as follows:

• a one-off fee upon the issue or redemption of fund units as a percentage of the amount invested in the fund units; or
• the part of the management fee payable once a year; or
• a combination of both of the aforementioned versions.

The amount of the fee receivable by the Bank and the payment procedure thereof shall be agreed on in a contract made between the Bank and the relevant management company. The compensation arrangement can vary between fund management companies and funds managed by the same company.

The fees receivable by SEB

Furthermore, the Bank may attend, without charge, training events carried out by the management company, which enable the Bank to perform better sales of fund units. The units of funds managed by management companies belonging to the SEB Group may in certain cases also be sold by other financial institutions. In such case a fee may be paid to them according to the aforementioned manner.

Structured instruments
SEB may sell structured instruments which have not been issued by SEB, but by other issuers. In such instances the issuer pays the Bank a fee for the intermediation of structured instruments. The fee may be a percentage of the value of the instruments sold through the Bank. The amount of the fee and the calculation principles thereof may differ in case of different issuers or instruments of the same issuer. The Bank may also sell structured instruments issued by the Bank itself through third persons, for which the Bank shall also pay a fee to such person. Generally, this is a one-off fee according to the invested sum.

Bond and equity market
The Bank may receive fees from issuers of bonds or money market instruments for organisation of issues or execution of transactions of the secondary market or discharge of other duties. The fee has generally been expressed as:

• a set fee; or
• a variable fee according to the turnover of securities; or
• a combination of the aforementioned versions.

The Bank may transfer, in part, the fee received from the client upon the receipt, forwarding or execution of transaction orders for securities to third persons, the service provided by whom is in the client's interests and increases the quality of the service provided (e.g. investment analysis). The fee payable is generally calculated as a percentage of the fee payable by the client.

Management of securities portfolio
The Bank may cooperate with certain portfolio managers, who perform their own or their clients' securities settlements in the Bank. On the basis of an agreement between the Bank and the provider of the portfolio management service the Bank and the relevant service provider may divide the fee payable by the client of the portfolio manager.

Recruitment and referral of clients
The bank may provide or receive compensation upon referral of a client from or to a third party. Such remuneration is normally calculated as a one-off compensation, an annual compensation in the form of a percentage of the assets under management, an annual compensation based on a share of paid commissions or a combination of these.

Securities

NB! The following description of financial instruments is of a general nature. The terms and conditions applying to individual financial instruments can vary, and investors should always take care to ensure that they investigate and are fully informed about the particular characteristics and risks of the instruments in which they invest. The bank does not assume any liability for damage that clients may incur if they make their investment decisions on the basis of only the following information and do not study the respective instruments more closely.

Regarding Securities in General
Securities (i.e. bonds, units of funds, custody certificates or other rights or obligations which are the subject of trading on financial instruments markets) normally yield a positive return in the form of a dividend (in the case of shares), or interest (in the case of bonds). In addition, the price (i.e. market value) of the security may appreciate and depreciate relative to its price / market valuation at the time when the investment was made. Hereinafter, the word "investment" is also used in the case of negative positions in securities (i.e. the "short" sale by an investor of a security which it does not own, but has borrowed).

The total return on an investment is the sum of dividends/interest rate payments and any change in the market value of the security. Derivative instruments, such as options, forwards, futures, etc., are issued for a variety of underlying assets, including shares, bonds, precious metals and currencies. Derivative instruments may be used to decrease the risk of an investment or to produce greater returns.

What every investor seeks is a positive return on an investment - that is, an investment that yields a profit, preferably as large as possible. But there is also a risk that the net return of an investment is negative, i.e. that the investment generates a loss. The risk of a loss varies with the security, as the prospect of a profit is usually correlated with the risk of a loss. The longer the duration of an investment, the greater the prospect of a profit and the risk of a loss. There are varying methods of investing in securities to minimise risks. It is usually considered safer not to invest solely in one or a few securities, but to instead diversify the investment across several or many financial instruments. These securities should then provide a dispersion of the risks, rather than producing a concentration of risks that may be realised simultaneously. When investing in securities listed in a foreign denomination, there is also a foreign exchange risk.

Investments in specific securities are associated with specific financial risks, as described in more detail at "Risks".

The risk is assumed by the client, who must therefore seek advice from its investment service provider or asset manager in relation to the properties, risks, terms and conditions applicable to specific investments. The client must also continuously monitor its investments in securities regardless of whether the client received individual investment advice before entering into the investment. Information required to monitor holdings of investments, such as prevailing market prices, are published in major newspapers, at various websites maintained by market operators, financial service companies and other public media. Furthermore, the client should, with its own best interests in mind, be prepared to take swift action, where necessary, to close positions which unexpectedly develop negatively, or to provide additional collateral for investments that have been financed by the use of loans if the collateral has depreciated in value.

The buying and selling of shares on regulated markets and other market venues constitutes a secondary market in the shares issued by a company. Efficient secondary markets, which are markets in which it is easy to find buyers and sellers and where bids and prices of concluded transactions are continuously published in an environment of open information, are also beneficial to the companies whose securities have been admitted for trading on regulated markets, since as a result it will be easier for them to issue new securities to raise new capital.

Different market venues
There are several kinds of market venues in which to buy and sell securities. Market venues are normally regulated markets, multilateral trading facilities (MTF) or systematic internalisers and where OTC-trading is provided with investment service companies; market makers or other liquidity guarantors or other persons who perform similar duties or functions with the aforementioned persons.

Regulated markets
Various securities can be traded on a regulated market. Strict requirements are imposed on companies admitted for trading on regulated markets with obligations that relate, among other things, to the size of owners' equity, owners, business history and financial disclosures of the company. A list of regulated markets is maintained by the European Commission and can be found at http://mifiddatabase.esma.europa.eu

Multilateral trading facility
A multilateral trading facility (MTF) may be described as a trading system that is provided by a regulated market or a financial service company. Generally, the requirements imposed on issuers of securities admitted for trading at an MTF are lower than the requirements imposed by regulated markets.

An MTF is often also called an alternative market, because it is an alternative to a regulated market, the latter being subject to far stricter requirements regarding admitting securities for trading, etc. In a multilateral trading facility non-concurrent or concurrent offers for trading in securities can be made and financial instruments can be traded between different persons on equal terms. The main difference between the facility and a regulated market (e.g. a stock exchange) is lower liquidity of the securities traded at the MTF in comparison with securities traded on a regulated market.

Systematic internalisers
A systematic internaliser is an investment service company that on a regular and systematic basis matches clients' orders outside a regulated market or an MTF by concluding transactions with clients on its own account.

A systematic internaliser must disclose its price quotation about liquid shares admitted for trading on a regulated market on a regular and constant basis at the usual trading time. A systematic internaliser must disclose to other market participants the volume, price and time of the transactions executed by it in an easily available manner.

The share price quotation contains the price the execution of which is mandatory for a systematic internaliser in the case of transactions that are not larger than the standard market volume of the class of share. The share price must indicate the conditions applicable with regard to the share on the market.

Financial instruments Shares and public limited companies Funds Exchange traded funds (ETF) Interest-bearing instruments Structured products Derivatives and short sales

SEB product groups A - conservative B - low C - average D - high E - very high

Investor Compensation Schemes

For the purpose of investor protection guarantee systems financed by market participants have been established on the initiative of the state or different market participants. The main goal thereof is to protect investors against risks which may threaten them upon investment in securities markets and to ensure regular and reliable functioning of the securities market as well as to increase the reliability and stability of the financial sector. The task of the relevant systems is, among other things, to preclude the possibility of inflicting losses on investors due to acts or omissions of the provider of investment services and to alleviate the consequences of loss events, which have already taken place.

1. Investor protection arising from the Guarantee Fund Act
The Guarantee Fund is a legal person in public law founded by the Guarantee Fund Act (GFA) who commenced operation on 1 July 2002. The objective of the Fund is to guarantee protection of depositors, investors, unit-holders of mandatory pension funds and funds invested by the policyholders in the insurer's pension agreements. In order to achieve its objective, the Fund: collects single and quarterly contributions from credit institutions, investment institutions, management companies of mandatory pension funds and insurers concluding pension agreements; and pursuant to the terms and conditions and in the extent and according to the procedure stipulated by law, compensates depositors for deposits placed thereby with credit institutions; compensates investors for their investments; compensates for any damage caused by a pension management company to unit-holders; and supports the transfer of the insurance portfolio of insurer's pension agreements to another insurer. Out of the contributions received by the Guarantee Fund, the Fund will establish the Deposit Guarantee Sectoral Fund, the Investor Protection Sectoral Fund, the Pension Protection Sectoral Fund and the Annuity Protection Sectoral Fund.

The specific procedure for guaranteeing and compensating deposits and investments as well as the categories of deposits and investments not subject to guarantees or compensation have been provided for in the GFA and legislation issued on the basis thereof. The following is a brief summary of the main aspects of functioning of the Guarantee Fund. For further information about the activities of the Guarantee Fund contact the Fund (Roosikrantsi 2, 10119 Tallinn; phone 611 0730; e-mail tf [at] tf [dot] ee; www.tf.ee). SEB or its subsidiaries have made the required contributions to the respective sectoral funds.

The Deposit Guarantee Sectoral Fund is established out of the contributions of credit institutions and used in order to guarantee and compensate, according to the provisions of the GFA, for deposits of depositors of credit institutions registered in Estonia and Estonian branches of foreign credit institutions. Deposits, with the interest thereon as of the date on which the deposits become unavailable, are guaranteed and compensated for, but not more than in the amount of 100,000 euros per depositor in any one credit institution. Interest on a deposit is calculated on the basis of the rates provided for in the settlement or loan contract or, in the absence of a written agreement, on the basis of the rates provided for in the standard depositing terms valid in the credit institution on the date on which the deposits become unavailable.

Compensation shall be paid by transfer to the bank account indicated by the depositor or, on the basis of an application of the depositor, in cash through one or several Estonian or foreign credit institutions specified in a resolution of the supervisory board of the Guarantee Fund. Compensation for deposits nominated in foreign currencies is paid in euros according to the daily exchange rate of the European Central Bank as at the date on which the deposits become unavailable. Compensation is not paid to persons who have outstanding liabilities to the same credit institution to the extent of such liabilities. Deposits of the state and financial intermediaries, deposits of persons related to credit institutions that have become insolvent, deposits associated with money laundering etc. shall not be compensated for (more information http://www.tf.ee/eng/protection-of-depositors/deposits-not-subject-to-guaran/).

If the fee payable by a depositor for payment of compensation in cash or by a bank transfer is higher than or equal to the amount of compensation, the compensation shall not be paid. The fee chargeable for the payment of compensation may not be higher than the usual fee chargeable by a credit institution for similar services.

The payment of compensations shall be commenced not later than 10 working days after the date on which deposits become unavailable and must be completed within 20 working days as of the date on which deposits become unavailable.

The Investor Protection Sectoral Fund is established out of the contributions of investment institutions and used in order to guarantee and compensate the investors, in accordance with the provisions of the GFA, for investments made through an investment institution registered in Estonia or the Estonian branch of a foreign investment institution. Investment institutions are investment firms for the purposes of the Securities Market Act, credit institutions and management companies. Investments are claims based on an agreement between the parties or on legislation, arising from which an investment institution is obliged to disburse to an investor money or transfer securities which are owed or which belong to the investor and which the investment institution has kept on the investor's account or disposed of with regard to the provision of investment services. Investments are guaranteed and compensated for to the extent of their value as of the compensation date, but not more than in the amount of 20,000 euros per investor in any one investment institution. The amount of compensation is determined on the basis of the value of the investment on the compensation date. The value of a foreign currency and securities nominated in a foreign currency is converted into euros on the basis of the foreign exchange reference rate of the European Central Bank as of the compensation date. Compensation is paid in money by a bank transfer to the account indicated by the investor. An investment the owner of which has outstanding liabilities to the same investment institution shall not be compensated for out of the Sectoral Fund to the extent of such liabilities. Investments, which are subject to compensation under §§ 52 and 53 of the Estonian Central Register of Securities Act, which regulates the civil liability of the registrar of the Estonian Central Register of Securities and the account manager in compensating for damage, is not compensated for out of the Sectoral Fund.

The Pension Protection Sectoral Fund is established out of the contributions of pension management companies and used in order to compensate, in accordance with the terms and conditions and pursuant to the procedure provided for in the GFA, for the loss caused to the unit-holders of a mandatory pension fund for which the unit-holders have not been compensated by the pension management company pursuant to §§ 32-36 of the Funded Pensions Act (FPA) by the due date established by the Supervision Authority. Loss means loss for the purpose of subsection 32 (1) and (2) of the FPA, whereby the Financial Supervision Authority has ascertained that there has been a violation of the requirements provided by legislation or the rules of a pension fund and the violation has caused loss to the unit-holders of the pension fund. A pension management company determines the extent of the loss on the basis of all the proprietary damage caused, including any loss of profit compared to the situation that would exist if such violation had not occurred and where the assets of the pension fund associated with the violation would have been invested similarly to the other assets of the pension fund. A unit-holder is compensated in full for loss subject to compensation out of the Pension Protection Sectoral Fund in the amount of up to 10,000 euros per specific loss event. Any loss exceeding 10,000 euros per specific loss event of a unit-holder shall be compensated for to the extent of 90%. The registrar of the Estonian Central Register of Securities shall, for the amount of compensation granted to a unit-holder, acquire for the unit-holder the maximum whole number of units of the pension fund to which the unit-holder makes mandatory funded pension contributions at the time of payment of the compensation. If a unit-holder has entered into a pension agreement or if he/she has deceased, the units of the existing pension fund, whose units he/she acquired last shall be acquired for him/her. If all the pension funds whose units the unit-holder has acquired have been liquidated, the units of the pension fund specified by the unit-holder or his/her successor shall be acquired for the compensation.

The Annuity Protection Sectoral Fund is established out of the contributions of insurers and used in order to guarantee the performance of the liabilities under pension agreements to the extent provided for in the GFA, supporting the transfer of the pension agreement insurance portfolio of an insurer and an Estonian branch of an insurer of a Member State of the European Economic Area, except Estonia, to another insurer in the case of revocation of the activity licence, establishment of a special regime or declaration of bankruptcy of the insurer. The support guarantees the contributions to pension under pension agreements (insurance contract for mandatory funded pension) for policyholders. The support amount shall be found as the difference between the technical provisions and financial liabilities according to pension agreements and the committed assets according to the insurance portfolio.

2. Investor protection arising from the Rules of the Tallinn Stock Exchange
The guarantee of transactions (Stock Exchange Transactions) made on the NASDAQ OMX Tallinn Stock Exchange (the Stock Exchange) are regulated by the Rules of the Stock Exchange. A guarantee fund has been established out of monetary contributions made by the members of the Stock Exchange for the purpose of securing Stock Exchange Transactions. The Stock Exchange disposes of the funds of the guarantee fund if it becomes evident that a Stock Exchange Transaction cannot be realised due to insolvency of a member of the Stock Exchange. Insolvency includes initiation of bankruptcy proceedings, declaration of a moratorium or other similar proceedings which result in restrictions on disposal of the assets of a member of the Stock Exchange. The Stock Exchange also has the right to use the funds of the guarantee fund if any other failure to realise a Stock Exchange Transaction would obviously jeopardise the regular functioning of the market. A member of the Stock Exchange is also responsible for ensuring that its client has sufficient funds to realise a Stock Exchange Transaction (securities in the case of a sales transaction and money in the case of a purchase transaction). SEB is a member of the Tallinn Stock Exchange and it has paid its contribution to the guarantee fund.

For further information about the guarantee fund of the Stock Exchange contact the Stock Exchange (Tartu mnt 2, 10145 Tallinn; phone 640 8800; tallinn(at)nasdaqomx.com; http://www.nasdaqomxbaltic.com/).

3. Investor protection arising from the Estonian Central Register of Securities Act
According to subsection 53 (2) of the Estonian Central Register of Securities Act, an account administrator shall insure the liability arising from administration of accounts. As a member of the group of Skandinaviska Enskilda Banken AB, AS SEB Pank is insured against possible damage and losses arising from illegal activities of bank employees or third parties or criminal attacks or bank employees' negligence related to office.

Services

SEB and its subsidiaries provide a wide range of services. In addition to the usual banking services the aim of the Bank is to provide its clients with the possibility to invest their assets with the help of investment and ancillary investment services of SEB.

Forwarding and Execution of Clients’ Transaction Orders
Securities may be traded both on the trading venues meant for such purpose (e.g. regulated or alternative markets) as well as on OTC markets. Generally, securities are traded through brokers, but clients may give orders both directly to the broker as well as through a client service assistant or U-Net. Depending on whether the broker who received a transaction order has access to the specific trading venue or not, the broker executes the client’s order itself or forwards it for execution to a broker who has access to the relevant market.

Upon the execution and forwarding of orders, the Bank adheres to the Best Execution Policy

The terms and conditions of the securities account of the Bank and the transactions (incl. currency transactions) related to the trading with securities and conducted on the basis of a financial markets client agreement
Contact data of the Money and Capital Markets Division of SEB related to services provided on the basis of a financial markets client agreement

The Bank may also trade with different securities on its own account.

Management of Securities Portfolio
The Bank provides the securities portfolio management service only to clients of private banking, i.e. to clients the volume of assets invested by whom is larger than the average.

The services and contact data of private banking

Investment Advice
The Bank provides its clients with investment advice through investment advisors and private banking client executives. The Bank will give investment advice to clients if it has been explicitly agreed that this is what the client requested, whether in relation to a relationship as a whole or to a specific transaction within it.

Each client to whom investment advice is given will be individually assessed at the time of the documentation of the agreement between the Bank and client, in order to determine suitable investment services and products to match its investment objectives, risk profile, financial situation, knowledge, experience and other relevant factors. All investment advice given will be based on the information provided to the Bank during this process, as updated during the course of the client’s continued business relationship with the Bank. It is therefore important that clients provide the Bank with accurate information and notify it of any material change which may affect the suitability and appropriateness of the client’s assigned category or of any service or advice.

If you are interested in the SEB advisory services in order to find along with the experienced specialists of the Bank the most suitable solution for you, please register for counselling at www.seb.ee/kutseeng

The terms and conditions of the investment advice of the Bank

Organisation of Offerings or Issues of Securities
SEB provides undertakings with the service of organising the issue of securities with a view to raise financial resources from investors. The issue of bonds is organised by the SEB Money and Capital Markets Division. Upon the organisation of share issues, the clients receive advice from AS SEB Enskilda, a subsidiary of the Bank.

Important Additional Information
Upon using services provided by SEB and making transactions with investment products offered through SEB, the client must carefully examine the terms and conditions, properties and risks of the specific service or product in advance. To receive explanations in case of questions, the client should address a teller, a client service assistant or an investment adviser of the Bank or ask for advice from its tax, financial or legal adviser. In the case of investment services and products the client must also understand the following circumstances:

• investments and positions in securities are held at the client's own risk;
• the yield on securities and investment products is not generally guaranteed and prices may both increase as well as decrease;
• the client must carefully read and review the terms and conditions of the Bank applicable to investment services and products;
• the client must carefully examine a transaction confirmation submitted regarding a transaction and promptly notify the Bank of any possible errors;
• the client must continuously monitor its investments and positions held in securities;
• the client must actively and at its own initiative take measures to minimise any potential risks of losses on investments in securities or other positions;
• the rights relating to foreign securities or funds may differ subject to the law governing such financial instruments or funds;
• in addition to any agreement between SEB and the client, a depository used for the holding of the client's securities or funds may have a security interest, lien or right of set-off over such assets.

Protection of Assets

During the provision of investment and ancillary investment services clients deposit their securities and funds on accounts administered by SEB or on accounts administered through SEB by other account administrators (i.e. on nominee accounts). In the depositing and safeguarding of clients’ assets SEB adheres to the requirements established in legislation and terms and conditions agreed on with the client.
The terms and conditions of SEB regarding securities account can be accessed here or you can contact customer service assistants in bank offices.

Upon the depositing of securities and conduct of transactions related thereto in foreign countries and through nominee accounts, the regulations, different technical solutions, rules established by market participants and local market practice in relevant countries must be taken into account.

For further information about the depositing of securities through account administrators of foreign countries see here
Each client and investor must definitely take account of the related risks, a summary of which has been provided at "Risks".

The following principles for the depositing and safeguarding of the client's assets set forth the rules which SEB follows at the depositing and safeguarding of the clients' assets.

1. Safeguarding of client securities and funds
1.1 SEB shall store data and keep such records and accounts that enable at any time and without delay assets held for one client to be distinguished from assets held for any other client, and from its own assets.
1.2 SEB shall store data and maintain records and accounts in a way that ensures their accuracy, and in particular their correspondence to the securities and funds held for clients.
1.3 SEB shall conduct, on a regular basis, reconciliations between its internal accounts, data and records and those of any third parties by whom those assets are held.
1.4 SEB shall ensure at any time that any client securities deposited with a third party are identifiable separately from the securities belonging to SEB and from securities belonging to that third party. This is achieved by recording the securities in differently titled accounts on the books of SEB.
1.5 SEB shall take necessary measures to ensure that client funds are held in an account or accounts identified separately from any accounts used to hold funds belonging to SEB.
1.6 SEB shall take organisational measures to minimise the risk of the loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor administration, inadequate record-keeping or negligence.

2. Depositing client securities
2.1 When depositing securities in an account or accounts opened with a third party, SEB shall adhere to the following rules:
2.1.1 SEB shall exercise due skill, care and diligence in the selection, appointment and periodic review of the third party and of the arrangements for the holding and safekeeping of those securities. In order to guarantee that such third party is reliable, SEB will regularly check the reliability of such party.
2.1.2 SEB shall take into account the expertise and market reputation of the third party as well as any legal requirements or market practices related to the holding of those securities that could adversely affect clients' rights.
2.2 If heightened requirements and supervision are applied to safekeeping securities on the account of another person in the jurisdiction in which SEB wishes to maintain the client's securities with a third party, SEB shall not be permitted to deposit the securities in such a jurisdiction in such a third party with respect to whom these requirements and supervision are not applied.
2.3 SEB shall not deposit securities held on behalf of clients with a third party in a third country that does not regulate the holding of securities for the account of another person unless in the event that:
2.3.1 regardless of the client classification, the nature of the securities or of the investment services connected with those securities requires them to be deposited with a third party in that third country; or
2.3.2 in the cases not specified in subsection 2.3.1 the securities are held on behalf of a client treated as a professional client and the client treated as a professional client gives SEB a written consent for depositing such securities with a third party in that third country.

3. Depositing client funds
3.1 When accepting client funds, SEB shall deposit them without delay on an account opened in the Bank of Estonia or in a credit institution authorised in a Member State of the European Economic Area or a foreign country that is not such Member State (a third country) (SEB being also such credit institution) or invest them into shares or units of a money market fund subject to a relevant agreement with the client.
3.2 In the event that SEB does not deposit the funds on an account opened in SEB, it shall exercise due care and diligence in the selection of the credit institution or money market fund where funds are deposited and the selection and periodic review of the arrangements for the depositing of the funds. In addition, SEB shall take into account the expertise and reliability of such credit institutions or money market funds or their management companies in order to ensure protection of clients' interests, as well as any legal requirements or market practices related to the holding of the client's funds that could adversely affect clients' rights.

4. Use and disposal of client securities
4.1 SEB may use the client securities held by SEB for the client or for its own account for any securities financing transactions only if the client has given prior consent for the use of securities under agreed terms. In addition, the client must give its consent in writing and such consent may be included in the contract of service provision entered into with the client and the use of the client securities shall be limited to the terms and conditions set forth in the contract.
4.2 SEB shall record the data of the clients whose instructions have governed the use of securities (a financing transaction) and shall keep records of the number of securities used belonging to the client.
4.3 Securities financing transactions shall be stock lending or stock borrowing or the lending or borrowing of other financial instruments, repurchase or reverse repurchase transactions, or buy-sell back or sell-buy back transactions.

Clients

SEB classifies all clients to whom investment services are provided as retail clients, professional clients and eligible counterparties. The following explains the classification of clients and the meaning of the classification.

Client categories and principles of classification

The extent of investor protection is defined for each client by classifying the client in one of the following manners:

• retail client;
• professional client;
• eligible counterparty.

Retail clients may not have sufficient knowledge, proficiency or experience to personally adequately evaluate the risks arising from investment. Consequently, retail clients are offered the highest level of investor protection. The obligation to provide information regarding SEB and the investment products and services and securities offered by it is the most extensive in the case of retail clients.

A retail client may request to be classified as a professional client if they believe that they have sufficient experience, knowledge and proficiency to make investment decisions themselves and to adequately assess the related risks. SEB is obliged to assess the given circumstances and, upon the assessment, SEB must take the nature of the planned trades or services into account. Furthermore, during the assessment at least two of the following conditions must have been met:

1. the client has carried out on average at least 10 transactions of significant size on the securities market per quarter over the previous four quarters;
2. the volume of the client's securities portfolio exceeds 500,000 euros;
3. the client works or has worked for at least one year in the field of finance at a position which requires knowledge about investment in securities.

Professional clients are presumed to have more extensive knowledge and experience in investment products and services in order to understand the risks related to the investment services or transactions or transaction or product types. Furthermore, the amount of assets and the volume and number of transactions of professional clients is presumed to be higher when compared to retail clients. Therefore, professional clients are offered investor protection that to a certain degree is lower than the protection offered to retail clients.

Generally, a professional client is a legal person who meets at least two of the following conditions:

• its balance sheet equals at least 20 million euros;
• its net turnover equals at least 40 million euros;
• its equity capital equals at least 2 million euros.

SEB also considers the following persons to be professional clients:

• an Estonian or foreign credit institution, investment company, management company, investment fund, insurer or other financing institution subject to financial supervision;
• the Republic of Estonia or a foreign country or a local or regional government unit or the central bank of Estonia or a foreign country;
• an international organisation, incl. the International Monetary Fund, European Central Bank, European Investment Bank;
• a person whose main business activity consists in dealing with goods or derivative instruments of goods on its own account;
• a person who deals, on its own account, on financial futures, options or other derivative instruments markets and on money markets only in order to secure investments made on derivative instruments markets or conducts transactions on the account of participants in the aforementioned markets or forms prices for them and the execution of whose transactions is secured by persons organising settlement on the same markets.

The clients who do not correspond to the aforementioned conditions are generally considered to be retail clients by SEB, but under the conditions described above a retail client may, however, ask itself to be regarded as a professional client.

A professional client may request that it be treated as a retail client if according to the client they are not able to sufficiently assess or manage the risks relating to the services and trades. In such an event SEB does not presume in the case of such a client as high awareness of the securities market as in the case of a professional client. Professional clients are responsible for keeping SEB informed about any change which could affect their treatment as a professional client. If SEB becomes aware that the client treated as a professional client no longer meets the criteria set for professional clients, SEB shall apply the provisions of retail clients to the client according to the changed circumstances.

In the case of certain investment services (i.e. upon the receipt and forwarding of orders related to securities and upon the execution of orders on the client's behalf and account) SEB may treat certain clients as an eligible counterparty. In the case of such clients, investor protection arising from legislation is the lowest. Such clients are presumed to have competence equal to that of SEB. Consequently, SEB does not need to require from its clients information about their knowledge or experience related to their investment and ancillary investment services and about the aims and circumstances related to such services, or present information about the securities and the planned investment strategy or provide guidelines and warnings related to risks.

Reclassification
A client may also request to be regarded as a client belonging into a different category. If reclassification means that the extent of investor protection applicable to the client is reduced (e.g. when a retail client is reclassified as a professional client), SEB shall assess the aforementioned circumstances in the case of the client. However, if reclassification means an increase in investor protection (e.g. classification of a professional client as a retail client), then SEB will assess the risks and consequences of the reclassification for the Bank.

Retail clients may request to be treated as professional clients, and vice versa. Professional clients may request to be treated as eligible counterparties and eligible counterparties may request to be treated as professional clients or retail clients. An application for amendment of client classification must be submitted to the client service assistant.

Explanations about the rights that the clients may forfeit if they choose the client classification providing less investor protection has been provided here