Introduction

You should not invest in any investment product or agree to receive any investment service unless you understand the nature of the contract you are entering into and the extent of your exposure to risk. You should be satisfied that any product or service is suitable to you given your financial position and investment objectives and where appropriate you should seek advice in advance of making any investment decisions.

 

1. General

 

1.1            The price and value of an investment is dependent upon fluctuations in the financial markets which are beyond anyone’s control. Past performance is not an indicator of future performance. The type and extent of an investment’s risk will vary between countries and according to nature of the investment and according to the diversification or concentration in a portfolio. Generic risks applicable to investments are set out as follows.

 

1.2            Market risk – the price of an investment will depend upon changes in the financial markets including supply and demand, investor perception and the prices of underlying investments or allied investments.

 

1.3            Foreign markets – an overseas investment or one with an overseas element will be subject to the risks of the overseas market which may differ from the investor’s home market. Risks may be greater with the investment’s return being subject to currency fluctuations

 

1.4            Emerging markets – price volatility in emerging markets can be extreme and sudden. Price discrepancies may be common and unpredictable movements and are not uncommon. These markets may lack the transparency, liquidity, efficiency, market infrastructure and regulation found in more developed markets. They may also be subject to political risk.

 

1.5            Currency risk – any foreign exchange transactions and transactions in derivatives and securities that are denominated in a currency, other than that in which your account is denominated, are subject to the impact of changes in exchange rates. These changes in rates may have a favourable or unfavourable impact.

 

1.6            Interest rate risk – interest rates can rise as well as fall. A risk exists with interest rates that the relative value of a security, in particular a bond, will worsen due to an interest rate increase. There can also be a negative impact on other products.

 

1.7            Concentration risk – investing in one type of investment can be a high-risk strategy. The value of the investment can increase significantly but can also drop significantly and there is a risk that all the amount invested is lost. A managed approach to diversify risk across different company shares and asset classes should be considered.

 

 

2. Equity Securities

 

2.1            Buying or subscribing for equity securities will mean that you will become a stakeholder of the issuer company and participate fully in its economic risk. Holding ordinary shares will generally entitle you to receive any dividend distributed each year (if any) out of the issuer's profits made during the reference period. Holdings in equities will generally expose you to more risk than debt securities since remuneration is tied more closely to the profitability of the issuer. In the event of insolvency of the issuer, your claims for recovery of your equity investment in the issuer will generally be subordinated to the claims of both preferred or secured creditors and ordinary unsecured creditors of the issuer. If you buy equity securities, you will be exposed to both the specific risks associated with individual securities held as well as the systemic risks of the equity securities markets. In addition to market risk, the shares may be subject to liquidity risk whereby the shares could become very difficult to sell particularly where the company is private or is listed but only traded infrequently.

 

2.2            Investing in preference shares gives the shareholders the right to a fixed dividend, the calculation of which is not based upon the success of the issuer company. Such shares do not usually give shareholders the right to vote at general meetings of the issuer though shareholders will have a greater preference to any surplus funds of the issuer than ordinary shareholders if the issuer were to go into liquidation.

 

2.3            Depositary receipts, including American or European Depositary Receipts (ADRs or EDRs), Global Depositary Receipts or Shares (GDRs or GDSs) or other similar global instruments are receipts representing ownership of shares of a foreign-based issuer. They are typically issued by a bank, will represent a specific number of shares in a company and are traded on a stock exchange which may be local or overseas to the issuer of the receipt. The risks involved relate to both the underlying share and the bank issuing the receipt.

 

2.4            Penny shares and those admitted to trading on AIM and the Aquis (formerly NEX) Exchange carry a higher degree of risk of losing money than other UK shares. Penny shares are shares which have speculative appeal due to their low value. There is likely to be a big difference between the buying price and the selling price of these shares, as well as the market depth. If they have to be sold immediately, you may get back much less than was paid for them. The price may change quickly, and it may go down as well as up.  It can be difficult to source reliable information about their value and the extent to which they are exposed to risk.

 

2.5            Equity securities traded in certificated form will take a longer to settle than the market standard settlement period for securities held in electronic form and a premium may be charged for such extended settlement terms.

 

2.6            If you buy equity securities issued under Regulation S of the US Securities Exchange Act 1933, such securities may be subject to trading conditions which may restrict your ability to sell.  There is no guarantee that such securities will hold their value until the end of any restriction period. Where settlement of these securities takes place in certificated form there may be a significant time period before delivery of the share certificates.

 

3. Equity placings

 

• A placing represents the issue of new shares in a company to a select number of private investors, rather than the general public, in order to raise capital.

 

• Investing via placings typically involves shares where there is a restricted market; it may be difficult to sell these shares at any price or obtain reliable information about their value. Under certain conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that under the AIM Rules trading is suspended or restricted.

 

• There is an additional risk of losing money when purchasing Investments in some smaller companies, including penny shares and companies that operate in high risk sectors and/or sensitive jurisdictions and/or high levels of research and development, which requires significant capital expenditure and does not yet produce income.  There may be a significant difference between the bid and offer price of these shares and they may not be readily realisable.  If you have to sell those Investments immediately, you may get back less than you paid for them.  The price may change quickly and may go down as well as up.

 

4. Warrants

 

4.1            A warrant is a time-limited right to subscribe for shares, debentures, loan stock or government stock and is exercisable against the issuer of the warrant. The issuer may be the original issuer of the underlying security or a third-party issuer. A relatively small price movement in the underlying security can result in a disproportionately large favourable or unfavourable movement in the price of the warrant.

 

4.2            The right to subscribe (‘exercise’) for any underlying investment which the warrant confers is limited in time with the consequence that if you fail to exercise the right within the pre-determined time period then the investment becomes worthless.

 

4.3            If you exercise a warrant you may be required to pay to the issuer additional sums. Exercise of the warrant will give you all the rights and risks of ownership of the underlying security.

 

4.4            A warrant that you hold is a contract between the issuer and yourself. You would therefore be exposed to the risk that the issuer will not perform their obligations under the warrant.

 

4.5            You should not buy a warrant unless you are prepared to incur a total loss of the money you have invested plus any commissions and transaction charges.

 

 

5. Exchange Traded Funds

 

5.1            Exchange traded funds ("ETFs") are closed-ended collective investment schemes, traded as shares on stock exchanges, and typically replicates a stock market index, market sector, commodity, or basket of assets. As such, they generally combine the flexibility and tradability of a share with the diversification of a collective investment scheme. Where you purchase ETFs, you will be exposed to similar risks as detailed in respect of equity securities, as well as the general risks detailed in paragraph 1.

 

 

6. Unlisted equities

 

6.1            Unlisted equities are financial instruments that are not traded on an exchange. These shares will not be subject to the listing rules of the United Kingdom Listing Authority, LSE rules, AIM rules, the UK Corporate Governance Code or any other similar rules or regulations applying to companies with securities admitted to or traded on a regulated market, investment exchange or other public market. The absence of a market listing is likely to make it more difficult to sell or transfer shares. There may not be a readily available market value. In general, they are only suitable for investors with other sources of wealth.

 

 

7. Contingent liability investment transactions

 

7.1            Contingent liability investment transactions, which are margined, require you to make a series of payments against the purchase price, instead of paying the whole purchase price immediately. If you trade in futures, contracts for differences or sell options, you may sustain a total loss of the margin you deposit with the firm with whom you trade to establish or maintain a position. If the market moves against you, you may be called upon to pay substantial additional margin at short notice to maintain the position. If you fail to do so within the time required, your position may be liquidated at a loss and you will be responsible for the resulting deficit. Even if a transaction is not margined, it may still carry an obligation to make further payments in certain circumstances over and above any amount paid when you entered the contract. Margined or contingent liability investment transactions which are not traded on or under the rules of a recognised or designated investment exchange may expose you to substantially greater risks.

 

 

8. Debt securities

 

8.1            All debt instruments, including bonds and debentures are potentially exposed to risks, in particular to credit and interest rate risk. Debt securities may be subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, general market liquidity and other economic factors. When interest rates increase the value of corporate bonds can be expected to fall. Fixed rate transferable debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities.

 

 

9. Complex instruments

 

9.1            A complex instrument is any instrument that satisfies the following criteria:

 

• It is a derivative or includes an embedded derivative;
• Consists of one or more underlying financial instruments that are difficult to value, assess performance or the risks involved;
• Use bespoke underlying indices rather than standardized market indices;
• There are not frequent opportunities to dispose, redeem or realise them at publicly available prices (independent of the issuer) through market participants;
• It may involve the any actual or potential liability in excess of the cost of acquiring the instrument
• Comprehensive information on the characteristics of the instrument is not publicly available in a readily understood format.

 

9.2           Complex instruments would thus include unlisted securities, warrants, subscription shares (newly issued securities), equity-linked notes, exchange-traded products, derivatives, contracts for differences (CFDs), shares in non FCA recognised collective investment schemes, units in tax exempt unauthorized unit trust, structured products, convertible debt and callable bonds.

 

9.3           These instruments have an increased level of risk and should not be invested in unless you are satisfied that the instrument is suitable for you.

 

9.4           Where you are classified as a retail client and wish to place execution-only orders with us in complex instruments, we are required to assess whether you have the necessary experience and knowledge to understand the products. 

 

 

10. Collateral

 

10.1         If you deposit collateral as security with us, the way in which it will be treated will vary according to the type of transaction and where it is traded. There could be significant differences in the treatment of your collateral, depending on whether you are trading on a regulated market, with the rules of that market (and the associated clearing house) applying, or trading off-exchange. Deposited collateral may lose its identity as your property once dealings on your behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get back the same assets which you deposited and may have to accept payment in cash. We will notify you of how we will deal with any collateral you deposit, including if your deposit is subject to total title transfer.

 

 

11. Commission

 

11.1         Before you begin to trade, you should obtain details of all commissions and other charges for which you will be liable.  If  any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear, written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. In the case of futures, when commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.

 

 

12. Suspensions of Trading

 

12.1         Under certain market conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that, under the rules of the relevant exchange, trading is suspended or restricted. Placing a stop-loss order will not necessarily limit your losses to the intended amounts, because market conditions may make it impossible to execute such an order at the stipulated price.

 

12.2         In the case of transactions as described in 12.2.1 and 12.2.2 there may be insufficient published information on which to base a decision to buy or sell such shares.

 

12.2.1      Transactions may be entered into in securities whose listing on an exchange is suspended, or whose listing or dealings in have been discontinued, or which is subject to an exchange announcement suspending or prohibiting dealings.

 

12.2.2      Transactions may be entered into in a grey market security being a security for which application has been made for listing or admission to dealings on an exchange where the security’s listing or admission has not yet taken place and the security is not already listed or admitted to dealings on another exchange.

 

 

13. Clearing House protections

 

13.1         On many exchanges, the performance of a transaction may be guaranteed by the exchange or clearing house. This guarantee is usually in favour of the exchange or clearing house member and cannot be enforced by a client. The client may therefore be subject to the credit and insolvency risks of the firm through whom the transaction was executed.

 

 

14. Insolvency

 

14.1         The insolvency or default of the firm with whom you trade, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets which you lodged as collateral and you may have to accept any available payments in cash.

 

  

 

                  June 2020