Ktimatiki Capital: elective professional re-categorisation and tied agents in Athens
Ktimatiki Capital CIF Ltd is a Cyprus investment firm authorised by CySEC under Law 87(I)/2017 for investment advice and reception and transmission of orders. It is onboarding Vrachos Family Office Ltd, a Limassol company holding €9.4 million of liquid financial instruments and €22 million of investment property. Vrachos has written to Ktimatiki asking to be treated as an elective professional client. Its sole finance director spent three years in a bank treasury department, and the company has never traded derivatives or placed an order through Ktimatiki. Separately, Ktimatiki plans to appoint two tied agents in Athens who will meet Greek retail clients, sign advisory agreements on Ktimatiki's behalf, hold signed applications for 48 hours pending head-office approval, and keep 45% of the advisory fee. The compliance officer has already moved Vrachos to the professional-client register without further assessment and has not notified CySEC of the Greek plan, on the view that tied agents are automatically covered by the firm's existing freedom to provide services.
1. Can Ktimatiki grant Vrachos elective professional treatment on the file as it stands, and what must still happen before any re-categorisation takes effect?
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The test. Elective treatment relies on Annex II of Law 87(I)/2017 (MiFID II Annex II, Section II). The client must meet at least two of three criteria: (i) an average of ten significant transactions per quarter over the previous four quarters on the relevant market; (ii) a financial instrument portfolio, including cash deposits, above €500,000; (iii) at least one year in a professional position in the financial sector requiring knowledge of the transactions envisaged.
Applied to the facts. Criterion (ii) is clearly met (€9.4 million of liquid instruments). Criterion (i) is not: Vrachos has never traded, and the assessment must reflect the client's actual activity, not its wealth. Criterion (iii) is arguable only if the treasury role genuinely required knowledge of the transactions envisaged; three years satisfies the duration, but the firm must document the substance of the role. The separate "large undertaking" route (two of balance-sheet total €20 million, net turnover €40 million, own funds €2 million) cannot be used, because none of those figures is on file - €22 million of investment property is not a balance-sheet total.
Procedure still required. A written request from the client; a written warning of the protections lost (investor compensation, information duties, appropriateness assessment); written confirmation that the client is aware of the consequences; a documented firm-side assessment of expertise, experience and knowledge; an approved internal policy; and a durable record. The client must also be told it can ask to be re-categorised if circumstances change.
Conclusion. The register entry is premature: on the current file only one criterion is clearly satisfied. Best execution, fair treatment and conflicts management remain owed in any event.
2. What must Ktimatiki complete before the two Athens tied agents may deal with clients, and which features of the proposed arrangement are incompatible with the tied-agent regime?
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Registration first. A tied agent is not an authorised firm; it acts for, and under the full and unconditional responsibility of, one investment firm only. Ktimatiki must enter each agent - and each natural person directing the business and each person dealing with clients - in the CySEC public register before any activity, after assessing good repute and the knowledge and competence of the agent and its staff. Cross-border use then follows the notification route: CySEC transmits the file to the Hellenic Capital Market Commission and the agent appears on the ESMA register. The firm, not the agent, carries the authorisation.
Two incompatibilities.
Holding client money or assets. A tied agent may not hold client money or client assets. Holding signed application forms for 48 hours is acceptable only if no money and no client assets pass through the agent's hands. If the agent collects cheques, cash or subscription monies even briefly, the arrangement is prohibited and the firm must route payments directly.
The 45% fee share. This is remuneration of the firm's own agent rather than a third-party inducement, so it is not banned outright, but it must be captured in the conflicts-of-interest policy, must not drive unsuitable recommendations, and must be disclosed where the service is presented as independent. A firm holding itself out as providing independent advice cannot operate a remuneration structure that rewards volume of recommendations without further controls.
Also required. The agents must disclose which firm they represent, may not act for any other firm, and their order-taking must be recorded and retained by Ktimatiki as if taken by head office.
3. A Greek retail client advised through one of the tied agents complains that the recommendation was unsuitable. Who is answerable, which authority supervises the agent's conduct, and where can the client escalate?
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Answerability. The client's contractual and conduct-of-business relationship is with Ktimatiki, not with the agent. MiFID II makes the investment firm fully and unconditionally responsible for any act or omission of its tied agents, so the suitability assessment, the appropriateness test where relevant, the recording of the advice, and any redress all sit with the firm. The firm cannot argue that the agent was an independent intermediary.
Supervision. The agent has no authorisation of its own, so prudential and conduct supervision of the agent's activity is exercised by CySEC as home-state authority, with the Hellenic Capital Market Commission cooperating under the notification framework and able to require information and to enforce local marketing and conduct rules. A finding against the agent is in practice a finding against Ktimatiki.
Escalation. The client should first use Ktimatiki's complaints procedure, which must be documented and time-bound. If unresolved, the client may complain to CySEC and to the Cyprus Financial Ombudsman for the conduct-of-business aspects, and may also approach the Hellenic authorities for the Greek leg of the service.
Evidential point. Because the firm must retain records of the suitability assessment and of the order, including orders received through a tied agent, an incomplete file will usually be read against the firm. The agent's own notes are not a substitute for the firm's records.