1. Are financial intermediaries (banks and brokers) allowed to charge fees?
Yes. Financial intermediaries (FIs) charge fees that are not subject to legal limits for the services they provide to investors. Charging fees is provided for in the general contractual clauses of the registration and deposit agreements of financial instruments (namely securities) entered into in writing with Clients.
However, these fees and all costs on clients must be provided in the form of a price list. The IFs shall make said available to Clients when opening a securities account and whenever said is requested by investors. The price list should be made available at all bank branches, public service places and also on the IF's website.
2. What is a financial intermediation price list?
The price list displays all the expenses and the conditions under which they are applied for the financial intermediation services provided by the FIs. The price list generally has the following fees and costs:
a) In market trading of financial instruments' fee - This fee is charged by the financial intermediary for providing the investor with the service of receiving, transmitting or executing a buy or sell order given by the investor. This cost can have a fixed value (per order) or variable (percentage of the amount traded).
Certain financial intermediaries charge this cost even if the order is not executed. In cases where a single order gives rise to multiple trades, financial intermediaries may charge a fee for each trade.
Usually, fees concerning transactions carried out on Euronext Lisbon include exchange (paid by the financial intermediary to Euronext), clearing (paid by the financial intermediary to Clearnet) and settlement (paid by the financial intermediary to Interbolsa) fees.
This fee may include postage and office expenses.
b) Registration and deposit of financial instruments' fee – This fee is charged by the FI for providing registration and deposit service of financial instruments in each investor's account (also known as custody fee). This cost can have a fixed or variable amount (percentage over the amounts that are part of the account, with minimum and maximum limits) and is usually charged on a quarterly basis.
Most financial instruments are book-entry (they exist only in computer records), but there are also certificated (paper) financial instruments. Opening and maintaining financial instrument registration accounts generates costs that financial intermediaries have on the price of services charged to investors.
c) Transfer of financial instruments between accounts' fee - Fee charged by the financial intermediary for the transfer of financial instruments registered in an investor's account to another account. In the case of transfers between accounts of different financial intermediaries, this commission is not normally charged by the FI to which the account is transferred.
d) Fee on the issuance of certificate for participation in the general meeting – Fee charged by the intermediary that issues the certificate for proof of share ownership and to enable voting rights. This cost is usually of a fixed amount for each issued certificate.
Since the issuance of the certificate is intended to prove ownership of the shares and to enable the exercise of voting rights at general meetings, a certificate must be issued for each meeting wherein the investor intends to participate.
The articles of association of certain companies limit the exercise of the voting right to a certain number of shares (for example, 500 shares). In such cases, the certificate does not allow the investor to exercise the vote and therefore, its issuance and payment of the corresponding cost may be useless.
e) Dividend payment fee – Fee charged by the intermediary whenever the value of dividends corresponding to the shares held by the investor is deposited in the investor's account. This cost usually has a variable value (percentage on the dividend value) and may be subject to a minimum and maximum limit. The fee may include postage and office expenses.
Charging the dividend payment fee is done automatically and thus does not require the investor requests the service. Not all companies distribute dividends. Fees are charged according the amount of the corresponding dividend credits.
f) Bond yield payment fee – Similar to the dividend payment fee whenever the financial intermediary credits the investor's account with the bond yields that said is a holder of.
g) Corporate events fee – Fee charged by the intermediary whenever the investor exercises the securities rights held by same, i.e. participation in capital increases, spin-offs or mergers of the company.
h) In addition to fees, investors will also have to bear the corresponding taxes.
3. Can the financial intermediary change fees without prior notice?
Adjusting price list fees must be communicated to the clients in advance. As a rule, the price list alteration conditions are set in the general contractual clauses of the registration and deposit contracts of financial instruments made in writing with the Clients.
4. Can financial instruments be kept at home to avoid paying fees?
Shares may be book-entry or certificated, depending on whether they are represented by account entries or paper documents, respectively. Therefore, the shares might not have physical existence and as such, must be registered.
Currently, all shares admitted to trading on the regulated markets managed by Euronext Lisbon, namely PSI 20 shares, are ordinary book-entry, registered or bearer shares, therefore dematerialised and cannot be delivered in physical form because they are represented by book entries.
In short, only company securities that are not admitted to trading (stock exchange) and whose form of representation is other than in book-entry form (since this form of representation is done through computerised account registration and therefore have no physical form) can be held at home.
5. How may the investor know the amount of fees that are to be charged?
Fees may not exceed the limits provided for each transaction and service contained in the price list. Investors have the right to be informed of the applicable fees prior to rendering any service. FIs should alert investors to operation fees prior to performing them and are required to display, in a place visible to all investors, the fee price list charged for providing each service and may not charge higher amounts. The CMVM, in order to assist investors, discloses on its website for information purposes only a Costs simulator.
6. After the execution of an operation, should the financial intermediary communicate its fee to clients?
After each transaction, the FI must inform the Client of the actual total price charged and duly detailed. The conditions for reporting the operations and services provided by the FIs are set out in the general contractual clauses of the registration and deposit agreements of financial instruments made in writing to the Clients, namely whether the dispatch must be made electronically or by post office.
7. Can the financial intermediary charge higher fees than that mentioned in the price lists?
FIs cannot charge fees that are higher than those mentioned in the price list and must inform the Clients concerning any subsequent changes to same.
8. How does one compare price lists?
The CMVM discloses on its website for information purposes only, all financial intermediary price lists in order to compare costs, including cost simulation of certain operations, specifying for this purpose which market and the transmission channel of the order (internet, telephone or branch):
9. Can a fee be charged that is not on the pricelist?
FIs cannot charge clients for any amounts other than those specified in the pricelists as fees or costs. However, they may apply lower fees or even no fees at all. The IF price list details all fees and contains the maximum value of all fees.
10. Will any fees be charged when securities are transferred to another financial intermediary?
The transfer of financial instruments between accounts gives rise to the payment of a fee that is charged by the financial intermediary for the transfer of financial instruments registered in an investor's account to another account at another financial intermediary, provided that the ownership of the account is the same. This fee is not normally charged by the financial intermediary to where the account is transferred.
11. If you transfer the portfolio of financial instruments to another financial intermediary and if you add another holder to the financial instruments account, do you have to pay any fee?
The transfer of the portfolio of financial instruments from one institution to another, wherein one of the holders changes ownership, is considered to be an off-market transaction and as such subject to fee payment.
12. How does one cease paying fees concerning a company that is in the process of liquidation?
Until such time as the company is liquidated, the respective issuance of financial instruments remains at the Central Securities Depository and is registered in the financial intermediaries' accounts (on behalf of their clients). The Central Securities Depository awaits from the issuing entity, the communication of the conclusion of the settlement process to cancel the respective registration of the issuance.
To avoid paying the registration and deposit fee of financial instruments, you may, if you hold a portfolio of financial instruments in another financial intermediary, transfer those financial instruments to another portfolio. However, prior to the transfer, you should be informed of the financial instruments' transfer cost. On the other hand, you can try to make your financial intermediary aware of the exemption of the securities custody fee since the company is bankrupt and is in administrative liquidation proceedings.