A professional investor is either a 'professional client' or an 'eligible counterparty' (each as defined in the Handbook of Guidance and Rules as implemented by the UK's Financial Services Authority).
A 'professional client' (as defined) is a client that either satisfies the criteria below (a 'per se' professional client) or has elected to become a professional client:
1. Entities required to be authorised or regulated to operate in the financial markets. The following list includes all authorised entities carrying out the characteristic activities of the entities mentioned, whether authorised by an EEA State or a third country and whether or not authorised by reference to a directive:
- Credit institutions;
- Investment firms;
- Other authorised or regulated financial institutions;
- Insurance companies;
- Collective investment schemes or the management companies of such schemes;
- Pension funds or the management companies of such funds;
- Commodity or commodity derivatives dealers;
- Locals;
- Other institutional investors;
2. Large undertakings that meet any of the following conditions:
- a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) (or has had at any time during the previous two years) called up share capital or net assets of at least £5 million (or its equivalent in any other currency at the relevant time);
- an undertaking that meets (or any of whose holding companies or subsidiaries meets) two of the following tests:: (1) a balance sheet total of EUR 12,500,000; (2) a net turnover of EUR 25,000,000; (3) an average number of employees during the year of 250.
- a partnership or unincorporated association which has (or has had at any time during the pervious two years) net assets of at least £5 million (or its equivalent in any other currency at the relevant time) and calculated in the case of a limited partnership without deducting loans owing to any of the partners;
- a trustee of a trust (other than an occupational pension scheme, SSAS, personal pension scheme or stakeholder pension scheme) which has (or has had at any time during the previous two years) assets of at least £10 million (or its equivalent in any other currency at the relevant time) calculated by aggregating the value of the cash and designated investments forming part of the trust's assets, but before deducting its liabilities;
- a trustee of an occupational pension scheme or SSAS or a trustee or operator of a personal pension scheme or stakeholder pension scheme where the scheme has (or has had at any time during the previous two years): (i) at least 50 members; and (ii) assets under management of at least £10 million (or its equivalent in any other currency at the relevant time)
- a local authority or public authority.
3. National or regional governments, public bodies that manage public debt, central banks, international or supranational institutions (such as the World Bank, the IMF, the ECB, the EIB) or other similar international organisations.
4. Other institutional investors whose main activity is to invest in financial instruments or designated investments, including entities dedicated to the securitisation of assets or other financing transactions.
5. Individual investors who expressly ask to be treated as a professional client (provided that he/she is a natural person resident in the UK), and meets the following criteria: (1) He/she has satisfied First Trust Global Portfolios after carrying out an assessment of the expertise, experience and knowledge of the client that, in light of the nature of the transactions or services envisaged, that the client is capable of making his/her own investment decisions and understanding the risks involved and (2) The client has stated in writing (a) that he/she wishes to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product and (b) (after receiving the written warning from First Trust Global Portfolios of the protections and investor compensation rights the client may lose) that he/is is aware of the consequences of loosing such protections.
An 'eligible counterparty' (as defined) is a client that either satisfies the criteria below (a 'per se' eligible counterparty) or has elected to become one:
1. investment firms
2. credit institutions
3. insurance companies
4. collective investment schemes authorised under the UCITS Directive or the management companies of such schemes
5. pension funds or their management companies
6. other financial institutions authorised or regulated under EU legislation or the national law of an EEA State (where financial institution includes regulated institutions in the securities, banking and insurance sectors)
7. undertakings exempt from the application of the Markets in Financial Instruments Directive under either Article 2(1)(k) (certain own account dealers in commodities or commodity derivatives) or Article 2(1)(l) (locals) of that directive;
8. national governments or their corresponding offices, including public bodies that deal with the public debt;
9. central banks
10. supranational organisations.
Other investors who expressly ask to be treated as eligible counterparties which is where such investor is an undertaking and is either (1) a per se professional client and is (a) a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) called up share capital of at least £10 million (or its equivalent in any other currency at the relevant time) or (b) meets two of the following tests: (i) a balance sheet total of EUR 12,500,000; (ii) a net turnover of EUR 25,000,000; (iii) an average number of employees during the year of 250 or (2) requests such categorisation and is an elective professional client but only in respect of the services or transactions for which it could be treated as a professional client.