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Investor

An investor is any person who:

  • Owns a security (e.g., stocks, bonds), or
  • Has agreed to acquire securities.

An investor who is considered to be a professional client may, on request, be treated as a professional client within the meaning of Annex II of the Investment Services and Activities and Regulated Markets Law 87(I)/2017 as amended.

Qualified Investor

A qualified investor is a specific type of investor with professional expertise or significant financial standing. According to the Estonian Securities Market Act (§ 6), qualified investors include:

  1. Financial Institutions
    Credit institutions, investment firms, management companies, investment funds, insurance companies, or other supervised financial entities.

  2. Governments and Central Banks
    The Republic of Estonia, foreign states, regional governments, or central banks (e.g., the Bank of Estonia).

  3. International Organizations
    Entities like the International Monetary Fund (IMF), European Central Bank (ECB), or European Investment Bank (EIB).

  4. Specialized Financial Entities
    Firms solely focused on investing in securities or trading commodities and derivatives.

  5. Large Enterprises
    Companies meeting at least two of these criteria:

    • Balance sheet total of at least €20 million,
    • Net turnover of at least €40 million,
    • Equity of at least €2 million.

  6. Professional Clients or Eligible Counterparties
    Individuals or entities classified as professional clients (§ 46) or eligible counterparties1 (§ 46-1), unless they opt to be treated as retail clients2.

Professional Investor (Professional Client)

A professional investor (or professional client) is a subset of investors with specific expertise or scale, as defined in § 46 of the Act. These include:

  1. Entities Listed in Qualified Investor Categories 1–5
    Financial institutions, governments, international organizations, specialized financial firms, and large enterprises (as above).

  2. Retail Clients Upgraded to Professional Status
    Individuals or companies not automatically qualified can be treated as professional clients if they meet at least two of these conditions:

    • Have executed an average of 10 significant securities transactions per quarter over the past four quarters,
    • Own a securities portfolio worth more than €500,000,
    • Have worked at least one year in a financial sector role requiring securities knowledge.
    • The client must request this status in writing, and the investment firm must assess and approve it, ensuring the client understands any reduced protections.

Professional clients can opt to be treated as retail clients if they feel unable to manage investment risks adequately.

Well–Informed Investor

A well-informed investor is every Investor who is not a professional investor and fulfills the following conditions (confirms in writing that):

(a)

  1. He/she possesses sufficient knowledge and experience in financial and business matters in order to be able to evaluate the benefits and risks associated with the planned investment in the Fund, and he/she is aware of the risks associated with the planned investments in the Fund; or
  2. His/her business activities are related to the management, acquisition, or disposal of assets, either on his own account or on behalf of third parties, which are of the same type as the investments in the Fund he wishes to invest in; and

(b)

  1. His/her investment in the Fund is at least equal to the minimum of EUR 125,000 (one hundred twenty-five thousand euro) (or currency equivalent); or
  2. He/she has been assessed as a well-informed investor by a credit institution or by, an AIFM or by, a UCITS management company or by, an investment firm, or a manager which is registered in the Republic of Estonia or in another EU member state for the management of AIFs and AIFs whose assets under management do not exceed the thresholds laid down in Article 4(2) of the AIFM Law or the corresponding article 3 paragraph (2) of Directive 2011/61/EU, and the assessment mentioned above indicates that he possesses sufficient knowledge and experience in financial and business issues to be able to evaluate the benefits and risks associated with the planned investments of in the Fund(s) based on its (their) investment policy(ies); or
  3. He/she is employed by any of the entities mentioned in subparagraph 2 of paragraph (b) above and receives total remuneration that takes him/her into the same remuneration bracket as natural persons who effectively conduct one of the business activities of the entities mentioned in subparagraph 2 of paragraph (b) or as the executive members of their government body who effectively conduct one of their business activities; whereas

(c) without prejudice to paragraphs (a) and (b), persons who direct the General Partner or are assigned portfolio management duties related to the General Partner. 3

Footnotes

  1. Eligible Counterparties: A smaller, highly sophisticated group (e.g., financial institutions, governments, international organizations from § 6(2)(1–3)) that face fewer regulatory requirements in transactions (§ 46-1). ↩

  2. Retail Clients: Anyone not classified as a qualified investor or professional client is considered a retail client (§ 46(3)) with full regulatory protections. ↩

  3. General Partner is a management company whose regular business is managing one or more AIFs following the authorization provided under the provisions of the Investment Funds Act of the Republic of Estonia and authorized by the Estonian Financial Supervision and Resolution Authority to operate as a fund manager. ↩