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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.

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. ↩