The Italian Ministry for Economy and Finance approved on November 11 2011 Ministerial Decree No. 236 which identifies "professional public clients". Such identification is essential in financial transactions, and more so in derivative transactions, to understand the level of information and the clauses of protection which should be provided and offered by financial intermediaries. The Ministerial Decree was only published in the Italian Official Gazette on March 7 2012 and was approved well after the decision of the legislator (which dates back to 2008) to block derivative transactions for regions and local authorities in Italy.
The Ministerial Decree tries to cancel a grey area which generated uncertainties and significant incomprehension between counterparties based on the original position of the legislator, which was to consider sufficient for the purpose of classifying a client as professional the fact that such client had securities listed on a market, and on the somehow easy and relaxed approach of many public counterparties which frequently confirmed their "professional" status.
For the Italian legislator, only the Republic of Italy and Bank of Italy may be considered automatically as public professional clients for any kind of services including those of collective management. The financial intermediary must inform such public professional clients before entering into any transaction where they will be treated as a professional client unless parties differently agree. The public professional client may in fact request the intermediary to be treated for specific transactions as a retail client obtaining a higher level of protection and a specific written agreement must, in this case, be executed.
Regions, local authorities and public entities may request financial intermediaries to treat them as professional public clients provided:
- they have definitive revenues higher than 40 million ($50.9 million) resulting in the last approved accounts;
- they have entered into transactions on the financial markets having a nominal or aggregate amount higher than 100 million during the three-year period preceding the execution of the relevant contract; and,
- there exists a financial department with personnel with adequate knowledge, experience and competence in financial services including collective management and financial instruments.
The request to be treated as a professional client must be autonomously evaluated and assessed by the financial intermediary, and if the request for a different classification is accepted, the intermediary must release an express certification confirming that it has evaluated the relevant elements and has expressly accepted the client's request.
The classification of regions, local authorities and public entities as public professional clients may be made only once the public counterparty has formally indicated in writing to the financial intermediary to be in possession of the requirements as far as revenues, number of transactions and dedicated personnel and the financial intermediary has indicated to the public client and the client duly acknowledged, which are the protections and indemnity rights which the client would consequently lose.
The Ministerial Decree introduces also the burden for public clients to inform their financial intermediaries of any change which may affect their profile and which could affect their classification, without, however, excluding the burden for intermediaries to adopt the necessary actions should the intermediary ascertain that the professional public client no longer meets the necessary requirements for the classification.