This document contains information about Innovestor Ltd (“Innovestor”) in accordance with the Investment Services Act, the offered investment services as well as the procedures to be complied with in the provision of investment services. In addition, the document contains information about the most common financial instruments and the most typical risks related to them.
In this document the definitions of the from time-to-time valid General Terms and Conditions for Investment services are used when applicable.
3 Information about Innovestor
Innovestor (business ID 2616018-4) is a Finnish investment firm for which the Finnish Financial Supervisory Authority has granted the authorization to arrange share issuances pursuant to the Investment Services Act and to receive and transfer orders, as well as offer related services in accordance with the same Act.
The registered office of Innovestor is located at Aleksanterinkatu 46 C, 00100 Helsinki. The supervisory authority of Innovestor’s operations in accordance with the Investment Services Act is Finanssivalvonta, Snellmaninkatu 6, PO Box 103, 00101 Helsinki, phone 010 831 51 (switchboard) fax 010 831 5328. Additional information: www.finanssivalvonta.fi.
4 Information about investment services offered by Innovestor
RECEPTION AND TRANSMISSION OF ORDERS
Innovestor receives and transfers subscription orders for both financial instruments and other securities that are subject to issues it arranges at any given time (”Subscription order”).
ARRANGING SHARE ISSUES
Innovestor offers an issuance service for unlisted shares, which is performed as a directed share issue with payment (”Share issue”) as regulated in Chapter 9 Section 4 of the Finnish Limited Liability Companies Act (21.7.2006/624).
Innovestor provides ancillary services related to the arrangement of issues, such as advice on capital structure, mergers, business strategy and other related questions.
INNOVESTOR’S TIED AGENTS
Innovestor offers the aforesaid investment and ancillary services also through its tied agents. Innovestor’s tied agents act on behalf of and under the responsibility of the company. Tied agents can (i) receive and transfer customer instructions and orders related to financial instruments offered by Innovestor and (ii) market investment and ancillary services offered by Innovestor.
The country of registration of tied agents is Finland.
The Finnish Financial Supervisory Authority maintains a public register of tied agents into which Innovestor registers its appointed tied agents.
5 Communication methods
Innovestor has the right to send written information regarding the investment service to the Customer by e-mail or in any other way agreed separately with the Customer.
The Customer may communicate with Innovestor by email or by meeting its representatives personally. The Customer may make orders regarding financial instruments (unlisted shares) electronically at Innovestor’s online service (www.innovestorgroup.com) and at personal meetings. Customer service is provided in Finnish.
Innovestor provides the Customer annually and separately upon the Customer’s request an investor report where all Customer’s investments done via Innovestor Group are recorded.
The Customer is aware that the use of email as a communication tool poses special risks, such as those related to data security or the fact that the message was not delivered. Innovestor has the right to rely on the authenticity and validity of a message received by email.
6 Expenses and fees related to investment and ancillary services
Innovestor charges an arrangement fee from a company using the arranged share issue service. Arrangement fee is determined separately in service agreement and is mainly linked to the success of the Share issue and the amount of collected capital.
Innovestor charges a subscription fee from Customers who have issued a Subscription order for taking care of the said Subscription order. Subscription fee is determined case by case. Information on the amount of the subscription fee is provided in the material concerning the respective security (such as the terms and conditions of the respective Share issue). The subscription fee will be charged in connection with the payment of the subscription in accordance with the Subscription order.
Incentives refer to payments or other benefits given or claimed from a third party in connection with offering an investment or ancillary service. Innovestor does not have arrangements under which Innovestor would pay or receive incentives.
7 The impact of cost related to the investment on the expected return
The cost to the Customer related to the Subscription order for securities arranged by Innovestor consists of a one-time subscription fee (see above Section 6).
Expected return of unlisted financial instruments varies remarkably depending on the features of the company subject to a Share issue. Return of the investment does not often realize until the time of selling of the Target Company since there might not be accrued dividends from the investment period. Expected return for an unlisted share is usually significantly higher than average expected return for listed shares.
In the following graph the effect of a one-time 3 % subscription fee on return is simulated so that annual return is expected to be 15 %, investment period 10 years and invested capital EUR 15.000. The expected return used in the example demonstrates the effect of expenses on the return of the investment on a long-term basis and does not demonstrate the historical or expected development of the product.
8 Recordkeeping of customer communication
Representatives of Innovestor are obliged to document and store in the customer relationship management system of Innovestor phone calls, emails, and notes of meetings with Customers which may lead to reception, transmission, or execution of orders. Kept records are used to verifying orders, risk management and mitigating possible disputes. Innovestor shall upon request of a competent authority assign recorded communication. Records shall be kept for five (5) years unless the Finnish Financial Supervisory Authority request to retain them for seven (7) years. The Customer is entitled to receive the records related to him/her/it upon request.
9 Processing of personal data
Due to Customer’s Subscription orders Innovestor processes necessary personal data of the Customer. Additionally, Innovestor processes personal data in order to fulfil the legal requirements imposed on it. Personal data collected based on the Act on Preventing Money Laundering and Terrorist Financing may be used to prevent, expose, and detect money laundering and terrorist financing and to inspect the crime based on which the assets subject to money laundering or terrorist financing have been gained
10 Customer classification
Primarily, Innovestor classifies all its Customers as non-professional customers at the beginning of the customer relationship unless the law requires otherwise, or the classification has been changed due to the Customer’s own request. The customer classification is informed to the Customer in writing in the subscription undertaking.
Customer classification criteria are outlined in more detail in the document (”Customer classification criteria”) that is available on the company’s website www.innovestorgroup.com.
APPLICATION FOR A CHANGE TO THE CLASSIFICATION
The Customer has the right to apply for the change of the customer classification. The application for the change to the classification must be made in writing. Such reclassification may have an impact on the investor protection and the application of procedural guidelines.
With the application of a professional customer, the Customer may be treated as a non-professional customer or an eligible counterparty. A Customer who has previously been classed as a non-professional customer may also be treated as professional customer subject to an application that meets the classification criteria.
A Customer classed as an eligible counterparty in turn may be treated as a professional or non-professional customer subject to an application.
A professional customer is obliged to request to be treated as a non-professional customer, if the Customer considers that he/she does not have sufficient experience and knowledge to assess and manage the risks related to the service or transaction.
EFFECT OF CLASSIFICATION ON APPLIED PROCEDURES
Before completing a written Subscription undertaking, a non-professional customer is provided the subscription terms and sufficient information about Innovestor, as well as the offered service. Information must be provided in an indelible manner, so that the Customer can print or save them.
Assessment of Customer’s experience and knowledge related to investing: Innovestor requests information from a non-professional customer regarding the willingness to take risks, investment experience and knowledge of investment service, in order to assess whether unlisted shares or service is appropriate for the Customer.
Only non-professional customers are covered by the Investor’s Compensation Fund described further under Section 11.
Innovestor is entitled to rely on the information provided by the Customer.
Professional customers are given a general description of the nature and typical risks of the financial instruments that are the subject of the service, if it is necessary, taking into account the Customer’s investment experience and knowledge.
An evaluation of the appropriateness for a professional customer is not undergone.
An eligible counterparty may request Innovestor in writing, that the procedural rules referred to as the investor protection are applied to transactions it carries out, either generally or for a single transaction. Innovestor shall consider on a case-by-case basis whether it shall agree to the request. In other cases, the procedural rules and investor protection rules do not apply to eligible counterparties.
11 Retention of customer funds
In terms of the arranged issuances, Innovestor receives the financial instruments’ subscription prices to a customer fund account upheld in Nordea Bank Oyj. The customer fund account is separate from Innovestor’s own funds.
Funds on customer fund account do not accrue interest.
INVESTOR’S COMPENSATION FUND
According to Finnish legislation, non-professional customers are covered by the Investors’ Compensation Fund. The Fund safeguards the non-professional investors’ uncontested and due receivables in the event that the investment firm is unable, due to a reason other than temporary insolvency, to pay the investors’ receivables within a certain period.
The amount of compensation to be paid to one investor is 9/10 of an investor’s receivable from one investment company, however no more than EUR 20,000. The Fund does not, however, compensate losses that are due to decrease in the stock price or incorrect investment decisions, so the Customer is still responsible for its own investment decisions’ consequences.
The customer funds on Innovestor’s customer fund account are within the scope of the Investor’s Compensation Fund as described above.
12 Reception of Subscription order
Innovestor offers the arrangement of issuance for unlisted shares which shall be carried out as Share issue (please see the definition above under Section 4). Share issue may be arranged directly into the company issuing the financial instrument (“Target Company“) or into a special purpose vehicle established for the Share issue which shall issue a financial instrument and subscribe shares of the Target Company.
In case the Share issue shall be arranged via a special purpose vehicle, the only task of the special purpose vehicle is to possess and govern the financial instruments of the Target Company. The special purpose vehicle shall use the total subscription amount of the Share issue to subscribe to the new financial instruments issued by the Target Company. Innovestor is responsible for the governance of the special purpose vehicle based on a service agreement concluded between Innovestor and the special purpose vehicle.
In the Share issues arranged by Innovestor the Subscription order shall be given and the subscription is performed by using a separate subscription undertaking. The subscription undertaking is available electronically in Innovestor’s platform or in a paper format document available upon request from Innovestor’s representatives.
Subscription order is always binding, and the Customer does not have the right to amend or cancel the given Subscription order. Innovestor confirms received subscription undertakings by sending a confirmation email to Customers. Confirmation contains the amount of shares to be subscribed to, subscription price in total and payment instructions. The Customer shall always pay the subscription price to the customer funds account of Innovestor (see Section 11 ”Retention of client funds”). Together with the subscription price the Customer shall also pay a subscription fee. Innovestor is responsible for depositing the subscription payments to the Target Company or to a special purpose vehicle.
Innovestor does not grant the Customer credit or other financing for the Customer’s securities trading. The Customer is responsible for paying the subscription amount latest on the fifth banking day after receiving the subscription confirmation, unless otherwise agreed.
Innovestor has the right not to accept the Customer’s Subscription order if (i) the subscription undertaking has been made on behalf of a legal person without appropriate authorization, (ii) the subscription price has not been paid from the bank account of the subscriber mentioned in the subscription undertaking, (iii) the financial instrument is not, under Innovestor’s assessment, appropriate for the Customer based on Customer’s level of investment experience and knowledge, financial conditions or other circumstances, or (iv) the Customer refuses to provide the information requested in the subscription undertaking or the given information is insufficient.
Innovestor shall inform the Customer of the cancellation of a subscription undertaking by the third (3) banking day following the expiry of the subscription period or suspended Share issue due to oversubscription. The possibly paid subscription price is refunded to the Customer within three (3) banking days from the notification of the cancellation.
13 Management of conflict of interests
The investment firm shall take all appropriate steps to identify and prevent conflicts of interest and, as they arise, treat the Customer in accordance with good practice.
A conflict of interest refers to an exceptional situation related to the provision of the investment service, which may involve a significant risk to the Customer’s interests. It is possible that Innovestor will come across situations, where the Customer’s interests are in conflict with Innovestor’s, its management’s and its staff’s interests or a conflict of interest arises between Innovestor’s Customers.
Innovestor shall comply with policies approved by the board of directors for the management of conflicts of interest in order to identify and prevent possible conflicts of interest.
Conflicts of interest are managed, for example, with principles regarding the staff’s and management’s trading rules and avocations.
If a conflict of interest cannot be avoided despite the previously mentioned action, the Customer is clearly and in an indelible manner informed in detail of the nature and reasons of the conflict of interest prior to carrying out the transaction. The Customer will independently consider whether he/she would like the transaction to be completed, despite the said conflict of interest.
Innovestor’s board of directors shall regularly review the content and validity of the operating principles regarding the management of conflicts of interest.
14 Information on investing in shares
A share is a financial instrument issued by a limited liability company which produces for its holder a right to the capital of the company. The possible proceeds of a share investment consist of dividends and increase of the share value. The share value is based on from time-to-time prevailing view on the value of the company which has issued the share. A share may be subject to public trading on a stock exchange or on an alternative marketplace. A share can also be unlisted.
15 Information on risks associated with investing in shares
From a shareholder’s point of view a share investment always involves financial risk. Share investments are associated with the risk of losing the invested capital completely if the Target Company would go bankrupt (counterparty risk).
In the following the most common risks associated with the share value are described. The presented risks are not in order of priority or the probability of their realization. In addition, the description of associated risks is not exhaustive.
The value of the share of a Target Company may fluctuate considerably during the investment period. If the value of the share does not develop as expected, return of the investment may remain small or be zero. The share’s value at a given date does not necessarily reflect the share return’s actual or future development. One cannot make trustworthy assumptions of future returns based on return history.
Risk of losing the capital invested in whole or partially
Various risk factors and conditions may result in the financial instrument’s market price declining. Thus, investing in shares is linked to the risk of losing part or all of the capital invested.
Shares of a Target Company are not subject to public or multilateral trading on any marketplace. Thus, the share does not have active or liquid secondary markets. Hence, there is a risk that the share cannot be sold or bought at a given time, since no purchaser can be found, or the offered purchase price is below subscription price or actual value. A buyer has also less information available about a Target Company than for example about listed companies.
Issuer risk (credit risk)
A Target Company is not able to pay share’s return to the investor.
Demand of Target Company’s products or services and that way the return of its business is influenced by the from time-to-time prevailing competitive situation, product and service development, common economic growth, and indirectly legislative actions. Hence, the business of a Target Company is prone to market risks independent of its own activities.
Operative risks are usually associated with processes and conduct, IT-systems, abuse possibilities, damaging of assets or capabilities of personnel. Operative risk can also come along as a decrease in reputation or trust or their loss in total. Target Companies’ operations are associated with the above listed conventional operative risks including risk related to key persons of a Target Company which might have material effects on the activities and economic standing of a Target Company.
Risk related to concentrated ownership
In an unlisted company the ownership of shares is typically concentrated, and the biggest shareholder or the biggest shareholders together might have a significant authority. Matters under the authority of the biggest shareholders can practically be for example strategy and business of Target Company, members of the board of directors, accepting financial statement and distribution of dividends. Actions, goals, and interests of the biggest shareholders might deviate from other shareholders’ goals and interests.
Legal risk is incurred if agreements will not be fulfilled or are invalid or void, immaterial rights are breached, or documentation is insufficient. Innovestor performs a background check on the Target Company before arranging a Share issue and scans any pending legal actions involving the Target Company. When the activities of a Target Company grow, also the significance of legal risks increases.
Restrictions on shareholder’s right in shareholders’ agreement or Articles of Association
A precondition for subscribing shares might be that the investor shall join the main shareholders’ agreement or the minority shareholders’ agreement (”Shareholders’ agreement”) of a Target Company. Investor shall familiarize himself/herself with possible Shareholders’ agreement and Target Company’s Articles of Association since they may include rights and obligations for the investor.
Shareholders’ agreement or Articles of Association may include voting restrictions relating to shareholders’ or share classes’ voting rights in general shareholders’ meeting. An investor shall familiarize himself/herself with such agreements relating to ownership of shares and using of voting rights which affect his/her rights and obligations in a Target Company.
Shareholders’ agreement or Articles of Association may include restrictions on the free transferability of shares and redemption rights for the Target Company or other shareholders relating to transfers. It might be that a Target Company has restricted the free transferability of shares in which case a shareholder shall first acquire an approval from the Target Company before selling investor’s share ownership to a third party. In a redemption clause a Target Company might give other shareholders a primary right to redeem those shares of a Target Company which would otherwise be sold to a third party. Redemption price is usually the same price which would be applied to when selling the shares to a third party. A shareholder is liable for complying with redemption clause and its terms.
16 Use of credit in investing
The Customer can also carry out investment transactions with loans. If the investment is developing positively, a higher return can be achieved with financing than in an investment that is made with merely personal assets. However, the investor must consider that if the investment develops negatively or if the investment loses its value entirely the credit taken out for the investment must still be paid back in full. A person considering to invest with loan capital should always assess their capability to pay back the debt, regardless of the development of the financed investment subject. Loan costs may also rise during the loan period due to a rise in interest rates. If the investment subject’s value is no longer sufficient to cover the collateral requirement for the loan, the investor may have to set additional collateral for the loan.
17 Distance selling
Innovestor provides investment services with distance selling. According to the Consumer Protection Act (CPA), Innovestor must provide the Customer with the following information on its activities:
- Details of Innovestor as a trader can be found in Section 3 of this information document (”Information about Innovestor”).
- Information about the offered financial service can be found in the subscription undertaking of each Share issue and in the general terms and conditions for investment services where applicable.
- Preliminary data of the remote agreement have been presented below in section “Preliminary data of the distance agreement”.
- Details on the legal remedies can be found in Section 20 of this information document (”Legal remedies”).
PRELIMINARY DATA OF THE DISTANCE AGREEMENT
The preliminary information presented in this document has been given in accordance with Finnish legislation. The agreement is governed by Finnish law, and disputes regarding the agreement are settled at the Helsinki District Court in accordance with Chapter 20 (”Legal remedies”). Preliminary data is provided in Finnish, and Innovestor agrees to use Finnish language during the contractual relationship.
RIGHT OF WITHDRAWAL
According to the Consumer Protection Act, Chapter 6a, there is no right to withdrawal in agreements that involve such financial instrument, whose price depends on the fluctuations of the financial markets, to which the service provider cannot influence. The Customer is therefore not entitled to cancel their Subscription order even if it had been delivered electronically.
The Customer must pay attention to the fact that there are tax consequences associated with the purchase, ownership, and sale of financial instruments. The Customer must ensure to obtain sufficient information regarding taxation already before making investment decisions. Taxation is based on the Customer’s individual circumstances and taxation may change during the investment period. More information on taxation is available at, for example, the tax office as well as the tax administration’s website www.vero.fi.
19 Customer support and management of customer complaints
In case of questions relating to the service, the Customer shall always primarily contact their account manager. Customers should inform Innovestor of any defects regarding the service and any related claims without delay.
Innovestor has a policy for handling customer feedback and complaints, which aim to ensure that Innovestor’s Customers have any complaints and customer feedback handled effectively, fairly and without delay. The feedback from Customers also offers Innovestor important information on the quality of the services and customer satisfaction and helps to further develop the services and operations.
All feedback and possible complaints concerning Innovestor are dealt centrally. Thus, customer feedback and possible complaints should be sent in writing to firstname.lastname@example.org (mark the subject as ”Customer complaint”) or Innovestor Oy / Customer complaints, Aleksanterinkatu 46 C, 00100 Helsinki. Customer complaints aim to be responded to without delay and latest within a week of the Customer’s contact. If this is not possible, for example, due to the acquisition of additional statements, this is to be notified to the Customer and he/she is given an estimated response time.
20 Legal remedies
In case of issues relating to the service, the Customer should always primarily contact their account manager. Customers should inform Innovestor of any defects regarding the service and any related claims without delay. If a solution cannot be reached between Innovestor and the Customer through negotiation, the Customer may request assistance from the Insurance and financial advice to help to settle the situation or take the dispute to the Securities Board to be settled. The Insurance and financial advice phone number is +358 9 685 0120 and website is www.fine.fi.
The Securities Board gives a free recommendation-based statement in dispute situations between a non-professional customer and a company that offers investment services. The dispute may concern the application of law, official regulation, good trading practice or agreement terms or the practice of a service provider. The Board does not deal with professional customers’ statement requests.
A non-professional customer may also take the matter to the Consumer Dispute Board to be settled. The Consumer Panel is an impartial and independent expert body, whose members equally represent consumers and traders. It provides recommendations for consumer and real estate disputes. The appeal must be made in writing, preferably by using the Board’s form. The appeal form, as well as guidance and advice are available on the Consumer dispute board’s website www.kuluttajariita.fi.
Agreements between Innovestor and the Customer are governed by Finnish law. Disputes regarding agreements between the contractual parties shall primarily be settled at the Helsinki District Court, unless the non-professional customer who is considered a consumer, requires for the proceedings to take place in the general court of first instance in whose jurisdiction he/she resides.