3.03 Federated ontology with 'financial instruments' as new federation http://fadyart.com/ Securities handling ontology. Construction phase 5: processes and procedures All rights reserved. Usage free for non-commercial purposes. Finance Finance Eddy Vanderlinden Rietlaan 79 8200 Sint-Michiels (Bruges) Belgium info@fadyart.com 3.02 Federated ontology with parties as new federation 3.01 Federated ontology including part of iso20022 3.00 Client acceptance processes 2.02 Commented relations 2.01 Referential systems 2.00 Risk monitoring 1.02 Financial instruments including credit rating information. 1.01 Financial instruments including ISO and ISIC codes 1.00 Financial instruments All rights reserved by Eddy Vanderlinden - Rietlaan 79 - B-8200 Bruges. Free for non-commercial usage. Entities managing global market transactions Global markets High impact on the stock price Network of commercial customer contacts Commercial network Accounting entities Accounting Retail customers contact points Retail branches Services Address Services rendered to the customers of and for account of our principals. The services can be rendered in own name or in name of the principals. Contact points for large investors Investment banking The state of actif and passif. Both are divided into categories depending on the term of immobilisation. The total of actif and passif should equal: they are in balance. Classes 1 to 5 contain the balance sheet accounts. Balance sheet http://www.fadyart.com/externalrisks.html Risk Risk monitoring Low risk probability Examples of political risk occurences: - Customer area If the products are subject to e.g. an import embargo: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the products cannot be exported to certain customers, this means: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer/Producer area If the issuer or producers are nationalized, this means: -- profits are going down in the general interest -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Customer area Political dictatures have a decreasing purchase power as consequence: -- less demand for the products -- less profit by the issuer in the short term -- less solvability by the issuer in the long term Risk incured by political decisions. Risk profile of the political situation. Valid time instants or periods Valid time Service of executing corporate actions Service linked to corporate action Exchange rate symptoms on which a risk profile is based. Exchange rate risk symptom Entities managing the customer referential systems Customer referentials Service of executing voluntary corporate actions like management buy outs, public purchase offers,... Voluntary corporate action Low solvability impact Contactpoints for large corporation customers Corporate banking Customer market risks on which a risk profile is based. Customer risk symptom Energy cost symptoms on which a risk profile is based. Energy cost risk symptom Impact on the solvability of the producer or issuer Solvability impact Channels through which the accounts can be administered and orders passed. Administration channel Debts which are fixed for more than 1 year, including the equity capital. Long term passif The risk of decreased purchase power. Examples of risk occurences: - Customer area If the customers are subject to purchase power reductions, the consequence is: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the producers are subject to reduced purchase power, the purchases become more expensive: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area Reduced purchase power with the issuer means his foreign holders will be more expensive to compensate for the reduced power. -- less profit by the issuer in the short term -- less solvability by the issuer in the long term Risk profile of the customers Insurances linked to the holdings in securities account. Exemple accident insurance which covers an amount in case of death of the valuation in securities account. Eventually wiht a maximum and minimum amount. Insurance Authorization to dispose over the client's holdings. The authorized person is allowed to transfer holdings to third party and to his own accounts. Client Authorization to dispose of the holdings Operational symptoms on which a risk profile is based. Operational risk symptom High profitability impact Commodity cost symptoms on which a risk profile is based. Commomdity cost risk symptom The reasons why an account is frozen. This means all positions on the account as well as the relationships with persons. Reasons for account freeze. The risk that the exchange rates fluctuate globally in a negative direction. Examples of risk occurences: - Customer area If the value of the customer’s currency depreciates against the producer’s currency, this means: -- a more expensive product -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the value of the producer’s currency appreciates against the customer’s currency, this means : -- a more expensive product -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If the value of the issuers currency depreciates against the holder’s currency, this means : -- less revenues in holder’s currency -- lower stock quotes because of the needed rentability uplift - Holder area If the value of the holder’s currency appreciates against the holder’s currency, this means : -- less revenues in holder’s currency -- lower stock quotes because of the needed rentability uplift Risk profile of exchange rates Debts which are frozen for max 1 year. Short term passif Medium profitability impact Medium solvability impact Profit and loss Demonstrates the construction of the result according to the nature of the profits and costs. This nature combined with the cost- and profitcenters found in the analytical accounting form a management information system. In the European normalized sheme, the first digit of an account number corresponds to an accounts class. Class 6 stands for the costs, class 7 for the costs. Accounts coupled to profit and loss accounts. In cost-accounting the purpose is to charge the source of costs and profits to so-called cost centers and to allocate the costs and profits to costbearers. Other models of analytical accounting are possible. In the European normalized sheme, the first digit of an account number corresponds to an accounts class. Classes 8 and 9 are reserved for analytical accounting..Normally class 8 for the cost centers, class 9 for the class bearers. Amounts of the profit- and loss accounts are posted simultaneously on a cost bearer. Periodically or directly, the costs are allocated to cost bearers. The allocation key is a periodic struggle in many companies, notably in the budgetting fase of the internal departments. Analytical account Vostro cash account Different public ISO codes used in the ontology Income owner is a fiscal non-resident in the fiscal country of the principal. His fiscal country is different from the principal's. Non resident income owner Interest rate symptoms on which a risk profile is based. Interest rate symptom Period during which the information on an individual is valid. Valid period Financial instrument The securities or combination of securities in the scope of this ontology. Entities managing securities handling. Securities handling Political symptoms on which a risk profile is based. Political risk symptom Reputational symptoms on which a risk profile is based. Reputational risk symptom The position of financial instruments in the account Client account position Low profitability impact Risk that legal restrictions like technical, ecological and cultural measures, will have negative effects. Examples of risk occurences: - Customer area If there are legal restrictions on the purchases by the customers, e.g. alcohol by young persons: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If there are legal restrictions on the production by the producers, e.g. cars with high carbon dioxide emission: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If there are legal restrictions on the issuance of stock, e.g. stock with mortgages as collateral are evaluated less than 100%, this means: -- need more collaterals as guarantee for loans -- increased costs for borrowing -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the purchase of stock is legally restricted, e.g. of so-called fiscal paradises, this means: -- less demand for the stock -- prices, thus valuation falling Risk profile of legal restrictions The risk bared by the operations of the issuer or the elements in the production chain. Example of operational risk: - Producer area Deliveries delayed, image damaged, poorer quality: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term Risk profile of business operations Monitoring of risk inherent to securities handling. Internal risk Organization of operational entities Operational organisation Service of execution of primary and secundary market orders Service linked to market orders Entities in charge of secundary market order handling. The secundary markets handling include orders on: - official markets; - over the counter markets (OTC); - public auctions for existing issues Secundary markets The members of the arrangement are all beneficial owners of the capital from economical and fiscal viewpoint. The application of this status is for capital operations, including entitlements linked to the equity capital. Example subsciption rights. Arrangement of capital beneficial owners The debts of the entity the accounting is done for. The equity capital is included since it is considered a debt against the share-holders. Passif The service of safekeeping and monitoring physical or inmaterial financial instruments. Safekeeping fee The total of the balances of suppliers or creditors. The totals are obtained in the balance sheet: - by periodic transfer of the totals of the supplier accounts - through simultaneaous posting of all details in the supplier accounts and the general ledger.(carbon copy posting) Both methods are representations of the double posting system:in the general ledger account and in the supplier account. Accounts payable Suppliers Private banking customer's contact points Private banking High solvability impact The position in financial instruments of the account NOSTRO account position The account in the principal's books of holdings of another financial institution. NOSTRO account Entities in charge of securities and securities accounts referential systems. When used exclusively for securities handling, this might include the customer referential systems. Referential systems Regulatory symptoms on which a risk profile is based. Regulatory risk symptom NOSTRO securities account http://www.fadyart.com/externalrisks.html Impact of the risk occuring Medium impact on the stock price Risk incurred by the public reputation. Examples of risk occurences: - Customer area If customers have to be excluded from sales due to reputational risk, e.g. armement deliveries to dictatures, this means: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the reputation of the producer is at risk, e.g. child labour in shoe manufacturies, this means: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If the reputation of the issuer is at risk, e.g. anti-trust investigations, this means: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the reputation of the holder is at risk, e.g. mafia connections of major shareholders, this means: -- less demand for the stock -- prices, thus valuation falling Risk profile of the reputation http://www.fadyart.com/externalrisks.html Symptom on which a risk assesment is based, so that a profile is obtained. Risk symptom Risk profile http://www.fadyart.com/externalrisks.html The risk profile is the core of the risk monitoring. The risk profile can be represented in an X/Y graph. Taxonomy of the risk profiles: 1 level of subclasses. The level is represented by different risk subclasses: commodity cost, customer risk, energy cost, exhange rate,... All profiles are stored at the level of the subclass. Each risk profile can have 3 possible impact evaluations: 1. Impact on the profitability position of the issuer of the stock. 2. Impact on the solvability position of the issuer of the stock. 3. Straight or indirect decrease of the stock price. That impactevaluation can be an individual of the subclasses of the impact class: High, Medium or Low. Example LowProfitabilityImpact. If we represent the impact evaluation on the Y-axis, we divide the Y-axis into 3 parts. The part starting at the intersection represents a low impact, the second part a medium impact and the upper part a high impact. On the X-axis we evaluate the probability of the risk occurring. The evaluation is done on both axis in 3 categories: low, medium and high. The low probability is represented on the 1/3 part starting at the intersection, the medium probability in the second part and the higher probabilities in the third part of the X-axis. Each individual profile of the subclasses refers to: 1. an impact subject and assessment of the impact 2. a probability assessment Further necessary information: 1. the area impacted by the risk: where is the source of the risk 2. the symptom which leads to a risk assessment 3. the source for the symptom: a press release, annual accounts statement, internet article,... 4. the validity period for the profile Capital owner is a fiscal resident in the fiscal residence country of the principal. Resident capital owner Authorization to manage the client's holdings. The authorized person is not allowed to transfer holdings to third party or to his own accounts. Client organization to manage the holdings The assumption is, the needed energy will allways be available but the price can reach skyhigh. The price increase is proportional to the scarceness. That way the valuation and related impactmeasurement is facilitated. Example of risk occurence: - Producer area If the energy costs increase, the costs of production are increasing, then: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term Risk profile of energy costs Comments to the yearly accounts are reported by reference to a separate ledger. In the European normalized sheme, the first digit of an account number corresponds to an accounts class. The claas reserved for comments is the 0 class. Comments to the yearly accounts Temporal information Time indicators Risk that the management represents through: - incompetency on management level; - ignorance in the field of activity of the issuer; - remuneration and departure premiums out of proportion to the results; - focus on short term results Examples of management risks - Issuer and producer areas Management errors are a risk factor for the issuer. Signs of dangerous management behaviour are (from empiric studies): -- the management did not learn from errors in the past since there were no errors commitet -- the management decides from “the stomac” -- only successes lived in the past with as result: -- less profit by the issuer or producer in the short term -- less solvability by the issuer or producer in the long term Risk profile of the management High risk probability The services rendered in the field of portfolio management. - advisory - discretionary Maagement fee The clients of the financial institution for whom's account the securities handling operations are performed. Client accounts Underlying-Collateral symptoms on which a risk profile is based. Underlying or collateral risk symptom NOSTRO cash account Contactpoints for institutional customers Institutional banking Entities managing the cash accounts and cards. Cash accounts and cards Service of executing orders on the primary market Primary market order fee The risk that the fiscal costs evolve increasingly high. Examples of risk occurences: - Customer area If the customer has to pay more taxes, his consumption is reduced with those directly or indirectly : -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If there are tax increases on the profits of producers, e.g. ruling is abolished: -- less profit by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If there are tax increases on the activities of issuers, e.g. stock market tax: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the fiscal pressure on stock increases, e.g. through higher prepaid tax rates, this means: -- less net profit for the holder -- less demand for the stock -- prices, thus valuation falling Risk profile of fiscal costs Risk that the cost for interest increases. Examples of risk occurences: - Customer area If the customer has to pay more interests for credits, his consumption is reduced with direct or indirect : -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the producer has to pay more interests for credits, his profitability is reduced, meaning: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If the market interests rise in the issuer’s area, the issuer has to provide a higher rentability too, meaning: -- less solvability by the issuer in the long term - Holder area If the market interests rise in the holder’s area, the rentability of the current investments lowers. -- to keep the rentability uplevel, the underlying value is lowered. Risk profile of interest rate costs Contact points for public customers Public banking Services rendered on the level of the client portfolio Servuices linked to client portfolios Legal restriction risk symptom on which a risk profile is based. Legal restriction risk symptom Instant at which the information of an individual is valid. Valid instant The assumption is, the needed commodity will allways be available but the price can reach skyhigh. The price increase is proportional to the scarceness. That way the valuation and related impactmeasurement is facilitated. Examples of risk occurences: - Producer area If the commodity costs increase, the costs of production are increasing, then: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If the commodity costs decrease, the costs of collaterals increase and the underlying assets of derivatives become less worth, then: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the commodity costs decrease, the underlying values become less worth, then: -- prices, thus valuation is lowered Risk profile of commodity costs The intrinsic risk that the trade in the stock is restricted wether this is due to market circumstances or regulatory measures. Example of risk occurence: - Issuer area If some capital markets would become unaccessible: -- less capital gathering possibilities -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area Due to stricter regulatory measures, liquidity decreases, with higher risk premiums as consequence: -- less demand for the stock -- prices, thus valuation falling Risk profile of the stock's liquidity The underlying for derivatives or the collateral for debt instruments can be negatively influenced. Examples of risk occurences: - Issuer area If the underlying assets become less worth, this means: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the underlying values become less worth, this means: -- prices, thus valuation is lowered Risk profile of the underlying assets or the collateral of a security The accounts which have to be published at least once a year according to the national legislation. Yearly account Fiscal symptoms on which a risk profile is based. Fiscal risk symptom Spread of the timeslices Granularity Management symptoms on which a risk profile is based. Management risk symptom Service of execution of purchase- or salesorders on the secundary markets Secundary market order fee Other debtors Values used in the account concept. Account values The finance ontology and the website pages of Eddy Vanderlinden are licensed according Creative Commons Attribution-Share alike 2.0 Belgium license. Finance Account Register of financial transactions. Value partition Partition with reference data. Values in this partition are referenced by the core concepts as there are: financial instrument, party, ... to value their properties. Contact points for small and middle sized incorporated customers Commercial banking Organizational structure of the principals Reference to the organisational structure of the principal is made for: - indication of the performer of procedure steps - commission calculations - common income- and cost attributions - authorizations - destination for files and reports - contactpoints for questions and issues - ... Final step in the customer compliance evaluation process Medium risk probability Vostro securities account Service of executing mandatory corporate actions: coupon payments, reimbursements,... Mandatory corporate action Economic sector symptoms on which a risk profile is based. Economic sector risk symptom The assets of the entity where-off the accounting is done. Actif Entities which safeguard the compliance with legislation, regulation and reputational risk matthers. Compliance entities Involved party Party involved with the conduct of securities handling or other financial transactions Entities managing the credits. Credits The total of the balances of customers or debtors. The totals are obtained in the balance sheet: - by periodic transfer of the totals of the customer accounts - through simultaneaous posting of all details in the customer accounts and the general ledger.(carbon copy posting) Both methods are representations of the double posting system:in the general ledger account and in the customer account. Accounts receivable The assumption is, the needed commodity will always be available but the price can reach sky high. The price increase is proportional to the scarceness. That way the valuation and related impact measurement is facilitated. Examples of risk occurences: - Producer area If the commodity costs increase, the costs of production are increasing, then: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Issuer area If the commodity costs decrease, the costs of collaterals increase and the underlying assets of derivatives become less worth, then: -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area If the commodity costs decrease, the underlying values become less worth, then: -- prices, thus valuation is lowered Risk profile of commodity costs Investments which are fixed for 1 year or more. Long term actif Entity in charge of handling the primary market orders. These orders include - new issues of financial instruments: equities and bonds; - continuous issues of financial instruments: open investment funds like SICAV's, saving bonds,... Primary markets The members of the arrangement are granted rights on the accounts they are linked to. These rights can be rights of disposal or rights of management of the account-holdings Arrangement of authorization holders Reason why a position in account is frozen Reason for position freeze Service rendered with regard to holdings in securities account. Service linked to securities accounts http://www.fadyart.com/externalrisks.html Probability of the risk occuring Assets which are frozen for less than 1 year. Short term actif Monitoring of risk external to the handling of securities. Risk profile class contains the core information. External risk Income owner is a fiscal resident in the fiscal residence country of the principal. Resident income owner The position of financial instruments in the account Vostro account position Impact on the profitability of the producer or the issuer. Profitability impact The application of foreign fiscal tax withholdings Stock price impact, direct or indirect. Direct impact on the stock price The members of the arrangement are all beneficial owners of the income from economical and fiscal viewpoint. The application of this status is for interest and dividend operations, including entitlements linked to the income. Example: optional dividends. stock dividends, ... Arrangement of income beneficial owners Customers Examples of risk occurences: - Customer area The markets in the scope are the export markets of the issuer or the producer’s. If the products are subject to e.g. an import restriction, the target is to reduce the share of imported products on the local market with as a consequence: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Producer area If the products are subject to e.g. stringent technical specifications, the consequence in first instance will be: -- less sales by the producer -- less profit by the issuer in the short term -- less solvability by the issuer in the long term - Holder area Due to stricter regulatory measures, liquidity decreases, with higher risk premiums as consequence: -- less demand for the stock -- prices, thus valuation falling The risk incurred by regulations. Risk profile of regulations Capital owner is a fiscal non-resident in the fiscal country of the principal. His fiscal country is different from the principal's. Non-resident capital owner Entity in charge of handling the corporate actions. These corporate actions include: - interest payments; - reimbursements; - optional-, stock-, cash dividend payments; - recouponing; - splits; - mergers; - squeeze outs,... Corporate actions Processes and procedures This class is the actual open wharf. The processes and subprocesses are represented by classes. Their prefix is Pcs. The procedures are represented by individuals in the class, their prefix is pcd. Client cash deposits The triggers to start a process Process triggers Contact points for corporations and wealthy customers Merchant banking Low impact on the stock price Client securities deposits The X/N status is determined at 2 levels: the customer securities account' beneficial owners and the financial instrument. Debt instruments eligible to the X/N status are instruments for which the Belgian National Bank is acting as settlement party and custodian. An instrument with status X can only be held by beneficial owners with X status. An instument with N or X/N status can be held by beneficial owners having the X or the N status. When an instrument is of X or X/N status, and the beneficial owners are of X status, the income is exempted from Belgian prepaid taxes. The account of the principal for his holdings in another financial institution's books. VOSTRO account Liquidity symptoms on which a risk profile is based. Liquidity risk symptom The domain of the underlying relations is Temporal or a subclass of Temporal The reason for restriction of the account management or disposal of the deposits Client accounts, Nostro or Vostro accounts as well as the principal's general ledger accounts can be restricted for many reasons. These possible reasons are found as individuals of the class ValuePartition - AccountValues - ReasonForAccountFreeze The values are trigger for the procedure steps of pocesses specified on the right side: ProcessAndProcedure The accounts are managed through the channels corresponding to the individuals of the class ValuePartition - AdministrationChannel The channels through which the accounts can be managed The organisational entity has access to channels represented by instances of the class ValuePartition - AdministrationChannel Points to the parties beneficial owners of the capital. The reference to beneficial owners capital of the financial instruments deposited in account is found in the individuals of class Party - PartyClientArrangement - PartyHolder The risk impact evaluation of the risk profile through reference to members of class Risk - ExternalRisk - ImpactOfRiskOccurence Points to the contactperson who's contact information contains the communication modalities The person appointed as contact according the modalities found in the contact class. The reference to the individual contact persons is found in class Party, any subclass included. The period during which the risk profile is valid is found in individuals of class Temporal - ValidTime - ValidPeriod The period during which the risk profile is valid The market where the valuation occured is referenced by individuals of class ValuePartition - ISO codes - ISO10383-Market IdentifierCodes. The market on which a valuation took place. Each position in the principal's customer account can be frozen for different reasons. Those reasons are found as individuals of the class ValuePartition - ReasonForPositionFreeze Reason for which a position is frozen The instant at which the information on the individual is valid. Reference to the validity instant is found in class Temporal - ValidTime - ValidInstant Client organization to manage the holdings Authorization to manage the client's holdings. The authorized person is not allowed to transfer holdings to third party or to his own accounts. The involved left hand side can be a client account, a NOSTO or VOSTRO account or a principal's general ledger account. The reference to authorized party individuals is found in class Party - PartyClientArrangement - PartyAuthorizedPerson. The left side of the relations are individuals of class Risk - ExternalRisk - RiskProfile The period for which the information on the individual is valid. Reference to the validity period is found in class Temporal - ValidTime - ValidPeriod The right side of the relation consists of individuals of the class Party - PartyCustodian The width of the time slices is found as individuals of class Temporal - Granularity The probability of the risk occuring through refence to individuals of class Risk - ExternalRisk - ProbabilityOfiskOccurance The area where the risk finds his source through reference to individuals of: parties, countries, activity sectors,... The symptoms of the existance of the risk through refence to individuals of class Risk - ExternalRisk-RiskSymptom Client Authorization to dispose of the holdings Authorization to dispose over the account's holdings. The authorized person is allowed to transfer holdings to third party and to his own accounts. Only client accounts are involved in thie left side of the relation. The reference to authorized party individuals is found in class Party - PartyClientArrangement - PartyAuthorizedPerson. The right side of the relation concerns the financial instrument where-off the position is registered. This is represented through an individual of the class FinancialInstrument The time at which the left hand side position is valuated. Reference is made to individuals of class Temporal - ValidTime - ValidInstant. The left hand side of the relation has individuals of the classes VostroAccountPosition, ClientAccountPosition and NostroAccountPosition as role, the right hand side refers to individuals of other classes. The right hand of the relation has individuals of the class Temporal as role, the left hand side refers to individuals of other classes. The left hand side of the relation has individuals of the class Account as role, the right hand side refers to individuals of other classes. Points to the parties beneficial owner of the income In some countries the parents have the legal usufructuary of the income of their children. The reference to beneficial owners capital of the financial instruments deposited in account is found in the individuals of class Party - PartyClientArrangement - PartyHolder or PartyUsufructuary or PartyLegalRepresentative The left side of the relations will be Nostro-, Vostro- and ClientAccountPosition Data property relations with Temporal individuals on their left side The value of the address. The source, communicataion, publication,... on basis of which the existance of the symptom is reported. The left hand of the relation has individuals of the class Contact as role, the right hand side refers to literal values. The interval according which documents are produced and sent to the indicated address. The granularity of the interval is a separate object property, part of contact. The end date and time of the period The start date and time of the period. The date and time identifying the instant. The party for who's account and eventually in who's name securities handling services are performed. A property of the Account class is the principal for whom the accounts are kept. The reference to the possible principals is found in Party-PartyPrincipal. Lots of reporting is done to the national authorities where the principal is situated. Example the National benk for statistical reporting. The rubriques in the reporting correspond to the present code. The account is frozen due to a juridical investigation Juridical investigation If the issuer or producers are nationalized, this means: - profits are going down in the general interest - less profit by the issuer in the short term - less solvability by the issuer in the long term Nationalization Extremely high indirect stcok price impact The markets in the scope are the export markets of the issuer or the producer’s. If the products are subject to e.g. an import restriction, the target is to reduce the share of imported products on the local market with as a consequence: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Import restriction If there are legal restrictions on the production by the producers, e.g. cars with high carbon dioxide emission: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Legal restriction on production The risk the value of the producer’s currency appreciates against the customer’s currency, this means : - a more expensive product - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If the value of the holder’s currency appreciates against the holder’s currency, this means : - less revenues in holder’s currency - lower stock quotes because of the needed rentability uplift The currency appreciation A corporate action is ongoing. E.g. coupon payment, equity exchange operation, convertion, rename, ... Position frozen for corporate action Abnormal high remunerations of the management team, linked to abnormal high departure indemnities in case of early break of the contract form an additional threath for the issuer. Abnormal remuneration If the commodity costs increase, the costs of production are increasing, thus: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Comodity cost increase High direct stock price impact The position serves as guarantee for a third party. E.g. as guarantee for a rental contract of real estate, guarantee as member of board of directors, guarantee for public works,... Posiition frozen as guarantee for third party If the products are subject to e.g. an import embargo: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Import embargo The account is frozen to solve an inheritance dispute. Inheritance dispute Extremely high direct stock price impact The account is frozen due to a seizure by a juridical administration. Seizure Very low solvability impact Nominative certificates, ADR/ADS,... Position frozen because the instument is nominative Low solvability impact Low risk probability The account is frozen until a dispute with the fiscal administration is settled. Fiscal dispute Very low direct stock price impact In some countries, if the holder becomes widow(er) the account has to be frozen until the legacy is settled according to the matrimonial status of the deceased. widow(er) Extremely high profitability impact If the commodity costs decrease, the costs of collaterals increase and the underlying assets of derivatives become less worth, thus: - less profit by the issuer in the short term - less solvability by the issuer in the long term If the commodity costs decrease, the underlying values become less worth, thus: - prices, thus valuation is lowered Commodity cost decrease Medium profitability impact 2999-12-31T09:00:08 2009-01-02T09:00:08 The account is frozen until a dispute before the justice of peace is settled. justice of the peace Medium risk probability Political dictatures have a decreasing purchase power as consequence: - less demand for the products - less profit by the issuer in the short term - less solvability by the issuer in the long term Democracy level is decreased Ignorance of the underlying business model and technicality of the producer or issuer. Decisions are taken without sufficient knowledge of the context. Ignorance about the business The management did not learn from errors in the past since there were no lessons to learn. Conceited management Extremely high solvability impact Abnormal transaction Some exemples of abnormal transactions: - the information provided arround the transaction is incorrect or irrealistic; - the bank has no knowledge about the source of the funds; - the customer requests parial transfers so that the global amount of the transaction remains hidden; - client is interested only in speed of the transaction, not in the costs related to the transaction, including exchange costs; - the client questions about the obligations of financial institutions in matthers of money laundering; The account is frozen due to a fiscal investigation Fiscal investigation If the value of the customer’s currency depreciates against the producer’s currency, this means: - a more expensive product - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If the value of the issuers currency depreciates against the holder’s currency, this means : - less revenues in holder’s currency - lower stock quotes because of the needed rentability uplift The currency depreciation Medium solvability impact Low indirect stock price impact If the underlying assets become less worth, this means: - less profit by the issuer in the short term - less solvability by the issuer in the long term If the underlying values become less worth, this means: - prices, thus valuation is lowered Loss of worth of the underlying or collateral 2999-12-31T09:00:08 1902-01-01T09:00:08 Unknown begin- and end date Near to certainty High solvability impact High profitability impact High indirect stock price impact WSJ 2008-03-01 The accountholders registered their shares to exercise their voting rights. Position is frozen until after the shareholders meeting The reason for freezing the account is a divorce settlement Divorce The management did not learn from errors in the past since there were no errors commitet Unexperienced management Low profitability impact Transaction amount The treshold for an eventual evaluation lies following the recommendations of FATF on 15 000 EUR/USD. This does not mean an investigation will take place for each transaction of 15 000 EUR/USD. There is an injunction on the financial instruments due to fraud, theft, loss,... Position frozen due to injunction measures Political parties can have a tradition in halting economic development of the nation: - less demand for the products - less profit by the issuer in the short term - less solvability by the issuer in the long term Ideology with tradition of failing economy If there are legal restrictions on the purchases by the customers, e.g. alcohol by young persons: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Legal restriction on sales If the customer has to pay more interests for credits, his consumption is reduced with direct or indirect : - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If the producer has to pay more interests for credits, his profitability is reduced, meaning: - less profit by the issuer in the short term - less solvability by the issuer in the long term If the market interests rise in the issuer’s area, the issuer has to provide a higher rentability too, meaning: - less solvability by the issuer in the long term If the market interests rise in the holder’s area, the rentability of the current investments lowers. To keep the rentability uplevel, the underlying value is lowered. Rise of interest rates The unit which performs investigations on client integrity risks and provides advice to the requestors on the opportunity of client relations. generic Anti-Money Laundering Unit Medium indirect stock price impact If the customers are subject to purchase power reductions, the consequence is: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If the producers are subject to reduced purchase power, the purchases become more expensive: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Reduced purchase power If some capital markets would become unaccessible: - less capital gathering possibilities - less profit by the issuer in the short term - less solvability by the issuer in the long term Stock trade restrictions Pure but mainly judgement errors from members of the management team. Management errors New client relation A new client relation is a trigger to make a client assesment from compliance point of view. Delayed deliveries damage the image of the producer/issuer with as consequence: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Delayed deliveries If the products cannot be exported to certain customers, this means: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Export embargo http://unstats.un.org/unsd/cr/registry/regdnld.asp?Lg=1 The financial instruments are damaged, unreadable, inidentifyable, ... Position froze due to irregular form of the instrument The account is frozen due to incapacity occurances with the holders or mandated persons. Incapacities A sales order is still valid for the position. Position frozen because a sales order is issued If the stock is less liquid then investors will require a compensation for it. Reduced stock liquidity Unusual transaction Some exemples of unusual transactions: - the transaction is unusual in respect of the known standing of the client; - the transaction is unusual in respect of the activities performed by the client; - the transaction is unusual in respect of the known turn-over on the client's account; - there is no justification nor documentation on the trasnaction; - the client's transactions are not for own account High risk probability If there are legal restrictions on the issuance of stock, e.g. stock with mortgages as collateral are evaluated less than 100%, this means: - need more collaterals as guarantee for loans - increased costs for borrowing - less profit by the issuer in the short term - less solvability by the issuer in the long term If the purchase of stock is legally restricted, e.g. of so-called fiscal paradises, this means: - less demand for the stock - prices, thus valuation falling Legal restriction on stock trade If the energy costs increase, the costs of production are increasing, thus: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Energy cost increase Low direct stock price impact 1902-01-01T09:00:08 Unknown instant The account is frozen due to the decease of one of the account-holders. Decease Poor quality damages the image of the producer/issuer with as consequence: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Poor quality The account is frozen until a descent dispute is settled Descent If the customer has to pay more taxes, his consumption is reduced with those directly or indirectly : - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If there are tax increases on the profits of producers, e.g. ruling is abolished: - less profit by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If there are tax increases on the activities of issuers, e.g. stock market tax: - less profit by the issuer in the short term - less solvability by the issuer in the long term If the fiscal pressure on stock increases, e.g. through higher prepaid tax rates, this means: - less net profit for the holder - less demand for the stock - prices, thus valuation falling Higher fiscal pressure If the reputation of the producer is at risk, e.g. child labour in shoe manufacturies, this means: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term If the reputation of the issuer is at risk, e.g. anti-trust investigations, this means: - less profit by the issuer in the short term - less solvability by the issuer in the long term If the reputation of the holder is at risk, e.g. mafia connections of major shareholders, this means: - less demand for the stock - prices, thus valuation falling Damage to the reputation Very low indirect stock price impact Very low profitability impact Near to no risk Position serves as pledge for a loan by the principal. Position frozen due to pledge If the products are subject to e.g. stringent technical specifications, the consequence in first instance will be: - less sales by the producer - less profit by the issuer in the short term - less solvability by the issuer in the long term Stringent technical specification In stead of thorough case studies, the management uses vague criteria to justify decisions: - from “the stomac” - by intuition - based on "feeling" Unprofessional approach Medium direct stock price impact Used countries as fiscal residence