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Risk Warning Disclosure for Retail Clients

Please read this Risk Warning and Disclosure Notice (the “Notice”) carefully. This Notice constitutes an integral part of the Terms of Business Agreement and should be read in conjunction with it, as well as with other Account Opening Agreements.

This Notice is provided to you a Retail Client for your information only and is not intended to be relied upon as legal, tax or as personal advice.

In compliance with the Conduct of Business Rules of the Dubai Financial Services Authority (the “Rules”), you are required to confirm that you have read and understood the content of this Notice before opening an account with FFA Private Bank (Dubai) Limited (“FFA”). If there is anything in this Notice you do not understand, please contact your Relationship Manager.

The purpose of this Notice is to provide you with information about complex financial instruments (“Restricted Speculative Investment”) you may trade on margin with FFA and draw your attention to the risks associated with such investment and, consequently, take investment decisions on an informed basis. It is not intended to explain all of the risks associated with FFA’s services nor does it contain a detailed explanation as to how FFA’s services are provided to you. The risk warning described in each financial product below is not exhaustive, and there may be other risk factors which you should take into account in relation to a particular investment. This Notice is designed to disclose, warn and explain in general terms the nature of the risks involved on a fair and non-misleading basis.

Restricted Speculative Investments are complex instruments and come with a high risk of losing money rapidly due to leverage. Most Retail Client accounts lose money while trading such products. You should consider whether you understand how such products work and whether you can afford to take the high risk of losing your money. Please refer to our website www.ffaprivatebank.com for information relating to the performance of active Retail Clients investing in Restricted Speculative Investments that were unprofitable in the last four quarters.

Opening an account with FFA will enable you to trade a variety of complex financial instruments on margin which carry a high degree of risks to the invested capital. In deciding whether to trade in Restricted Speculative Investment, you hereby understand and acknowledge the following:

• The types of Restricted Speculative Investment which you may trade are complex financial instruments where the loss or profit is determined by reference to the movement of the value or price of the underlying reference.
• Margined products carry a high level of risk, you should not deal in Restricted Speculative Investment unless you understand the nature of such products and the extent of your exposure to risk and high potential loss of your money.
• Trading in financial products always involves a risk. As a general rule, you should not deal in financial instruments unless you understand their nature and the extent of your exposure to risk. You should carefully consider and be satisfied that the specific financial instrument(s) that you select to trade is / are suitable and appropriate for you in light of your circumstances, investment experience, financial position, investment objective, and risk tolerance and that you only speculate with funds you can afford to lose.
• Margined products can only be settled in cash. Investing in CFDs carries the same risks as investing in a future or an option or other margined products. Transactions in margined products may also have a contingent liability and you should be aware of the implications of this as set in this Notice.
• FFA does not provide clients with any regulatory, tax or legal advice and is not responsible for the management of your tax affairs. You are responsible for managing your tax and legal affairs including making any regulatory filings and payments and complying with applicable laws and regulations. If you are in any doubt as to the tax treatment or liabilities of investment products available in your account with FFA, you should seek independent advice.
• FFA does not provide investment advice in relation to trading in complex products including Restricted Speculative Investment. Our services are provided on an execution-only basis.
• It is your responsibility to ensure that you understand investments in complex products including Restricted Speculative Investment and that your investment decisions are made on a well-educated and informed basis and in light of your knowledge and experience as well as to your personal circumstances and ensure whether you can afford to take high risk of losing money. If you are in any doubt, you should consult independent professional advice as to the suitability and appropriateness of your situation prior to making any investments and/or entering into any legally binding agreements with FFA.

Definitions

As defined by the rules of the Dubai Financial Services Authority: Restricted Speculative Investment means an over-the-counter Derivative which is:

• a leveraged contract for differences;
• a leveraged rolling spot forex contract;
• an Option over a contract referred to in (i) or (ii); or
• any other leveraged Investment similar in nature to an instrument referred to in (i), (ii) or (iii);

rolling spot forex contract means an instrument that falls within paragraph (b)(ii) of the definition of a Future in GEN Rule A2.3.1 where the value of the contract is ultimately determined by reference, wholly or in part, to fluctuations in an exchange rate or the value of a currency.

contract for differences (CFD) means an instrument that falls within paragraph (b)(ii) of the definition of a Future in GEN Rule A2.3.11, other than a rolling spot forex contract;

Margin means the pre-agreed amount a Retail Client is required to pay in the form of money to open a position in relation to a Restricted Speculative Investment;

over-the-counter Derivative means an instrument that is not formed or traded on an Exchange or a Regulated Exchange.

For any capitalized term, which has not been defined in this Notice, please refer to definitions section of the Terms of Business Agreement.

 

Role of FFA Private Bank (Dubai) Limited

For your dealings in Restricted Speculative Investment, it is understood that the role of FFA is limited to:

• Arranging Deals in Investments;
• Dealing in Investments as Principal (limited to deals undertaken on a Matched Principal basis only)
• Dealing in Investments as Agent
• Advising on Financial Products
• General Communications with Clients and Market Information

Foreign Exchange Trading (FOREX)

When trading in FOREX, the investor speculates in the development of the price of one currency relative to another, where one is sold and the other is purchased. FOREX is traded as a margin product, which means that you can invest more money than is available in your account with FFA. FOREX may be traded as FX Spot, FX Forward or FX Options. FX Spot is the purchase of one currency against the sale of another for immediate delivery.

FX Forward and FX Options transactions are settled on an agreed date in the future at prices which are agreed on the date of the transaction.

FX Forward trading involves an obligation to make the transaction at the agreed price on the settlement date. A purchaser of FX Options has a right to make a transaction in the underlying FX Spot currency pair on the expiry date if the price is more favourable than the market price at this time. On the other hand, a seller of options has an obligation to enter into a transaction with the purchaser on the settlement date if requested by the purchaser.

Purchased options therefore involve a limited risk in the form of premium which is payable when the contract is made, while options that have been sold involve an unlimited risk in the form of changes to the price of the underlying FX Spot currency pair.

The currency exchange market is characterised, among other things, by a relatively low profit margin compared to other products. A high profit is therefore subject to a large trading volume, which is achieved for instance by margin trading as described above. When trading in FOREX, a gain net of costs, such as commission and spread, realised by one market player will always be offset by another player's loss. As FOREX is margin traded, allowing you to take a larger position than you would otherwise be able, a relatively small negative or positive market movement can have a significant effect on your investment. FOREX trading therefore involves a high level of risk. This makes the potential gain quite high, even if the deposit is relatively small. If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit.

Contract for Differences (CFDs) Trading

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

A CFD product allows you to speculate in future increases or decreases in the value of a specific asset, for instance a share. If your speculations prove to be correct, you will make a profit from the difference in value (less costs), but you will have to pay the difference in value (plus costs) if your speculations turn out to be wrong.

CFDs are always margin traded allowing you to take a larger position than you would otherwise be able to, based on your funds with FFA, a relatively small negative or positive movement in the underlying instrument can have a significant effect on your investment. CFD trading therefore involves a high level of risk. This makes the potential gain quite high, even if the deposit is relatively small. If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit.

Futures Trading

Futures trading involves the obligation to make, or to take, delivery of the underlying asset of the contract at a future date, or in some cases to settle the position with cash. They carry a high degree of risk. The gearing or leverage often obtainable in futures trading means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small movement can lead to a proportionately much larger movement in the value of your investment, and this can work against you as well as for you. Futures transactions have a contingent liability, and you should be aware of the implications of this, in particular the margin requirements, which are set out below.

Options Trading

Option trading is highly speculative and is not suitable for all investors due to the high level of risks involved. Buyers and sellers of Contract Options should familiarize themselves with the type of option (i.e. put or call, bought or sold) they intend to trade and the associated risks.

Contract Options that gives you the right to either sell or buy an underlying asset (bought Contract Options) might expire worthless and your initial investment (i.e. premium and transaction costs) will be lost. Contract Options that give you the obligation to either sell or buy an underlying asset (sold Contract Options) can result in substantial (potentially unlimited) losses. To assure you will be able to cover losses on sold Contract Options, FFA will require margin charges. Nonetheless, potential losses can exceed the margin charged and you will be liable for these losses.

If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit. If the underlying asset of a Contract Option is a margin traded product (i.e. a derivative), and if the Contract Option is being exercised, then the buyer (in case of a call option) or the seller (in case of a put option) of the Contract Option will acquire a position in the underlying margin traded product with associated risks as well as liabilities to provide margin.

Stock Options Trading

Final Settlement of Stock Options requires physical delivery of the underlying stocks vs. payment of the strike value in cash. In case you are holding a stock options position, but is short either cash or stocks, you will not be able to settle the options position and you will fail to deliver on your contractual obligation.

As a general rule, you have responsibility to meet the delivery requirements related to your option positions. As such FFA will not pre-emptively act on your positions to avoid delivery failure. It will be your responsibility to manage your positions especially when approaching expiry to make sure you can meet any delivery obligations.

In case you fail to meet your delivery obligation, FFA will act on your behalf and without the need to notify you in advance to resolve the delivery failure. FFA will resolve a short stock position by acquiring the required stocks at market price, FFA will resolve a short cash position by liquidating any or all positions under delivery and if available any long option position that provided cover for a settling short option position.

In the Exchange Traded Options context, this will be referred to as default handling. Transactions executed for the purpose of default handling will be charged additional (substantial) commissions. Therefore, FFA recommends that you close the position before expiry.

Notwithstanding the above, in case FFA could be exposed to uncollateralized losses incurred by clients, FFA reserves the right to act pre-emptively and close-out some or all of the clients’ positions that could cause potential losses.

Margin Requirements for Retail Clients

Trading on margin requires you to make a series of payments instead of paying the whole purchase price immediately. If you trade in margined products, you may rapidly sustain a total loss of the margin you deposit to establish or maintain a position.

Your liability as a Retail Client for all Restricted Speculative Investments connected to your trading account with FFA is limited to the funds in that trading account. Therefore, if markets continue to move against you, you may need to add additional margin at short notice to maintain your positions to avoid their liquidation.

In certain circumstances, your Margin rates and trading requirements could be increased resulting in additional Margin deposit that you will be required to have in your account to maintain that trade.

In compliance with the DFSA rules and regulation, you hereby confirm and acknowledge that it is prohibited to use a credit card or third party credit facility to fund your account(s) with FFA to pay Margins.

Commission, Fees and Charges

Before you begin to trade, you should be aware of all commissions, fees and other charges for which you will be liable in accordance with FFA’s List of Charges and Prevailing Rates. We suggest that you visit our website www.ffaprivatebank.com from time to time to obtain an updated version of the List of Prevailing Rates and Charges. Statements of accounts and reports of settlements shall disclose commissions and charges applied to your account(s) and shall be deemed an official notification of such commissions and charges. If you do not receive reports of settlements and statements of account for any period, it is your responsibility to request such document(s) immediately.

Suspensions of Trading

Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that under the rules of the relevant exchange trading is suspended or restricted. Placing a stop-loss order will not necessarily limit your losses to the intended amounts, because market conditions may make it impossible to execute such an order at the stipulated price. Stop-loss orders are therefore not guaranteed.

General Communications with Clients

FFA may provide its clients with market information, published research, or opinion regarding a specific investment or a specific market (the “Information”) that may not have been approved by the DFSA.

Unless FFA specifically agrees otherwise in writing with you, where FFA provide you with such Information, you hereby acknowledge that is not for any particular person or class of persons and is provided solely for your information purpose with no regard to your specific investment objectives, special investment goals, financial situation or particular needs.

Furthermore, you hereby acknowledge that providing you with such Information is intended for informational and/or marketing purposes only and does not constitute an offer, recommendation, solicitation to enter into any transaction, financial product or financial service, or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments.

Although FFA ensures that all Information is obtained from sources which FFA believes to be reliable and with due care and diligence, the Information may not be independently verified and FFA makes no representation or warranties, of any kind, express or implied, with respect to the Information, content, materials or products and disclaims liability for any Information not being complete, accurate, suitable and relevant for you. FFA shall not be under any obligation to update the Information or perform any other action.

Where past performance information is provided, past performance is not indicative of future performance.

Total Loss Might Exceed Initial Amount

The Client acknowledges that trading in Restricted Speculative Investments involves a substantial risk of loss that may exceed the initial investment and deposited amounts.

While the Client affirms their responsibility to assess his financial resources, ensuring they are sufficient for their risk appetite and trading activities, and to ensure that losses do not exceed the funds specifically allocated in accounts opened for trading in Restricted Speculative Investments, FFA will provide Retail Clients with Negative Balance Protection in accordance with DFSA rules and regulations. FFA may take necessary actions to transfer funds from any of the Client's accounts opened for trading in Restricted Speculative Investments to cover any losses, in line with the authorizations given to FFA to transfer funds between the Client's accounts.

Offer of Incentives

In compliance with the DFSA rules and regulations, FFA does not provide any incentive that influences, or is reasonably likely to influence, Retail Clients to trade complex products or engage in transactions involving Restricted Speculative Investments.

Past Performance

Past performance, simulation or prediction of a Financial Instrument is not indicative and does not guarantee its current and/or future performance. Statistical information and historical performance do not constitute a binding or safe forecast as to the corresponding future performance of a financial instrument to which the said information refers. Past performance and risk scores should not be considered as hypothetical performance results. There is no guarantee that any account will or is likely to achieve profits or losses similar to the last performance.

No Guarantees of Profits

FFA provides no guarantees of profit nor of avoiding losses when trading in financial instruments. FFA cannot guarantee the future performance of the Client’s account, promise any specific level of performance or promise that Client’s investment decisions, strategies, will be successful/profitable

Retail Client Performance

The below table displays the performance of active Retail Clients investing in Restricted Speculative Investments that were unprofitable in the last four quarters.

Quarter	Percentage of Active Retail Clients that were unprofitable
Q4 2023	33.33%
Q1 2024	33.33%
Q2 2024	66.67%
Q3 2024	33.33%