How is Your Property Protected at Finax?

The Foundation is a Broker’s License

Finax was established in January 2018. However, Finax is not just an ordinary joint-stock company. The name itself, Finax, o.c.p., a.s., indicates that Finax holds a broker’s license (o.c.p.) from the National Bank of Slovakia (NBS). While setting up a regular joint-stock company can be done in a matter of days, the process for obtaining a brokerage license is significantly more complex and rigorous.

Obtaining a license from NBS requires considerable effort. As part of the application process, Finax had to submit extensive contractual documentation and approximately 20 different policies, including an IT security directive and an anti-money laundering policy among others.

In addition, all responsible individuals underwent detailed background checks. As the founder, I had to provide a clean criminal record, proof of education and experience, a comprehensive overview of my assets, and tax returns demonstrating how I acquired the funds to establish the brokerage. Similar scrutiny was applied to five other key personnel.

We also had to deposit a minimum capital of €125,000 and prove sufficient funds to support the company’s long-term operations. Despite knowing exactly what was required, the entire licensing process took nine months and required significant effort on our part.

The NBS ensures that individuals managing Slovak clients’ money are morally impeccable, knowledgeable, experienced, and financially capable of running a brokerage responsibly.

Two Key Indicators and Strict Asset Segregation

Obtaining the license is only the beginning of our interaction with the NBS. Its supervisory department closely monitors brokers, requiring various reports daily, monthly, quarterly, semi-annually, and annually—amounting to 12 types of reports in total.

One critical report pertains to our capital adequacy. Like banks, we must continuously demonstrate sufficient own resources to ensure long-term viability, reassuring the regulator that we can withstand financial challenges. Additionally, NBS monitors that we do not rely excessively on borrowed funds.

Most importantly, all of Finax’s assets are strictly segregated from client assets. Clients remain the ultimate owners of their funds and securities in their Finax accounts, enjoying all associated rights and obligations. These assets are not included in Finax’s balance sheet, and we cannot manage them beyond agreed transactions defined in the portfolio management agreement and associated investment strategy.

This separation is the cornerstone of your asset protection. Unlike bank deposits, which become part of the bank’s balance sheet and represent liabilities to the bank, assets held with a broker like Finax remain the sole property of the client.

To ensure this separation, we maintain two accounts at Tatra Bank: a client account for deposits and an operational account for company expenses. Every transaction, from deposit to investment, value changes in securities, and eventual withdrawal, must be meticulously accounted for down to the cent.

For international operations, we use accounts at reputable banks:

• Poland: BNP Paribas
• Czech Republic: Česká spořitelna
• Hungary: OTP
• Croatia: Raiffeisen Bank
• Germany and Romania: Citibank

Securities are primarily purchased through the Belgian bank KBC, which also ensures their safekeeping. KBC, one of Europe’s largest banks, is also a custodian for several Slovak bank funds. Learn more about asset custody at KBC.

Guarantee Fund: Protection Against Human Error

Despite the best possible security systems, there will always remain one significant factor that can fail—us, humans. Theoretically, a situation could arise where money and securities become inaccessible due to reasons on Finax’s side or on the side of the chain of companies through which Finax trades and holds client assets (banks and KBC).

What could these reasons be? Embezzlement of funds, incorrectly executed orders, or other human errors that result in the broker not having the money or securities in their account that they declare they hold on behalf of clients.

Finax is required to screen its employees and, whenever technically possible, sets transaction limits. However, failures can also occur on the part of our partners. That is why it is crucial to thoroughly screen them as well.

Securities brokers are legally part of a system designed to protect client assets. A portion of their fees is mandatorily contributed to a fund that covers any inaccessible client assets. If the fund’s resources are insufficient, the state covers the remaining amount (similar to the Deposit Protection Fund, which protects household deposits in banks).

This mechanism is similar in every EU country. All Finax clients, regardless of nationality, are covered by the Slovak Investment Guarantee Fund. The compensation levels vary from country to country.

It is worth noting that the Slovak Investment Guarantee Fund offers clients the second-highest level of protection among Central European countries. Our clients are 100% protected up to €50,000. This means our Czech, Polish, or Croatian clients receive a higher level of protection compared to investing through local brokers in their own countries.

If you wish to invest a larger amount through Finax, you can divide your investment among multiple members of your household. The limit applies to each individual, including children. A family of four can thus enjoy protection of up to €200,000.

If Finax were to go bankrupt, it doesn’t automatically mean that the Guarantee Fund would come into play. As mentioned, we keep client assets segregated. In the worst-case scenario, the National Bank of Slovakia would appoint a new custodian—another securities broker—to manage the client assets going forward. The Guarantee Fund does not cover losses resulting from investment declines due to market developments.

The Investment Guarantee Fund has never been activated in Slovakia, which reflects the high integrity of the market. Personally, I served on the board of the Guarantee Fund for one term, during which everything was in perfect order. Great credit goes to the National Bank of Slovakia for its supervision of financial market entities.

Note that mutual funds do not offer such protection. Asset management companies segregate client assets through custodians, and the responsibility for the actions of fund managers and mutual funds, aside from the NBS, lies with the custodian, which is compensated accordingly.

IT Security: A Pillar of Modern Operations

There are days in the office when I feel like we’re more of an IT company than financial experts. We’ve chosen to manage your finances in a modern way that reduces costs, administrative burden, and errors. Technology is therefore an integral part of our business.

Your data is stored in one of the most advanced data centers in Slovakia, meeting the highest security standards. Our servers are centralized in one location to minimize communication over public networks, yet they are regularly backed up to a second data center via a private connection.

Additionally, we’ve implemented numerous security measures, including password policies, backups, and server and tool protections. Together, these safeguards protect not only our company but, most importantly, your data.

We also conduct regular security testing of our infrastructure. To this end, we are negotiating partnerships with several companies specializing in “ethical hacking.” These experts help identify potential vulnerabilities so we can address them effectively.

I hope I’ve clarified some aspects of how we ensure the security of your finances. If you’re investing with us for the long term, it’s crucial that you have complete trust in Finax. If anything remains unclear, please write to us, and we’ll gladly expand on this article.

We founded Finax with ambitious goals. We’re convinced that financial services can be offered transparently and with a clear conscience. We believe that this approach will reward us in the long run with satisfied clients and increased assets under management. From the start, all our activities have been aligned with this client-focused philosophy.

I believe that the fair setup of our portfolios and our long-term thinking are clear proof of our intentions and goals. Trust can only be built over time.

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