• A system of traffic lights or numbers will warn about the risk of deposits, bonds, stocks, insurance and pension plans
  • The customer must receive the information in the advertising of the product and prior to marketing

The Ministry of Economy and Competitiveness has approved a ministerial order on information and classification of financial products, whose purpose is to ensure that private investors know the risks they assume with the purchase of a specific financial asset. The order establishes a classification of these products by means of a six-color scale, known as traffic lights, or numbers from 1 to 6. The information must be delivered to the customer prior to the commercialization of banking products, insurance, bonds, individual and associated pension shares or funds. Aspects such as whether or not the capital invested is guaranteed, the term in which the principal is returned and the credit quality of the product or, failing that, that of the issuing entity will be taken into account.

The measure derives from a project of the National Securities Market Commission, submitted for consultation a little over a year ago. The report of the Congress Subcommittee on transparency in the information of financial and mortgage instruments of credit institutions has also been taken into account. This report recommended the adoption of a classification of products by risk and complexity that could be represented through colors.

The information obligations contained in the ministerial order affect investment services companies, credit institutions, financial credit institutions, insurance entities and pension fund management entities. They also apply to the previous entities (except the EFcs or financial credit establishments for not having a community passport) that are foreign and provide investment services or market, in Spanish territory, any of the financial products provided in the ministerial order, through branch or free provision of services.

The products on which these information obligations are reinforced are the financial instruments included in article 2 of the Securities Market Law, which include stocks, bonds and obligations; bank deposits including, among others, demand, savings and term deposits; life insurance products for savings purposes, including insured pension plans; and individual and associated pension plans.

Insurance and collective pension funds, national public debt and EU Member States and PRIIPs products are excluded (packaged retail investment and insurance products which are those whose value is subject to fluctuations due to their exposure to certain reference values ​​or to the evolution of underlying assets, since these products must have a harmonized information document at the level of the European Union as of December 31, 2016 ).

Risk warnings will be directed primarily to non-professional clients. For this purpose, a system of classification and information of financial products is established, in order to ensure that the client understands the risks assumed in the contracting of each of them and can choose the products that best meet their needs. The marketing entities will be obliged to include in their advertising communications and to deliver, prior to the commercialization, and together with the rest of the information obligations, a series of additional indicators and alerts established in this order:

  1. A risk indicator identified with a color between a range of six colors that tries to summarize easily and visually the risk that is assumed based on aspects such as whether or not the product's capital is guaranteed, the period in which it is returned said principal and the credit quality of the product or, failing that, that of the issuing entity. However, entities may substitute the color figure for the numerical indication of the class to which the financial product belongs in the numerator part of the fraction, the denominator always remaining constant at number 6.
  2. In addition, when the financial product sold by the entities is a pension plan, the entities will provide, in place of the risk indicator, another one prepared in accordance with the provisions of CNMV Circular 2/2013 on the synthetic risk indicator for the collective investment institutions. This indicator consists of a figure on a scale of 1 to 7 based on the level of historical volatility of the collective investment institution. In this way, pension plans will have the same classification system as companies and investment funds.
  3. They may also establish an alert on the possible limitations regarding liquidity and the risks of early sale when the product is especially illiquid, accompanied by a figure or two figures of a lock, depending on the degree of illiquidity.
  4. Finally, there will be an alert that indicates that it is a complex and difficult to understand product accompanied by two exclamation marks.

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