- The approved RDL reinforces investor protection and will be completed with a Royal Decree that includes the most regulatory aspects of the project
- This regulation establishes the regime of authorization, conduct and supervision of investment services companies and recognizes new supervisory powers to the National Securities Market Commission (CNMV)
- Among the novelties, the limitation of the collection of retrocessions, the introduction of new requirements for the commercialization of structured deposits and the increase of surveillance and control of products
The Council of Ministers approved today a Royal Decree-Law that modifies the consolidated text of the Securities Market Law. With this RDL and the subsequent development of a Royal Decree, in which the most regulatory content of the project will be collected, the transposition of Directive 2014/65, relating to financial instrument markets, better known as MIFID II, will be completed.
Its transposition as RDL is motivated by urgency. The deadline expired on July 3, 2017, and the Commission has already filed a complaint with the CJEU for non-compliance, with the corresponding sanction proposal. Likewise, its incorporation into the legal system is essential to prevent the erosion of the competitiveness of national investment services companies and Spain as a destination for European and foreign investments.
This transposition allows the investor protection to be strengthened substantially, increasing the level of demand and specificity in the obligations of information to the client, and the degree of control that is required over any circumstance that affects the conflicts of interest of the service companies of investment with respect to the framework contemplated by MIFID I. In addition, new supervisory powers are granted to the CNMV and the cooperation obligations between this agency, the national supervisory authorities of the European Union and the European Markets and Securities Agency (ESMA) ).
Prohibition of incentives or setbacks
One of the main novelties that the RDL includes is the prohibition of establishing incentives or setbacks in the provision of the financial advisory service by the marketers (mainly credit institutions), in the sale of products generated by the management companies. Their perception is limited to being justified by the improvement of the quality of the service provided to the client and provided that the incentive does not only generate a benefit for the investment services company (ESI), but there is also a benefit for the client.
The objective of this measure is to improve the management and elimination of the conflict of interest of the marketer when selecting the most appropriate products for its customers.
Product monitoring and control
The RDL establishes the obligation to design products in accordance with a coherent process and with a correct identification of potential clients (level of financial knowledge, risk profile, etc.), with the aim of ensuring that the product is suitable for the type of customer to whom it is addressed. These procedures must be approved by the Board of Directors itself.
The analysis must ensure that, once the customer they are addressed is defined, the characteristics of the financial product respond to the needs and particularities of this group of customers. The analysis should also include all aspects related to distribution channels.
Recording telephone conversations and electronic communications
In order to improve the supervisory work of the CNMV and the internal control of the entity, investment services companies must develop a registry that includes telephone and electronic communications related to the execution of customer orders.
Likewise, structured deposits (deposits whose profitability is linked to that of other underlying assets) are included in the scope of the Directive and it is established that the credit institutions that sell these products must comply with the rules governing good governance of the entity; have internal organization measures and measures to avoid conflicts of interest; comply with the obligations on recording recordings and respect certain rules of conduct related to customer classification, product design and remuneration.
Mandatory to have a branch in Spain
It also establishes the obligation to have a branch in Spain to third-party investment services companies when they provide investment services to retail clients in the national territory.