• The basic objective of the text is to strengthen the protection of financial services customers and increase transparency and information related to operations carried out with financial instruments.
  • The approved Royal Decree regulates the legal regime of regulated markets, as well as that of Investment Services Companies
  • In relation to incentives and retrocessions, specific requirements are established to consider that there is an improvement in the quality of the service offered and provided to the client

The Council of Ministers approved today the Royal Decree on the development of the Securities Market Law for its adaptation to the regulations related to the markets of financial instruments, better known as MIFID II. With this Royal Decree the transposition to the Spanish legal system of the regulatory package of MIFID II is completed.

The urgency to complete the transposition is given by the end of the deadline in July 2017 and the filing of a claim for non-compliance with the Court of Justice of the European Union (CJEU), with the corresponding sanction proposal. Likewise, its incorporation into Spanish regulations is a priority to have all the instruments that allow greater protection of the client and a better functioning of the markets, which ultimately results in the improvement of the financing of companies and individuals.

The MIFID II Directive has been transposed into the legal system through Royal Decree-Law 21/2017, of December 29, on urgent measures for the adaptation of Spanish law to the regulations of the European Union regarding the stock market, of Royal Decree-Law 14/2018, of September 28, which modifies the consolidated text of the Securities Market Law and the Royal Decree that is approved today.

The Royal Decree has as basic objectives to strengthen the protection of clients of financial services, increasing the level of confidence in the entities that provide these services, and increase transparency and information available to supervisors and the general public about the operations that They are carried out with financial instruments in the stock markets.

In accordance with these objectives, the approved text details the legal regime of regulated markets, as well as that of Investment Services Companies.

With regard to regulatory development of stock markets, a set of requirements are established to improve the corporate governance of its governing bodies. Likewise, the requirements for access, loss and suspension of the condition and management of conflicts of interest of the so-called members of regulated markets are developed.

Limits are established on derivative positions on raw materials, in order to prevent market abuses and encourage correct pricing and settlement conditions to avoid positions that distort the market. Finally, in relation to the providers of data supply services, the typology of these entities is developed, which are an important piece to increase transparency in the negotiation of financial instruments pursued by the standard.

The Royal Decree addresses the regulatory development of the operation and obligations of Investment Services Companies, also with the objective of strengthening investor protection. In this area, and as regards the limitation of the collection of incentives or retrocessions, the marketing of at least 25% of third-party financial products and at least two third-party alternatives are established as requirements, among others. each category of funds traded, so that it can be estimated that there is an increase in the quality of the service offered and therefore retrocession can be charged.

As regards the monitoring and control of the design and distribution of financial products, it is provided that the prior approval process of each investment product will be the responsibility of the board of directors of the investment services company.

The purpose is that the characteristics of the products are the most appropriate for each type of customer. In this way, the main objective of the protection of the financial client is reinforced, since the aspects related to the suitability of the financial instrument for the specific client to which it is addressed are not only present at the time of commercialization, but from the very conception of the same.

Another issue that reinforces both the protection of the investor and the supervisory capacity of the CNMV is the one related to the obligation to include telephone conversations and electronic communications in the records of investment services companies related to the execution of self-employed orders. and with the provision of the service of reception, transmission and execution of orders.

The obligations to be fulfilled by investment service companies that carry out algorithmic negotiation are also developed. In the adaptation of MIFID II to the Spanish legal system, requirements are established in order to avoid the operational risk derived from the lack of human intervention and ensure a correct assumption of responsibilities.

Regarding direct electronic access, the regulation requires that investment services companies guarantee the proper functioning of this functionality, as well as the adequate assignment of responsibilities in case of errors or anomalies.

Finally, regarding third-party companies that provide investment services in Spain, the regulation details the authorization procedure for the opening of branches.

Additionally, this Royal Decree also completes the transposition of the CRD IV Capital Directive in regard to certain obligations of financial services companies when they keep assets of clients in their accounts, since they must establish controls and receive authorizations necessary to ensure adequate protection of said files.

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