The National Securities Market Commission (CNMV) has opened to public consultation until September 30 your draft technical guide to review the assessment of convenience that investment entities they must perform to their customers. The current document dates from June 2010.
In this context, the supervisor has considered that it is time to update some criteria, practices and methodologies. In particular, the regulations that have emerged in this regard in the last decade, the documents and guides published by the European regulator ESMA and the “supervisory experience” obtained since their publication will be taken into account.
The guide is aimed at supervised entities that provide investment services on securities market instruments and structured deposits. The CNMV verify compliance with national and community regulations. In addition, it has been announced that the definitive guide will not be published until ESMA approves the convenience guidelines currently in process.
Among the aspects included in the draft technical guide that is submitted to public consultation, the CNMV indicates that entities must ensure that the products that, a priori, they consider not suitable for certain investors, are not actively marketed to such investors. Especially if they are complex products.
In this case, if the entities contacted the client and offered this product, would cease to comply with the rules of conduct of the stock market, even if they informed him of the inconvenience of the operation.
To analyze suitability, the entity may build on information you already have and, if you can’t get it internally, perform questionnaires or convenience test, with particular emphasis on the actual level of financial literacy. They should always ask the client for their familiarity with the characteristics and risks of financial products, regardless of whether you may have previous investment experience or a certain level of academic training.
The information that the entity obtains in relation to the level of education, training or profession of the client can only provide a generic idea financial knowledge available, so it would only allow general assumptions.
Deadlines and exceptions
The new guide also adds that, in the case of finance professionals, the entity must be sure that the client’s professional experience is directly related to the securities markets, their products and their risks. Even if it is reasonable that convenience can be presumed solely on the basis of your professional experience.
To evaluate the convenience of an operation, the entity can rely on a previous analysis that had a suitable result. The guide that the CNMV submits to public consultation considers reasonable that the validity period of the previous convenience analyzes is up to five years for non-complex products and up to three years for complex products.
The guide also includes cases in which it is not mandatory to evaluate convenience, in which the entity must include a warning that clearly indicates that it is not obliged to evaluate the appropriateness of the operation and that, therefore, the client lacks the protections provided for in this case.