Published legislation and draft legislation - Spain
Knowledge and competence of staff providing information and advice
National Securities Market Committee (CNMV) guidelines
Taking into account the guidelines issued by the European Securities & Markets Authority in March 2016 for the assessment of knowledge and competence of staff who inform and advise, as well as the internal organization requirements contained in the European MiFID I regulation (Directive 2004/39) and in the securities market regulation, Spain’s National Securities Market Commission, the CNMV, has published technical guidelines to define the criteria using which entities can prove that their staff who inform or give advice about investment services possess the necessary knowledge and competence and that they are acting in clients’ best interests.
The document explains how the institution’s governing body or, in the case of large institutions, a Board Committee set up for this purpose, and consisting of at least 3 suitably prepared directors, will be in charge of:
- Establishing the criteria that identified staff must satisfy,
- Appointing the unit in charge of its application, and
- Defining the control procedures to ensure compliance.
Among other matters, the governing body should make staff responsibilities very clear, the policy on the qualification of identified staff, the procedures to ensure that these members of staff are assessed, the qualifications they should have, the number of training hours or the external agencies/internal area of the institution in charge.
Accreditation of staff qualification
Financial institutions must guarantee to the Securities Commission, whether they use internal means or outsource the task, that their key staff possess the necessary knowledge and competences to fulfil their obligations and that they are aware of, understand and put into practice the institution’s internal policies and procedures to ensure regulatory compliance.
When the accreditation is handled by the institution itself, the governing body will have to establish the necessary control mechanisms to guarantee that staff have the appropriate skillset. To this end, the regulatory compliance unit will be responsible for preparing a report for the governing body that should include proof that the tests conducted accredit that this has been achieved.
Institutions must keep their records up to date on the accreditation of their identified staff members’ knowledge and competence, with information about each staff member, his/her experience, the training received, etc., that will be made available to the CNMV.
Furthermore, the institution’s governing body must review the development and needs of key staff every year, to ensure that they continue to be suitably qualified and have kept abreast of developments. If the staff member is not considered to have the necessary knowledge and skills, measures must be taken to ensure that they cannot provide information and advice, or that they provide it under supervision.
The CNMV has published a first list of certificates approved for the identified staff.
Knowledge and competences
Staff who give investment advice must have higher levels of knowledge and competences than staff who simply provide information about investment products and services.
Among other matters, staff giving information must know the following: i) the essential characteristics and risks associated with the products on offer, ii) the total amount of costs and expenses the customer will incur, iii) how financial markets operate, the impact of economic data and national and international events on the same and the value of the products, and iv) the regulations applicable to the securities market.
On the other hand, staff who provide advice, as well as knowing the foregoing, must i) meet the suitability requirements under MiFID rules, ii) know the total relative costs of the advice provision, iii) analyze whether the type of product offered may not be appropriate for the customer after having assessed the information provided by that customer, and iv) understand how portfolio management works and the implications of diversification relative to individual investment alternatives.
The minimum period in which the necessary experience can be acquired will be 6 months full time (or the part-time equivalent). The maximum period during which it is permissible not to have qualification or experience will be 4 years.
The guidelines apply to all those entities providing investment services in Spain (“financial institutions”) and to their identified staff, who will be those who inform or advise customers or potential customers and who handle customers with portfolios with discretionary management agreements.
A member of staff will acquire the condition of “identified” if he/she complies with the following requirements:
- Being in possession of the knowledge and competences required by regulation
- Having received the minimum number of teaching hours (80 hours for staff who provide information and 150 hours those who advise) in both theoretical and practical training, whether these are taught in the financial institution itself or by training companies, both in person and online.
* Article 193 of the revised text of the Securities Market Act and Circular 1/2014, 26th February, from the CNMV, on the internal organization requirements and the control functions of institutions providing investment services.
** Credit institutions, investment service firms, fund managers and closed-end fund managers.