NSMC Proposes a Technical Guide for Assessing Investment Advisers
On 24 April 2017, the Spanish National Securities Market Commission (hereinafter, the NSMC) published a draft Technical Guide establishing criteria regarding (i) the knowledge and competence that employees must have, if they provide information and/or advice to clients on behalf of investment service providers (hereinafter, the Relevant Staff), and (ii) the manner in which such knowledge and competence should be assessed (hereinafter, the Technical Guide).
The Technical Guide's criteria will enter into force on 1 January 2018. It establishes that the Relevant Staff that informs clients regarding investment products must be knowledgeable of (i) the characteristics, risks and essential aspects of the investment products they are offering; (ii) the amount of the costs and expenses the client will incur; (iii) the characteristics and scope of the investment services or auxiliary services; (iv) how financial markets operate and how they affect the value and determination of prices for investment products; (v) legal regulations and aspects regarding market abuse and money laundering; and (v) the market structures related to the investment products about which they are providing information.
When Relevant Staff advises regarding investments, they must (i) be knowledgeable of the risks and essential aspects of the investment product they are offering or recommending; (ii) be knowledgeable of the amount of the costs and expenses the client will incur in the context of the product or service transaction that is being offered or recommended; (iii) fulfill all obligations related to eligibility requirements; (iv) be aware of whether the product being offered is suitable for a client or not, once the staff has examined the information submitted by the client; and (vi) the legal regulations and aspects regarding market abuse and money laundering.
In both cases (when providing information or advice) the Relevant Staff must meet all the criteria for knowledge and competence that are established by the Technical Guide.
The institution's governing body (or a committee of three directors with sufficient authority, in the cases of large entities) will establish the criteria for staff qualification and experience; appoint the unit in the institution that is responsible for applying such criteria; establish procedures to monitor and ensure that any Relevant Staff that does not have the required knowledge and experience to render these services do not do so or, if they are so assigned, that they do so under supervision. In this regard, the nature, size and complexity of the institution's business must be borne in mind, as well as its client type and staff size.
The NSMC will publish a list of degrees or certificates that it deems ensure the proper qualification for the person who is to render the services set out in the list. It will be possible for institutions providing investment services to require other degrees or certificates as suitable for performing such work (under their own responsibility), if the institution feels such credentials are equivalent to those recognized by the NSMC, and notwithstanding the possibility for the institution to provide complementary training to make up for any lack of know-how, if said degrees or certificates do not entirely fulfill the competence required.
Finally, the Technical Guide indicates that the minimum period to acquire a suitable amount of experience is six months of full-time work providing the services in question.