CNMV releases a public statement on certain malpractices in connection with cross-border commercialization of investment services by entities based in other EU member states

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On November 24, 2020, the Spanish Securities Markets Commission (“CNMV”) issued a public statement in connection with certain malpractices regarding the cross-border commercialization of investment services by entities based in other EU member states1.

CNMV already made clear an interest in controlling the advertisement of complex financial products at its Activity Program for both 2019 and 2020. Among other, these mission statements have resulted in the recent drafting and publication of the new CNMV circular on the advertising of investment products and services2 and an increase in supervision and probing proceedings. The rationale behind such interest lays on the risks complex financial products and services entails for retail investors, quite often the ultimate target of these practices.

With the increase in the recent years of commercialization practices regarding complex investment products, and the high risk for retail investors brought by an amount of specialized financial intermediaries, the Supervisor deems necessary the adoption of protective measures for those, investors both in Spain and in the EU.

Among other measures, CNMV has reinforced its supervisory activity vis-à-vis the commercialization of particularly complex investment products. As a result, certain market practices have been identified as inadequate, practices that are rather frequent within the activities of entities based in other EU member states that may commercialize products in Spain under the EU Passport scheme. Quite often these entities are those acting under freedom to provide services scheme (hence with no permanent establishment in Spain). CNMV public statement refers to such practices and includes criteria for the fulfillment of the applicable law.

1. Commercialization of investment services and client acquisition through non-authorized third parties.

For the entities of reference, is a common practice the offering at its website of an affiliate or associate program, which consist in proposing payment to third parties for client acquisition. These payments may be calculated as a fix amount for each acquired client or even as a percentage of the income generated by means of the clients investment activities. These third parties, that usually do not hold any license for delivering investment services, make the initial contact and acquires the client through different means, event through practices considered as aggressive.

This said, section 144 of the Spanish Securities Market Act (Ley del Mercado de Valores) clearly establishes that the commercialization of investment services and client acquisition may only be professionally developed by investment services entities or by means of tied agents.

The execution of these activities (i.e. commercialization of investment services or client acquisition for investment services by means of an affiliate program or similar), may only comply with the applicable law when executed by authorized investment entities or their tied agents. Hence, as a result of this CNMV public statement, it is not admissible the use of affiliates program for client acquisition in Spain when it implies or allows for unauthorized third parties to professionally acquire clients or develop investment services.

2. Promotion of contracts for differences (CFD) through entities of the group based in third countries and not authorized to carry out activity in the EU.

For guaranteeing an adequate retail investors’ protection, in particular when facing intermediaries specialized in CFD or other complex products, CNMV addresses those financial intermediaries that may carry out activity in Spain with following communication:

  • The duty or obligation to fulfill section 144 of the Spanish Securities Market Act and consequently the need to ensure the commercialization of its investment services and client acquisition is only executed through authorized entity or registered agents. In particular, is inadmissible to make payment for the commercialization or client acquisition in Spain to unauthorized entities.
  • When these entities may offer an affiliate or associate program in Spain, they will need to include an express announcement in its website. Such statement must be sufficiently clear and identifiable in the website, and it shall proclaim that in Spain only entities authorized to deliver investment services or its tied agents may enter into those programs, for the reason that commercialization of investment services and client acquisition are reserved activities.
  • Any activity with the purpose to direct retail clients based in Spain to entities based outside the EU shall be deemed as against the law.

In this regard, CNMV is determined to address other EU supervisors competent for supervising the activity of entities under freedom to provide services, for extending this message to all intermediaries registered at their domain and with passport to carry out activities in Spain with no permanent establishment. Additionally, the Spanish Supervisor does not reject the option of adopting additional measures in the view of any situation against the interests of investors in Spain or when deemed necessary for protecting the proper functioning of the markets.

To conclude, CNMV has made clear its commitment to continue defending before ESMA the adoption of measures at an EU level with the purpose of enhancing the protection of investors in this matter.

Should you have any questions regarding the above, or should you be an entity affected by this public statement and the recent regulation on advertising of investment products and services, please do not hesitate to contact us for an assessment on the matter.


  1. http://cnmv.es/
  2. https://boe.es/
    http://cnmv.es/

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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