The CNMV increases surveillance over advertising of investment products and services

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The CNMV increases surveillance over advertising of investment products and services

The CNMV increases surveillance over advertising of investment products and services

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November 27, 2020

On 13 November 2020 the Spanish Official State Gazette has published the Spanish Securities Markets Commission (hereinafter, the “CNMV”) Circular 2/2020, of 28 October, on the advertising of investment products and services (hereinafter, the “Circular”).¹

The aim of this Circular is to establish appropriate regulatory and supervisory measures to ensure that advertising is clear, sufficient, fair and not misleading and, to disseminate certain criteria that the CNMV has been lately applying in its supervisory activities regarding the content of advertising messages and other aspects. All the above in accordance with the provisions of Order EHA/1717/2010, of 11 June, on the regulation and control of advertising of investment services and products (hereinafter, the “Order”).²

Scope of application

In accordance with Rules 3 and 4 of the Circular, it is aimed at those entities carrying out advertising activities directed to Spanish resident investors or potential investors, which offer or draw attention to the following products or services:

Financial instruments included in the annex of the Securities Markets Act;
Structured deposits, as defined by MiFID II;
Crowdfunding platforms services and the projects to which these services relate, regulated by Law 5/2015 on the promotion of business financing;
Any other financial products, services or activities supervised by the CNMV.

On the other hand, the Circular applies to the following entities:

Investment services companies operating in Spain in any form, even when acting through an agent;
Credit institutions operating in Spain in any form, even when acting through an agent;
Collective investment institution management companies operating in Spain in any form, even when acting through an agent;
Crowdfunding platforms;
Any party interested in a takeover bid or a public offer for sale or subscription of securities, with the exceptions established in the Order;
Any entity that carries out the advertising activities included in Rule 3 on its own initiative or through third parties.

Advertising control

According to the Circular, the advertising of the products and services listed in Rule 3 of the Circular shall respect the provisions of Law 34/1988, of 11 November, on General Advertising, Law 3/1991, of 10 January, on Unfair Competition, the Order and, the Circular.

Furthermore, the Circular establishes the obligation of those entities carrying out advertising activities to establish a commercial communication policy. This policy shall include appropriate internal procedures and controls, which must be proportionate to the scale and complexity of its advertising activity, the complexity of the products or services offered, the characteristics of the advertising recipient or the means of dissemination of the advertising messages.

The commercial communication policy shall be approved by the administrative board and count with a favorable report from the relevant control function. In addition, the policy must be kept duly updated and available to the CNMV.

Finally, those entities carrying out advertising activities shall keep a duly internal record of its advertising activities that complies with the conditions of truthfulness, exhaustiveness, accessibility and traceability necessary to enable the CNMV to carry out its supervisory functions and, in particular, to verify the compliance of the provisions of the Circular. This record shall be kept by the entities for a period of five years from the beginning of the advertising campaign.

Advertising supervision

The CNMV is the entity responsible of the supervision of the advertising activity, as defined by the Circular.

It is important to note that advertising activity aimed at Spanish resident investors shall not require prior authorization from the CNMV. However, the CNMV is entitled to request specific information on advertising campaigns from the entities in order to assess compliance with the Order and the Circular, as well as to require the cessation of advertising, its timely correction or even initiate a sanctioning procedure.

Entry into force

The Circular shall enter into force three months after its publication in the Spanish Official State Gazette. This applies to all the Rules of the Circular except its Rule 7, about advertising records, which shall enter into force six months after the publication by the Bank of Spain of the technical specifications laid down in the second final provision of the Bank of Spain Circular 4/2020, of 26 June, on advertising of banking products and services³.