The Spanish National Securities Market Commission ("CNMV") published last Friday Circular 2/2020 on the advertising of investment products and services (the "Circular 2/2020"). With the publication of this new Circular 2/2020, the CNMV is reacting to the increase in advertising activity relating to complex financial products and the need to establish supervisory criteria thereof.
1. CONTENTS OF THE CIRCULAR 2/2020
Circular 2/2020 is divided into three chapters: the first, of a general nature, establishes the objective and subjective scope of the regulation; the second, contains the rules that must govern advertising, regulating for this purpose the content and format of the advertising message, the commercial communication policy (procedures and internal controls) and advertising recording; and the third, which regulates the supervision regime on advertising activity.
1.1 Scope of application
The Circular 2/2020, to define the activities considered as advertising:
- (a) Includes advertising activity addressed to investors in Spain regarding any financial product, investment services or activities under the supervision of the CNMV, including the activity carried out by crowdfunding platforms regulated by Law 5/2015 of 27 April on promotion of business financing and that relating to structured deposits.
- (b) Excludes from its scope of application (i) pre-contractual and contractual information including warnings on the characteristics and risks of the products or services provided to investors prior to contracting products or services or carrying out a transaction on such products; and (ii) documentation or information on Alternative Investment Funds (AIFs) provided to analysts or institutional investors in order to verify the interest in an AIF during the period prior to its marketing.
- (c) In addition, advertising activity addressed to retail investors or the general public concerning any product or service the sale or provision of which is not allowed to retail clients is prohibited.
- (d) The Circular 2/2020 will be applicable to investment firms, credit institutions, management companies of collective investment schemes and management companies of closed-end collective investment schemes authorised in Spain and to those authorised in another EU Member State or third country under the freedom to provide services, as well as to the branches in Spain of these entities. It will also apply to crowdfunding platforms.
- (e) Likewise, Circular 2/2020 extends its application to any interested party in a public offer for the acquisition of securities or in a public offer for the sale or subscription of securities, and to other entities that carry out, at their own initiative or on behalf of third parties, advertising activities aimed at potential investors resident in Spain.
1.2 Rules governing advertising
Among others, the following are the most noteworthy:
- (a) It establishes the minimum content that the commercial communication policy of the subject entities must have and the mandatory internal procedures and controls. This communication policy must be approved by the governing body and must be kept duly updated and available to the CNMV.
- (b) The characteristics and minimum content of the internal record in which entities must note down and keep all the documentation corresponding to each advertising campaign are specified, which must be available to the CNMV for five years from the start of the campaign.
- (c) The possibility of entities voluntarily joining advertising self-regulation systems is established as one of the ways of proving that they have controls in place to ensure compliance with the content and format requirements of the advertising message.
- (d) For small entities whose advertising activity is limited and mainly concerns non-complex investment products, provision is made for the governing body to establish a simplified commercial communication policy and a simplified record system always geared to meeting the obligations laid down in Circular 2/2020.
- (e) Entities within a group may structure the commercial policy at a group level, establishing single policies and procedures for the whole group. They may also have a single record provided that the group carries out its activity centrally.
1.3 Supervision
Finally, Chapter III regulates the procedure by which the CNMV, in the exercise of its supervisory function, may require specific information on advertising campaigns or pieces, as well as the cessation or rectification of advertising that does not comply with the provisions of Circular 2/2020.
The Circular 2/2020 will come into force three months after its publication in the Spanish Official Gazette, except for the provisions relating to the characteristics of the Register, which will come into force six months after the publication by the Bank of Spain of the technical specifications established in the second Final Provision of Circular 4/2020, of 26 June, of the Bank of Spain, on advertising of banking products and services.
