Order EHA/1717/2010 of June 11, on advertising regulations and oversight for investment products and services

1 July 2010

The order establishes the rules, principles and criteria to which advertising for investment services and financial instruments should be subject and authorizes the Spanish Securities and Exchange Commission to implement the order.

The order is based on the principle of consumer protection, which implies that the investor should have access to truthful information on which to base their investment decisions.

On the one hand, the range of the activities subject to control is defined: i.e., in which cases advertising would be subject to regulation by the Securities and Exchange Commission (known by the Spanish acronym CNMV), and what is considered advertising; and on the other hand, the special rules and the basic principles and criteria for stock market service and product advertising are specified. The CNMV is authorized to issue a memo, and to exercise administrative regulatory powers over advertising including, in certain cases, issuing cease and desist or rectification orders for advertising campaigns.

The fact that companies providing investment services are assuming a series of risks, both legal and reputational, through their advertising campaigns has been taken into account. As entities are expected to adequately manage these risks, supervisors are granted the authority to verify that they have the mechanisms in place to do so.

The necessary framework has been established so that the CNMV can exercise their administrative powers in two different ways. Firstly, when the advertising refers to sale or subscription offers for financial instruments which have or will have a registered pamphlet, or in which an entity authorized to render investment services intervenes in the transaction, the CNMV can order the discontinuance or rectification of advertising which does not meet the regulatory rules for investment instruments, products, services and activities and furthermore order the inclusion of warnings in the advertisements. The CNMV is likewise authorized to make public announcements.

On the other hand, when the advertisements refer to sale or subscription offers for stocks which do not and will not have a registered information pamphlet and where no authorized investment services entities have intervened, the CNMV has the authority to issue public announcements and to order the inclusion of warnings in the advertisement specifying the absence of oversight by the CNMV and recommendations to investors to compile additional information on the nature and characteristics of the products in question.

For further information, please contact Stefan Meyer: smeyer@mmmm.es