I

Recent Law 47/2007 of 19 December amending Law 24/1988 of 28 July on the Stock Market incorporates into Spanish law Directive 2004 /39/EC of the European Parliament and of the Council of 21 April 2004 on the markets for financial instruments.

This Directive 2004 /39/EC has been developed in certain respects by two other Community rules: Commission Directive 2006 /73/EC of 10 August 2006 implementing Parliament Directive 2004 /39/EC European Union and the Council as regards the organisational requirements and operating conditions of the investment firms and terms defined for the purposes of that Directive and Commission Regulation (EC) No 1287 /2006/EC of 10 August 2006, implementing Directive 2004 /39/EC of the European Parliament and of the Council as regards the obligations of investment firms to keep a register, information on transactions, market transparency, admission to trading of financial instruments, and terms defined for the purposes of that Directive.

While the law has collected some limited aspect of Directive 2006 /73/EC it is necessary to complete the transposition of that Directive. Therefore, the present Royal Decree has as its fundamental objective the completion of this transposition and the completion of the regulatory development of the regime applicable to the entities providing investment services after the recently introduced changes In the Law 24/1988, of July 28, of the Stock Market, deepening the principles that already inspired the modification of the Law.

These principles that have inspired the royal decree and which emanate from those that were the driving force behind the recent reform of the Securities Market Law are the following: The modernization of the financial markets to adapt them to the new needs (expansion of investment services, in turn creating a new type of investment firm); the strengthening of measures aimed at the protection of investors (established in the royal decree a large catalogue of investment services); rules to which the action of those providing investment services is to be subject; and, finally, the adaptation of the organisational requirements required of institutions providing investment services to ensure that their organisation in general is in line with the complex range of services they provide.

The current royal decree recasts two royal decrees (Royal Decree 867/2001 of 20 July 2001 on the legal status of investment firms and Royal Decree 629/1993 of 3 May 1993 on rules for action in the the securities markets and mandatory registers), in a single regulatory text in such a way that the legal regime applicable to entities providing investment services (investment firms and their companies) is covered by a single global rule. agents, credit institutions and management companies of collective investment institutions).

II

The royal decree consists of eighty-one articles divided into a preliminary title and four titles, an additional provision, two transitional provisions, one repeal and five endings.

The preliminary title develops the general questions. Firstly, it clarifies the scope of the rule by making it necessary to distinguish between the investment firms to which the entire royal decree applies, on the one hand, and on the other hand, the other entities providing services of investment, in particular, credit institutions and management companies of collective investment institutions, to which relevant articles apply to them when they provide investment services (mainly certain organisational rules) and the rules of conduct). In addition, the preliminary title provides for a number of definitions of concepts used throughout the royal decree and details of certain requirements when institutions providing investment services provide information to their clients. clients.

Title I lays down fundamental aspects of the system of investment firms, partly by collecting the content of Royal Decree 867/2001 of 20 July 2001 on the legal status of the service undertakings of the investment in the new developments introduced by Law 47/2007 of 19 December, amending Law 24/1988 of 28 July on the Stock Market and incorporating certain articles of Directive 2006 /73/EC into Spanish law Commission of 10 August 2006. In particular, when defining investment services, the important concept of financial advice is defined by distinguishing it from other recommendations outside its scope. In addition, the development of ancillary services details certain aspects of the regime applicable to investment reports and other general recommendations on financial instruments.

As regards the authorisation scheme for investment firms, it has been decided to establish a special authorisation scheme for firms providing financial advice given the nature and nature of the investment services. the functions they perform. Similarly, in accordance with European legislation, the existence of a special type of securities agency is recognised exclusively for the receipt and transmission of orders without taking funds or financial instruments from its clients, with lower capital requirements. On the other hand, it is worth noting the elimination of the requirement of the report of the Advisory Committee of the National Securities Market Commission in the procedures for authorization of investment services companies in order to give the procedure of greater agility. Finally, Title I completes the system applicable to the agents of the investment firm established in Law 24/1988 of 28 July.

Title II covers other matters applicable to the legal status of investment firms and other entities providing investment services. Chapter I is of great importance, since it includes a large number of organisational requirements which must be met on the one hand by investment firms and on the other hand, and in any case with the extent to which they are based. (a) preliminary, credit institutions and management companies of collective investment institutions. This chapter incorporates a large part of the text of Commission Directive 2006 /73/EC of 10 August 2006. While it can be argued that the previous Spanish legal order was not entirely alien to the new requirements of internal organization, it is true that the new royal decree regulates in a wide detail the demands of organization that the entities they must comply with, inter alia, manage their conflicts of interest, delegate essential functions and investment services to third parties, maintain records of their activities and operations, control the personal operations of their employees or to protect the funds and financial instruments of its clients. In short, this profuse regulation is in greater legal certainty on the part of the financial intermediaries and, on the other hand, facilitates the work of the supervisory bodies. In any event, the rule respects, where necessary, the necessary proportion of the required requirements and the size, nature and characteristics of the activity carried out by the entity concerned.

The second and third chapters of this Title were already in force in the previous regulations and are only applicable to investment firms. In particular, the financial regime of investment firms and the self-employed capacity of investment firms other than securities companies is regulated.

Title III includes the regime for cross-border action of investment firms by completing the provisions of the Law 24/1988 of 28 July on the Securities Market and, in short, maintaining the regime already in place. in the previous regulations.

III

Title IV incorporates the Spanish legal order, together with Chapter I of Title II, the bulk of Commission Directive 2006 /73/EC of 10 August 2006. This title applies to all entities providing investment services and establishes a comprehensive catalogue of rules to be followed in the provision of investment services. This title includes the witness of the previous Royal Decree 629/1993 of 3 May on rules of action in the markets for compulsory securities and registers, setting up a much more extensive and detailed regulatory regime where they deserve to be highlighted, in addition to the profuse obligations of information to the clients, the requirement to perform a test or examination of suitability or convenience with character prior to the provision of the service, a detailed regime to carry out the execution of orders of the customers and the establishment of a set of principles to be followed in the joint processing of orders from different clients. It should be borne in mind that in this title the different treatment given according to the customer's retail or professional profile is of vital importance. In this way, the royal decree reconciles the necessary protection to be given to investors with the establishment of requirements that meet this objective and which do not entail an expensive, unnecessary and fruitless burden for the entity as well as for the client.

Finally, the single additional provision specifies the system of communication of the identity of the clients to the National Securities Market Commission as regards the communication of transactions as set out in Article 59a of the Law 24/1988 of 28 July of the Stock Market; the first transitional provision grants to the entities providing the financial advisory service a period of one year from the entry into force of the royal decree to proceed to the required registration of the National Securities Market Commission and the provision The second transitional period gives the supervisor a special clearance to be able to adapt within 12 months of the entry into force of the royal decree the time limits laid down in Article 59a of the Securities and Exchange Act The only additional provision of the royal decree. As regards the derogating provision, it expressly states the main rules which are the subject of a derogation, declaring certain articles of Royal Decree 867/2001, of 20 July 2001, in force. As regards the final provisions, the third final provision which introduces certain amendments to the regulation of Law 35/2003 of 4 November, of the Collective Investment Institutions, is to be reviewed, for, on the one hand, the clarification of the the rules of conduct applied in that area and, on the other hand, to transpose Articles 3 and 4.1 of Commission Directive 2007 /16/EC of 19 March 2007 laying down detailed rules for the implementation of the Directive Council Regulation (EEC) No 2052/88 on the approximation of the laws, regulations and administrative provisions relating to: certain undertakings for collective investment in transferable securities (UCITS) as regards the clarification of certain definitions.

In its virtue, on the proposal of the Second Vice President of the Government for Economic Affairs and Minister of Economy and Finance, according to the Council of State and after deliberation of the Council of Ministers at its meeting of 15 February 2008,

D I S P O N G O:

PRELIMINARY TITLE

General provisions

Article 1. Scope of application.

1. The present royal decree applies to investment service companies.

2. Credit institutions which provide investment services in accordance with Article 65.1 of Law 24/1988 of 28 July 1988 on the Securities Market shall be subject to the provisions of the following provisions of this Royal decree:

(a) Articles 5 and 8 of Chapter I of Title I.

(b) Articles 27 (1) and (2) and (28); Article 31 as regards the function of regulatory compliance; Article 39 as regards the deposit of financial instruments; Articles 40 and 42; Article 43 as regards the deposit of financial instruments and Sections 2. 3 and 6. of Chapter I of Title II.

c) Title IV.

(d) To the extent that they result from application to the provisions set out in the preceding letters, the following articles of this preliminary title.

3. Foreign credit institutions which come to lend in Spanish territory any of the investment services provided for in Article 5 of this royal decree shall be governed by the provisions of Royal Decree 1245/1995 of 14 July 1995 on the creation of banks, cross-border activity and other matters relating to the legal status of credit institutions, without prejudice to the provisions of Article 71a of the Law 24/1988 of 24 July on branches of credit institutions Community credit authorised to provide investment services in Spanish territory.

4. For the purposes of the two preceding paragraphs, the Banco de España shall communicate to the National Securities Market Commission, in order to include the information in its registers, foreign and/or Spanish credit institutions. authorised to provide investment services in Spain.

5. To the management companies of collective investment institutions which are authorised to carry out the activities of discretionary and individual management of investment portfolios, investment advice, custody and the management of the shares of the investment funds and, where appropriate, the shares of the investment companies, the following provisions of this royal decree shall apply to them in the provision of the said services Investment:

(a) Chapter I of Title II, with the exception of Section 2, of which only Article 32 shall apply.

(b) Chapter I, with the exception of Article 58; Chapter III; Article 79 and Chapter VI of Title IV.

(c) To the extent that they relate to the provisions referred to in the preceding letters, the following articles of the preliminary title and Article 5.1.g).

Article 2. Definitions.

For the purposes of this royal decree:

a) Distribution Channel: Any means through which the information is disseminated or may be disseminated publicly, meaning that it has access to a large number of people.

(b) Lasting support: Any instrument that enables the customer to store the information personally addressed to him, so that he can easily retrieve it for a period of time suitable for the purposes for which the information is intended to allow unchanged reproduction of the stored information.

(c) Competent person in relation to an entity providing investment services:

1. º) An administrator, partner, manager, or agent of the entity.

2. º) An administrator, partner, or management position of any agent in the entity.

3. º) An employee of the entity or an agent of the entity, as well as any other natural person whose services are made available to and under the control of the entity or an agent of the entity and who participates in the performance by the investment services entity.

4. (º) A natural person who is directly involved in the provision of services to the entity or to its agent under a delegation agreement for the provision by the investment services entity.

d) Financial Analyst: The competent person who carries out the fundamental part of the investment reports.

e) Delegation: Any type of agreement between an entity that provides investment services and a third party by virtue of which it performs a service, process or activity that in other circumstances would carry out that service.

f) Person with whom a competent person has a parentage relationship:

1. °) The spouse of the competent person or any person attached to it by a relationship of analogous affectivity, in accordance with national law.

2. º) The children or stepchildren who are in charge of the competent person.

3. °) Those other relatives who live with it for at least one year before the date of the personal operation considered.

g) Securities financing operation: Business or securities lending or other financial instruments, sale transaction with repurchase agreement or purchase transaction with resale pact.

h) High management of an investment services company: The managers and the management positions of the entity. It is understood that the directors-general and those who develop in the entity functions of senior management under the direct dependence of their management or executive commissions or delegated advisors are managerial positions of the entity.

Article 3. Conditions applicable to the provision of information.

1. Where, in accordance with the provisions of this royal decree, institutions providing investment services are required to provide information to their clients on a durable medium, institutions may provide information on a medium-term basis. other than paper, when the following conditions are met:

a) That the provision of the information in the chosen medium is appropriate to the context in which the activity between the entity and the client is, or is to be, carried out.

b) That the person to whom the information should be provided specifically chooses the provision of information on a different media, when given the option to choose between the two media.

2. Where, in accordance with the provisions of this Royal Decree, an entity providing investment services provides information to a customer through a website and that information is not personally addressed to it, the requirements shall be met. following:

a) The provision of the information in this medium shall be appropriate to the context in which the activity between the entity and the client is, or is to be, carried out.

b) The customer must expressly accept that the information is provided to him on that support.

c) Customer must be notified electronically of the address of the website and the place on the website where the information can be accessed.

d) The information must be up to date.

e) The information must be accessible continuously through the website for the period of time the client may reasonably need to examine it.

3. For the purposes of points (a) of the previous two paragraphs, the provision of information by electronic communications shall be deemed appropriate if there is evidence that the client has regular access to the Internet. A valid proof shall be that the customer's communication of an e-mail address for the purpose of the development of the business of the entity providing investment services.

TITLE I

From investment services companies

CHAPTER I

Concept and types of investment services companies

Section 1. General Regime

Article 4. Concept.

1. Investment firms are undertakings whose main activity is to provide investment services of a professional nature to third parties on the financial instruments referred to in Article 2 of the Law 24/1988 of 28 June 1988. July, on the Securities Market. The investment services companies are governed by Law 24/1988, of July 28, of the Market of Securities, the present royal decree, the remaining real decrees that develop the Law and that result from application and their respective dispositions of development.

2. They are investment services companies as follows:

a) Securities companies.

b) The securities agencies.

(c) Portfolio management companies.

d) Financial advisory companies.

Article 5. Investment services and ancillary services.

1. Investment firms, under their specific legal arrangements, may carry out the following investment services:

a) The receipt and transmission of client orders in relation to one or more financial instruments.

b) The execution of those orders on behalf of clients.

c) Self-negotiation.

d) Discretionary and individualized management of investment portfolios according to the mandates conferred by clients.

e) The placement of financial instruments.

f) The assurance of an issue or a placement of financial instruments.

g) Investment advice, in the understanding of the provision of personalised recommendations to a client, either at the client's request or on the initiative of the investment firm, with respect to one or more transactions relating to financial instruments. Recommendations of a generic and non-personalised nature which may be made in the field of the marketing of financial instruments and securities shall not be considered as providing advice for the purposes of this paragraph. Such recommendations shall have the value of commercial communications. Also, recommendations that are disclosed exclusively through distribution channels or to the public will not be considered as a personalized recommendation.

For such purposes, the recommendation made to a person in his or her capacity as an investor or potential investor, or in his capacity as a representative or proxy for that person, shall be understood on a personal recommendation.

The recommendation should be presented as appropriate for that person, based on a consideration of their personal circumstances and should consist of a recommendation to perform any of the following actions:

i) Buy, sell, subscribe, redeem, redeem, maintain or secure a specific financial instrument.

ii) Exercising or not exercising any right conferred by a particular financial instrument to buy, sell, subscribe, redeem or redeem a financial instrument.

h) The management of multilateral trading systems.

2. Investment firms, under their specific legal arrangements, may carry out the following ancillary services:

(a) The custody and administration for the account of clients of the instruments provided for in Article 2 of Law 24/1988, of 28 July, of the Securities Market.

(b) The granting of loans or loans to investors, in order to enable them to carry out an operation on one or more of the instruments provided for in Article 2 of Law 24/1988 of 28 July 1988 on the Securities Market, provided that The company that grants the loan or loan is involved.

c) Advice to companies on capital structure, industrial strategy and related issues, as well as advice and other services in relation to mergers and acquisitions of companies.

(d) Services related to the operations of emission assurance or placement of financial instruments.

e) The development of investment and financial analysis reports or other forms of general recommendation relating to financial instrument operations.

In any case the recommendations (understanding of any information intended for the public, related to one or more securities or financial instruments or with the issuers of these, including any report on the The present or future value or the price of these instruments, which advises or suggests an investment strategy) which do not meet the two conditions laid down in Article 63.2.e) of the Law 24/1988 of 28 July, will have the (a) advertising communications, and the investment services companies which present them or To ensure that they are clearly identified as such. In addition, the recommendation should contain a clear and prominent statement, or in the case of oral recommendations, a measure having equivalent effect, that it has not been drawn up in accordance with the regulations aimed at promoting the independence of the investment reports and that there is no prohibition on the negotiation before the dissemination of the report.

f) Currency exchange services, when related to the provision of investment services.

(g) Investment services as well as ancillary services which relate to the non-financial underlying of the derivative financial instruments referred to in Article 2 (3), (4), (5) and (8) of the Law 24/1988, of 24 (a) July, the Securities Market, where they are linked to the provision of investment services or ancillary services.

3. Acts carried out by an investment firm that are preparatory to the provision of an investment service should be considered an integral part of the service.

Section 2. Other Types of Investment Services Companies

Article 6. Typology.

1. Securities companies are those investment firms which are able to operate professionally, both on an employed and self-employed basis, and to carry out all the investment services and ancillary services provided for in Article 5. previous.

2. Securities agencies are those investment firms that professionally only operate on behalf of others, with or without representation.

They may carry out the investment services and ancillary services provided for in Article 5 above with the following exceptions:

a) Self-negotiation.

b) The assurance of an issue or a placement of financial instruments.

(c) The granting of loans or loans to investors to enable them to carry out transactions on one or more of the instruments provided for in Article 2 of Law 24/1988 of 28 July of the Securities Market.

3. The portfolio management companies are those investment firms which, on a professional basis, manage discretionary and individualised investment portfolios on the basis of the mandates conferred by investors. They can also provide investment advice and perform the following ancillary services:

(a) Advice to companies on capital structure, industrial strategy and related issues, as well as advice and other services related to mergers and acquisitions of companies.

b) The development of investment and financial analysis reports or other forms of general recommendation on financial instrument operations.

4. The financial advisory companies are those natural or legal persons who can only provide the following investment advisory investment service and the following ancillary services:

(a) Advice to companies on capital structure, industrial strategy and related issues, as well as advice and other services related to mergers and acquisitions of companies.

b) The development of investment and financial analysis reports or other forms of general recommendation on financial instrument operations.

Article 7. Naming reservation.

1. The social names of the investment firms described in the preceding articles shall include, in a compulsory manner, the reference to the type of investment firm in question: "securities company", " securities "," holding company of portfolios, "financial advisory firm", or its abbreviations "SV", "AV", "GSC", and "EAFI", in correspondence, printed, propaganda, contracts and, in general, in all public references of any kind which come from such entities.

2. Foreign investment firms operating in Spain shall retain their original denomination; however, they must express in their public references, in particular in their relations with the customers, their character as undertakings of investment services, as well as their own or foreign operating arrangements.

3. Any person or entity not listed in the records of the National Securities Market Commission may use the names and abbreviations referred to in paragraph 1 of this Article or the name of 'service undertaking'. investment " or any other name or abbreviation which may lead to confusion with them.

Article 8. Activity reservation.

1. No person or entity may, without having obtained the required authorization and be registered in the corresponding administrative records of the National Securities Market Commission or the Bank of Spain, develop with Article 5 (2) of this Royal Decree, in conjunction with the instruments provided for in Article 2 of Law 24/1988 of 28 July 1988, of 28 July 1988, of the European Parliament and of the Council, of the European Parliament and of the Council of the European Parliament and of the Council of the European Parliament Stock Market, comprising, for that purpose, foreign exchange operations.

Likewise, the marketing of investment services and the collection of clients may only be carried out professionally by themselves or through the agents regulated in Article 65a of Law 24/1988 of 28 July 1988. Securities market, entities that are authorised to provide such services.

2. For the above purposes, it shall be understood that the note of habituality is fulfilled when the activities are accompanied by commercial, advertising or other activities designed to create customer relations or are based on the use of customer relations or interest from another source. It is understood that the note of professionalism is fulfilled when the activities are carried out to clients in general and in a remunerated manner.

CHAPTER II

Activities and services

Article 9. Program of activities.

1. Investment firms must have at all times a programme of activities to be carried out by the National Securities Market Commission which will include investment and ancillary services and ancillary activities to which refers to the following Article, which they carry out, with the general or limited scope with which they intend to develop them, detailing, in addition, the instruments to which they relate and the organisation and means at their disposal.

2. Investment firms may only provide, with the appropriate scope, the services they have declared to the National Securities Market Commission and shall comply with all rules affecting the service in particular, especially those that relate to the relations with the clientele. Institutions shall not be able to perform services not included in their programme of activities or to do so with a different scope.

Article 10. Ancillary activities.

Investment services companies, provided that they meet the requirements set out in this Royal Decree and properly resolve any conflicts of interest between them and their clients, or between those of the different types of customers, may provide the services referred to in Article 5 of this royal decree relating to instruments not covered by Article 2 of Law 24/1988 of 28 July of the Stock Market, or other ancillary activities (a) the extension of his business, where this does not detract from the company's own social object; investment services.

Investment services companies may not assume exclusive functions of management companies of collective investment institutions, pension funds or asset-securitisation funds.

Article 11. Modifications to the activity schedule.

1. The initial activities programme of the investment firm shall accompany the application for authorisation referred to in Chapter III of this Title. Any subsequent alteration of the programme of activities shall be subject to the procedure laid down in that Chapter.

They will not require authorization from the Minister of Economy and Finance, although they will have to be communicated to the National Securities Market Commission, those modifications to the program of activities that have little relevance to affect to services and activities not reserved, to the alteration or reduction of services and activities already authorized, or because they are considered by the National Securities Market Commission in response to the prior consultation formulated to the effect by the the investment services company concerned.

2. The Minister for Economic Affairs and Finance may refuse to amend the programme of activities if the assumptions provided for in Articles 67.1, 70, 70 b, 70 c and Title VII of the Law 24/1988 of 28 July 1988 on the Securities Market are given. other, if the administrative and accounting organisation of the institution, its human and technical means, its internal control procedures or the rules of conduct it has adopted is insufficient, in particular if they are not appropriate for the purposes of avoid conflicts of interest that may arise in the development of content services and activities in the proposed program of activities.

3. In the case of investment firms authorised in another Member State of the European Union, the amendment of the programme of activities shall be subject to the receipt by the National Commission of the Market of Securities of a Communication of the supervisory authority of the country of origin of the investment firm indicating the modification of the activities to be carried out in Spain.

4. The business activities of the investment firm shall be recorded in the records of the National Securities Market Commission in the form that it determines.

CHAPTER III

Authorization and registration of investment services companies

Section 1. General Regime

Article 12. Authorization.

1. Without prejudice to Article 20, it shall be the responsibility of the Minister for Economic Affairs and Finance, on a proposal from the National Securities Market Commission, to authorise the establishment of investment service undertakings or the processing of a society in that category.

2. The decision on the application for authorisation shall be reasoned and shall be notified within three months of its receipt, or at the time of completion of the required documentation, and, in any event, within six months of the date of receipt of the request. receipt of the initial request.

When the resolution is not notified within the time limit, it may be deemed to be dismissed, as provided for in Article 66.1 of Law 24/1988 of 28 July of the Securities Market.

3. Obtained the authorization and, after its incorporation and registration in the Commercial Registry, the investment services companies to carry out their activities, must be registered in the Register of the National Commission of the Market of Securities.

4. No registration shall be made in the Register of the National Securities Market Commission in the event that more than one year has elapsed between the date of authorization and the date of application for registration in the Register.

Article 13. Communication to the European Commission.

The National Securities Market Commission will communicate to the European Commission the difficulties that Spanish investment firms may find in establishing or providing investment services in a non-member state. the European Union.

Article 14. Requirements for exercising your activity.

1. They shall be eligible for an entity to obtain and retain its authorisation as an investment firm of the following:

(a) To have for exclusive social object the performance of the activities that are their own of the investment services companies, according to the Law 24/1988, of July 28, of the Market of Securities, and this royal decree.

b) Revestir the form of a public limited company. In any event, the company must be of indefinite duration, with a denomination adjusted as provided for in Article 7 of this royal decree, and the shares or units belonging to its share capital must have a nominative character.

c) When it is a newly created entity, it must be constituted by the simultaneous foundation procedure.

(d) A minimum share capital and own funds not less than the amounts required in the following Article and the solvency rules applicable to it.

This share capital must be fully disbursed in cash, in the case of new creation.

In the case of transformation, the disbursement of the difference between the minimum social capital and the net worth of the entity applying for the transformation shall be cash.

e) Contar with an administrative board consisting of no less than three members. All of them, as well as those of their dominant entity where they exist, shall be persons of recognised business or professional repute and shall have at least the majority in each of the relevant council, knowledge and experience with the stock market to perform its functions. Such good repute, knowledge and experience shall also be required of the general or similar directors of the entity and its parent, where it exists. Good repute will also be required for natural persons representing legal persons on boards of directors, who should also have adequate knowledge and experience where necessary to ensure the right of the compliance with this requirement by the majority of the members of the Management Board.

f) Having the procedures, measures and means necessary to comply with the organisational requirements set out in Article 70b (1) and (2) of the Law 24/1988, the Securities Market, of 28 July, and the rules of conduct laid down in Title VII of the Law. In particular, the Management Board shall establish appropriate rules of operation and procedures to facilitate all its members to be able to fulfil their obligations at all times and to assume the responsibilities of them. In accordance with the regulatory standards of the securities market, Royal Decree 1564/1989 of 22 December 1989 approving the recast of the Law on Limited Companies or other provisions that apply.

When the entity intends to provide services by telematic means, it must have the appropriate means to ensure the security, confidentiality, reliability and capacity of the service provided and for the proper performance of the rules on the prevention of money laundering, conduct, internal control and risk assessment and for the proper development of the supervisory and inspection rules of the National Securities Market Commission.

In any event, the institution must have adequate procedures and organs for internal control and communication to prevent and prevent the conduct of money laundering related operations, under the conditions of the established in Articles 11 and 12 of the Regulation of 28 December 1993 on certain measures for the prevention of money laundering, adopted by Royal Decree 925/1995 of 9 June 1995.

g) Having an internal rules of conduct adjusted to securities market regulatory standards; in particular those contained in Chapter II of Title VII of Law 24/1988 of 28 July of the Securities Market and its rules as well as a system of personal operations of the directors, managers, employees and proxies of the company that ensures compliance with the rules of conduct.

h) Join the Investment Guarantee Fund in the terms established by its specific regulation. This requirement shall not apply to financial advisory undertakings.

i) Having their registered office, as well as their effective administration and management, on national territory.

j) that you have submitted a business plan that reasonably proves that the investment services company project is viable in the future.

k) Having submitted appropriate documentation on the conditions and services, functions or activities to be delegated, so that it can be verified that this fact does not denature or leave the authorisation without content requested.

2. They have adequate knowledge and experience to perform their duties in investment firms, who have performed, for a period of not less than three years, senior management, management, control or advisory functions. of financial institutions or functions of similar responsibility in other public or private entities with a dimension at least analogous to the entity to which it is intended to be accessed.

3. Investment firms must comply at all times with the requirements laid down in paragraph 1 of this Article. However:

(a) The authorisation may be revoked only for the lack of suitability of an exceptional partner, as provided for in Article 69 (11) of Law 24/1988 of 28 July of the Stock Market.

(b) For lack of commercial or professional honorability of directors or directors, the revocation shall only proceed if the persons concerned do not cease their positions within a month of the requirement that the Commission directs them to do so. National of the Securities Market. There shall be no lack of good repute for the mere fact that, in the exercise of his office, a counsellor or director is charged or prosecuted for any of the offences referred to in Article 67.2, (f), third paragraph, of Law 24/1988, of the Securities Market, of July 28.

Article 15. Financial requirements of investment services companies.

1. Investment firms shall have a share capital not less than the following amounts:

(a) Securities companies; EUR 2,000,000.

(b) Securities agencies, when they intend to acquire the status of members of secondary markets, or to adhere to securities clearing and settlement systems, or to include in their activity programme the custody of financial instruments and may maintain an instrumental and transitional creditor accounts, in accordance with the terms of Article 29.2 of this Royal Decree, EUR 500,000.

(c) Securities agencies that do not intend to acquire the status of members of secondary markets or to join clearing and settlement systems, when they do not include in their programme of activity the custody of instruments The Commission has also been able to make a statement on the situation in the European Parliament and the Council of the European Parliament. Where they are only authorised for the receipt and transmission of orders without holding funds or financial instruments belonging to their clients, they shall have:

i) An initial capital of 120,000 euros; or

(ii) A professional civil liability insurance, a guarantee or other equivalent guarantee which allows the liability to be made in respect of negligence in the exercise of his professional activity throughout the territory of the Union European, with a minimum coverage of 2,500,000 euros per claim for damages, and a total of 3,500,000 euros annually for all claims.

(iii) A combination of initial capital and professional liability insurance which results in a level of coverage equivalent to that of previous points (i) and (ii).

d) Portfolio management companies, EUR 100,000.

2. Changes in the programme of activities of investment firms which provide for the performance of activities for which a higher social capital is required shall be subject to the corresponding capital increase.

Article 16. Requirements for the request.

1. The application for authorisation for the establishment of an investment firm or the processing of such an investment firm shall be accompanied by the following documents:

a) Project of social statutes, accompanied by a registration certificate negative of the proposed social denomination or accreditation that can be used legitimately.

(b) Programme of activities, in which, in a specific manner, the investment services, ancillary services and ancillary activities to be carried out shall be included, indicating the instruments to be provided.

(c) Description of the administrative and accounting organisation, the technical and human means appropriate to its programme of activities, as well as the procedures for internal control, access and safeguarding of computer systems; accompanied, where necessary, by the relevant report by an independent expert.

d) Relationship of partners with indication of their holdings in the share capital. In the case of partners having the consideration of legal persons, the shares in their capital shall be indicated, which directly or indirectly represent a percentage higher than 5 per 100. In the case of partners who are to hold a significant participation, they shall also be provided, if they are natural persons, information on their career and professional activity, and if their statutes, annual accounts and reports are legal persons. management, with the audit reports, if any, of the last two exercises, the composition of its administrative organs and the detailed structure of the group to which they may belong.

e) The relationship of administrators and those who have to serve as general or assimilated directors, with detailed information on the trajectory and professional activity of all of them.

(f) Rules of Procedure in which, in an express manner, the arrangements for the personal operations of the directors, employees and proxies of the undertaking are provided for and other aspects referred to in Title VII of the Law on the Market of Securities and in Title IV of this royal decree which, according to the schedule of activities envisaged, are applicable to the entity.

In any case, it will be possible for the promoters to require all data, reports or records to be considered appropriate to verify compliance with the conditions and requirements set out in this royal decree.

2. Where the transformation of another entity into an investment firm is requested, in addition to the above documents it shall be accompanied by:

(a) An audited intermediate balance sheet, closed no earlier than the last day of the quarter preceding the time of filing, with an express mention and sufficient detail of any contingencies that might affect the valuation of the estate. The balance sheet shall be drawn up with the same criteria, structure and form to be included in the annual accounts.

(b) The audited annual accounts of the last two years or their creation, if this has occurred during this period.

c) Public writing of the entities ' constitution and subsequent amendments thereto.

3. The National Securities Market Commission shall be responsible for the creation and management of a register of directors and directors-general of the dominant entities, other than credit institutions, investment firms or entities. insurance companies or reinsurers of Spanish investment services companies, where the directors, directors and assimilated persons must be registered.

For registration on such registration, such persons shall communicate their appointment within 15 days of their acceptance of the charge, including personal and professional data which they establish, in general, the National Securities Market Commission and expressly declare, in the document certifying their acceptance of the charge, that they meet the requirements of good repute and, where appropriate, professionalism that are necessary for them and that there are no incourses in any limitation or incompatibility laid down in the rules which they are application.

Article 17. Refusal of the request.

1. The Minister for Economic Affairs and Finance shall, by means of a reasoned decision, refuse the authorization to set up an investment firm for the reasons set out in Article 67.1 of Law 24/1988 of 24 July 1988 on the Stock Market.

2. For the purposes of Article 67,1 (b) of that law, the commercial and professional good repute of the shareholders shall be assessed taking into account the provisions of Article 67.2.f) of that law. This good repute shall always be presumed when the shareholders are public administrations or entities dependent on them.

3. For the purposes of Article 67,1 (c) of that law, close links shall mean a whole set of two or more natural or legal persons joined by:

(a) The fact that they have a direct or indirect ownership, or by means of a control link, 20 per 100 or more of the voting rights or capital of a company, or,

b) A control link in the terms of Article 4 of Law 24/1988, of July 28, of the Securities Market.

Article 18. Authorisation of investment services companies subject to the control of foreign persons.

The authorisations granted to investment firms which are to be directly or indirectly controlled by one or more undertakings authorised or domiciled in a non-Member State of the European Union shall be communicated by the National Securities Market Commission to the European Commission, specifying the structure of the group to which the institution belongs.

Article 19. Corporate operations.

1. For the purposes of this royal decree, the conversion, merger, division and segregation of an activity in which an investment firm is involved, at least one investment firm, shall be considered to be social operations.

2. Company operations are subject to the authorisation procedure and requirements set out in this Chapter III.

3. In the processing of the authorisation of corporate transactions, the National Securities Market Commission shall check:

(a) That the change in the structure of the company as a result of the corporate operation cannot mean any of the requirements that the investment services companies ' constitution are required to establish in this royal decree.

(b) That, when the disappearance of an investment firm occurs, the clients do not suffer damages, and that, where appropriate, the pending operations shall be settled in order.

4. The National Securities Market Commission may require, where necessary, the accreditation that the social capital and net worth of the entity resulting from a corporate operation exceeds the minimum capital requirements laid down in the Article 15 of this royal decree. For this purpose, the presentation of audited balance sheets, including those of institutions of the consolidated group, may be required not before the last day of the quarter preceding the time of the filing of the application.

Section 2. Financial Advisory Companies

Article 20. Authorization.

The authorization of financial advisory companies will be the responsibility of the National Securities Market Commission.

The authorisation and registration procedure will be subject to the deadlines and requirements set out in Article 12 of this royal decree. In addition, in the case of financial advisory firms that are natural persons, the registration of the National Securities Market Commission is sufficient, therefore, the authorization and registration of the registration of the National Commission of the Market for Simultaneous Securities.

Article 21. Requirements for exercising the activity.

1. In order for financial advisory firms to obtain and retain their authorisation, they must comply with the requirements laid down in Article 14 of this royal decree, with the following specialties:

(a) To have exclusive social object to exercise its own activities, in accordance with Article 64 of Law 24/1988, of July 28, of the Stock Market.

(b) In the case of natural persons, they must have legal capacity to exercise trade.

(c) In the case of legal persons, the form of a limited liability company or limited liability company shall be established for an indefinite period, in the case of limited liability companies having all their shares as nominative.

d) That in the case of a newly created entity it is constituted by the simultaneous foundation procedure and that its founders do not reserve any special benefits or remuneration of any kind.

e) Contar with fully paid-up social capital in cash, in the case of legal persons, and meet the financial requirements set out in the following article when they are natural persons.

f) Most members of your board of directors or, where appropriate, your administrator or administrators, as well as all of your general and assimilated directors have adequate knowledge and experience for the exercise of their functions.

Administrators, CEOs, and those who develop senior management functions, as well as those representing legal persons, must have recognized business or professional good repute.

g) Natural persons who are constituted as financial advisory firms shall have adequate business or professional good repute as well as sufficient knowledge and experience for the exercise of their functions.

(h) Partners with significant participation of financial advisory firms must meet the eligibility requirements laid down in Article 67 (1) (b) of the Securities Market Act 24/1988 of 28 July 1988. they shall also be enforceable in the case of natural persons who are established as financial advisory firms.

i) shall comply with the general requirements of the organization, with the scope that the National Securities Market Commission determines, and have adequate procedures and organs for internal control and communication to prevent and to prevent money laundering operations, under the conditions laid down in Articles 11 and 12 of the Regulation of 28 December 1993 on certain measures for the prevention of money laundering, adopted by the Commission, Royal Decree 925/1995 of 9 June.

j) Meet the rules of conduct provided for in Title IV of this royal decree.

k) Having an internal regulation of conduct adjusted to the regulatory standards of the securities market; in particular those contained in Chapter II of Title VII of Law 24/1988 of 28 July 1988 on the Securities Market and its rules as well as a system of personal operations of the directors, managers, employees and proxies of the company that ensures compliance with the rules of conduct.

l) Having your registered office and central administration in national territory. In case of natural persons, they must have their residence in Spain.

m) That they have presented a business plan that accredits their viability.

n) Only the exercise of administrative-type functions may be delegated to third parties.

or) Financial advisory firms may not contract agents for the performance of their duties.

2. The authorisation of a financial advisory firm may be refused for the reasons set out in Article 67. 1 of the Law 24/1988, of July 28, of the Stock Market, and 17 of this royal decree.

3. The authorization of the financial advisory companies may be revoked in the cases provided for in Article 73 of Law 24/1988 of 28 July, of the Securities Market, and in Article 14.3 of this royal decree.

4. The National Securities Market Commission shall determine the arrangements for subsequent amendments to the registration of these entities in the National Securities Market Commission's register.

Article 22. Financial requirements.

1. Financial advisory firms that are legal persons shall have:

i) An initial capital of 50,000 euros; or

(ii) A professional civil liability insurance covering the entire territory of the European Union, guarantee or other comparable guarantee to face liability for professional negligence in the exercise of its business professional throughout the European Union, with a minimum coverage of 1,000,000 euros per claim for damages, and a total of 1,500,000 euros per year for all claims.

(iii) A combination of initial capital and professional liability insurance which results in a level of coverage equivalent to that of previous points (i) and (ii).

In the case of the transformation of another entity, the own resources at the time of registration shall be at least the amount referred to in point (i) above.

2. Financial advice undertakings which are natural persons shall comply with the provisions of point (ii) of the previous paragraph.

Article 23. Requirements for the request.

The application for authorization and registration of a financial advisory company must be accompanied by the documents established for this purpose by the National Securities Market Commission.

CHAPTER IV

Agents of investment services companies

Article 24. Hiring agents.

1. The exercise of the activity of the agents of the investment firm is subject to the supervision of the National Securities Market Commission, which may lay down additional requirements for the coverage of the risks arising from the defaults or frauds arising from your activity.

2. Any natural or legal person may act as an agent of an investment firm, with the exception of:

(a) Natural persons linked by an employment relationship to the institution itself or to any other person providing investment services on the instruments provided for in Article 2 of Law 24/1988 of 28 July 1988 on the market Values.

(b) Natural or legal persons acting as agents of another investment firm or as agents of credit institutions providing investment services, unless both entities belong to the same group.

3. Action as an agent of legal persons shall be conditional upon the compatibility of such activity with its social object.

4. The agents of the investment firm must comply with the requirements laid down in paragraph 1 (f) of the article of this royal decree, and, where they are legal persons, as provided for in paragraphs (d) and (e) of that Article. paragraph, all with the precise adaptations which, if any, the Minister of Economy and Finance determines for natural and legal persons.

Article 25. Representation regime.

1. Investment services companies that appoint agents shall be responsible for the compliance by these of all the rules of management and discipline of the securities market in the acts they perform.

2. In addition, in accordance with Article 65 (4) of the Law 24/1988 of 28 July, investment firms must have the necessary means to effectively monitor the performance of their agents and to make the necessary comply with the rules and internal procedures of the entities that are applicable to them, prior to the formalisation of the legal business of representation or proxy, they shall check the adequacy and adequacy of the administrative and media organization, operational procedures, internal control and accounting systems and, where appropriate, of the computer systems to be used by those in the further development of their actions. In the event that the representation is to be granted to a legal person, the above checks shall be extended to their economic and financial situation. Investment firms shall condition the recruitment of the agents to the satisfactory verification of the aspects referred to in this paragraph.

In the same way, investment firms will impose on the agents that their actions are carried out in accordance with the operating procedures, internal control and accounting procedures that will be developed by the companies to the they represent, in particular as regards cash or payment instruments, as well as to impose the use of computer systems to ensure the proper integration of the data and information between the agents and the company they represent. To this end, the operators must allow and collaborate in those operational audits, procedures and internal controls which, on such procedures and systems, carry out the undertakings to which they represent. Investment firms shall, where appropriate, condition the maintenance of the legal business of representation or enforcement by their agents of these measures.

3. Without prejudice to the relevant notarized proxy registered in the Trade Register in which the scope of the representation and its geographical scope is detailed, the private representation contract shall be concluded in writing and shall specify, (a) the scope of the operations and services in which the staff member may act, the system of charges and payments to the customers, the system of invoicing, settlement and recovery of the services of representation, and the exceptional scheme of the personal operations of the agent, as provided for in Articles 34 and 35 of this royal decree.

4. Any delivery or receipt of funds shall be carried out directly between the investment firm and the investor, without the funds being able to be in a transitional manner in power or in the account of the representative. Except for the receipt or delivery of funds by means of nominative purposes, either in favour of the investment firm in favour of the investor, as appropriate.

5. In any event, the securities or financial instruments of the clients may not, even temporarily, be in possession or deposit of the agents, and must be deposited directly in the name of the agents.

6. Mandates with powers for a single operation shall also be made in writing and shall specify, in a specific manner, the individual operation concerned and all the aspects referred to in paragraph 3 above. The signature of acceptance of the representative shall also be given to the power received.

Article 26. Communication and advertising of representation relationships.

1. The National Securities Market Commission may obtain from the investment services companies represented and its agents any information it deems necessary on the matters relating to the matters covered by its jurisdiction.

2. In accordance with the provisions of Article 65a of Law 24/1988 of 28 July 1988, investment firms shall require their staff to make clear their status in respect of their relations with their customers, identifying the entity they represent and the scope of the power received. In this sense, agents are required to display such power to all customers who request it.

3. An investment firm must have a file whose content will be determined by the National Securities Market Commission, relating to the documentary support of established agency relationships and the mandates given.

TITLE II

Other issues of the legal regime of investment firms and other entities providing investment services

CHAPTER I

Organizational Requirements

Section 1. Organization

Article 27. General organizational requirements.

1. Under the provisions of Article 70b of Law 24/1988 of 28 July 1988 on the Securities Market, institutions providing investment services shall comply with the following requirements, taking into account the nature, scale and complexity of their business activity and the nature and range of services provided:

a) Employee with the skills, knowledge and experience needed to perform the functions assigned to them.

b) Bring an orderly and proper record of your internal activity and organization.

(c) Ensure that the competent persons fulfil their different tasks in an appropriate, honest and professional manner.

2. Investment firms shall establish, implement and maintain systems and procedures to safeguard the security, integrity and confidentiality of information which are appropriate in the light of the nature of the information provided. in question.

3. In accordance with Article 70 (2) (b) of that law, institutions shall have a policy of continuity and regularity in the provision of their services which ensures, in the event of interruption of their systems and procedures, that they are not the preservation of essential data and functions and the maintenance of investment services or, where this is not possible, the timely recovery of such data and functions and the resumption of investment services.

4. In accordance with the provisions of Article 70 (2) (a) of that Law, institutions shall have accounting procedures that allow them to submit to the National Securities Market Commission in due time, at the request of the National Securities Market, financial assets which offer the true image of the assets, their financial situation and their results and which comply with the accounting provisions and rules in force.

5. Institutions shall carry out regular monitoring and evaluation of the adequacy and effectiveness of their systems, internal control mechanisms and measures established in accordance with the provisions of the previous paragraphs of this Article. They shall also take appropriate measures to address any deficiencies.

Article 28. Compliance function.

1. An institution providing investment services shall establish, implement and maintain appropriate measures and procedures to detect any risk of non-compliance by the undertaking with the obligations imposed by the rules resulting from it. as well as the associated risks, and to minimize such risks and allow the National Securities Market Commission to exercise its powers effectively.

2. To ensure that the regulatory compliance function is developed in an appropriate and independent manner, institutions providing investment services shall ensure that the following conditions are met:

(a) The unit ensuring the development of the regulatory compliance function shall be endowed with the necessary authority, resources and expertise and shall have access to all relevant information.

b) A compliance officer shall be appointed to be in charge of the development of the compliance function as well as the compliance report for the entity's senior management.

(c) Persons responsible for ensuring the development of the compliance function shall not be involved in the provision of the services and activities they control.

(d) The system for determining the remuneration of persons referred to in the preceding subparagraph shall not, either actual or potentially, compromise their objectivity.

In any event, the entity shall not be required to comply with points (c) and (d), provided that, depending on the size, nature, scale and complexity of its activities and the nature and range of its services. investment, can demonstrate that compliance with such requirements is not proportionate, and that the operation of the unit remains effective.

Article 29. Risk management.

1. In accordance with Article 70 (2) (a) of Law 24/1988 of 28 July, institutions providing investment services shall take the following measures:

(a) Establish, implement and maintain risk management procedures and policies to determine the risks arising from their activities, processes and systems and, where appropriate, to establish the level of risk tolerated by the entity.

b) Adopt effective measures, processes and mechanisms to manage risks related to the entity's activities, processes and systems based on their level of risk tolerance.

c) Check:

i) That the company's risk management policies and procedures are appropriate and effective.

(ii) The level of compliance by the entity and its competent persons with the measures, processes and mechanisms referred to in point (b) above.

iii) That the measures taken to address any possible deficiencies in policies, procedures, measures, processes and mechanisms are appropriate and effective, indicating those cases in which the staff of the company does not comply with such measures, processes and mechanisms, or does not apply policies and procedures.

2. Where it is proportionate in terms of the nature, scale and complexity of their business activity and the nature and range of investment services they provide, investment firms shall create and maintain a unit of risk management that works independently and develops the following functions:

(a) Application of the policy and procedures referred to in paragraph 1.

b) Reporting and providing advice to the entity's senior management.

Regardless of whether or not the risk management body exists, all investment firms must be able to demonstrate that the policies and procedures adopted in accordance with the provisions of the Previous section meets the provisions of the and are effective.

Article 30. Internal audit.

1. The internal audit function shall report on internal audit matters to the senior management.

2. In addition, the internal audit function shall be performed by an independent body where it is provided in the light of the nature, scale and complexity of its activity and the nature and range of the investment services provided by the entity.

Article 31. Senior management responsibility.

1. Senior management must ensure that the company complies with the obligations imposed on it by Law 24/1988 of 28 July and its implementing provisions. In particular, it shall assess and review at the intervals which it considers to be based on the size of the institution, the complexity of the management of its risks and the nature of the investment services provided and, at least annually, the effectiveness of the the policies, measures and procedures laid down to comply with the obligations imposed on the entity by law and to take measures to address potential deficiencies.

2. The senior management will have to receive written reports on regulatory compliance, risk management and internal audit at least annually and at least annually. In these reports, it should be noted in particular whether appropriate measures have been taken to remedy the deficiencies in their case.

Section 2. Required Records

Article 32. Record keeping.

1. Institutions providing investment services shall retain for at least five years the data included in all the records required by Title V and VII, Chapter I of Law 24/1988 of 28 July and by this Royal Decree.

Without prejudice to this, the registration of contracts referred to in Article 79b of that law shall be maintained for the duration of the relationship with the customer. Where the investment firm sees its authorisation revoked before the end of the five-year period, the National Securities Market Commission may require the entity to retain the data until that period is completed.

In any event, where necessary for the exercise of its supervisory functions, the National Securities Market Commission may, in exceptional circumstances, require the maintenance of all or some of the records referred to in the preceding paragraph for a period as long as the nature of the instrument or the operation justifies it.

2. Records shall be kept on a medium that allows the storage of the information in a manner accessible to the National Securities Market Commission, and the following conditions shall be met in any case:

a) The National Securities Market Commission will be able to access them easily and will be able to reconstruct each of the key phases in the processing of each operation.

b) It should be possible to distinguish any correction or modification made from the contents of the records prior to those, without it being possible, in any case, the manipulation or alteration of the records of another mode.

3. The National Securities Market Commission shall publish the list of records required in accordance with paragraph 1.

Article 33. Customer order record on financial instruments and trading record.

1. The data to be included in the customer order records are those set out in Commission Regulation 1287/2006 of 10 August 2006 implementing Directive 2004 /39/EC of the European Parliament and of the Council as regards the obligations of investment firm undertakings to keep a register, information on transactions, market transparency, admission to trading of financial instruments, and terms defined for the purposes of that Directive. In the register it must be kept:

(a) The original copy of the order signed by the customer or by person authorized in a feisty form, when it is done in writing.

b) The recording tape, when the order is made by phone.

c) The corresponding magnetic record in the case of electronic transmission.

Entities willing to accept orders received by the unwritten telephone must establish the means necessary for the identification of their orders, as well as having tapes for the recording of such orders; it is necessary, however, to warn the payer in advance of such recording. It shall also be necessary for the order by the payer to be confirmed in writing, the use of any means such as telex, fax or other similar being admissible. In any event, the order shall be deemed to have been confirmed when the recipient of the order informs its payer by any means of writing the execution and, where appropriate, the liquidation of the order in accordance with its instructions and the latter does not manifest disconformity in the time limit to which the institution gives the institution, which may not be less than 15 days from the receipt of such information by the payer.

Orders that relate to longer-term operations over three months must be confirmed before the value date. Such confirmation shall be made by any means written either by the payer or by the recipient of the order.

2. The recording of operations shall be carried out by computer.

3. Each entry in the trade repository shall be supported by an order of between those included in the order record. Institutions shall establish the correspondences that must exist between the register of orders and the trade repository, and between that and the accounting base and the balances of the financial and statistical statements related to them.

Section 3. Personal Operations

Article 34. Concept of personal operation.

Personal operation is any transaction with a financial instrument performed by or on behalf of a competent person, when any of the following requirements are met:

(a) That the competent person acts outside the scope of the activities that correspond to him by virtue of his or her duties in the company.

b) That the transaction be performed on behalf of any of the following persons:

i) Of the competent person;

(ii) of any person with whom the competent person has a relationship of kinship or has close links. For such purposes, the definition of close links laid down in Article 17.3 of this royal decree shall be defined;

(iii) A person whose relationship with the competent person is such that the person has a significant direct or indirect interest in the outcome of the transaction. It is not understood that there is any interest in the mere collection of fees or fees due for the execution of the transaction.

Article 35. Prohibited activities and measures to be taken.

1. In accordance with the provisions of Article 70 ter.1 (d) of Law 24/1988 of 28 July, institutions providing investment services shall establish appropriate measures to avoid the activities referred to in the following paragraph. where they are carried out by any competent person who, or is involved in activities that may give rise to a conflict of interest, or has access to inside or relevant information, or to other confidential information related to clients or transactions with or for clients, by virtue of an activity that you perform on behalf of the company.

The prohibited activities for the purposes of the preceding paragraph are:

a) Performing a personal operation, when any of the following assumptions are made:

i) That the operation is prohibited for that person under the provisions of Chapter II of Title VII of Law 24/1988 of 28 July and its provisions for development.

ii) That the operation involves improper use or improper disclosure of confidential information.

iii) That the transaction between or may conflict with an obligation of the entity in accordance with the provisions of Law 24/1988, of July 28 and its provisions of development.

b) advice or assistance to another person, irrespective of the normal performance of his or her work or, where appropriate, his contract of services, to carry out a transaction with financial instruments which, in the case of a personal operation of the competent person would fall within the provisions of point (a) above or in Article 47.2.a) or (b) or in Article 8oe) of this royal decree.

c) Subject to the provisions of Article 81.2.b) of Law 24/1988 of 28 July 1988, the communication, except in the normal exercise of the work or contract of services, of any information or opinion to any other person when the competent person knows, or can reasonably know, that as a result of such information the other person may, or may be presumed to be able to, carry out any of the following:

(i) to carry out an operation on financial instruments which, in the case of a personal operation of the competent person, would be affected by the provisions of point (a) above or in Article 47.2 (a) or (b) or in the Article 8oe) of this royal decree.

ii) Advise or assist another person to perform such an operation.

2. The measures referred to in the previous paragraph shall be designed to ensure, in particular, that:

(a) The competent persons referred to in the previous paragraph are aware of the existing restrictions on personal transactions and of the measures that the institution has established in relation to transactions personal information and disclosure, in accordance with the provisions of the previous paragraph.

(b) The undertaking shall be promptly informed of any personal transaction carried out by a competent person by means of either the notification of the transaction or other procedures enabling the entity to identify the operations.

Where arrangements exist for the delegation of functions or services, the undertaking shall ensure that the entity in which it has delegated the activity carries a record of the personal transactions carried out by any other entity. competent person and why he provides that information to the investment firm as soon as possible, when requested.

c) A record of the personal transactions reported to or identified by the company, including any authorization or prohibition related to such operations, is carried out.

3. The two preceding paragraphs shall not apply, in the case of the following operations:

(a) Personal transactions carried out in the framework of the provision of the discretionary and individualised management investment service of investment portfolios, where there is no prior communication on the transaction between the manager the portfolio and the competent person or other person on whose account the operation is carried out.

(b) Personal transactions in units or shares in collective investment institutions, harmonised or subject to supervision under the law of a Member State which establishes a level equivalent to the Community rules for the distribution of risks between their assets, provided that the competent person or any other person on whose account the transaction is carried out does not participate in the management of the institution as defined in the Article 64,a) of the Regulation of Law 35/2003, of 4 November, of the institutions of Collective Investment, approved by Royal Decree 1309/2005 of 4 November.

Section 4. Delegation of functions or services

Article 36. Definition of essential functions for the provision of investment services.

1. For the purposes of Article 70 (2) (d) of Law No 24/1988 of 28 July 1988, a function is to be understood to be essential for the provision of an investment service if a failure or failure to implement it can, in any event, affect considerable, to the capacity of the investment firm to comply permanently with the conditions and obligations arising from its authorisation and the arrangements laid down in Law 24/1988 of 28 July, or to affect the results of the financial or the soundness or continuity of its investment services.

2. Without exhaustive character, they will not have the consideration of essential functions:

(a) The provision to the investment firm of advice or other services which are not part of the investment activity of the undertaking, including the provision of legal advice, the training of staff, billing and surveillance services and the security of the premises and the staff of the entity.

b) The purchase of standardized services, including market and price information services.

Article 37. Conditions for delegating the performance of investment services or the exercise of essential functions for their delivery.

1. The delegation of investment services or of essential functions by investment firms in third parties will not diminish their responsibility for the fulfilment of the obligations laid down in Law 24/1988, 28 of July, and in its development provisions. In particular they shall meet the following conditions:

(a) The delegation shall not assume a delegation of responsibility by the senior management.

(b) The delegation may not alter the relations and obligations of the investment firm with its customers.

(c) The conditions to be met by the investment firm to receive and retain the authorisation may not be removed or modified by the existence of a delegation agreement.

2. Investment firms must take the necessary measures to ensure that:

a) The third delegate:

i) has the competence, capacity and any authorisation required by law to perform the delegated functions or services in a reliable and professional manner.

ii) Effectively performs delegated services. To this end, the investment firm shall establish measures to assess its level of compliance.

iii) Oversees correctly performing the delegated functions and properly manages the risks associated with the delegation.

(iv) Communique to the investment firm any event that may significantly affect the effective performance and in accordance with the applicable regulations of the delegated functions.

v) Coopera with the National Securities Market Commission in all matters relating to the activities delegated to it.

vi) Protect all confidential information referred to the investment firm and its clients.

(b) The investment firm takes appropriate action when it is assessed that the third party cannot perform the functions effectively and in accordance with applicable regulatory provisions.

(c) The investment firm has the necessary expertise to effectively monitor the delegated functions and to adequately manage the risks associated with such a delegation.

(d) The investment firm may terminate the delegation contract where it is necessary without detriment to the continuity and quality of the provision of services to the clients.

(e) The investment firm, its auditors and the competent authorities have effective access to the data relating to the delegated activities and the dependencies of the third party. The investment firm must also ensure that the competent authorities can effectively exercise the right of access.

(f) The investment firm and the third party develop, implement and maintain an emergency plan for the recovery of data in the event of disasters and periodically check the IT security mechanisms, when this is necessary in view of the delegated function or service.

3. The delegation agreement between the investment firm and the third party shall be formalised in a written contract setting out the rights and obligations of the parties.

4. Where the investment firm and the third party belong to the same group, the latter shall assess its ability to control the third party and to influence its performance.

5. Investment firms shall make available to the National Securities Market Commission at the request of the National Securities Market Commission any information necessary for the supervision of the compliance with delegated activities.

Article 38. Delegation of the portfolio management service to service providers located in third countries.

1. Without prejudice to the provisions of the previous Article, where the portfolio management service is delegated to retail customers in third countries located in a third country, the investment firm shall verify that the service is fulfilled. the following requirements:

(a) The third party must be authorised or registered in his/her country of origin for the provision of that service and must also be subject to prudential supervision.

(b) An appropriate cooperation agreement shall exist between the National Securities Market Commission and the supervisory authority of the country of origin of the third party. For these purposes, the National Securities Market Commission shall publish a list of third countries with which it has concluded the relevant cooperation agreements.

2. Where one or both of the requirements set out in the previous paragraph are not met, the investment firm may only delegate the service to a third-country entity if it has previously notified the National Market Commission of its requirements. Under the terms of the delegation contract, the delegation does not express its opposition within one month of its receipt.

The National Securities Market Commission will also have to publish a statement indicating the policy it intends to apply in the cases mentioned in the previous paragraph. The communiqué shall include specific examples of cases in which the National Securities Market Commission shall not object, or is likely to object, to the arrangements for delegation to third-country entities, and shall be based on because it is considered that, in such cases, the delegation does not jeopardise the ability of the investment firm to comply with the obligations set out in the previous article.

Section 5. Protection of the clients ' assets

Article 39. Protection of the assets of the clients.

In accordance with Article 70b (1) (f) and Article 70b (2) (c) of Law 24/1988 of 28 July, institutions providing investment services shall comply with the following requirements:

(a) You must maintain the records and accounts necessary to enable them at all times and without delay to distinguish the assets of a client from those of the other clients and their own assets.

(b) Records and accounts shall ensure the accuracy of the data they contain and their correspondence with financial instruments and client funds.

(c) Where appropriate, they shall regularly reconcile their internal accounts and records with those of third parties in whose possession the assets of their clients are available.

d) You must take the necessary steps to ensure:

i) That the financial instruments of clients deposited in a third party are distinguished from those belonging to the investment firm and to that third party. To this end, accounts with a different denomination in the third-party accounting, or equivalent measures that ensure a similar level of protection, shall be established.

(ii) that the clients ' funds are accounted for by the depositary in an account or accounts other than those in which the funds belonging to the investment firm are accounted for.

e) You have to take the necessary organizational measures to minimize the risk of loss or decrease in the value of clients ' assets, or of rights related to those, as a result of a bad use of assets, fraud, poor management, inadequate maintenance of records or negligence.

Article 40. Custody of client financial instruments.

1. Institutions providing investment services may deposit the financial instruments of their clients into an account or open accounts with a third party provided that they act with due diligence, competence and attention in the selection, the appointment and periodic review of the third party and the arrangements governing the holding and custody of financial instruments.

In particular, institutions shall take into account the experience and prestige on the market of the third party, as well as any regulatory or market requirements related to the holding of such financial instruments. can harm the rights of customers.

2. Where the institution intends to deposit the financial instruments in a third-party domiciled in a State which is subject to regulation and supervision of the custody of financial instruments on behalf of another person, the entity shall designate a third party that is subject to such regulation and supervision.

You may also deposit the financial instruments of your clients only in a third party domiciled in a State that does not subject to regulation and supervision the custody of financial instruments on behalf of other persons, if any of the following conditions are met:

(a) The nature of financial instruments or services related to those instruments requires that custody be held in a third party of that State.

(b) The financial instruments belong to a professional client and the professional client requests in writing to the company that they are placed in a third party of that State.

Article 41. Customer's deposit of funds.

1. Institutions providing investment services shall immediately deposit the funds they receive from their clients in any of the following entities:

a) Central banks.

(b) Credit institutions authorised in the Member States of the European Union.

(c) Banks authorised in third countries.

d) Money market funds enabled. Collective investment institutions shall have this character harmonised or subject to supervision and, where appropriate, the authorisation of a Member State, provided that the following conditions are met:

i) That the principal objective of the investment is the maintenance of the net worth of the equity of the collective investment institution, understood as the constant value at par (i.e. without the profits), or as the value of the Investors ' initial capital plus earnings.

(ii) that they only invest in high quality money market instruments with a residual maturity or maturity not exceeding 397 days, or with regular performance adjustments consistent with that maturity and with a weighted average maturity of 60 days. They may also invest in deposits with credit institutions. Only those who have been granted the highest available solvency rating by each competent rating agency that has valued them shall be considered to have the highest quality of instruments available to them. only those rating agencies which attribute solvency ratings to money market funds on a regular basis and on a professional basis and which, in addition, comply with the provisions of Article 6.2 of Law 13/1985, May 25, of investment coefficients, own resources and reporting obligations of the financial intermediaries.

(iii) Provide liquidity on the same day or day after settlement.

In any event, the client may at any time refuse to deposit its funds in a money market fund, so that it will always give its express and prior consent. Such consent may be granted on a general basis at the time of the conclusion of the contract for the provision of services with the entity.

2. Where funds are not deposited in a central bank, institutions providing investment services shall act with due competence, attention and diligence in the selection, designation and periodic review of the entity chosen and in the adoption of the arrangements governing the holding of these funds.

In particular, they shall take into account the experience and prestige on the market of the third party in order to ensure the protection of the rights of the clients, as well as any related regulatory requirements or market practices with the holding of client funds that may impair the rights of the clients.

Article 42. Use of the financial instruments of the clients.

1. Institutions providing investment services may only establish arrangements for securities financing transactions on the financial instruments of their clients, or use them in any other way, both on their own account and on behalf of their own account. of another client, according to the following requirements:

(a) The customer must give his express consent prior to the use of the financial instruments. In the case of retail customers, it is necessary for the consent to be recorded in a written document with the signature of the client or in any equivalent alternative mechanism.

b) The use of financial instruments shall be in accordance with the conditions specified and accepted by the customer.

2. In addition to the provisions of the previous paragraph, where the client's financial instruments are deposited in a global account provided that the applicable rules so permit, the following requirements shall be met:

(a) All customers whose financial instruments are deposited in the global account must have expressed their individual and prior consent in accordance with the provisions of point (a) of the previous paragraph.

(b) The entity shall have systems and controls in place to ensure compliance with the provisions of the preceding point.

To allow for the correct allocation of possible losses, the entity's records shall include customer data according to whose instructions the financial instruments and the number of instruments have been used. financial used belonging to each client.

Article 43. Reports from external auditors.

1. Institutions providing investment services shall ensure that their external auditors refer to the National Securities Market Commission an annual report on the adequacy of the measures taken by the National Securities Market Commission to comply with the provisions of this Regulation. Article 70 (1) (f) and Article 70b (2) (c) of Law 24/1988 of 28 July 1988 and in this Section. In the case of credit institutions, the Banco de España shall receive a copy of that report.

2. The National Securities Market Commission is enabled to fix the content of the report as well as the means and deadlines for its referral.

Section 6. Conflicts of Interest

Article 44. Potentially disruptive conflicts of interest for clients.

In order to identify conflicts of interest for the purposes of Article 70c of the Law 24/1988 of 28 July, institutions providing investment services shall take into account, as a criterion, minimum, if the company itself, or a competent person or other person directly or indirectly linked to it by means of a control relationship, is in one of the following situations:

a) The entity or person in question may obtain a financial benefit, or avoid a financial loss, at the expense of the client, or,

b) has an interest in the outcome of the service provided or the transaction performed on behalf of the client, other than the client's own interest in that outcome, or,

c) has financial or other incentives to favor the interests of third parties, against the client's own interests in question, or,

d) the professional activity is identical to that of the client, or,

e) receives, or will receive, from a third party an incentive in relation to the service provided to the client, in money, goods or services, other than the commission or usual remuneration for the service in question.

In any event, as mentioned in Article 70c of the Law, it will not be considered sufficient for the company to be able to obtain a profit, if there is also no possible injury to a customer; or that a customer can obtain a gain or avoid a loss, if there is no possibility of concurrent loss of a client.

Article 45. Policy for the management of conflicts of interest.

1. In accordance with Article 70c of Law 24/1988 of 28 July, institutions providing investment services shall approve, implement and maintain a policy for the management of conflicts of interest which is effective and appropriate to the the size and organisation of the company and the nature, scale and complexity of its business. In addition, the policy shall be written in writing and where the undertaking belongs to a group, account shall be taken of any circumstances arising from the structure and activities of other entities of the group which the entity knows or should know likely to cause a conflict of interest.

2. The management policy must:

(a) identify, in relation to investment and ancillary services carried out by or on behalf of the undertaking, the circumstances which give rise to or may result in a conflict of interest involving a significant risk of Impairment of the interests of one or more clients.

b) Specify the procedures and measures to be taken to manage such conflicts, ensuring that the competent persons involved in the activities that may involve a conflict of interest in accordance with the above in the above letter they act with a level of independence appropriate to the size and activities of the company and, where appropriate, their group, and to the importance of the risk of undermining the interests of the clients. The procedures and measures shall be those of those listed below that are necessary and appropriate to ensure the necessary degree of independence:

(i) Effective procedures to prevent or control the exchange of information between competent persons involved in activities involving the risk of a conflict of interest, where such an exchange may take place in detriment to the interests of one or more clients.

(ii) the separate supervision of those competent persons whose principal functions consist in carrying out activities or services on behalf of clients with different interests that may conflict, or those competent persons who in any other way represent different interests that may conflict, including those of the company itself.

iii) The elimination of any direct relationship between the remuneration of those competent persons who perform primarily an activity and the remuneration or income generated by other competent persons performing primarily another activity, where a conflict of interest may arise in relation to these activities.

(iv) Measures to prevent or limit any person's ability to exert an inappropriate influence on the way a competent person provides investment or ancillary services.

(v) Measures to prevent or control the simultaneous or consecutive participation of a competent person in various investment or ancillary services where such participation may be detrimental to the proper management of the conflicts of interest.

When the adoption of the above measures and procedures does not guarantee the necessary degree of independence, the company shall apply the alternative or additional procedures and measures deemed necessary and appropriate. to achieve such an end.

3. The disclosure to the customer of conflicts of interest in accordance with Article 70 (2) of Law 24/1988 of 28 July 1988 must be made on a durable medium and must include sufficient data, depending on the nature of the client, so that the client can make a decision in relation to the investment or auxiliary service to which the conflict of interest is affected.

Article 46. Record of services that cause harmful conflicts of interest.

An entity providing investment services shall regularly have and update a record of the classes of investment and ancillary services carried out by or on behalf of the undertaking in which it is, or A conflict of interest arises, or may arise in the case of ongoing services.

Article 47. Additional organisational requirements where an entity providing investment services elaborates and discloses investment reports.

1. Entities providing investment services that develop or undertake the development of investment reports that are intended to be disseminated, or which may be disseminated later, between the clients of the entity or the general public, under its own or under the responsibility of the undertakings in its group, shall ensure that all the measures referred to in Article 45 (2) (b) are applied in relation to the financial analysts involved in the preparation of the investment reports and in relation to other competent persons whose professional responsibilities or interests may conflict with the interests of the persons receiving the reports. For the purposes of this Article, the concept of an investment report as set out in Article 63.2.e of the Law 24/1988 of 28 July of the Stock Market shall be included.

2. They shall also take the necessary measures to ensure compliance with the following requirements:

(a) Financial analysts and other competent persons referred to in the previous paragraph may not conduct personal transactions or trade on behalf of any person, including the company itself, unless they do so as market makers acting in good faith and in the ordinary course of this activity or in executing an order not requested by a customer without having mediated prior proposal of the entity in relation to the financial instruments to which it relates the investment report, or any related financial instrument, if they are aware of the dates of dissemination or the likely content of the report and these data have not been made public or have not been disclosed to the customers and cannot be easily inferred from the information available, until the recipients of the report have had a reasonable ability to act on this.

(b) In circumstances not covered by the above letter, financial analysts and other competent persons responsible for reporting on investments may not conduct personal transactions with the financial instruments to which such reports relate, or to financial instruments connected in a manner contrary to the recommendations in force, except in exceptional circumstances and with the prior written approval of a service member legal or service enforcement service.

(c) Entities providing investment services, financial analysts and other competent persons involved in the development of investment reports shall not be able to accept incentives from those who have an interest relevant to the subject of the report in question and may not engage with issuers to produce favourable reports.

d) When the draft report on investments contains a recommendation or a price objective, the issuers, the competent persons, with the exception of financial analysts, and any other review the draft before the public release of the report, in order to verify the accuracy of the objective statements contained in the report, or for any other purpose, other than to verify that the undertaking complies with its legal obligations.

For the purposes of this paragraph, a related financial instrument shall be understood to be the price of which is directly affected by changes in the price of a financial instrument which is the subject of a report on investments, including financial instruments derived from that investment.

3. The provisions of the above paragraphs shall not apply where the entity providing investment services spreads an investment report if the following requirements are met:

a) That the person making the report is not a member of the group to which the entity belongs.

b) That the entity does not significantly modify the recommendations contained in the report.

c) That the entity does not present the report as prepared by it.

d) That the entity verify that the person making the report is subject to requirements equivalent to those provided for in this royal decree in connection with the development of investment reports or has adopted a policy that provides for such requirements.

CHAPTER II

Financial requirements for investment services companies

Article 48. Liquidity ratio.

1. In accordance with the provisions of Article 70.1.b) of the Law 24/1988 of 28 July 1988, investment firms, with the exception of the holding companies of portfolios, of the financial advisory firms and of the securities agencies which are only authorised for the receipt and transmission of orders without the holding of funds or financial instruments belonging to their clients, shall at all times maintain the volume of investments in low-risk and high-risk assets liquidity which, as a percentage of all its liabilities payable with a residual maturity of less than one year, excluding the balances of the creditor accounts, establish the Minister of Economy and Finance, with a minimum of 10 per 100.

2. The Minister for Economic Affairs and Finance and, with his express rating, the National Securities Market Commission, will establish:

(a) Assets eligible for liquidity ratio compliance, including cash and deposits in the view or a term of not more than one month in credit institutions, fixed income securities and shares and holdings in collective investment institutions under the conditions to be determined.

(b) The criteria for accounting and assessing the balances of the liabilities payable under that ratio.

(c) The procedures to be applied to monitor the compliance with the liquidity ratio.

Article 49. Financial transactions with financial institutions.

1. Investment firms may obtain financing, including in the form of a loan or deposit, from Spanish or foreign entities which are entered in one of the registers relating to financial institutions held by the National Securities and Exchange Commission, the Banco de España or the Directorate-General for Insurance and Pension Funds of the Ministry of Economy and Finance or in registers of the same nature as the European Union.

2. Investment firms may carry out active lending or deposit operations with the entities referred to in the preceding paragraph, to the extent and with the limitations which, in order to ensure their effective dedication to the activities that are of their own, the Minister of Economy and Finance.

Article 50. Financial operations with the public.

1. Investment firms shall not be able to receive funds from persons other than those referred to in the previous Article, except for:

a) Action Issue.

b) Subordinate financing.

c) Emission of securities admitted to trading on an official secondary market.

2. By way of derogation from the provisions of the preceding paragraph, the instrument and transitional creditor accounts which the companies and securities agencies shall open to clients in connection with the execution of operations carried out on behalf of the them. The balances of these accounts shall be invested in those categories of liquid and low-risk assets that the Minister of Economy and Finance determines.

The maintenance of these balances will be conditional on the existence of the internal control mechanisms entity that, with the requirements that the National Securities Market Commission determines, ensure that such balances are met. as provided for in the preceding paragraph.

3. The Minister for Economic Affairs and Finance will determine the scheme for the issuance of shares and debt issuance of investment firms.

CHAPTER III

Regime of the activities and operations developed by the investment services companies.

Article 51. Own-account operations of securities agencies.

1. Securities agencies may negotiate on their own account in securities admitted to trading on an official secondary market for the exclusive purpose of renting their own resources up to the amount of their own resources, deducted from permanent investments or low liquidity that the National Securities Market Commission determines.

2. They may also acquire the following securities not admitted to trading on an official secondary market or on another regulated market:

(a) The necessary to acquire the status of a member of a secondary market or of another regulated market or of its clearing and settlement systems.

b) Participations in the management companies of the Investor Guarantee Fund or equivalent systems abroad.

(c) Participations in financial instruments that involve the extension of the business or the activity of which involves the provision to entities of the same group of ancillary services, such as holding of real estate or material assets, the provision of computer, assessment, representation, mediation or similar services.

d) Participations in financial institutions, as defined in Article 3 of Royal Decree 1343/1992 of 6 November 1992, implementing Law 13/1992 of 1 June 1992 on own resources and supervision on the basis of consolidated financial institutions, except in the entities referred to in paragraph (h) of that Article.

3. Investment in derivative financial instruments, whether admitted to trading on an official secondary market or other regulated market, shall be limited exclusively to ensuring adequate coverage of the risks assumed in the rest of the market. the portfolio referred to in paragraph 1 above.

4. In their own-account trading, they may only offer, on an instrumental and transitional basis, their clients when it is essential to avoid non-compliance with obligations arising from the development of their business activities. (a) negotiation on behalf of others or in cases determined by the Minister for Economic Affairs and Finance.

Article 52. Arrangements for the management companies of portfolios.

Portfolio management companies may not own or hold on their behalf the funds or financial instruments put at their disposal by their clients for their discretionary management or that are the result of such management. This prohibition also applies to any other activity incorporated in its programme of activities.

Article 53. Own-account activity of the portfolio management companies.

Portfolio management companies may only acquire securities on their own account in the circumstances provided for in paragraphs 1, 2, with the exception of paragraphs (a) and (b), and 3 of Article 51 of this Royal Decree.

TITLE III

Cross-border performance of investment services companies

CHAPTER I

Opening of branches and freedom to provide services in Spain by foreign investment services companies

Article 54. Non-Community investment services companies.

1. In accordance with the provisions of Article 771 (c) of the Law 24/1988 of 28 July 1988, the opening in Spain of branches of non-Community investment firms will require the authorisation of the Minister for Economic Affairs and Finance, Proposal of the National Securities Market Commission. The above articles of this royal decree will be observed in the application, with the following particularities:

(a) By minimum social capital, the amount held by the institution in Spain of permanent and indefinite-duration funds, available for the loss coverage of the branch, shall be understood.

(b) paragraphs (a), (b), (c) and (e) of Article 14 (1) of this royal decree shall not apply.

The reference to the draft Statute referred to in paragraph (a) of Article 16 of this royal decree shall be understood as referring to the draft constitution of the branch and to the existing Statutes of the branch. entity, it should be reported to the National Securities Market Commission for changes that are subsequently produced in both.

(c) You must have at least two persons who effectively determine the orientation of the branch and are directly responsible for the management. Both the good repute, knowledge and experience referred to in Article 14 shall be required.

d) The social object of the branch may not contain activities not permitted to the entity in its country of origin.

(e) The documentation accompanying the application shall contain the information necessary for the accuracy of the legal and management characteristics of the requesting foreign entity, as well as its financial situation. A description of the organisational structure of the entity and of the group in which it is eventually integrated shall also be included. It shall also be established that it is in possession of the authorisations of its country of origin to open the branch, where required, or the negative certification, if they are not accurate.

2. Where a non-Community investment firm intends to provide investment services without a branch in Spain, it must first apply to the National Securities Market Commission, indicating the activities to be carried out and obtain the relevant authorisation. The National Securities Market Commission may request an extension of the information provided, as well as condition the exercise of those activities to the fulfilment of certain requirements as a guarantee of compliance with the markets in which it intends to operate or those issued for reasons of general interest.

CHAPTER II

Cross-border action of Spanish investment services companies

Article 55. Opening of branches abroad by Spanish investment services companies.

1. Spanish investment firms seeking to open a branch in a State other than a member of the European Union must first apply to the National Securities Market Commission, accompanied by the information provided by the State in whose territory they intend to establish the branch and the address provided for it, a programme of activities indicating, in particular, the operations it intends to carry out and the structure of the branch organisation and the establishments through which it will operate and the name and history of the managers responsible of the branch.

2. The National Securities Market Commission shall give a reasoned decision and notify it within three months of the receipt of the request. Where the decision is not notified within the time limit laid down, it may be deemed, in accordance with Article 43 of Law No 30/1992, of 26 November 1992, of the Legal Regime of the General Administration and of the Common Administrative.

3. The application may be refused only by the National Securities Market Commission when it has reason to doubt, in view of the project in question, the adequacy of the administrative structures or the financial situation of the company investment services; where activities not authorised by the institution are included in the programme of activities; or where it considers that the activity of the branch is not to be subject to effective control by the authority; the supervisory authority of the host country; or the existence of legal or other obstacles preventing or hindering the control and inspection of the branch by the National Securities Market Commission.

4. Any modification of the information referred to in paragraph 1 of this Article shall be communicated by the investment firm, at least one month before it is made, to the National Securities Market Commission.

A relevant modification may not be made in the branch's program of activities if the National Securities Market Commission, within a period of one month, objects to it, by means of a reasoned resolution that will be notified to the entity. Such opposition shall be based on the causes provided for in this Article which are applicable in each case.

Article 56. Provision of services without a branch abroad.

Spanish investment firms which intend, for the first time, to provide services without a branch in a non-EU Member State, must first apply to the National Securities Market Commission, indicating the activities for which it is intended to be carried out. Article 55 (2) and (3) of the preceding paragraph shall apply to this authorisation procedure.

Article 57. Action through other investment services companies.

1. In accordance with the provisions of Article 71.5 of Law 24/1988 of 28 July 1988, in the case of the creation by an investment firm or a group of Spanish investment services companies of an investment firm in Spain, a State which is not a member of the European Union, the application for authorisation which is lodged with the National Securities Market Commission shall be accompanied, at least, by the following information:

a) Amount of the investment and the percentage that represents the participation in the capital and the voting rights of the entity to be created. Indication, where appropriate, of the entities through which the investment will be made.

(b) The rule provided for in Article 16.1, paragraphs (a), (b), (c) and (e) of this royal decree. The list referred to in paragraph (d) shall be replaced by a list of the partners who will have significant holdings.

c) A complete description of the securities market rules applicable to investment firms in the State in which the new company is to be established, as well as the rules in force in the field of taxation and prevention of money laundering.

2. Where, in accordance with Article 71.5 of Law 24/1988 of 28 July 1988, a holding is to be acquired in an investment firm, the latter being understood to be of a significant nature, according to the provided for in Article 69 of Law No 24/1988, or if any of the percentages referred to in Article 69 (4) are to be increased significantly, by reaching or exceeding one of the percentages referred to in Article 69 (4), (b) the above paragraph may be limited to data which has a public character.

The time limit for the realisation of the investment, the annual accounts of the last two financial years of the investee entity and, where applicable, the rights of the institution in order to designate representatives in the the administrative and management bodies of the latter.

3. In any event, it shall be appropriate for applicants to require all data, reports or records to be deemed appropriate for the National Securities Market Commission to be able to give an appropriate opinion and, in particular, to assess the possibility to exercise the group's consolidated supervision.

TITLE IV

Rules of conduct applicable to those who provide investment services

CHAPTER I

Eligible counterparts, incentives, and reporting obligations to potential clients and clients

Article 58. Eligible counterparts.

1. In addition to the provisions of Article 78 ter.1, first paragraph of Law 24/1988 of 28 July, the entities referred to in points (a) to (d) of Article 78b (3) of that Law shall also be considered as eligible counterparties. expressly listed in that article.

2. Where, pursuant to Article 78 ter.2, second paragraph of Law 24/1988, of 28 July, an eligible counterparty applies for the treatment as a customer, without requesting its consideration as a retail client, it shall be treated as a client professional, if the entity agrees. Otherwise, the procedure described in Article 78b (e) (e) of the Law 24/1988 of 28 July 1988 will be followed.

Article 59. Incentives.

For the purposes of Article 79 of Law 24/1988, of July 28, the following are considered incentives:

(a) Fees, fees or non-cash benefits paid or delivered to a customer or a person acting on their behalf, and those offered by the customer or by a person acting on their behalf;

(b) Non-monetary fees, commissions or benefits paid or delivered to a third party or to a person acting on behalf of the third party, and those offered by a third party or by a person acting on behalf of the third party, or the following conditions:

(i) The existence, nature and amount of the non-monetary fees, commissions or benefits, or, where the amount cannot be determined, the method of calculating that amount, shall be clearly disclosed to the customer, complete, accurate and comprehensible, prior to the provision of the investment service or ancillary service. For such purposes, institutions providing investment services may communicate the essential conditions of their incentive system in summary form, provided that they carry out a more detailed communication at the request of the client. This latter obligation shall be deemed to be fulfilled when the entity makes the required information available to the client through the distribution channels of the entity or on its website, provided that the client has consented to such a form of provision of the information.

(ii) The payment of incentives should increase the quality of the service provided to the customer and will not hinder the performance of the company's obligation to act in the best interests of the client.

(c) The appropriate fees for the provision of investment services, such as custody, settlement and change fees, regulatory fees or legal advice costs, and which, for their purposes, are necessary for the provision of investment services; nature, cannot conflict with the company's duty to act with honesty, impartiality, diligence and transparency according to the best interests of its clients.

Article 60. Conditions to be met by information to be impartial, clear and non-misleading.

1. For the purposes of Article 79 (2) of the Law 24/1988 of 28 July 1988, any information, including advertising communications, addressed to retail customers, including potential customers, or disseminated in such a way as to is likely to be received by them, must meet the conditions set out in this article. In particular:

(a) The information shall include the name of the entity providing the investment services.

(b) The information shall be accurate and shall not highlight the potential benefits of an investment service or financial instrument without also indicating the relevant risks, in an impartial and visible manner.

(c) The information shall be sufficient and shall be presented in a manner that is understandable to any middle member of the group to which it is addressed or to its likely recipients.

d) The information will not hide, cover up or minimize any important aspects, statements, or warnings.

e) When the information refers to a particular tax regime, it should be clearly clarified that this regime will depend on the individual circumstances of each client and may vary in the future.

(f) In no case may the name of the National Securities Market Commission, or other competent authority, be included in the information in such a way as to indicate or be likely to induce the authority to approve or endorse the the company's products or services.

2. Where the information compares investment services or ancillary services, financial instruments or persons providing the services, the following requirements shall be met:

(a) The comparison shall be relevant and shall be presented in an impartial and balanced manner.

b) The information sources used for the comparison must be identified.

c) The main facts and assumptions used to make the comparison will be included.

3. Where the information includes historical results of an investment service, a financial instrument or a financial index:

a) Such results may not be the most prominent element of communication.

(b) The results shall relate to the previous five years immediately, or, to the entire time during which the financial instrument was offered, prepared the financial index or the service, if the time limit is less than five years, or a period as wide as the company decides if it is more than five years. In any case, the results information shall be based on full periods of 12 months.

(c) The reference period and the source of the information shall be clearly stated.

d) It should be noted in a visible way that the figures refer to the past and that past yields are not a reliable indicator of future results.

(e) Where the figures are expressed in currencies other than that used in the Member State of residence of retail customers, including potential customers, the currency used shall be clearly indicated and a currency shall be warning by preventing possible increases or decreases in performance based on currency fluctuations.

f) When information is based on gross results, the effect of commissions, fees or other charges shall be published.

4. The information may only include simulated historical results in the case of financial instruments or financial indices. In these cases, the following requirements must be met:

(a) The simulated results shall be based on actual historical results of one or more financial instruments or financial indices that are identical to or underlying the financial instrument concerned.

(b) The actual historical results shall comply with all the letters, except the (d), of the preceding paragraph.

c) It should be noted in a visible manner that the figures refer to simulated historical results and that past yields are not a reliable indicator of future results.

5. If the information contains data on future results, the following requirements must be met:

a) It cannot be based on simulated historical results or reference to them.

b) It shall be based on reasonable assumptions backed by objective data.

c) When based on gross results, the effect of commissions, fees or other charges shall be published.

d) It should be clearly noted that forecasts are not a reliable indicator of future results.

Article 61. Information regarding the classification of clients.

1. Following the entry into force of this royal decree, institutions providing investment services shall notify, or have notified, their existing and new clients, the classification of clients in retailers, professionals and counterparties. (b) eligible to establish, in accordance with Articles 78a and 78b of Law 24/1988, of 28 July.

In addition, they must communicate to their clients, on a durable medium, that they are assisted by the right, where appropriate, to demand a different classification, indicating the limitations that this new classification could entail as regards the client protection.

2. For the purposes of the above paragraph, institutions on their own initiative or at the request of the client may:

(a) To treat as a professional or retail client a client who, failing that, could be classified as an eligible counterparty under the first paragraph of Article 78 ter.1 of Law 24/1988 of 28 July.

(b) To treat as a retail client a customer who is considered professional under the provisions of Article 78b (a) to (d) of Law 24/1988 of 28 July 1988. In this regard, it will be for the professional customer to apply for a higher degree of protection when he considers that he is not in a position to assess or manage the risks to which he is exposed correctly. In particular, you will be treated as a retail client when you enter into a written contract with the entity where the services and types of products and transactions for which you will be treated as a retail client will be specified.

3. For the purposes of Article 78 (3) (e) of Law 24/1988 of 28 July 1988, in order to enable the persons referred to in that letter to be treated as professional clients, the following procedure shall be observed:

(a) The customer must ask the entity in writing to classify it as a professional client, either in a general manner, or for a particular service or transaction, or for a specific product or transaction type.

(b) The entity shall clearly warn you in writing of the protections and possible rights to which it would be deprived.

(c) The customer must declare in writing, in a document other than that of the contract, that he knows the consequences arising from his renunciation of the classification as a retail client.

4. Institutions shall develop and implement internal policies and procedures, in writing, to classify their clients, corresponding to professional clients, informing the entity of any changes that might change their classification. In any event, where the entity becomes aware that a customer has ceased to comply with the requirements to be treated as a professional, it shall consider it immediately, for all purposes, as a retail client.

Article 62. General information requirements for clients.

1. Institutions providing investment services shall provide their retail clients, including potential retailers, with the following information in good time for the conclusion of the investment service delivery contract or ancillary, or to the provision of the service, where the service is before the service:

a) Contract conditions;

(b) The information required in Article 63 in relation to the contract or to the investment or ancillary services.

2. Institutions shall provide retail customers, including potential retailers, with the information required by Articles 63 to 66 in advance in sufficient time for the provision of the service in question. In the case of professional clients, the information to be supplied shall be as required in Article 65 (5) and (6

.

You must also notify in good time any important changes in such information that are relevant to a service that is being provided to the customer in question.

3. The information required in the preceding paragraphs must be provided on a durable medium or, via a web page, provided that in this second case, when circumstances are not given to be considered as durable medium, the conditions referred to in Article 3.2. The notification of changes in the information provided referred to in the second subparagraph of the previous paragraph shall be provided on a durable medium, where it was used for the reference of the information to which it is reference.

4. Without prejudice to the provisions of paragraphs 1 and 2 above as regards retail customers, the information referred to therein may be provided immediately after the conclusion of the relevant contract or, in the case of paragraph 2, immediately after the provision of the service in question, when the following conditions are met:

(a) that the contract, at the request of the client, has been concluded using a means of distance communication which prevents the information in accordance with paragraphs 1 and 2 from being provided.

(b) In any event, even if the means used has not been the voice telephony, the provisions of Article 7.3 of Law 22/2007 of 11 July 2007 on the distance marketing of financial services shall apply. intended for consumers, considering the customer as a consumer and the company as a supplier.

5. In any event, the information contained in the advertising communications shall be consistent with any information the company provides to its customers in the course of the provision of the investment and ancillary services.

Also, the advertising communication shall include the information relevant to that referred to in Articles 63 to 66 when it contains an offer or invitation that complies with the following and includes the form of response or a form that can be answered by:

(a) In the case of an offer to conclude a contract on a financial instrument or on an investment or ancillary service with anyone responding to the communication.

(b) In the case of an invitation to the person who responds to the communication to make an offer to conclude a contract on a financial instrument or on an investment or ancillary service.

The second subparagraph of this paragraph shall not apply where the potential retail client, in order to respond to the offer or invitation, has to refer to another or other documents which, in such a way as individually or as a whole, contain the information referred to in the second paragraph.

Article 63. Information about the investment services company and its services for retail customers.

1. Institutions providing investment services shall provide retail clients, including potential customers, with the following information on the entity and on the services it provides:

a) The name and address of the company as well as all the contact details necessary to enable effective customer communication with the company.

b) The languages in which the client can communicate with the company and receive documents and any other information from it.

(c) The means of communication to be used between the undertaking and the customer, including where appropriate, the forms of dispatch and receipt of orders.

(d) A statement certifying the authority of the entity, including the name and address of the competent authority that granted the authorization.

(e) Where the undertaking acts through an agent, a declaration must be included in this respect specifying the Member State in which the agent is registered.

(f) The nature, periodicity and date of the reports on the service provided by the entity to its clients in accordance with Article 79 bis.4 of Law 24/1988 of 28 July.

g) When the company has funds or client financial instruments in its possession, a brief description of the measures it takes to ensure its protection, including the most relevant data of any relevant system of security of deposits or of compensation to investors that is applicable to the institution under its activities.

(h) A description, which may be summarized, of the entity's policy of conflicts of interest, in accordance with the provisions of Article 45. Also, at the request of the client, at any time, more information about this policy should be provided through a durable medium or, through a web page, provided that in this second case, when the circumstances are not consider it as a durable medium, the conditions set out in Article 3.2 are met.

2. Where the company provides the investment portfolio management service, it shall use an appropriate method of assessment and comparison, such as a significant benchmark based on the investment objectives of the client and on the types of financial instruments in your portfolio, in order to enable the client to assess the outcome of the business.

3. Where the institution proposes the provision of an investment portfolio management service to a retail client, including potential clients, it shall provide, in addition to the information referred to in paragraph 1, the following information, where applicable:

(a) Information on the method used and the periodicity in the valuation of the financial instruments of the client's portfolio.

b) Where appropriate, information on the delegation of the management of all or part of the client's financial instruments, or of their funds.

c) Specifying the reference parameter to be used to compare the results of the client's portfolio.

d) The types of financial instruments that can be included in the client's portfolio as well as the types of transactions that can be performed with them, including any applicable limits.

e) The management objectives, the level of risk to be reflected in the discretionary management and any specific limitation of such discretion.

Article 64. Information on financial instruments.

1. Institutions providing investment services shall provide their clients, including potential clients, with a general description of the nature and risks of financial instruments, taking into account, in particular, the classification of client as a retailer or a professional. The description shall include an explanation of the characteristics of the type of financial instrument in question and of the risks inherent in that instrument, in a sufficiently detailed manner to enable the client to take informed investment decisions.

2. The explanation of the risks shall include, where justified on the basis of the type of financial instrument in question and the knowledge and profile of the client, the following information:

(a) The risks related to that type of financial instrument, including an explanation of leverage and its effects, and the risk of total investment loss.

(b) The volatility of the price of that type of financial instrument and any market constraints, or markets, in which it can be traded.

(c) The possibility for the investor to assume, in addition to the acquisition cost of the financial instrument in question, financial commitments and other additional obligations, including possible legal liabilities, such as consequence of the carrying out of transactions on that financial instrument.

d) Any mandatory margin that would have been established or other similar obligation applicable to such instruments.

3. Where the institution provides a retail client, including potential, with information on a financial instrument at the time of a public offering subject to the obligation to draw up a prospectus, in accordance with the provisions of the Article 30a of Law 24/1988, of 28 July, shall inform you of the date on which the prospectus shall be made available to the public.

4. Where the risks associated with a financial instrument consisting of two or more financial instruments or services are likely to be greater than the risk associated with each of those individually considered instruments or services, provide an appropriate description of each of the instruments or services that make up the financial instrument in question and an explanation of the way in which the interaction between the different components of that financial instrument increase the risks.

5. Where the financial instrument incorporates a guarantee from a third party, sufficient information on the guarantor and the guarantee shall be provided to enable the retail client, including the potential, to reasonably assess the collateral provided.

Article 65. Information requirements with a view to the safeguarding of financial instruments or client funds.

1. Institutions that provide investment services and which maintain financial instruments or funds of their clients shall provide their retail clients, including potential retailers, with the information contained in this relevant article. In the case of professional clients, the information described in paragraphs 5 and 6 shall be provided.

2. The client shall be informed of the possibility that the financial instruments or funds are deposited in a third party on behalf of the institution, as well as its liability under the applicable national law for any act or the third, and the consequences for the client of the insolvency of that third party.

3. Where, in the case of financial instruments deposited abroad, they are deposited in a global account of a third party, the customer must be informed in advance, and must be clearly informed of the risks results.

4. Where, in accordance with the law of the State in which the financial instruments are deposited, it is not possible to differentiate the financial instruments of the clients held by a third party from those of the third party, must inform the customer about this, including a well-visible warning about the resulting risks.

5. Where accounts containing funds or financial instruments of the client are to be subject to the legal order of a State which is not a member of the European Union, the customer shall be informed of the respect, indicating that the rights of the client on financial instruments or funds may be different than if they were subject to the law of a Member State.

6. The customer shall be informed of the existence and conditions of any right of guarantee or charge which the undertaking, or if any, the depositary, has or may have on the financial instruments and the funds of the clients, or of any the right of compensation to be held by the undertaking, or the depositary, in relation to those instruments or funds.

7. Before carrying out securities financing transactions relating to a client's financial instruments, or for use in any other way, on its own account or on behalf of another client, in the terms set out in Article 42, it shall provide the client, in good time and on a durable medium, with clear, complete and accurate information on the undertaking's obligations and responsibilities as regards the use of those instruments, including the conditions for their refund and on the inherent risks.

Article 66. Information about associated costs and expenses.

Retail customers, including potential customers, should be provided with the following information:

(a) The total price the customer has to pay for the financial instrument, the investment service or the ancillary service, including all fees, commissions, costs and associated expenses, and all taxes to be paid by through the investment services company. Where an exact price cannot be indicated, the calculation basis for the total price must be reported so that the customer can verify it.

In any case, the fees charged by the company will be reported separately in each case.

(b) Where a part of the total price is to be paid in a currency other than the euro, the currency in question and the applicable counter-value and costs shall be indicated.

c) A warning of the possibility of other costs arising for the customer, including the payment of taxes, as a result of transactions linked to the financial instrument or service in question and not being paid to through the investment services company and not provided by the investment firm.

(d) Payment modalities as well as any other issues that directly or indirectly affect the price to be paid for the financial instrument or service in question.

Article 67. Information prepared in accordance with the provisions of Law 35/2003, of 4 November, of Collective Investment Institutions.

In the case of units or shares of collective investment institutions, sufficient information on the proposed financial instruments and investment strategies and on the associated costs and expenses shall be considered. which refer to the institution of collective investment, including commissions for subscription or acquisition and reimbursement or disposal, for the purposes of Article 79 (2) of the Law 24/1988 of 28 July 1988, Simplified prospectus required pursuant to Article 17 of Law 35/2003 of 4 November Collective Investment Institutions.

Article 68. Information about the execution of orders not related to the portfolio management service.

1. Where institutions providing investment services execute an order on behalf of a client, not related to the portfolio management service, they shall take the following measures:

a) You must provide the customer with immediate support, essential information about the execution of the order.

(b) In the case of a retail client, it shall send a notice to it, with the content referred to in the following paragraph, confirming the execution of the order as soon as possible and no later than the first working day following the execution of the order or, when the company receives the confirmation of a third party, to the receipt of the confirmation of the third party. However, the provisions of this letter do not apply when the client is required to receive an immediate confirmation identical to that indicated in this letter sent by another person.

The provisions of the above two letters shall not apply where the orders executed on behalf of a client relate to bonds which finance mortgage loan contracts of that client in which case the report on the transaction will be provided at the same time as the loan clauses are communicated but never later than one month after the execution of the order.

The entities shall also provide the client, upon request, with information on the status of their order.

2. The notice referred to in point (b) of the previous paragraph shall contain the following information as applicable and, where applicable, in accordance with Table 1 of Annex I to Regulation 1287/2007 implementing Directive 2004 /39/EC, of the European Parliament and of the Council, as regards the obligations of investment firms to carry out a register, information on transactions, market transparency, admission to trading of instruments financial, and terms defined for the purposes of that Directive:

a) Identification of the company that reports.

b) The name or other designation of the client.

c) The run date and time.

d) The order type.

e) The identification of the execution center and the financial instrument.

f) The indicator of purchase or sale or the nature of the order if it is not for purchase or sale.

g) The volume, unit price, total consideration. As regards the volume, where the order is executed in instalments, information may be provided on the price of each tranche or on the average price. If information on the average price is provided, the price of each tranche must be reported if the customer expressly requests it.

h) The total amount of fees and expenses included, as long as the client requests it, a detailed breakdown of such expenses and commissions.

(i) The liabilities of the customer in connection with the settlement of the transaction, including the delivery or payment period and the timely data of the account, when such data has not been previously communicated to it; and responsibilities.

j) When the client's counterparty is the entity that provides the investment service, or another person in its group, or another client of the company, this circumstance shall be reported unless the order is executed through a trading system that facilitates anonymous trading.

The information referred to in this section may be provided using standard codes provided that an explanation of these codes is also provided.

3. In the case of orders from retail clients on holdings and shares of collective investment institutions admitted to trading on regulated markets or in multilateral trading systems that are regularly executed, the undertakings may choose to comply in each case with the provisions of paragraph 1 (b) of this Article, or, at least for a period of at least six months, to provide such information in respect of all operations carried out, with the content set out in the previous section.

Article 69. Information about the portfolio management service.

1. Where institutions providing investment services provide the portfolio management service, they shall provide each client with a durable medium with a periodic statement of the portfolio management activities carried out on behalf of the portfolio. client, except where that state is provided by another person.

2. In the case of retail customers, the state shall include, where appropriate, the following information:

a) The name of the entity.

b) The name or other designation of the customer account.

(c) Information on the content and valuation of the portfolio, including data on each financial instrument, its market value or, in its absence, the fair value and the cash balance at the beginning and end of the period to which it is refers to the information as well as the performance of the portfolio during that period.

(d) The total amount of the fees and expenses incurred during the reporting period, detailing at least the total management fees and total expenses associated with the execution, including where applicable, a statement indicating that a more detailed breakdown may be provided at the request of the client.

e) Where appropriate, a comparison of the performance of the portfolio during the reporting period and the benchmark of the investment performance agreed between the company and the client.

(f) The total amount of dividends, interest and other payments received in connection with the client's portfolio during the reporting period as well as information on any other company transaction that grant rights in relation to the financial instruments of the portfolio.

g) For each transaction executed during the reporting period, the information referred to in points (c) to (g) of Article 68.4, where applicable. The provisions of this letter shall not apply where the client prefers to receive individual information on each transaction executed, in which case the essential information on each transaction must be made available immediately to the client. durable medium and in addition, a notice confirming the transaction, with the content referred to in Article 68 (4), shall be sent to the retail client not later than the first working day following the execution or, where the undertaking receives the confirmation of a third party, immediately upon receipt of such confirmation and never later than first business day following the same. However, it will not be necessary to send the notice when the client must immediately receive an identical confirmation to such a notice sent by another person.

3. In the case of retail customers, the entity shall forward the periodic status on a semi-annual basis, except where the following circumstances apply:

a) That the customer requests the quarterly referral. For this purpose, the entity shall inform the client of this possibility.

(b) Where, in accordance with point (g) of the preceding paragraph, the customer requests to receive individual information for each transaction executed, the reporting of the periodic statement shall be at least annual except in the case of transactions on the financial instruments referred to in Article 2 (2) to (8) of Law 24/1988 of 28 July, in which case it shall be half-yearly.

(c) When under the portfolio management contract, a leveraged portfolio is permitted, the status shall be submitted on a monthly basis.

4. Also, where institutions providing investment services execute portfolio management operations for their retail clients or operate accounts of such retail clients that include an unguaranteed position in an operation with contingent liability, shall inform the customer of any loss exceeding the threshold previously determined between the undertaking and the customer, at the latest by the end of the day on which the threshold is exceeded, or if it occurs on an indeft day, of the first business day next.

Article 70. Information about the financial instrument states or client funds.

1. Where institutions providing investment services maintain financial instruments or funds of their clients, except in the case of cash deposits held by credit institutions, they shall, on a durable and in-character basis, refer to them. annual, a state of such instruments or funds, except where such information has already been provided to them in another periodic state.

For the purposes of the preceding paragraph, institutions providing the portfolio management service may include this state in the periodic state referred to in Article 69 (1

.

2. The status must include the following information:

a) Data for all financial instruments and funds held by the entity on behalf of the client at the end of the period covered by the state. Where a customer's portfolio includes the income of one or more non-settled transactions, the trading date or settlement date may be used as a reference, provided that the same date applies to all such information as appears in the state.

(b) Where applicable, the securities financing transactions in which the financial instruments or funds of the clients have been used and the extent of the profit accrued in favour of the client for the participation in that financing operation and the accrual basis for that benefit.

CHAPTER II

Fees applicable to commissions

Article 71. Rate regime.

1. Institutions providing investment services shall freely establish their maximum fees for fees and charges for the activities listed in Article 63 of Law 24/1988 of 28 July.

2. Fees shall be established for all transactions that the institution normally carries out, and may exclude those arising from financial services of a singular character, in the case of the National Securities Market Commission. determine.

3. The rates established under the previous paragraph must be included in a prospectus whose contents will be determined by the Minister for Economic Affairs and Finance, and whose models will be drawn up by the National Securities and Exchange Commission and the Bank of Spain, in the case of the Public Debt Market in annotations, must be clearly, concretely and easily understood by the clientele.

4. The Minister for Economic Affairs and Finance is hereby enabled to develop the provisions of this Article and any other relevant aspects relating to the rate regime of entities providing investment services, including the scheme for the advertising of same.

CHAPTER III

Assessment of suitability and convenience

Article 72. Assessment of suitability.

For the purposes of Article 79a. 6 of the Law 24/1988 of 28 July, the entities providing the service of investment advice or portfolio management shall obtain from their clients, including potential clients, the information necessary to enable them to understand the essential data of its customers and to enable them to have a reasonable basis for thinking, taking due account of the nature and scope of the service provided, that the specific transaction to be recommended or to be carried out when you provide the portfolio management service, you meet the following conditions:

a) Respond to the investment objectives of the client in question. In this respect, information on the desired time horizon for the investment, its preferences for risk-taking, its risk profile, and the purposes of the investment shall be included, where appropriate.

b) It is of such a nature that the customer can, from a financial point of view, take on any investment risk that is consistent with his investment objectives. Where the investment advisory service is provided to a professional client listed in points (a) to (d) of Article 78b (3) of the Law 24/1988 of 28 July 1988, the institution may assume that the client may bear the following: financially any investment risk for the purposes of the provisions of this letter.

Also, information regarding the client's financial situation shall include, where applicable, information on the origin and level of its periodic income, its assets, including its liquid assets, investments and assets. buildings, as well as their periodic financial commitments.

c) It is of such a nature that the customer has the experience and knowledge necessary to understand the risks involved in the transaction or the management of his portfolio. In the case of professional clients, the entity shall have the right to assume that the customer has the necessary knowledge and experience for the purposes of the provisions of this letter as regards the products, services and transactions for which it is classified as a professional customer.

When the entity does not obtain the information indicated in the preceding letters, it will not be able to recommend investment services or financial instruments to the client or possible client or to manage its portfolio.

Article 73. Assessment of convenience.

For the purposes of Article 79 bis.7 of Law 24/1988 of 28 July, institutions providing investment services other than those provided for in the preceding Article shall determine whether the customer has the same knowledge and experience necessary to understand the risks inherent in the product or investment service offered or demanded. In this regard, the institution may assume that its professional clients have the necessary experience and knowledge to understand the risks inherent in those investment services and specific products, or to the types of services and operations for which you are classified as a professional customer.

Article 74. Common provisions for suitability and convenience assessments.

1. For the purposes of the two preceding Articles, the information relating to the customer's knowledge and experience shall include the data listed below, in so far as they are appropriate to the nature of the customer, to the nature and scope of the service to be provided and the type of product or transaction envisaged, including the complexity and risks inherent:

a) The types of financial instruments, transactions, and services that the client is familiar with.

b) The nature, volume, and frequency of client transactions on financial instruments and the period during which they were performed.

c) The level of studies, the current profession and, where appropriate, the client's previous professions that are relevant.

2. In no case shall the entities have their clients unprompted so that they do not provide them with the information provided for in Article 79a (6) and (7) of the Ley/1988 of 28 July.

3. Institutions shall also be entitled to rely on the information provided by their clients, except where they know, or need to know, that the information is manifestly out of date, or is inaccurate or incomplete.

CHAPTER IV

Contractual documents

Article 75. Contract content.

For the purposes of Article 79b of Law 24/1988 of 28 July, in the contract concluded between the institution and its client, the rights and obligations of the parties may be included by reference to other documents or legal texts.

Article 76. Type-contracts.

The Minister for Economic Affairs and Finance will determine the assumptions in which the existence of contracts-type or regulatory contracts of the activities or operations in question will be mandatory for the entities providing services. investment to retail customers. The Minister for Economic Affairs and Finance shall also determine the minimum content of such contracts, and, where appropriate, their advertising arrangements and other relevant aspects.

CHAPTER V

Optimal execution (obtaining the best possible result)

Article 77. Best-run criteria.

1. For the purposes of Article 79 (1) (a) of the Law 24/1988 of 28 July 1988, institutions shall take into account the following criteria in determining the relative importance to be given to each of the factors: indicated in that article:

a) The customer's profile, including their classification as a retail or professional customer.

b) The characteristics of the order given by the client.

c) The characteristics of the financial instrument that are the subject of the order.

d) The characteristics of the execution centers to which the order can be directed. For such purposes, a regulated market, a multilateral trading system, a systematic internaliser, a market maker or another liquidity provider, as well as entities carrying out functions in third countries, shall be understood as a performance centre. similar to those made by the above entities.

2. For the purposes of the first paragraph of Article 79 sexies.4 of Law 24/1988 of 28 July, the institution shall also be deemed to comply with the obligation to obtain the best possible result when the institution is executing a specific aspect. of an order following a specific instruction from the client on that particular aspect.

3. For the purposes of the second paragraph of Article 79 sexies.4 of Law No 24/1988 of 28 July 1988, where there is more than one possible centre for the execution of the order, account shall be taken to determine the best possible outcome. commissions and costs for the institution to be generated from the execution in each of the centres to which it has access and which have been detailed in its policy. To this end, institutions may not structure or charge their commissions in such a way that they unfairly discriminate against institutions in relation to others.

Article 78. Command Execution Policy.

1. For the purposes of Article 79e (2) and (5) of the Law 24/1988 of 28 July, institutions providing investment services shall review their policy and their contracts for the execution of orders on an annual basis, or in any the time when a major change occurs that affects the ability of the entity to continue to obtain the best possible results in the execution of the orders of its clients using the centers included in its policy.

2. In the case of retail clients, institutions shall provide them, in good time with the provision of the service, with the following information on a durable medium or, through a website, provided that in this second case, when they do not The conditions set out in Article 3.2 shall be fulfilled in order to be considered as durable medium:

(a) An explanation of the relative importance that the institution grants, on the basis of the criteria defined in Article 77 (1), to the factors referred to in Article 79 (1) (a) of Law 24/1988 of 28 July; or, where appropriate, a description of the procedure by which the undertaking determines the relative importance of such factors.

b) The list of execution centers that the entity considers to allow it to obtain, in a systematic manner, the best possible outcome for the client.

(c) A clear and visible warning that any specific instruction of a customer may prevent the entity from taking the measures included in its enforcement policy to obtain the best possible outcome for its clients, in relation to the items included in those instructions.

Article 79. Duty to act in defence of the best interest for its customers in the execution of orders when the portfolio management services are provided and order receipt and transmission services are provided.

1. Institutions providing portfolio management and receiving and order transmission services shall act in the interests of the best interests for their clients when they give execution orders to other entities on behalf of their clients, or when transmit the orders of these to other entities for execution, and must comply with the provisions of this article.

Now, these entities will not be subject to the provisions of this article but to Article 79e of the Law 24/1988 of 28 July and its provisions of development, when they themselves carry out the execution of the orders. received or the adoption of the trading decisions on behalf of the portfolio of its clients.

2. Institutions shall take reasonable steps to obtain the best possible outcome for their clients taking into account the factors described in Article 79e (1) (a) of Law 24/1988 of 28 July. The relative importance of each of the factors shall be determined in accordance with the provisions of Article 77 (1) and, in the case of retail customers, in accordance with the provisions of the second paragraph of Article 79e. 4 of Law 24/1988, of July 28, and in Article 77 (3) of this royal decree.

When the entity follows specific instructions from its client when giving or transmitting an order it will be deemed to act in defense of the best interest of its client without the provisions of the preceding paragraph being applicable.

3. Institutions shall adopt a policy enabling them to comply with the above paragraph, specifying, for each type of financial instrument, the entities to which they give or transmit orders for execution, and shall provide their clients the timely information about that policy.

Also, designated entities must have procedures and enforcement measures that allow those entities to comply with this article, when they give or pass an order to them for execution.

Entities should periodically check the effectiveness of their policy, with particular attention to the quality of execution of designated entities, and should address any deficiencies that arise. In addition, you will need to review the policy on an annual basis, or at any time when there is a major change affecting the entity's ability to continue to provide its customers with the best possible results.

CHAPTER VI

Fulfillment of customer orders

Article 80. General principles.

1. Institutions providing investment services shall comply with the following requirements when they execute the orders of their clients:

a) You must ensure that orders executed on behalf of your clients are recorded and attributed quickly and accurately.

(b) They must execute similar orders of customers in a sequential and rapid manner, except where the characteristics of the order or the conditions prevailing on the market do not permit, or where the interests of the client require another how to act.

c) You must immediately inform the retail client about any relevant difficulties that arise for the proper execution of the order.

(d) When the entity is responsible for the supervision or settlement of the executed order, it shall take all reasonable steps to ensure that the financial instruments or funds received from the institution client for order settlement, are assigned quickly and correctly to the corresponding customer account.

e) You may not make improper use of the information available to you on the outstanding orders of your clients, and shall take all reasonable steps to prevent the improper use of such information by your clients. competent persons.

2. Institutions shall take measures to facilitate the quickest possible execution of orders of customers at a limited price in respect of shares admitted to trading on a regulated market that are not immediately executed under the conditions existing on the market. To this end, the companies must, unless the customer indicates otherwise, immediately make the customer's order publicly available at a limited price, so that other market participants can easily access it. The company shall be deemed to comply with this obligation by transmitting customer orders at a price limited to a regulated market and/or a multilateral trading system. The National Securities Market Commission may exempt from the obligation to publish information on limited-price orders the volume of which can be considered as large in comparison with the standard volume of the market, as established In Article 43.2, last paragraph of Law 24/1988, of July 28, of the Stock Market.

Article 81. Accumulation and attribution of orders.

Entities that provide investment services will only be able to execute client orders by accumulating them to other clients or to transactions on their own account when the following conditions are met:

a) That it is unlikely that the accumulation will harm any of the clients whose orders accumulate.

b) That each affected customer be informed that as a result of the order backlog they may be harmed in relation to a particular order.

c) The effective implementation and enforcement of an order attribution policy that accurately provides for the equitable allocation of cumulative orders and transactions, specifying how the relationship between volume and price of the orders determines the attributions and the treatment of the partial executions. In this policy, procedures designed to avoid reattribution, in a way that is detrimental to customers, of self-employed transactions that are executed in combination with customer orders, should be included in this policy.

d) That when multiple customer orders are accumulated and the accumulated order is only partially executed, the operations are attributed in accordance with their order management policy.

e) That when they accumulate orders from one or more clients with transactions on their own account, operations are not attributed in a way that is detrimental to a customer.

f) When the order of a customer is accumulated with an own account transaction and the accumulated order is executed in part, the client's priority operations are attributed to the entity except where it can to demonstrate, in a reasonable manner, that without the cumulation the order could not have been executed, or could not have been done in such advantageous terms, in which case the transaction on its own account can be attributed proportionally according to the provisions of point (c) above.

Single additional disposition. Of the operations communications on financial instruments.

1. In accordance with Article 59a of the Law 24/1988 of 28 July 1988, the Securities Market, investment firms and credit institutions which carry out transactions in financial instruments shall communicate to the Commission the following information: National Securities Market Commission the identity of the customers on behalf of whom they have executed their operations.

The communication shall be carried out by the technical channels and with the formats established by the National Securities Market Commission and shall be made no later than the working day following the execution of the operation.

2. For the purposes of this Article, a customer shall be deemed to be a customer in the accounting record of the financial instruments or whose ownership is to be affected as a result of the transaction. In the event that the customer's identification is not available at that time, the identity of the sending financial institution shall be communicated.

The identification will contain the customer's name and social name. In the case of a number of clients, each client shall be identified and the amount or number of financial instruments to which it corresponds shall be detailed. It shall also include for each person an identification code, which shall be the Fiscal Identification Number in the case of resident natural persons and the Tax Identification Code in that of resident legal persons.

3. Where the institution obliged to report does so by means of any of the indirect means referred to in Article 59a (2) of the Securities Market Act 24/1988 of 28 July 1988, it shall ensure that the obligations of the Member States are met. more stringent confidentiality with respect to the data contained in the communications and, in particular, those relating to the identification of the clients, respecting in any case the provisions of Law 15/1999, of 13 December, of Data Protection Personal Character.

4. The National Securities Market Commission may establish supplementary identification codes or formats for cases of persons, such as minors or those who do not have their registered office in Spain, who do not have those mentioned in the paragraph 2 above as well as technical specifications for the communications and procedures for proper reception and treatment.

First transient disposition. Deadline for adapting companies engaged in financial advice.

The companies that, at the date of entry into force of this royal decree, have been developing the activity of investment advisory will have to request the corresponding authorization and registration in the registration of the National Securities Market Commission within one year from the entry into force of this royal decree.

Second transient disposition. Transitional arrangements applicable to the communications of operations on financial instruments.

During the twelve months following the entry into force of this royal decree, the National Securities Market Commission may set deadlines for communication other than those laid down in Article 59a of Law 24/1988. July 28, the Securities Market and the only additional provision of this royal decree, in order to allow the gradual adaptation of the systems of the obligated entities.

Single repeal provision. Repeal clause.

1. Repealed:

(a) Royal Decree 867/2001 of 20 July 2001 on the Legal Regime of investment firms, with the exception of Articles 35 to 37.

(b) Royal Decree 629/1993 of 3 May on rules for action in the markets for compulsory securities and registers.

(c) The third and fifth sections of the Ministerial Order of 25 October 1995, of partial development of Royal Decree 629/1993 of 3 May, of rules of action on the markets for compulsory securities and registers.

(d) The second and third paragraphs of the Order of 7 October 1999, for the development of the general code of conduct and rules for the management of investment portfolios.

2. Similarly, any rules of equal or lower rank shall be contrary to the provisions of this Royal Decree.

Final disposition first. Competency enablement.

This royal decree is issued in accordance with the provisions of Article 149.1.6., 11. and 13. of the Constitution.

Final disposition second. Regulatory enablement.

The Minister of Economy and Finance and, with his express rating, the National Securities Market Commission will be able to dictate the precise provisions for the proper execution of this royal decree.

Final disposition third. Amendment of the Regulation of Law 35/2003 of 4 November of collective investment institutions approved by Royal Decree 1309/2005 of 4 November 2005.

The Regulation of Law 35/2003 of 4 November of collective investment institutions approved by Royal Decree 1309/2005 of 4 November is amended as follows:

One. Article 36 (1) (h) (eligible assets for investment) is reworded in the following terms:

" (h) Monetary market instruments, provided that they are liquid and have a value that can be accurately determined at all times, not traded on a market or trading system that meets the requirements set out in Paragraph (a), provided that one of the following requirements is met:

1. º That are issued or guaranteed by the State, the Autonomous Communities, the local entities, the Banco de España, the European Central Bank, the European Union, the European Investment Bank, the central bank of some of the Member States, any public administration of a Member State, a third country or, in the case of federal States, by one of the members of the Federation, or by an international public body to which one or more States belong members.

2. º That are issued by a company whose securities are traded on a market that meets the requirements set out in paragraph (a).

3. º That are issued or guaranteed by an entity subject to prudential supervision.

4. º That are issued by entities belonging to the categories determined by the National Securities Market Commission.

For the purposes of this paragraph (h), financial instruments that meet one of the following criteria shall be considered as monetary market instruments:

i) which, at the date of issue, have a maturity of less than or equal to 397 days;

(ii) having a residual maturity of not less than or equal to 397 days;

(iii) that are subject to periodic performance adjustments, in accordance with monetary market conditions, at least once every 397 days;

(iv) that its risk profile, including credit and interest-rate risks, corresponds to that of financial instruments with a maturity such as that provided for in points (i) or (ii), or are subject to performance adjustments in accordance with as provided for in point (iii).

In addition, they shall be considered as liquids provided that they can be sold at a limited cost within a reasonably short period of time, taking into account the obligation of the collective investment institution to repurchase or repay its shares or actions at the request of any shareholder or shareholder. '

Two. New wording is given to Article 97 (General Code of Conduct), in the following terms:

" Article 97. Application of Royal Decree 217/2008 of 15 February on the Legal Regime of investment firms and other entities providing investment services and amending in part the Regulation of Law 35/2003, of 4 November, of institutions of collective investment, approved by Royal Decree 1309/2005, of 4 November.

1. It shall apply to the persons and entities listed in the previous Article of Title IV (rules of conduct applicable to investment services) of Royal Decree 217/2008 of 15 February on the Legal Regime of undertakings investment services and of the other entities providing investment services and partly amending the Regulation of Law 35/2003 of 4 November of collective investment institutions, approved by Royal Decree 1309/2005, of 4 November.

2. For the purposes of the above paragraph, the Minister of Economy and Finance is enabled to develop and adapt, on a proposal from the National Securities Market Commission, the provisions of the aforementioned royal decree as necessary to the specific characteristics of the activity in the area of collective investment. '

Three. Article 98 (2) (Rules of Procedure of Conduct) is worded as follows:

" 2. Internal rules of conduct shall be based on the principles referred to in the rules referred to in Article 65 of the Law and in Title IV (rules of conduct applicable to investment services) of the Royal Decree. 217/2008, of 15 February, on the Legal Regime of investment firms and other entities providing investment services and amending in part the Regulation of Law 35/2003 of 4 November 2001, collective investment institutions, approved by Royal Decree 1309/2005 of 4 November 2005 and in its rules of development. "

Four. An article 98 bis is added with the following wording:

" Article 98 bis. Assignment of operations.

The internal control procedures of the entities referred to in the preceding article shall permit accrediting that investment decisions in favour of a particular collective investment institution, or client, are adopt with a character prior to the transmission of the order to the intermediary. It must also have criteria, objectives and pre-established criteria for the distribution or breakdown of operations affecting several collective investment institutions, or clients, that ensure equity and non-discrimination between them. "

Final disposition fourth. Entry into force.

This royal decree shall enter into force on the day following that of its publication in the "Official Gazette of the State", without prejudice to the provisions of the transitional provision of Law 47/2007 of 19 December 2007, The Law 24/1988 of 28 July of the Stock Market is amended.

Final disposition fifth. Incorporation of European Union law.

This royal decree incorporates into Spanish law the Commission Directive 2006 /73/EC implementing Directive 2004 /39/EC of the European Parliament and of the Council as regards the organisational and the the operating conditions of the investment firms and terms defined for the purposes of that Directive as well as the transposition of Articles 3 and 4.1 of Commission Directive 2007 /16/EC of 19 March 2007 laying down provisions implementing Council Directive 85 /611/EEC on the coordination of legal provisions, regulations and administrative provisions on certain undertakings for collective investment in transferable securities with regard to the clarification of certain definitions.

Given in Madrid, on February 15, 2008.

JOHN CARLOS R.

The Second Vice President of the Government and Minister of Economy and Finance,

PEDRO SOLBES MIRA