Circular 4/2010 of the Bank of Spain on Credit Institution Agents and Agreements for the Provision of Financial Services

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Circular 4/2010, of July 30, of the Bank of Spain, to credit institutions, on agents of credit institutions and agreements entered into for the habitual provision of financial services (BOE of August 4) (Correction of errors BOE of August 6)

In development of what is established in Article 22 of Royal Decree 1245/1995, of July 14, Bank of Spain Circular 5/1995, of October 31, and subsequently Circular 6/2002, of December 20, came to regulate the communication obligations that, regarding the agents of credit institutions and the agreements entered into with foreign credit institutions for the habitual provision of financial services, were established in said Royal Decree. Various reasons now lead to a review of this regulation.

First, the modification made at the end of 2007 in the Securities Market Law (in particular, the content of paragraph 6 of the new Article 65 bis thereof, dedicated to the use of agents by credit institutions in the provision of investment services), makes it convenient to review the Circular to take that into account in the regulation applicable to credit institutions and their agents, and, in particular, to have information on the professionals who habitually, in the name and on behalf of credit institutions, market the services provided by the institution and attract clients, even if they do not have powers of representation that allow them to bind the principal institution.

Secondly, the experience accumulated since 2002 advises clarifying with greater clarity the agreements and the agents subject to declaration, especially if they are integrated into the networks of other supervised entities, in which case they already enjoy their own regime of control and transparency. Likewise, it advises clarifying various aspects related to the designation of agents and their declaration.

Finally, the specific obligation to periodically send the list of agents that institutions must include in an annex to their annual report is eliminated, insofar as they are already obliged to send the complete report to the Bank of Spain pursuant to what is established in paragraph 8 of the additional provision first of Bank of Spain Circular 4/2004.

With the aim of safeguarding the legal certainty of the parties involved in the provision of financial services through agents, especially that of the end client, the public nature of the information received regarding this is maintained.

Consequently, in exercise of the powers granted, the Governing Council of the Bank of Spain, upon proposal of the Executive Commission, has approved this Circular, which shall be governed by the following rules:

First Rule.

Declaration of agents.

1. Spanish credit institutions and branches in Spain of foreign credit institutions shall communicate to the Bank of Spain (Department of Financial Institutions), within a maximum period of 15 calendar days from the date of their authorization, the information indicated in Annex 1 of this Circular regarding natural or legal persons (even other credit institutions), Spanish or foreign, resident or not, to whom the institution has granted powers to act habitually before its clientele, in the name and on behalf of the principal institution itself, in the formalization of typical operations of a credit institution, including the provision of investment services referred to in Article 65 bis of the Securities Market Law that they are legally authorized to provide, or in the negotiation of all or some of their contractual conditions.

The following shall not be included in such communication:

– Correspondents. – Attorneys-in-fact with powers for a single specific operation. – Persons who are linked to the institution, or to other entities of the same group, by an employment relationship. – Persons integrated into the commercial networks of investment service companies, management companies for collective investment institutions or pension funds, or insurance entities declared as agents of the credit institution, when such persons are already registered as agents in the records of the National Securities Market Commission or the General Directorate of Insurance and Pension Funds. – Representatives, attorneys-in-fact, or employees of any kind of legal person agents, without prejudice to the prohibition of acting through sub-agents referred to in paragraph 8 of Article 22 of Royal Decree 1245/1995.

Within the same period and format, the cancellation of the granted representations or any variation regarding the previously communicated data must be communicated.

The persons and entities referred to in the following paragraph 2 that have powers to formalize operations or negotiate them by setting their contractual conditions shall be declared only in Annex 1.

2. With reference to the last day of each natural semester, Spanish credit institutions and branches in Spain of foreign credit institutions shall communicate to the Bank of Spain (Department of Financial Institutions) the information indicated in Annex 2 of this Circular regarding those natural or legal persons who have been designated to professionally, on a habitual basis and in the name and on behalf of the institution, carry out the activities of promotion and marketing of operations or services typical of the activity of a credit institution, including investment and auxiliary services referred to in Article 63 of the Securities Market Law. The professional nature shall be assessed taking into account the characteristics of the remuneration they receive from the institution and the breadth of their activity, and it shall be considered in all cases that such nature exists when they are integrated into the commercial organization of the institution.

In any case, when within the framework of these activities the provision of advice on the financial instruments and investment services offered by the institution is contemplated, under the terms provided in paragraph 1 of Article 65 bis of the Securities Market Law, the persons who carry it out shall be included among those contemplated in paragraph 1.

This information shall be sent to the Bank of Spain during the months of February and September of each year and shall not include the persons excluded from the communication contemplated in paragraph 1.

3. In the event that the list of agents that must appear as an annex to the annual report of the institutions, pursuant to Article 21.4 of Royal Decree 84/2015, of February 13, includes the persons referred to in the preceding paragraph, these shall be separated, in a clear and understandable manner, from the agents referred to in paragraph 1. [ 1 ]

[1]

Paragraph 3 drafted according to Circular 2/2016, of February 2, final provision third.

Second Rule.

Declaration of agreements with foreign entities.

Spanish credit institutions shall communicate to the Bank of Spain (Department of Financial Institutions), within a period of one month from the date of signing the corresponding agreements, the information indicated in Annex 3 of this Circular regarding foreign credit institutions with which they have entered into agreements for the habitual provision in Spain of financial services to the clientele of said foreign entities, in the name and on behalf of the foreign entity. Correspondency agreements, understood as those specific ones in which the Spanish entity exclusively makes receipts and payments on behalf of the foreign entity, shall not be included in the aforementioned communication.

Within the same period of one month, and in the same format, the cancellation of the aforementioned agreements or any variation in the previously communicated data must be communicated.

In the case of agreements reached with foreign credit institutions for the reciprocal provision of financial services, the powers granted to the foreign entity to act in the name and on behalf of the Spanish one must be declared, if appropriate due to the scope of the functions to be developed, in the list provided for in Annex 1 in accordance with what is established in paragraph 1 of the First Rule, while those granted to the Spanish entity to operate in Spain in the name and on behalf of the foreign one must be declared as established in the first paragraph of this Rule.

Third Rule.

Support for declarations.

The communications established in paragraphs 1 and 2 of the First Rule and in the Second Rule above shall be carried out on magnetic media or through computer interconnection, in accordance with the technical specifications communicated for that purpose. However, exceptionally, for justified causes, the Bank of Spain may authorize the submission of said data in the forms attached as Annex 1 (List of authorized persons in accordance with paragraph 1 of the First Rule), 2 (List of persons designated for client acquisition or promotion and marketing of operations or services), and 3 (Agreements), completed in accordance with the indications established by the Department of Financial Institutions. These forms must be presented dated, stamped, and signed by a person with sufficient power of the sending institution.

Fourth Rule.

Filing of information.

All documentation related to the powers or agreements subject to communication, pursuant to the First and Second Rules of this Circular, must be kept in a specific file for each agent or principal foreign credit institution, which shall be at the disposal of the Bank of Spain at all times in the central offices of the institution.

Fifth Rule.

Dissemination of information.

In order to ensure its knowledge by the clientele, the information sent to the Bank of Spain pursuant to the communications established in the First and Second Rules of this Circular, or those it may receive from other foreign credit institutions without a branch in Spain regarding the provision of services in our country through agents, shall be public.

The Bank of Spain shall give it adequate dissemination.

Sixth Rule.

Internal control.

Within the framework of the obligations referred to in paragraph 6 of Article 22 of Royal Decree 1245/1995, of July 14, credit institutions shall adopt adequate measures so that in the establishment and management of their agent networks there are controls that promote the professional capacity of their agents and ensure that these comply at all times with banking regulations, and those related to securities markets, applicable to them in their relations with the clientele.

The notarization of the powers of the agents shall, with respect to the applicable regulatory and disciplinary framework, and without prejudice to the obligations established by commercial legislation, be optional for the principal institution.

The exclusivity in the agency relationship referred to in paragraph 7 of Article 22 of Royal Decree 1245/1995 shall not prevent the declared persons from carrying out any other activities, whether as agents for entities other than credit institutions, regulated or not, or on their own account, unless this is not permitted by the corresponding sectoral regulation applicable to said regulated entities. However, credit institutions shall ensure that the other activities developed by their agents do not conflict with the proper performance of the representation entrusted to them; when both types of activities are provided face-to-face with the public, the institution shall ensure that the agent establishes adequate differentiation between them, to avoid any confusion among the clientele.

Repealing Rule.

Upon entry into force of this Circular, Bank of Spain Circular 6/2002, of December 20, regarding information on agents of credit institutions and agreements entered into for the habitual provision of financial services, shall be repealed.

Final Rule.

Entry into force.

This Circular shall enter into force three months after its publication in the "Official State Gazette".

ANNEX 1

LIST OF AUTHORIZED PERSONS IN ACCORDANCE WITH PARAGRAPH 1 OF THE FIRST RULE

ANNEX I-C-4-2010.PDF (119 KB)

ANNEX 2

LIST OF PERSONS DESIGNATED FOR CLIENT ACQUISITION OR PROMOTION AND MARKETING OF OPERATIONS OR SERVICES

ANNEX II-C-4-2010.PDF (128 KB)

ANNEX 3

AGREEMENTS ENTERED INTO WITH FOREIGN CREDIT INSTITUTIONS FOR THE HABITUAL PROVISION, IN THE NAME OR ON BEHALF OF THESE, OF FINANCIAL SERVICES OR AGENCY SERVICES.

ANNEX III-C-4-2010.PDF (124 KB)

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