CNMV Technical Guide Knowledge and Competence

Following ESMA’s “Guidelines for the assessment of knowledge and competence” and Articles 24.2 and 25 of MiFID2, the Spanish Securities Markets Commission - Comisission Nacional del Mercado de Valores (CNMV) has published a Technical Guide, which will apply from January 2018 to all relevant staff (including agents) of credit institutions, investment firms, management companies (including management companies of closed-end funds) that provide investment services in Spain.

In the context of enhancing protection of clients of investment services and in view of the forthcoming entry into force of MiFID2, on 29 June 2017, CNMV approved the Technical Guide 4/2017 on the assessment of knowledge and competence of staff providing advice or information in financial entities (the Technical Guide). The Technical Guide is currently only available in Spanish.

Although requirements on knowledge and competence by staff and agents of financial entities providing investment services are already included in various Spanish legal provisions, approval of the Technical Guide goes one step further. The Technical Guide - which takes into account the “Guidelines for the assessment of knowledge and competence” published by the European Securities and Markets Authority on 03 January 2017 (the ESMA Guidelines) - both determines the criteria considered appropriate by the CNMV for financial entities to ensure that relevant staff providing information or advice on investment services have the required knowledge and competence to carry out those actions and clarifies the manner in which entities must demonstrate their compliance to the CNMV.

The Technical Guide will assist investors taking investment decisions based on an understanding of the products and risks involved. At the same time, for affected firms, the fact that their staff will have a higher level of technical knowledge (in accordance with the regulations) will help better guarantee that services are properly provided.

Aims of the Technical Guide

The twin aims of the Technical Guide are to ensure that:

• investors properly understand the risks of those products in which they invest, and
• relevant staff of financial entities who provide information or advice in Spain have the necessary knowledge to (i) understand the products and the capacity to explain them and (ii) assess whether they are appropriate or suitable for each investor. 

Scope

The Technical Guide applies to the following entities which provide investment services in Spain and also to their relevant staff:

• credit institutions
• investment firms
• management companies of collective investment schemes (open-ended funds), and
• management companies of closed-end funds.

For the purposes of the Technical Guide, "relevant staff" means the staff (in this context, including agents) who provide information or advice to clients (including potential clients) as well as staff who assist clients under a discretionary portfolio management agreement.

General provisions

The Technical Guide includes an assessment process by which to assess knowledge and competence gained by the relevant staff, and information on how to notify compliance to the CNMV.

A flexible approach has been followed with regards to the certification process. The CNMV establishes three alternatives, which consist on the obtaining of:

• a certification from an entity included in an official CNMV list (to be published)
• some other external certification containing the requirements set out in the Technical Guide (the entity itself will be in charge of verifying the required level of this certification), or
• an internal qualification fully compliant with the requirements set out in the Technical Guide.

The main aspects set out in the Technical Guide are as follows:

• Minimum internal organisational requirements will be required for the assessment, maintenance and updating of knowledge and competence (though these will be subject to the principle of proportionality).
• The board of directors or, in the case of large entities, a specific committee constituted for that purpose, composed by at least three high-level directors (the Administrative Body) will be responsible for (i) establishing criteria for the qualification and experience of the relevant staff, (ii) appointing the department responsible for the application of these criteria and (iii) establishing control procedures to ensure compliance with them. Such control will be carried out by the regulatory compliance unit (the Compliance Unit).
• The Compliance Unit will be in charge of evaluating and reviewing compliance with the minimum criteria established in the Technical Guide (and will prepare a report for the Administrative Body).
• The technical guide sets out the criteria and documentation required for entities wanting to apply to be included in the official list to be published by the CNMV as official entities providing external training.
• Minimum records and information must be kept and put at the disposal of the CNMV, to demonstrate compliance.

Timeline and deadlines

With regards to the staff who only provide information, a minimum of 80 learning hours is required. This becomes 150 learning hours in the case of staff who provide advice. However, based on the principle of proportionality and considering reasonable grounds, entities may shorten the number of hours required.

The minimum continuous training time for staff who only provide information should be 20 hours per year, or 30 hours per year in the case of staff providing advice. The principle of proportionality may again be relied upon when dealing with continuous training sessions.

The minimum period of time in which to gain appropriate experience after commencing to provide the relevant services is six months (full time or equivalent period on partial time basis).

Where a member of staff has not obtained the appropriate qualification or experience to provide the relevant service, provision of services may not be carried out unless under supervision. The maximum period of time during which an employee lacking appropriate qualification or experience may provide services under supervision (being supervised by a qualified employee) is four years.

The CNMV will apply the measures and criteria contained in the Technical Guide in its supervisory function as of January 2018. From that date, when it considers it advisable, the CNMV, within the scope of its supervisory function, may conduct tests on the knowledge and competence of the relevant staff.