The Spanish
Securities Market
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STRUCTURE, ORGANISATION AND OPERATION
OF THE SPANISH SECURITIES MARKET
4. RULES OF CONDUCT FOR INVESTMENT FIRMS
Title VII of the LMV lays out a list of rules of con-
duct applicable to those firms offering investment ser-
vices. It should be pointed out that it does not establish
a single and uniform level of protection, rather the law
recognises the reality of the financial markets today, in
that the profile of the investor has changed.
Classes of Clients
The rules of conduct oblige firms to classify their
clients according to their knowledge, financial experti-
se, profile and investment objectives. The LMV defines
three classes of clients.
Minority investors
These investors are more protected and come un-
der the category of clients who cannot be classed as
professional or an eligible counterparty. This category
includes natural persons, self-employed, small compa-
nies, etc.
Professional clients
Clients who are presumed to have the necessary
experience, knowledge and necessary qualifications to
make their own investment decisions and properly as-
sess the risks that it incurs. This category includes finan-
cial institutions, States, regional administrations, central
banks, institutional investors and large companies.
Eligible counterparties
These are legal persons who meet the require-
ments to be classified as professionals and comprise
the following groups: investment firms, credit insti-
tutions, insurance companies, collective investment
schemes (CISs), pension funds, fund management
companies, and other financial institutions authorised
or regulated under Community legislation, national
governments, etc.
Adequacy and suitability test
Firms that provide investment services also have
certain obligations to provide information to clients,
and clients must undergo a suitability test or exam be-
fore the company can provide its services.
Disclosure obligations
Entities that provide investment services must keep
their clients informed at all times. All information for
clients, including advertising matter should be fair,
clear and not misleading. In pre-contractual informa-
tion clients will be provided, in a clear and understan-
dable manner, correct information about the entity and
its services; on financial instruments costs and associa-
ted costs, in such a way that the client can understand
the nature and risks of the financial service and the fi-
nancial instrument.
Best execution and order management
Persons or entities that provide investment servi-
ce have a duty to provide best execution, to take the
correct measures to achieve the best possible result
for client orders, taking into account price, costs, spe-
ed and likelihood of the order being executed and any
other relevant element involved in the execution of an
order.
The duty to provide best execution will be ca-
rried out via an order execution policy that the entities
should apply and that their clients should be aware of.
Trading centres, and which of them allows the best re-
sult possible for clients to be achieved, should be inclu-
ded in this policy.
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