sou · GUB350d2 · 2007-01-01 00:00:00 — (c)the firm or that person has a financial or other incentive to favour the interest of another client or group of clients over the interests of the client; (d)the firm or that person on the same business as the client; (e)the firm or that person receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service. (Articles 13(3) and 18(1) of Directive 2004/39/EC) Conflicts of interest policy 1.Member States shall require investment firms to establish, implement and maintain an effective conflicts of interest policy set out in writing and appropriate to the size and organisation of the firm and the nature, scale and complexity of its business. Where the firm is a member of a group, the policy must also take into account any circumstances, of which the firm is or should be aware, which may give rise to a conflict of interest arising as a result of the structure and business activities of other members of the group. 2.The conflicts of interest policy established in accordance with paragraph 1 shall include the following content: (a)it must identify, with reference to the specific investment services and activities and ancillary services carried out by or on behalf of the investment firm, the circumstances which constitute or may give rise to a conflict of interest entailing a material risk of damage to the interests of one or more clients; (b)it must specify procedures to be followed and measures to be adopted in order to manage such conflicts. 3.Member States shall ensure that the procedures and measures provided for in paragraph 2(b) are designed to ensure that relevant persons engaged in different involving a conflict of interest of the kind specified point paragraph 2(a) of that paragraph carry on those activities at a level independence appropriate to the size and activities of the investment firm, and of the group to the degree of risk entailed which it belongs, and to the materiality of the risk of damage to the interests of clients. For thosethe purposes, they of paragraph 2(b), the procedures to be followed and measures to be adopted shall include such of the following as are necessary and appropriate for the firm to ensure the requisite leveldegree of independence: (a)effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients; (b)the separate supervision of relevant persons whose principal functions involve carrying out activities on behalf of, or providing services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of the firm; (c)the removal of any direct link between the remuneration of relevant persons principally engaged in one activity and the remuneration of, or revenues generated by, different relevant persons principally engaged in another activity, where a conflict of interest may arise in relation to those activities; (d)measures to prevent or limit any person from exercising inappropriate influence over the way in which a relevant person out investment or ancillary services or activities; (e)measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate investment or ancillary services or activities where such involvement may impair the proper management of conflicts of interest. If the adoption or the practice of one or more of those measures and procedures does not ensure the requisite leveldegree of independence, Member States shall require investment firms to adopt such alternative or additional measures and procedures as are necessary and appropriate for those purposes. 4.Where, in case of a specific conflict of interest, an investment firm is not reasonably confident that the measures adopted under its general conflicts policy couldin accordance with paragraph 2(b) will prevent the risk of damage to its clients it shall, in accordance with the Directive,addition to those measures, clearly disclose the general nature or source of the conflict of interest in accordance with Directive 2004/39/EC. However, where in exceptional circumstances a specific conflict entailing a material risk of damage to the interests of one or more clients of an investment firm arises in connection with a service that the firm provides or proposes to provide to a client and is not covered by the policy adopted in accordance with paragraph 2, the firm may provide that service if it has clearly disclosed in advance the general nature and source of the conflict. 5.Member States shall ensure that disclosure to clients, pursuant to Article 18(2) of Directive 2004/39/EC and paragraph 4, is made in a durable medium and includes sufficient detail, taking into account the nature of the client, to enable that client to take an informed decision with respect to the investment or ancillary service in the context of which the conflict of interest arises. (Article 13(6) of Directive 2004/39/EC) Record of services or activities giving rise to detrimental conflict of interest Member States shall require investment firms to keep and regularly to update a record of the kinds of investment or ancillary service or investment activity carried out by or on behalf of the firm in which a conflict of interest entailing a material risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing service or activity, may arise. (Article 19(2) of Directive 2004/39/EC) 1.For the purposes of Article 25, investment research means research or other information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers of financial instruments, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public, and in relation to which the following conditions are met: (a)it is labelled or described as investment research or in similar terms, or is otherwise presented as an objective or independent explanation of the matters contained in the recommendation; (b)if the recommendation in question were made by an investment firm to a client, it would not constitute the provision of investment advice for the purposes of Directive 2004/39/EC. 2.A recommendation within the meaning of Article 1(3) of Directive 2003/125/EC that does not meet the conditions set out in paragraph 1 shall be treated as a marketing communication for the purposes of Directive 2004/39/EC and Member States shall require any investment firm that produces or disseminates the recommendation to ensure that it is clearly identified as such. Additionally, Member States shall require those firms to ensure that any such recommendation contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. (Article 13(3) of Directive 2004/39/EC) Additional organisational requirements where a firm produces and disseminates investment research 1.Member States shall require investment firms which produce, or arrange for the production of, investment research that is intended or likely to be subsequently disseminated to clients of the firm or to the public, under their own responsibility or that of a member of their group, to ensure the implementation of all the measures set out in Article 22(3) in relation to the financial analysts involved in the production of the investment research and other relevant persons whose responsibilities or business interests may conflict with the interests of the persons to whom the investment research is disseminated. 2.Member States shall require investment firms covered by paragraph 1 to have in place arrangements designed to ensure that the following conditions are satisfied: (a)financial analysts and other relevant persons must not undertake personal transactions or trade, other than as market makers or in the execution of an unsolicited client order, on behalf of any other person, including the investment firm, in financial instruments to which investment research relates, or in any related financial instruments, if that financial analyst or other relevant person has knowledge of the likely timing or content of that investment research which is not publicly available or available to clients and cannot readily be inferred from information that is so available, until the recipients of the investment research have had a reasonable opportunity to act on it; (b)in circumstances not covered by point (a), financial analysts and any other relevant persons involved in the production of investment research must not undertake personal transactions in financial instruments to which the investment research relates, or in any related financial instruments, contrary to current recommendations, except in exceptional circumstances and with the prior approval of a member of the firms legal or compliance function; (c)the investment firms themselves, financial analysts, and other relevant persons involved in the production of the investment research must not accept inducements from those with a material interest in the subject-matter of the investment research; (d)the investment firms themselves, financial analysts, and other relevant persons involved in the production of the investment research must not promise issuers favourable research coverage; (e)issuers, relevant persons other than financial analysts, and any other persons must not be permitted to review a draft of investment research for the purpose of verifying the accuracy of factual statements made in that research if the draft includes a recommendation or a target price. For the purposes of this paragraph, related financial instrument means a financial instrument the price of which is closely affected by price movements in another financial instrument which is the subject of investment research, and includes a derivative on that other financial instrument. 3.Member States shall exempt investment firms which disseminate investment research produced by another person to the public or to clients from complying with paragraph 1 if the following criteria are met: (a)the person that produces the investment research is not a member of the group to which the investment firm belongs; (b)the investment firm does not substantially alter the recommendations within the investment research; (c)the investment firm does not present the investment research as having been produced by it; (d)the investment firm verifies that the producer of the research is subject to requirements equivalent to the requirements under this Directive in relation to the production of that research, or has established a policy setting such requirements. Operating conditions for investment firms (Article 19(1) of Directive 2004/39/EC) Member States shall ensure that investment firms are not regarded as acting honestly, fairly and professionally in accordance with the best interests of a client if, in relation to the provision of an investment or ancillary service to the client, they pay or are paid any fee or commission, or provide or are provided with any non-monetary benefit, other than the following: (a)a fee, commission or non-monetary benefit paid or provided to or by the client or a person acting on behalf of the client; (b)a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, where the following conditions are satisfied: (i)the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, must be clearly disclosed to the client, in a that is comprehensive, accurate and understandable, prior to the provision of the relevant investment or ancillary service; (ii)the payment of the fee or commission, or the provision of the non-monetary benefit must enhance the quality of the relevant service to the client and not impair compliance with the firms duty to act in the best interests of the client. Member States shall permit an investment firm, for the purposes of point (b)(i), to disclose the essential terms of the commission arrangements relating to the fee, commission or non- monetary benefit in summary form, provided that it undertakes to disclose further details at the request of the client and provided that it honours that undertaking. INFORMATION TO CLIENTS AND POTENTIAL CLIENTS (Article 19(2) of Directive 2004/39/EC) Conditions with which information must comply in order to be fair, clear and not misleading 1.Member States shall require investment firms to ensure that all information they address to, or disseminate in such a way that it is likely to be received by, retail clients or potential retail clients, including marketing communications, satisfies the conditions laid down in paragraphs 2 to 8. 2.The information referred to in paragraph 1 shall include the name of the investment firm. It shall be accurate and in particular shall not emphasise any potential benefits of an investment service or financial instrument without also giving a fair and prominent indication of any relevant risks. It shall be sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received. It shall not disguise, diminish or obscure important items, statements or warnings. 3.Where the information compares investment or ancillary services, financial instruments, or persons providing investment or ancillary services, the following conditions shall be satisfied: (a)the comparison must be meaningful and presented in a fair and balanced way; (b)the sources of the information used for the comparison must be specified; (c)the key facts and assumptions used to make the comparison must be included. 4.Where the information contains an indication of past performance of a financial instrument, a financial index or an investment service, the following conditions shall be satisfied: (a)that indication must not be the most prominent feature of the communication; (b)the information must include appropriate performance information which covers the immediately preceding 5 years, or the whole period for which the financial instrument has been offered, the financial index has been established, or the investment service has been provided if less than 5 years, but not less than one year, or such longer period as the firm may decide, and which is based, in every case, that performance information must be based on complete 12-month periods; (c)the reference period and the source of information must be clearly stated; (d)the information must contain a prominent warning that the figures refer to the past and that past performance is not a reliable indicator of future results; (e)where the indication relies on figures denominated in a currency other than that of the in which the retail client or potential retail client is resident, the currency must be clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations; (f)where the indication is based on gross performance, the effect of commissions, fees or other charges must be disclosed. 5.Where the information includes or refers to simulated past performance of a financial instrument, or a financial index or investment service, the following conditions shall be satisfied: (a)the simulated past performance must be based on the actual past performance of one or more financial instruments, financial or investment services which are the same as, or underlie, the financial instrument concerned; (b)in respect of the actual past performance referred to in point (a), the conditions set out in paragraph points (a) to (c), (e) and (f) of paragraph 4 must be complied with; (c)the information must contain a prominent warning that the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance. 6.Where the information contains information on future performance, the following conditions shall be satisfied: (a)the information must not be based on or refer to simulated past performance; (b)it must be based on reasonable assumptions supported by objective data; (c)it must be based on or at least include a clear indication of net performance; (d)it must contain a prominent warning that such forecasts are not a reliable indicator of future performance. 7.Where the information refers to a particular tax treatment, it shall prominently state that the tax treatment depends on the individual circumstances of each client and may be subject to change in the future. 8.The information shall not use the name of any competent authority in such a way that would indicate or suggest endorsement or approval by that authority of the products or services of the investment firm. (Article 19(3) of Directive 2004/39/EC) Information concerning client classificationcategorisation 1.Member States shall ensure that investment firms notify the client of its classificationcategorisation as a retail client, a professional client or an eligible counterparty in accordance with Directive 2004/39/EC. 2.Member States shall ensure that investment firms inform clients in a durable medium about any right that client has to request a different classificationcategorisation and about any limitations to the level of client protection that it would entail. 3.Member States shall permit investment firms, either on their own initiative or at the request of the client concerned: (a)to treat as a professional or retail client a client that might otherwise be classified as an eligible counterparty pursuant to Article 24(2) of Directive 2004/39/EC; (b)to treat as a retail client a client that is considered as a professional client pursuant to Section I of to Directive 2004/39/EC. It shall be a matter for the investment firm whether to agree to a request from a client for a different classificationcategorisation resulting in treatment as a different class of client. (Article 19(3) of Directive 2004/39/EC) General requirements for information to clients 1.Member States shall require investment firms, in good time before a retail client or potential retail client is bound by any agreement for the provision of investment services or ancillary services or before the provision of those services, whichever is the earlier, to provide that client or potential client with the following information in a durable medium: (a)the terms of any such agreement; (b)the information required by Article 30 relating to that agreement or to those investment or ancillary services. 2.Member States shall require investment firms, in good time before the provision of investment services or ancillary services to retail clients or potential retail clients, to provide the information required under Articles 30 to 33 in a durable medium . 3.Member States shall require investment firms to provide professional clients with the information referred to in Article 32(5) and (6) in a durable medium and in good time before the provision of the service concerned. 3A The information referred to in paragraphs 1 to 3 shall be provided in a durable medium or, in the case of information required under paragraph 1 and Articles 30 to 33, by means of a website (where that does not constitute a durable medium) provided that the conditions specified in Article 3(2) are satisfied. 4.By way of exception to paragraphs 1 and 2, Member States shall permit investment firms, in the following circumstances, to provide the information required under paragraph 1 to a retail client immediately after that client is bound by any agreement for the provision of investment services or ancillary services, and the information required under paragraph 2 immediately after starting to provide the service: (a)the firm was unable to comply with the time-limits specified in paragraphs 1 and 2 because, at the request of the client, the agreement was concluded using a means of distance communication which prevents the firm from providing the information in accordance with paragraph 1 or 2; (b)in any case where Article 3(3) of Directive 2002/65/EC does not otherwise apply, the investment firm complies with the requirements of that Article in relation to the retail client or potential retail client, as if that client or potential client were a consumer and the investment firm were a supplier within the meaning of that Directive. 5.Member State shall ensure that investment firms notify a client in good time about any material change to the information provided under Articles 30 to 33 which is relevant to a service that the firm is providing to that client. That notification shall be given in a durable medium if the information to which it relates is given in a durable medium. 6.Member States shall require investment firms to ensure that information contained in a marketing communication is consistent with any information the firm provides to clients in the course of carrying on investment and ancillary services. 7.Member States shall ensure that, where a marketing communication contains an offer or invitation of the following nature and specifies the of response or includes a form by which any response may be made, it includes such of the information referred to in Articles 30 to 33 as is relevant to that offer or invitation: (a)an offer to enter into an agreement in relation to a financial instrument or investment service or ancillary service with any person who responds to the communication; (b)an invitation to any person who responds to the communication to make an offer to enter into an agreement in relation to a financial instrument or investment service or ancillary service. However, the first subparagraph shall not apply if, in order to respond to an offer or invitation contained in the marketing communication, the potential retail client must refer to another document or documents, which, alone or in combination, contain that information. 8.If a professional client requests it, an investment firm shall provide that client with any type of information in a durable medium which the firm is required under Directive 2004/39/EC or this Directive to provide to a retail clientWithout prejudice to the obligations of investment firms to provide to all clients the information that they need to take investment decisions on an informed basis, an investment firm shall provide that client with anyadditional information that the client reasonably considers necessary for the purposes of its investment decisions, and expressly requests. (the first indent of Article 19(3) of Directive 2004/39/EC) Information about the investment firm and its services for retail clients and potential retail clients 1.Member States shall require investment firms to provide retail clients or potential retail clients with the following general information, where relevant: (a)the name and address of the investment firm, and the contact details necessary to enable clients to communicate effectively with the firm; (b)the languages in which the client may communicate with the investment firm, and receive documents and other information from the firm; (c)the methods of communication to be used between the investment firm and the client including, where relevant, those for the sending and reception of orders;