sou · GUB374 · 2007-01-01 00:00:00 — (78)Without prejudice to Directive 2003/6/EC, for the purposes of the provisions of this Directive concerning client order handling, client orders should not be treated as otherwise comparable if they are received by different media and it would not be practicable for them to be treated sequentially. For the further purposes of those provisions, any use by an investment firm of information relating to a pending client order in order to deal on own account in the financial instruments to which the client order relates, or in related financial instruments, should be considered a misuse of that information. However, the mere fact that market makers or bodies authorised to act as counterparties confine themselves to pursuing their legitimate business of buying and selling financial instruments, or that persons authorised to execute orders on behalf of third parties confine themselves to carrying out an order dutifully, should not in itself be deemed to constitute a misuse of information. (79)Advice about financial instruments given in a newspaper, journal, magazine or any other publication addressed to the general public (including by means of the internet), or in any television or radio broadcast, should not be considered as a personal recommendation for the purposes of the definition of investment advice in Directive 2004/39/EC. (80)This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of Union and in particular by Article 11 thereof and Article 10 of Convention on Human Rights. In this regard, this Directive does not in any way prevent Member States from applying their constitutional rules relating to freedom of the press and freedom of expression in the media. (81)Generic advice about a type of financial instrument is not investment advice for the purposes of Directive 2004/39/EC, because this Directive specifies that, for the purposes of Directive 2004/39/EC, investment advice is restricted to advice on particular financial instruments. However, if an investment firm provides generic advice to a client about a type of financial instrument which it presents as suitable for, or based on a consideration of the circumstances of, that client, and that advice is not in fact suitable for the client, or is not based on a consideration of his circumstances, depending on the circumstances of the particular case, the firm is likely to be acting in contravention of Article 19(1) or (2) of Directive 2004/39/EC. In particular, a firm which gives a client such advice would be likely to contravene the requirement of Article 19(1) to act honestly, fairly and professionally in accordance with the best interests of its clients. Similarly or alternatively, such advice would be likely to contravene the requirement of Article 19(2) that information addressed by a firm to a client should be fair, clear and not misleading. (82)Acts carried out by an investment firm that are preparatory to the provision of an investment service or carrying out an investment activity should be considered as an integral part of that service or activity. This would include, for example, the provision of generic advice by an investment firm to clients or potential clients prior to or in the course of the provision of investment advice or any other investment service or activity. (83)The provision of a general recommendation (that is, one which is intended for distribution channels or the public) about a transaction in a financial instrument or a type of financial instrument constitutes the provision of an ancillary service within Section B(5) of of Directive 2004/39/EC, and consequently Directive 2004/39/EC and its protections apply to the provision of that recommendation. (84)of Regulators, established by Commission Decision 2001/527/EC7 has been consulted for technical advice. (85)The measures provided for in this Directive are in accordance with the opinion of , HAS ADOPTED THIS DIRECTIVE: 1.This Directive lays down the detailed rules for the implementation of Article 4(1)(4) and 4(2), Article 13(2) to (8), Article 18, Article 19(1) to (6), Article 19(8), and Articles 21, 22 and 24 of Directive 2004/39/EC. 2.Chapter II and Sections 1 to 4, Article 45 and Sections 6 and 8 of Chapter III and, to the extent they relate to those provisions, Chapter I and Section 9 of Chapter III and Chapter IV of this Directive shall apply to management companies in accordance with Article 5(4) of Council Directive 85/611/EEC. For the purposes of this Directive, the following definitions shall apply: distribution channels means distribution channels within the meaning of Article 1(7) of Commission Directive 2003/125/EC;9 (2)durable medium means any instrument which enables a client to store information addressed personally to that client in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored; (3)relevant person in relation to an investment firm, means any of the following: (a)a director, partner or equivalent, manager or tied agent of the firm; OJ L 191, , p. OJ L 339, 24.12.2003, p. (b)a director, partner or equivalent, or manager of any tied agent of the firm; (c)an employee of the firm or of a tied agent of the firm, as well as any other natural person whose services are placed at the disposal and under the control of the firm or a tied agent of the firm and who is involved in the provision by the firm of investment services and activities; (d)a natural person who is directly involved in the provision of services to the investment firm or to its tied agent under an outsourcing arrangement for the purpose of the provision by the firm of investment services and activities; (4)financial analyst means a relevant person who produces the substance of investment research; (5)group, in relation to an investment firm, means the group of which that firm forms a part, consisting of a parent undertaking, its subsidiaries and the entities in which the parent undertaking or its subsidiaries hold a participation, as well as undertakings linked to each other by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC on consolidated accounts11; (6)outsourcing means an arrangement of any form between an investment firm and a service provider by which that service provider performs a process, a service or an activity which would otherwise be undertaken by the investment firm itself; (7)person with whom a relevant person has a family relationship means any of the following: (a)the spouse of the relevant person or any partner of that person considered by national law as equivalent to a spouse; (b)a dependent child or stepchild of the relevant person; (c)any other relative of the relevant person who has shared the same household as that person for at least one year on the date of the personal transaction concerned; (8)securities financing transaction has the meaning given in [the Implementing Regulation]12; (9)senior management means the person or persons who effectively direct the business of the investment firm as referred to in Article 9(1) of Directive 2004/39/EC. 11OJ No L 193, , p.1. 12[OJ XXX] Conditions applying to the provision of information 1.Where, for the purposes of this Directive, information is required to be provided in a durable medium, Member States shall permit investment firms to provide that information in a durable medium other than on paper only if: (a)the provision of that information in that medium is appropriate to the context in which the business between the firm and the client is, or is to be, carried on; and (b)the person to whom the information is to be provided, when offered the choice between information on paper or in that other durable medium, specifically chooses the provision of the information in that other medium. 2.Where, pursuant to Article 29, 30, 31, 32, 33 or 46(2) of this Directive, an investment firm provides information to a client by means of a website and that information is not addressed personally to the client, Member States shall ensure that the following conditions are satisified: (a)the provision of that information in that medium is appropriate to the context in which the business between the firm and the client is, or is to be, carried on; (b)the client must specifically consent to the provision of that information in that form; (c)the client must be notified electronically of the address of the website, and the place on the website where the information may be accessed; (d)the information must be up to date; (e)the information must be accessible continuously by means of that website for such period of time as the client may reasonably need to inspect it. 3.For the purposes of this Article, the provision of information by means of electronic communications shall be treated as appropriate to the context in which the business between the firm and the client is, or is to be, carried on if there is evidence that the client has regular access to the internet. The provision by the client of an email address for the purposes of the carrying on of that business shall be treated as such evidence. Additional requirements on investment firms in certain cases 1.Member States may retain or impose requirements additional to those in this Directive only in those exceptional cases where such requirements are objectively justified and proportionate so as to address specific risks to investor protection or to market integrity that are not adequately addressed by this Directive, and provided that one of the following conditions is met: (a)the specific risks addressed by the requirements are of particular importance in the circumstances of the market structure of that Member State; (b)the requirement addresses risks or issues that emerge or become evident after the date of application of this Directive and that are not otherwise regulated by or under Community measures. 2.Any requirements imposed under paragraph 1 shall not restrict or otherwise affect the rights of investment firms under Articles 31 and 32 of Directive 2004/39/EC. 3.Member States shall notify to the Commission: (a)any requirement which it intends to retain in accordance with paragraph 1 before the date of transposition of this Directive; and (b)any requirement which it intends to impose in accordance with paragraph 1 at least one month before the date appointed for that requirement to come into force. In each case, the notification shall include a justification for that requirement. The Commission shall communicate to Member States and make public on its website the notifications it receives in accordance with this paragraph. 4.By the Commission shall report to Parliament and application of this Article. (Article 13(2) to (8) of Directive 2004/39/EC) 1.Member States shall require investment firms to comply with the following requirements: (a)to establish, implement and maintain decision-making procedures and an organisational structure which clearly and in documented specifies reporting lines and allocates functions and responsibilities; (b)to ensure that their relevant persons are aware of the procedures which must be followed for the proper discharge of their responsibilities; (c)to establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the investment firm; (d)to employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them; (e)to establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the investment firm; (f)to maintain adequate and orderly records of their business and internal organisation; (g)to ensure that the performance of multiple functions by their relevant persons does not and is not likely to prevent those persons from discharging any particular function soundly, honestly, and professionally. Member States shall ensure that, for those purposes, investment firms take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business. 2.Member States shall require investment firms to establish, implement and maintain systems and procedures that are adequate to safeguard the security, integrity and confidentiality of information, taking into account the nature of the information in question. 3.Member States shall require investment firms to establish, implement and maintain an adequate business continuity policy aimed at ensuring, in the case of an interruption to their systems and procedures, the preservation of essential data and functions, and the maintenance of investment services and activities, or, where that is not possible, the timely recovery of such data and functions and the timely resumption of their investment services and activities. 4.Member States shall require investment firms to establish, implement and maintain accounting policies and procedures that enable them, at the request of the competent authority, to deliver in a timely to the competent authority financial reports which reflect a true and fair view of their financial position and which comply with all applicable accounting standards and rules. 5.Member States shall require investment firms to monitor and, on a regular basis, to evaluate the adequacy and effectiveness of their systems, internal control mechanisms and arrangements established in accordance with paragraphs 1 to 4, and to take appropriate measures to address any deficiencies. (Article 13(2) of Directive 2004/39/EC) 1.Member States shall ensure that investment firms establish, implement and maintain adequate policies and procedures designed to detect any risk of failure by the firm to comply with its obligations under Directive 2004/39/EC, as well as the associated risks, and put in place adequate measures and procedures designed to minimise such risk and to enable the competent authorities to exercise their powers effectively under that Directive. Member States shall ensure that, for those purposes, investment firms take into account the nature, scale and complexity of the business of the firm, and the nature and range of investment services and activities undertaken in the course of that business. 2.Member States shall require investment firms to establish and maintain a permanent and effective compliance function which operates independently and which has the following responsibilities: (a)to monitor and, on a regular basis, to assess the adequacy and effectiveness of the measures and procedures put in place in accordance with the first subparagraph of paragraph 1, and the actions taken to address any deficiencies in the firms compliance with its obligations; (b)to advise and assist the relevant persons responsible for carrying out investment services and activities to comply with the firms obligations under Directive 2004/39/EC. 3.In order to enable the compliance function to discharge its responsibilities properly and independently, Member States shall require investment firms to ensure that the following conditions are satisfied: (a)the compliance function must have the necessary authority, resources, expertise and access to all relevant information; (b)a compliance officer must be appointed and must be responsible for the compliance function and for any reporting as to compliance required by Article 9(2); (c)the relevant persons involved in the compliance function must not be involved in the performance of services or activities they monitor; (d)the method of determining the remuneration of the relevant persons involved in the compliance function must not compromise their objectivity and must not be likely to do so. However, an investment firm shall not be required to comply with point (c) or point (d) if it is able to demonstrate that in view of the nature, scale and complexity of its business, and the nature and range of investment services and activities, the requirement under that point is not proportionate and that its compliance function continues to be effective. (second subparagraph of Article 13(5) of Directive 2004/39/EC) 1.Member States shall require investment firms to take the following actions: (a)to establish, implement and maintain adequate risk management policies and procedures which identify the risks relating to the firms activities, processes and systems, and where appropriate, set the level of risk tolerated by the firm; (b)to adopt effective arrangements, processes and mechanisms to manage the risks relating to the firms activities, processes and systems, in light of that level of risk tolerance; (c)to monitor the following: (i)the adequacy and effectiveness of the investment firms risk management policies and procedures; (ii)the level of compliance by the investment firm and its relevant persons with the arrangements, processes and mechanisms adopted in accordance with point (b); (iii)the adequacy and effectiveness of measures taken to address any deficiencies in those policies, procedures, arrangements, processes and mechanisms, including failures by the relevant persons to comply with such arrangements, processes and mechanisms or follow such policies and procedures. 2.Member States shall require investment firms, where appropriate and proportionate in view of the nature, scale and complexity of their business and the nature and range of the investment services and activities undertaken in the course of that business, to establish and maintain a risk management function that operates independently and out the following tasks: (a)implementation of the policy and procedures referred to in paragraph 1; (b)provision of reports and advice to senior management in accordance with Article 9(2). Where an investment firm is not required under the first sub-paragraph to establish and maintain a risk management function that functions independently, it must nevertheless be able to demonstrate that the policies and procedures which it is has adopted in accordance with paragraph 1 satisfy the requirements of that paragraph and are consistently effective. (second subparagraph of Article 13(5) of Directive 2004/39/EC) Member States shall require investment firms, where appropriate and proportionate in view of the nature, scale and complexity of their business and the nature and range of investment services and activities undertaken in the course of that business, to establish and maintain an internal audit function which is separate and independent from the other functions and activities of the investment firm and which has the following responsibilities: (a)to establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the investment firms systems, internal control mechanisms and arrangements; (b)to issue recommendations based on the result of work carried out in accordance with point (a); (c)to verify compliance with those recommendations; (d)to report in relation to internal audit matters in accordance with Article 9(2). (Article 13(2) of Directive 2004/39/EC) Responsibility of senior management 1.Member States shall require investment firms, when allocating functions internally, to ensure that senior management, and, where appropriate, the supervisory function, are responsible for ensuring that the firm complies with its obligations under Directive 2004/39/EC. In particular, senior management and, where appropriate, the supervisory function shall be required to assess and periodically to review the effectiveness of the policies, arrangements and procedures put in place to comply with the obligations under Directive 2004/39/EC and to take appropriate measures to address any deficiencies. 2.Member States shall require investment firms to ensure that their senior management receive on a frequent basis, and at least annually, written reports on the matters covered by Articles 6, 7 and 8 indicating in particular whether the appropriate remedial measures have been taken in the event of any deficiencies. 3.Member States shall require investment firms to ensure that the supervisory function, if any, receives on a regular basis written reports on the same matters. 4.For the purposes of this Article, supervisory function means the function within an investment firm responsible for the supervision of its senior management. (Article 13(2) of Directive 2004/39/EC) Member States shall require investment firms to establish, implement and maintain effective and transparent procedures for the reasonable and prompt handling of complaints received from retail clients or potential retail clients, and to keep a record of each complaint and the measures taken for its resolution. (Article 13(2) of Directive 2004/39/EC) Meaning of personal transaction For the purposes of Article 12 and Article 25, personal transaction means a trade in a financial instrument effected by or on behalf of a relevant person, where at least one of the following criteria are met: (a)that relevant person is acting outside the scope of the activities he out in that capacity; (b)the trade is carried out for the account of any of the following persons: (i)the relevant person; (ii)any person with whom he has a family relationship, or with whom he has close links; (iii)a person whose relationship with the relevant person is such that the relevant person has a direct or indirect material interest in the outcome of the trade, other than a fee or commission for the execution of the trade. (Article 13(2) of Directive 2004/39/EC) 1.Member States shall require investment firms to establish, implement and maintain adequate arrangements aimed at preventing the following activities in the case of any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information within the meaning of Article 1(1) of Directive 2003/6/EC or to other confidential information relating to clients or transactions with or for clients by virtue of an activity carried out by him on behalf of the firm: (a)entering into a personal transaction which meets at least one of the following criteria: (i)that person is prohibited from entering into it under Directive 2003/6/EC; (ii)it involves the misuse or improper disclosure of that confidential information; (iii)it conflicts or is likely to conflict with an obligation of the investment firm under Directive 2004/39/EC; (b)advising or procuring, other than in the proper course of his employment or contract for services, any other person to enter into a transaction in financial instruments which, if a personal transaction of the relevant person, would be covered by point (a) or Article 25(2)(a) or (b) or Article 47(3); (c)without prejudice to Article 3(a) of Directive 2003/6/EC, disclosing, other than in the normal course of his employment or contract for services, any information or opinion to any other person if the relevant person knows, or reasonably ought to know, that as a result of that disclosure that other person will or would be likely to take either of the following steps: (i)to enter into a transaction in financial instruments which, if a personal transaction of the relevant person, would be covered by point (a) or Article 25(2)(a) or (b) or Article 47(3); (ii)to advise or procure another person to enter into such a transaction. 2.The arrangements required under paragraph 1 must in particular be designed to ensure that: (a)each relevant person covered by paragraph 1 is aware of the restrictions on personal transactions, and of the measures established by the investment firm in connection with personal transactions and disclosure, in accordance with paragraph 1;