sou · GUB374 · 2007-01-01 00:00:00 — If the adoption or the practice of one or more of those measures and procedures does not ensure the requisite degree 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.Member States shall ensure that disclosure to clients, pursuant to Article 18(2) of Directive 2004/39/EC, 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 of the type covered by Article 1(3) of Directive 2003/125/EC but relating to financial instruments as defined in Directive 2004/39/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 acting in good faith and in the ordinary course of market making 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, with 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 before the dissemination of investment research be permitted to review a draft of the investment research for the purpose of verifying the accuracy of factual statements made in that research, or for any other purpose other than verifiying compliance with the firms legal obligations, 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 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 be designed to 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; (c)proper fees which enable or are necessary for the provision of investment services, such as custody costs, settlement and exchange fees, regulatory levies or legal fees, and which, by their nature, cannot give rise to conflicts with the firms duties to act honestly, fairly and professionally in accordance with the best interests of its clients. Member States shall permit an investment firm, for the purposes of point (b)(i), to disclose the essential terms of the 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, or such longer period as the firm may decide, and 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, it must relate to a financial instrument or a financial index, and 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 or financial 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 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)where the information is based on gross performance, the effect of commissions, fees or other charges must be disclosed; (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 categorisation 1.Member States shall ensure that investment firms notify new clients, and existing clients that the investment firm has newly categorised as required by Directive 2004/39/EC, of their categorisation as a retail client, a professional client or an eligible counterparty in accordance with that Directive. 2.Member States shall ensure that investment firms inform clients in a durable medium about any right that client has to request a different categorisation 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. (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: (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. 3.Member States shall require investment firms to provide professional clients with the information referred to in Article 32(5) and (6) in good time before the provision of the service concerned. 4.The information referred to in paragraphs 1 to 3 shall be provided in a durable medium or by means of a website (where that does not constitute a durable medium) provided that the conditions specified in Article 3(2) are satisfied. 5.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 of Parliament and of the Council of concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC15 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. OJ L 271, 9.10.200, p. 6.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. 7.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. 8.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. (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; (d)a statement of the fact that the investment firm is authorised and the name and contact address of the competent authority that has authorised it; (e)where the investment firm is acting through a tied agent, a statement of this fact specifying the in which that agent is registered; (f)the nature, frequency and timing of the reports on the performance of the service to be provided by the investment firm to the client in accordance with Article 19(8) of Directive 2004/39/EC; (g)if the investment firm holds client financial instruments or client funds, a summary description of the steps which it takes to ensure their protection, including summary details of any relevant investor compensation or deposit guarantee scheme which applies to the firm by virtue of its activities in a Member State; (h)a description, which may be provided in summary form, of the conflicts of interest policy maintained by the firm in accordance with Article 22; (i)at any time that the client requests it, further details of that conflicts of interest policy in a durable medium or by means of a website (where that does not constitute a durable medium) provided that the conditions specified in Article 3(2) are satisfied. 2.Member States shall ensure that, when providing the service of portfolio management, investment firms establish an appropriate method of evaluation and comparison such as a meaningful benchmark, based on the investment objectives of the client and the types of financial instruments included in the client portfolio, so as to enable the client for whom the service is provided to assess the firms performance. 3.Member States shall require that where investment firms propose to provide portfolio management services to a retail client or potential retail client, they provide the client, in addition to the information required under paragraph 1, with such of the following information as is applicable: (a)information on the method and frequency of valuation of the financial instruments in the client portfolio; (b)details of any delegation of the discretionary management of all or part of the financial instruments or funds in the client portfolio; (c)a specification of any benchmark against which the performance of the client portfolio will be compared; (d)the types of financial instrument that may be included in the client portfolio and types of transaction that may be carried out in such instruments, including any limits; (e)the management objectives, the level of risk to be reflected in the managers exercise of discretion, and any specific constraints on that discretion. (second indent of Article 19(3) of Directive 2004/39/EC) Information about financial instruments 1.Member States shall require investment firms to provide clients or potential clients with a general description of the nature and risks of financial instruments, taking into account, in particular, the clients categorisation as either a retail client or a professional client. That description must explain the nature of the specific type of instrument concerned, as well as the risks particular to that specific type of instrument in sufficient detail to enable the client to take investment decisions on an informed basis. 2.The description of risks shall include, where relevant to the specific type of instrument concerned and the status and level of knowledge of the client, the following elements: (a)the risks associated with that type of financial instrument including an explanation of leverage and its effects and the risk of losing the entire investment; (b)the volatility of the price of such instruments and any limitations on the available market for such instruments; (c)the fact that an investor might assume, as a result of transactions in such instruments, financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the instruments; (d)any requirements or similar obligations, applicable to instruments of that type. Member States may specify the precise terms, or the contents, of the description of risks required under this paragraph. 3.If an investment firm provides a retail client or potential retail client with information about a financial instrument that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with Directive 2003/71/EC, that firm shall inform the client or potential client where that prospectus is made available to the public.