PROTOCOL ON THE MARKETING OF COMPLEX FINANCIAL PRODUCTS

Transcription

1 The English translation is for information purposes only. The original and official language for this Protocol is Portuguese. PROTOCOL ON THE MARKETING OF COMPLEX FINANCIAL PRODUCTS Between The Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários - CMVM), and for this purpose is hereby represented by Prof. Doutor Carlos Francisco Ferreira Alves (Member of the Executive Board) and - Banco Best, SA, and for this purpose is hereby represented by Engª. Isabel Ferreira (Chair of the Executive Board) and Dr. Pedro Neves ; - Banco BIC Português, SA, and for this purpose is hereby represented by Dr. Manuel Maria Sousa e Vasconcelos (Director of Capital Markets); - Banco Bilbao Vizcaya Argentaria, SA, and for this purpose is hereby represented by Dr. Daniel da Silva Mendes (Director of Equities and Derivatives) and Dr. Luís Castro e Almeida (Director of Development and Business); - Banco BPI, SA, and for this purpose is hereby represented by Dr. Alexandre Lucena e Vale (Central Director) and Dra. Sérgia Narciso ; - Banco Comercial Português, SA, and for this purpose is hereby represented by Dr. Miguel de Campos Pereira de Bragança (Vice-Chairman); - Banco de Investimento Global, SA, and for this purpose is hereby represented by Dr. Nicholas Racich (Vice-Chairman of the Board of Directors); - Banco Espirito Santo, SA, and for this purpose is hereby represented by Dr. António José Baptista do Souto ; - Banco Invest, SA, and for this purpose is hereby represented by Dr. Paulo Monteiro (Director of Asset Management); - Banco Popular Portugal, SA, and for this purpose is hereby represented by Dr. Carlos Manuel Sobral Cid da Costa Álvares (Member of the Board of Directors);

2 - Banco Português de Investimento, SA, and for this purpose is hereby represented by Dr. Alexandre Lucena e Vale and Dra. Sérgia Narciso (Nominee); - Banco Santander Totta, SA, and for this purpose is hereby represented by Dr. Manuel Preto ; - Banif Banco Internacional do Funchal, SA, and for this purpose is hereby represented by Dr. Vítor Farinha Nunes ; - Banif Banco de Investimento, SA, and for this purpose is hereby represented by Dr Vítor Farinha Nunes ; - Barclays Bank PLC (Branch in Portugal), and for this purpose is hereby represented by Dr. Carlos Jorge Ferreira Brandão (Manager and Member of the Executive Committee of the Branch); - BNP Paribas, SA (Branch in Portugal), and for this purpose is hereby represented by Dr. Luís Mendes (Compliance Management); - Caixa Central Caixa Central de Crédito Agrícola Mútuo, CRL, and for this purpose is hereby represented by Dr. José Alberto Galo Vareda (Responsible for Securities); - Caixa Económica Montepio Geral, and for this purpose is hereby represented by Dr. Jorge Humberto da Cruz Barros de Jesus Luís (Member of the Executive Board); - Caixa Geral de Depósitos SA, and for this purpose is hereby represented by Dra. Ana Cristina Leal ; - Deutsche Bank AG (Branch in Portugal), and for this purpose is hereby represented by Eng. Bernardo Meyrelles (Chief Country Officer) and Dr. Rui Ahrens Teixeira (Chief Operating Officer); 2

3 Whereas 1. The marketing and sale of Complex Financial Products (CFP) to retail clients has been steadily increasing in financial markets. 2. The high level of complexity that characterizes some of these products requires special consideration in the respective marketing and sale thereof in order for its features and risks to be appropriately perceived not only by the clients but also by the employees involved therein. 3. Both the Portuguese Securities Market Commission (CMVM), pursuant to the guidelines for its supervision activity as envisaged in Article 358 of the Portuguese Securities Code, and each bank as signatory hereto are committed to ensuring that bank employees show high standards of professionalism and quality in the marketing and sale of the CFP. 4. The distributors of these products must have skilled human resources that are able to: Understand the CFP that are being marketed and sold; Convey accurate information to investors; and Ensure that investing in these products is preceded by the appropriate warnings thereto and, in accordance with legal requirements, a test is competently carried out on the suitability of the product for the investor. 5. The marketing and sale of such products should be strictly guided by the principles of respecting and protecting investor interests. 3

4 6. Having particular regard to the legal framework imposed by Decree-Law No A/2008, of 3 November, and the CMVM Regulation No. 2/2012. The following is agreed upon between the CMVM and each signatory Bank hereto: 1 Qualifications of the Employees Each signatory Bank is committed to ensuring that the marketing and sale of the CFP shall always be carried out with the participation of employees who have, via appropriate training sessions, acquired the knowledge on financial markets and products and thereby enabling them to understand and explain the features and risks of these products to the clients. 2 Refrain from Distribution 1. Each signatory Bank undertakes not to market the following to retail clients, outside the scope of the provision of discretionary portfolio management services and investment advice: a) CFP that are classified with an orange or red warning symbol and whose expected average profitability rates between percentiles 20% and 80% is negative, based on models drawn up in accordance with Article 13/2 and /3 of CMVM Regulation No. 2/2012; b) CFP that are classified with an orange or red warning symbol pursuant to Article 9 of CMVM Regulation No. 2/2012 and whose payable income and/or principal relies on more than three mechanisms from those listed in the Annex to the Protocol, or other mechanisms that the signatory Banks and the CMVM consider to be highly complex. 4

5 2. For the purposes of this Protocol: a) "Retail clients" are considered to be clients in respect of whom the following two requirements are met: (i) are classified as non-qualified pursuant to Articles 317 and 30 of the Portuguese Securities Code, and (ii) hold financial assets equal to or less than 500,000 (five hundred thousand euros) in individual or collective accounts. "Financial assets" of a client are understood to be all financial instruments held and thus accordingly does not include bank deposits; b) "Refrain from distributing" means that no CFP are offered at the initiative of the signatory Bank to its retail clients, but this would not cover the services of reception, transmission and execution of orders concerning this type of CFP as long as the service is demonstrably provided exclusively at the client's initiative. 3 Prevention and management of conflicts of interest In compliance with the duties laid down by Article 309 of the Portuguese Securities Code, each signatory Bank undertakes to adopt an effective system for preventing and managing conflicts of interests in the marketing and sale of CFP, which ensures that the interests of clients will always be first and foremost represented compared to any other, particularly, not adopting variable compensation mechanisms or incentives that depend solely or substantially on the amount of specific CFP sold by the employee or the business structure under which she/he is integrated. 4 Legal Effect 1. This Protocol shall be effective from 1 January 2014 until 31 December 2014, and will be annually renewed unless any party objects thereto in accordance with the following. 2. Any signatory Bank may withdraw from this Protocol by written notification to the CMVM. This should be submitted up to 60 days prior to the expiry of the current Protocol, with a copy thereof to the APB (the Portuguese Bankers Association) that shall thereby notify the other signatory Banks. 5

6 3. With one or more signatory Banks submitting a withdrawal notice, the other signatory Banks should notify the CMVM within 30 days prior to the expiry of the current Protocol if they also purport to exercise their right to withdraw from or remain a party to the Protocol. 4. The CMVM may withdraw from this Protocol by means of a written notice to each of the signatory Banks to date and said notice is to be submitted at least 60 days prior to the expiry of the current Protocol. 5 Monitoring and Assessment 1. Under the internal control report that should be submitted by the end of June, each signatory Bank undertakes to notify the CMVM on the measures adopted and also the coverage, results and conclusions thereof, in order to comply with commitments envisaged in the preceding paragraphs. 2. Based on the report referred to in the preceding paragraph, the CMVM and each signatory Bank annually assess the impact of this Memorandum. 6 Subsequent Accession Any Bank that is not a signatory party to this Protocol may during the term hereof, apply to join this Protocol and the application should be addressed to the CMVM. If this is accepted, the CMVM should inform the other signatory Banks thereof. Lisbon, 10 December

7 By the CMVM Carlos Francisco Ferreira Alves (Member of the Executive Board) By Banco Best, SA Engª Isabel Ferreira (Chair of the Executive Board) Pedro Neves By Banco BIC Português, SA Manuel Maria Sousa e Vasconcelos (Director of Capital Markets) By Banco Bilbao Vizcaya Argentaria, SA Daniel da Silva Mendes (Director of Equities and Derivatives) Luís Castro e Almeida (Director of Development and Business) By Banco BPI, SA Alexandre Lucena e Vale (Central Director) Sérgia Narciso 7

8 By Banco Comercial Português, SA, Miguel de Campos Pereira de Bragança (Vice-Chairman) By Banco de Investimento Global, SA Nicholas Racich (Vice-Chairman of the Board of Directors) By Banco Espírito Santo, SA António José Baptista do Souto (Executive Director) By Banco Invest, SA Paulo Monteiro (Director of Asset Management) 8

9 By Banco Popular Portugal, SA Carlos Manuel Sobral Cid da Costa Álvares (Member of the Executive Board) By Banco Português de Investimento, SA Alexandre Lucena e Vale Sérgia Narciso (Nominee) By Banco Santander Totta, SA Manuel Preto By Banif Banco Internacional do Funchal, SA Vítor Farinha Nunes 9

10 By Banif Banco de Investimento, SA Vítor Farinha Nunes By Barclays Bank PLC (Branch in Portugal) Carlos Jorge Ferreira Brandão (Manager and Member of the Executive Committee of the Branch) By BNP Paribas, SA (Branch in Portugal) Luís Mendes (Compliance Management) By Caixa Central Caixa Central de Crédito Agrícola Mútuo, CRL José Alberto Galo Vareda (Responsible for Securities) By Caixa Económica Montepio Geral Jorge Humberto da Cruz Barros de Jesus Luís (Member of the Executive Board) 10

11 By Caixa Geral de Depósitos, SA Ana Cristina Leal By Deutsche Bank AG, Branch in Portugal Bernardo Meyrelles (Chief Country Officer) Rui Ahrens Teixeira (Chief Operating Officer) 11

12 ANNEX I LIST OF MECHANISMS FOR THE PURPOSES OF 2/1/B) OF THE PROTOCOL The remuneration and/or repayment of complex financial products depend on a number of mechanisms that operate on: These include: 1) one or more underlying assets (underlying) 2) one or more observation dates (observation) 3) one or more payment dates (period) 1) Mechanisms for aggregating the number of observations per underlying asset. For example: average (arithmetic, weighted or other), distribution (standard deviation or other), maximum ("look-back max"), minimum ("lookback min"), etc. 2) Mechanisms for aggregating several underlying assets during a certain period. For example: average (arithmetic, weighted or other), maximum ("best"), minimum ("worst"), difference (difference of indices' performance, "spread" or "excess return"), inversion ("reverse return" ), sum of the indices' performance, default event ("first to default"), ratio, etc. 3) The existence of one or more barriers. For example, step-up condition (wherein the yield varies according to the number of barriers reached). 4) The existence of caps and/or floors. For example, restricting the remuneration to 40%. 5) Discretionary early repayment ("call" by the issuer or "put" by the investor). 6) Mechanisms for automatic early repayment. For example, the exercise of a call option (repayment in advance if a particular condition is met) or target redemption (if a specific remuneration level is attained). 7) Mechanisms for converting assets (e.g. "reverse convertibles"). 8) Change in the remuneration structure over different time periods. For example, changing the form of aggregating the observations and/or changing the form of aggregating several underlying assets, changing barriers, etc. 12

13 9) Mechanisms that change the form of remuneration during subsequent periods. For example, recalling unpaid coupons for possible future payment; lock-in, switch or other conditions that put an end to the initial remuneration formula for a fixed income, postponing the repayment date, etc. 10) Use of indices, the methodology of which and/or price is not freely available. 11) Remuneration and/or redemption amount is dependent on the issuer's hedging transactions. For example, fees charged to the investor that result from materialisation of risks from hedging transactions entered into by the issuer such as interest rate swaps, options, etc. 12) Repayment or interest in a different currency from that of the investment currency. 13