The regulatory bodies in Spain
As in the UK, Financial Advisers must be properly authorised. The main difference is that Spain legislates separately for those advisers offering direct investment (stocks, shares, unit trusts etc) advice and those acting as insurance brokers/agents offering investment products via insurance companies. The former are regulated by the CNMV (Comisión Nacional del Mercado del Valores) and the latter by the DGS (Dirección General de Seguros Y Fondos de Pensiones).

It is not possible for an IFA to be regulated by both. You must choose between the two bodies. If you are regulated by the CNMV you cannot offer investments issued by insurance companies and if you are regulated by the DGS you cannot advise on, and receive commissions from, direct investment such as unit trusts.

The DGS has an excellent website where, amongst other things, you can search for companies and individuals who are regulated and for companies operating illegally in Spain. OMM’s entry is under its licence no. J-2126.

Regulated status
Option 1
As in the UK, you pass examinations after a course of study.

Option 2
You work for a regulated firm as an appointed representative (auxiliar externo).

An excellent knowledge of the Spanish language and grammar would be required for Option 1. Most advisers wishing to operate in Spain choose Option 2 as the simplest and most convenient way of doing business in a legal fashion.

A third option is to passport into Spain using the 3rd Life Directive Passporting rules. However your activities are still regulated by the UK FSA and all the red tape that would apply to cases written there applies to cases written in Spain and the high cost of UK PI cover would still apply.

Appointed Representative (Auxiliar Externo)
As an AE you operate in Spain in almost the same way as you would operate in the UK but without many of the problems. The main difference is that clients would receive OMM’s advice and not advice given directly by you. You would conduct the initial meeting and obtain a fact-find in the normal way. You pass this back to OMM with comments and OMM prepares and issues the initial client report with appropriate recommendations for you to discuss with the clients. You, or the client, completes the appropriate application forms and passes them back to OMM for processing.
The advice from OMM passed on in this way by AEs to clients is covered by OMM’s Professional Indemnity insurance. Each AE is issued with a copy of both the PI policy and the DGS authorisation for display to clients.

The importance of being regulated in Spain
For the client
Clients know that they are dealing with a company that has been vetted not only for its professional expertise but also for its ability to service the clients’ needs in a fashion that protects them if they have a complaint and where they can obtain compensation if, as a result of professional negligence, they sustain financial losses.

For the AE
The appointed representative knows he/she is working with a reputable company that takes responsibility for the advice given being appropriate to a client’s circumstances and objectives. The AE leaves the regulation concerns to OMM leaving him/her free to concentrate on servicing the client.

For our suppliers
Insurance companies find it easier to grant agencies to regulated brokers and know that they will be getting quality business from them backed up by written client reports and “reason why” letters all countersigned by clients before any new business is processed.

Each year OMM has to produce a detailed report for the DGS on its activities throughout the year in various areas of operation in terms of the volumes of business produced in different categories, the number of AEs, confirmation that its PI cover is in full force and many other things to ensure the effectiveness and efficiency of a regulated firm of brokers.

In June 2008 OMM were subject to a very intensive routine inspection from the DGS in which they looked at every aspect of how we deal with clients. We have been led to believe that OMM were the very first brokerage that the inspector had ever inspected which complied in all respects with every aspect of the legislation applicable to our profession.

Passporting
OMM is passported into the UK under the 3rd Life Directive passporting rules. We are in the process of passporting into France, Portugal and Ireland. This allows us to deal with residents in those countries under our regulation here in Spain.