The National Securities Market Commission (CNMV) is making its debut. This Thursday he starts with his homework surveillance on cryptocurrency advertising. After a month for the companies in the sector to be clear about their obligations to the supervisor, all the tools with which the institution will exercise its new powers.
The last control mechanism that has seen the light has been the form that cryptocurrency companies are obliged to send to the CNMV when they are preparing a “massive” advertising campaign. Namely, addressed to a potential audience of more than 100,000 people.
This form is available in both Spanish and English, the two languages that the CNMV admits for official communications, and throughout 52 fields distributed in a total of four sections and nine pages collects even the smallest of details of the campaigns in preparation. With special attention to those in which the regulation announced 11 months ago now places more emphasis.
The data contained in this form will be the basis for the scrutiny of “massive” campaigns by the CNMV. Therefore, the standard requires that the document be sent “at least 10 business days before execution” of the promotion. Throughout this time, the supervisor may request the deletion or rectification of the points that he considers do not conform to the standard.
The deadline for companies to cryptos assume these requirements or present arguments is two days, with the aim of streamline procedures and the flow of information as much as possible. However, the body chaired by Rodrigo Buenaventura reserves the right to demand changes or knock down campaigns that are already underway even after those ten legally established days.
The circular published in the Official State Gazette (BOE) a month ago includes: “In no case, the lack of response during the period between the communication and the start of the campaign will imply that the CNMV considers that the campaign complies with all the rules”. A lack of specificity that has been one of the points that has generated the most discomfort in the industry.
In addition, the supervisor reserves the right to request information on specific advertising campaigns or pieces, current or from the last two years, that they will have to be attended in three days at the latest. Also the possibility of subject to prior review some campaigns that, without being considered “massive in the strict sense”, they are assumed to have a significant impact “on the target audience” to whom they are addressed.
In order to avoid scares, the industry advocates exercise caution. Especially, in these early stages of surveillance of the CNMV. Several representatives of the sector point to the convenience of sending the form to the supervisor with a more than ten days in advance in the norm. And also fill in this model for any initiative that could especially draw the attention of the supervisor -such as large format signage– even without reaching the threshold of 100,000 potential hits.
We must not forget that it was precisely an outdoor signage campaign that triggered the regulation of this activity in Spain. Formally, the circular establishes that the potential audience in this case will be defined according to the “estimated number of people who will view the message” according to specialized metrics or, failing that, according to “the number of people recorded in the Register of the municipalities in which the advertising is installed“.
Networks and warnings
The vigilance so that the publicity of the investment in the bitcoin and its younger sisters is “clear, balanced, impartial and not misleading” will also have a vast field of work in social networks. So much so that the circular specifically states that influencers They also remain under the surveillance of the body, with particular mentions in this regard also in the new form.
Beyond these specificities, any campaign will be subject to the inclusion of specific warnings, similar to those established for complex products such as contracts for differences (CFDs). In this way, the CNMV will ensure that a “format and position that guarantees the relevance” of the following message is always granted: “Investment in crypto assets is not regulatedmay not be suitable for retail investors and the entire amount invested may be lost.”
In addition, it establishes the obligation to indicate a link -if the medium allows it- or indications to the location on additional and detailed risks, which are in line with those that the CNMV had already been indicating in its recent warnings to the market as a whole. For this, formulas such as QR codeswhich must be specified in the mandatory prior communication for “massive” campaigns.
The profitability hook
Another point to which the CNMV will pay special attention will be “avoid making references to high past returns”, so that they do not become a bait for new investors. In any case, advertising will have to warn “prominently that past returns not a reliable indicator of future returns.
Within this same point, it will be necessary to indicate “expressly the period of time to which it refers” the return data provided, which in no case may be less than one year. Likewise, it will be mandatory to indicate, “with the same prominence, the same information for the intermediate period, before or after, in which the higher percentage depreciation“.
All these details will have to be accurately included in the form for campaigns aimed at the general public. Y in duplicatetripled or as many times as it corresponds in the event that they are mentioned in the same ad for more than one single cryptoactive.
Anonymous complaints and fines
In all cases, is vetoed andthe term “gift”. In particular, references to “all those operations that tax regulations qualify as remuneration in kind” will be monitored, such as reward programs (rewards) or distributions of tokens (airdrops), as specified by the standard.
With the objective of have more watchful eyesthe CNMV will also attend citizen complaints about possible breaches of this regulation through its anonymous infraction communication mailbox. The supervisor requires that they contribute “factual elements from which it is reasonably derived, at least, a well-founded suspicion” of non-compliance. Something that in this case could be specified in something as simple as a screenshot or photograph of the advertising element in question.
In any case, skipping these new requirements can result in a large bill for offenders. Considering a serious fault, they could be pointed out fines of up to 300,000 euros and even more. In this sense, the Securities Market Law establishes sanctions for the greater of the figures between twice the gross profit obtained, 2% of the entity’s own resources or 2% of the total own or third-party funds involved in the infringement.