Independent Financial Advisory Firm (EAFI)

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An independent financial advisory company (EAFI) is an investment services company (ESI) authorized to provide financial advisory services in Spain.

Financial advice consists of making personalized recommendations on any type of financial instrument and offering advice on financial matters such as capital structuring, industrial strategy and services related to mergers and acquisitions.

Characteristics of an EAFI

First of all, it should be noted that the independent financial advisory firm (EAFI) cannot act on its own. You can only carry out operations on behalf of your clients. Therefore, the powers of the Eafi are limited compared to those of the securities companies.

Furthermore, Eafi can only provide investment services related to financial advice. That is, services in which a personalized recommendation is issued to a client on a specific financial instrument suitable for him.

It is necessary to emphasize the necessary individualization of the investment proposal based on the personal circumstances of the client. Otherwise, generic recommendations would be issued that would not fall within the framework of investment advice. In addition, the recommendation must be suitable for the client. In other words, it is necessary to analyze the client's financial knowledge, experience, financial situation and investment objectives in order to then issue an investment recommendation in accordance with all these criteria that determine their investor profile. Therefore, Eafi must carry out the suitability test, also known as the MiFID test, on each and every one of their clients.

The Independent Financial Advisory Company was born with the purpose of offering a specialized service. In principle, they try to be an alternative to credit institutions that provide investment services. In addition, in order to authorize an Eafi for the provision of the advisory service, it is required, by regulations, that the management members have recognized professional integrity in the sector. For this reason, the degree of specialization of this type of company is usually quite high.

Types of investment services companies

The following are regulated in the Securities Market Law and in RD 217/2008, of February 15, on the legal regime of investment services companies:

  • Securities company (SV): They are entitled to offer all types of investment services both on behalf of others and on their own.
  • Securities agency (AV): They are only authorized to operate on behalf of others.
  • Portfolio Management Company (SGC): Its functions are limited to the discretionary management and advice of investment portfolios.
  • Financial advisory company (Eafi): They are exclusively authorized to provide financial advisory services.

The National Securities Market Commission (CNMV) is the competent supervisory body that authorizes these investment proposal services to companies and individuals.

Activities and services provided by EAFIs

Independent financial advisory firms are exclusively empowered to perform financial advisory services to companies and investors.

See comparison between all investment services companies.

Supervision of the Independent Financial Advisory Company (EAFIs) in Spain

According to the regulations, the CNMV supervises all those entities authorized to provide investment services:

  • Investment services companies.
    • Securities company (SV).
    • Stock agency (AV).
    • Portfolio management company (SGC).
    • Independent Financial Advisory Company (EAFI).
  • Management Companies of Collective Investment Institutions (SGIIC).
  • National credit institutions (investment service providers).
  • Foreign credit institutions (authorized to operate in Spain).

In addition, the investor can check in the official CNMV records which Eafi is really authorized.

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