The CMVM decided to fine Best in 2022, for violating the duties of financial intermediaries. Banco Best appealed to the Court of Appeal and the Constitutional Court and lost.
This Wednesday, the CMVM published a ruling from the Constitutional Court, in relation to Administrative Infraction Case No. 49/2015, which dismisses the appeal filed by the defendant as unfounded. Now, the Administrative Infraction Case CMVM No. 49/2015 has Banco Best, the Novobanco online bank, as the defendant.
The CMVM initially imposed a fine of €30,000, but the Competition Court reduced the fine to €27,000, partially suspending its enforcement by €10,000, and ordered the remaining €17,000 to be enforced over two years. Al-Afdal appealed to the Court of Appeal and then to the Constitutional Court and lost.
The CMVM decided to impose a fine on Best in 2022, for violating the duties of financial intermediaries. More specifically, for violating the duty to assess the appropriateness of operations within the scope of the portfolio management service; and the duty to identify and act in order to avoid or minimize the risk of conflicts. The facts in question occurred between 2014 and 2017.
Remember that Best was at BES and was passed to Novobanco by Banco Espírito Santos decision in August 2014.
CMVM accused Banco Best of concluding portfolio management contracts with 20 clients, without obtaining information regarding their investment experience, which included the type of financial brokerage services the client was familiar with; the nature, volume and frequency of the client’s transactions in specific financial instruments; the period during which the operations were carried out; and detailed information about the client’s net assets, investments and real estate assets.
“By his conduct, the defendant violated, on 20 occasions, the duty to assess the suitability of transactions based on the client profile within the scope of providing the portfolio management service (…) constituting a practice of very serious administrative infraction, respectively, punishable (…) by a fine ranging from 25,000 euros to five million euros.”
The defendant market supervisor was also accused of subscribing to his clients’ portfolio, within the scope of the portfolio management service, the product. Unit linked best investment. which was managed by GNB – Companhia de Seguros de Vida, but “did not identify and did not act in a way to avoid or minimize the risks of conflicts of interest that arise between the interests of clients in obtaining an assessment of your portfolio and subscribing to the products most suitable to your profile, and on the other hand, the interests of Novobanco, as a company
Dominant, either for the defendant or for GNB-Companhia de Seguros de Vida, see the listed products Unit linked best investment (ICAE)”.
The CMVM concluded that “the defendant, by his conduct, violated the duty to organize himself in order to avoid potential conflicts of interest and to act in such a way as to avoid or minimize the risk of their occurrence (…) which constitutes the practice of a conflict of interest.” A very serious crime, punishable (…) by a fine of between 25,000 euros and five million euros.
“Taking into account the circumstances of this specific case, the CMVM Board of Directors has decided to apply a single fine to the defendant Best – Banco Electrónico de Servicio Total, in the amount of 30 thousand euros, the execution of which is partially suspended for the amount of 10 thousand euros for two years,” the CMVM indicated.
This decision was taken by the CMVM on January 19, 2022.
A judicial appeal against the CMVM's decision was then requested before the Competition, Regulation and Supervision Court.
The Competition, Regulation and Supervision Court, in its decision issued on 5 July 2023, partially upheld the judicial appeal, after maintaining the conviction for committing the administrative offence (…) but reducing the value of the fine to 27,000 euros, and partially suspending its implementation by 10,000 euros, while limiting the implementation of the remaining amount of 17,000 euros over a period of two years.
“The appellant was not satisfied, he filed an appeal against this judgment before the Lisbon Court of Appeal which, by judgment of 20 November 2023, dismissed the appeal as completely unfounded, having set the date of the commission of the facts as 13 February 2017,” reads the judgment now published.
Banco Best then filed an appeal before this Constitutional Court on December 4, 2023. The Constitutional Court ruling published by CMVM reads: “The appellant asserts, in his claims, the unconstitutionality of the rule.” But “there is no reason for the appellant.”
Phrases such as “the appellant’s argument is invalid,” and “the appellant’s claim is not worthy of acceptance” end with the phrase “in these terms and in other applicable laws, their Excellencies must dismiss the appeal.”
The judges’ ruling decided “not to consider the rule contained in Articles 309.° No. 1 and 397.° No. 2, subparagraph b) of the Securities Law approved by Decree-Law No. 486/99 dated November 13 in the form of Decree-Law No. 63-A/2016 dated September 23, then in force.”
The practice of facts, in the interpretation according to which a financial intermediary's breach of the duty to regulate itself in a way that avoids or minimizes the risks of conflicts of interest, constitutes a very serious offence.
The Constitutional Court ruled that Banco Best's appeal was “completely unfounded”.
Recall that in March 2023, Novobanko launched the sale of Banco Best, which it called “Project Bravo”. However, months after the launch of the sale, the bank withdrew from the sale of Banco Best due to the group’s strategic repositioning in the digital space.
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