Independent Director of an Investment Firm

An investment firm (ESI) is an entity authorized to provide investment services and activities in financial instruments under MiFID II. In Spain, investment firms are regulated by Law 6/2023 on Securities Markets and Investment Services (LMVSI) and Royal Decree 813/2023.

The main types are broker-dealers (sociedades de valores), securities brokers (agencias de valores), portfolio management companies (SGC) and financial advisory firms (EAF/EAFN). All of them are supervised by the CNMV.

An independent director is a board member appointed on the basis of their personal and professional qualities who can perform their duties without being influenced by relationships with the company, its significant shareholders or its senior management (LSC Art. 529 duodecies).

At investment firms of a certain size and at listed entities, having independent directors on the board is a legal or practical requirement, with a qualified presence on the audit committee (LSC Art. 529 quaterdecies) and on the nomination and remuneration committee.

Under the EBA/ESMA Guidelines GL/2021/06 and CNMV Circular 1/2014, the independent director must demonstrate commercial and professional good repute, adequate knowledge and experience, the ability to devote sufficient time to the role and absence of conflicts, and, as part of the board as a whole, must contribute to board diversity.

The CNMV assesses the individual and collective suitability of the management body before the appointment and on an ongoing basis.

The LMVSI and MiFID II limit the number of directorships a director may hold at the same time, depending on the size of the entity. The general rule is one executive directorship plus two non-executive directorships, or four non-executive directorships, with possible exceptions authorized by the CNMV.

Directorships held within the same group count together as one.

The duties of care and loyalty in Arts. 225–232 of the Capital Companies Law apply in full. The director is liable for acts or omissions to the company, the shareholders and the creditors (LSC Art. 236), with possible joint and several liability unless they prove they acted with due care or opposed the decision.

In addition, the LMVSI provides for administrative liability for the investment firm’s infringements where there is negligence or a lack of oversight.

It is the business judgment rule (LSC Art. 226): strategic and business decisions are presumed to have been made with due care if they are taken in good faith, with no personal interest, with sufficient information and through an appropriate procedure.

To rely on it, the director must keep a record of the information received, the analyses considered and the reasoning followed (detailed minutes, reports, external opinions).

The audit committee (LSC Art. 529 quaterdecies) must be made up mostly of non-executive directors, at least two of them independent and one with expertise in accounting or auditing. It oversees financial reporting, the internal control system, internal and external audit, and risk management.

Together with the nomination committee, it is the committee where the independent director adds the most value.

It is highly advisable. Directors & Officers insurance covers legal defense and any compensation in civil and administrative claims. Before signing, review the exclusions, limits, deductibles, triggers, run-off cover and territorial scope.