Understanding CNMV, Investment Firms, and Financial Assets
What is the CNMV? Objectives
The National Securities Market Commission (CNMV) is a public law entity with its own legal personality and full capacity to exercise the functions assigned by law. It operates under the Ministry of Finance, monitoring and inspecting securities markets and the activities of all participants.
Objectives of the CNMV
- Ensure the transparency of securities markets.
- Ensure proper background and training for the protection of investors.
Investment Services Firms: Types and Differences
Investment services companies are financial institutions whose principal activity is to provide investment services, on a professional basis, to third parties.
Differences between Types of Investment Firms
- Securities Companies (Sociedades de Valores): Can operate on their own account and on behalf of clients.
- Securities Agencies (Agencias de Valores): Act primarily as intermediaries, forwarding orders.
- Portfolio Management Companies (Sociedades Gestoras de Carteras): Manage portfolios on behalf of investors and provide investment advice.
Understanding Financial Asset Environments
Key factors in the environment of financial assets include:
- Risk: The possibility of not recovering the invested capital or not achieving the expected return.
- Creditworthiness/Solvency: The ability of issuers to meet debt payments to third parties.
- Volatility: The ease with which a security’s value can change, either upward or downward, in a short period.
- Liquidity: The ability of a security to be quickly converted into cash; higher liquidity means greater ease of conversion.
Distinguishing Issue Prices: Below Par, At Par, Above Par
- Below Par (Under Par): Occurs when an investment is issued at less than 100% of its nominal value.
- At Par: Occurs when an investor is asked to pay 100% of the nominal value at the time of issue.
- Above Par: Occurs when investors are asked to pay more than the face value at the time of subscription.
Issuance Conditions
Fixed Income
- At Par: Uncommon, as it implies a lower return.
- Below Par: Used when the issuer seeks quick funding, making the security more attractive.
- Above Par: Generally unattractive to investors.
Equities
- At Par: Common.
- Below Par: Never issued below par, as it signals poor company health and is unattractive.
- Above Par: Used when the company is financially sound or has high stock market quotations and seeks liquidity (premium).
Investment Profiles
- Conservative: A conservative investor would primarily invest in fixed income. If they need the money, they might not be able to access it in the medium term, depending on market interest rates.
- Speculative: A speculative investor would invest in equities, particularly those with high potential profitability but also high risk due to volatility.
Subscription Rights
Subscription rights allow shareholders to receive income as compensation for the loss of value of their shares when a capital increase occurs.
Stock Indexes: Understanding the IBEX 35
Stock indexes are numerical indicators that reflect the overall level of financial market prices, their evolution, expectations, and opportunities.
The IBEX 35 is a key Spanish stock index that tracks the stock price performance of the 35 companies with the largest market capitalization on the continuous market.
Fondtesoro
Fondtesoro are funds that invest a substantial portion of their portfolio in debt. Their risk is relatively low and depends on the type of debt they acquire. The risk is lower if they invest in short-term debt instruments (like treasury bills) compared to longer-term bonds.