Government to restrict sale of preference shares

The government plans to impose strict conditions on the sale of complicated preferential shares, including setting a minimum investment amount of 100,000 euros when the company is not listed on the stock exchange, with the aim of dissuading the sale of these high-risk products to small investors.

Ordinary savers in Spain are thought to have been sold 30 billion euros’ worth of these elaborate financial products, and many are now battling to get their money back through the courts.

Economy Minister Luis de Guindos announced this weekend that the government will pass a royal decree this Friday that will set out new rules for the sale of preference shares, to avoid customers being led to believe by banks that they are simple deposit accounts.

Preference shares are perpetual, and returns on them are dependent on the bank in question turning a profit.

There are no concrete figures but calculations by consumer associations suggest that around 800,000 to a million clients poured their savings into preference shares.

“These products are on many occasions for sophisticated investors, and they should not be sold in bank branches,” De Guindos said at the weekend, adding that with these new regulations, “we will avoid situations like the one we have seen in recent years.”

From Friday, banks who offer preference shares will have to sell half of the total offered to institutional investors, such as investment funds, who will be offered the same conditions as small investors.

Before being sold the shares, clients will also have to sign a document acknowledging that they are aware that this product may not be adequate for them, but that they still want to invest.