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NEWSLETTER I FINANCE AND CAPITAL MARKETS
CONTENTS FINANCE AND CAPITAL MARKETS NEWSLETTERI 1ST QUARTER 2017 I NEW REGULATORY FRAMEWORK APPLICABLE TO MARKETS IN FINANCIAL INSTRUMENTS II LEGISLATION
A. BANKING LAW: INSTITUTIONAL AND MATERIAL B. INSURANCE LAW: INSTITUTIONAL AND MATERIAL C. SECURITIES AND CAPITAL MARKETS III RELEVANT COURT DECISIONS
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FINANCE AND CAPITAL MARKETS NEWSLETTER
I NEW REGULATORY FRAMEWORK APPLICABLE TO MARKETS IN FINANCIAL INSTRUMENTS
Following the EU Commission's December 2010 consultation to reform the Directive 2004/39/EC of the Eurpean Parliament and of the Council of 21 April 2004 on markets in financial instruments ("MiFID I"), the Commission published its legislative proposals on 20 October 2011, which took the form of a revised Directive and a new Regulation .
Upon endorsement by the European Parliament on 15 April 2014 and adoption by the Council on 13 May 2014, DIRECTIVE 2014/65/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU ("MiFID II") and REGULATION (EU) NO. 600/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 ("MiFIR") were published in the Official Journal of the European Union on 12 June 2014.
Both MiFID II and MiFIR (which is directly applicable in all Member States) entered into force on 2 July 2014 (20 days after publication) and must be complemented by delegated acts and technical standards (Level 2 acts).
A substantial set of Level 2 acts, aimed at complementing MiFID II and MiFIR, was published in the Official Journal of the European Union, on 31 March 2017. Said acts are listed below according to the relevant nature: Delegated Acts, MiFID II Regulation Technical Standards and MiFIR Regulation Technical Standards.
Delegated Acts
COMMISSION DELEGATED DIRECTIVE (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or nonmonetary benefits ("Delegated Directive").
COMMISSION DELEGATED REGULATION (EU) 2017/577 of 13 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations ("MiFID II Delegated Regulation").
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COMMISSION DELEGATED REGULATION (EU) 2017/567 of 18 May 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions ("MiFIR Delegated Regulation").
MiFID II Regulation Technical Standards
COMMISSION DELEGATED REGULATION (EU) 2017/566 of 18 May 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards for the ratio of unexecuted orders to transactions in order to prevent disorderly trading conditions.
COMMISSION DELEGATED REGULATION (EU) 2017/568 of 24 May 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the admission of financial instruments to trading on regulated markets.
COMMISSION DELEGATED REGULATION (EU) 2017/569 of 24 May 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the suspension and removal of financial instruments from trading.
COMMISSION DELEGATED REGULATION (EU) 2017/570 of 26 May 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards for the determination of a material market in terms of liquidity in relation to notifications of a temporary halt in trading.
COMMISSION DELEGATED REGULATION (EU) 2017/571 of 2 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the authorisation, organisational requirements and the publication of transactions for data reporting services providers.
COMMISSION DELEGATED REGULATION (EU) 2017/573 of 6 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on requirements to ensure fair and non-discriminatory co-location services and fee structures.
COMMISSION DELEGATED REGULATION (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks.
COMMISSION DELEGATED REGULATION (EU) 2017/575 of 8 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial
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instruments with regard to regulatory technical standards concerning the data to be published by execution venues on the quality of execution of transactions.
COMMISSION DELEGATED REGULATION (EU) 2017/576 of 8 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the annual publication by investment firms of information on the identity of execution venues and on the quality of execution.
COMMISSION DELEGATED REGULATION (EU) 2017/578 of 13 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards specifying the requirements on market making agreements and schemes.
COMMISSION DELEGATED REGULATION (EU) 2017/584 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying organisational requirements of trading venues.
COMMISSION DELEGATED REGULATION (EU) 2017/586 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the exchange of information between competent authorities when cooperating in supervisory activities, on-the-spot verifications and investigations.
COMMISSION DELEGATED REGULATION (EU) 2017/588 of 14 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards on the tick size regime for shares, depositary receipts and exchange-traded funds.
COMMISSION DELEGATED REGULATION (EU) 2017/589 of 19 July 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading.
COMMISSION DELEGATED REGULATION (EU) 2017/591 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the application of position limits to commodity derivatives.
COMMISSION DELEGATED REGULATION (EU) 2017/592 of 1 December 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the criteria to establish when an activity is considered to be ancillary to the main business.
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MiFIR Regulation Technical Standards
COMMISSION DELEGATED REGULATION (EU) 2017/572 of 2 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on the specification of the offering of pre-and post-trade data and the level of disaggregation of data.
COMMISSION DELEGATED REGULATION (EU) 2017/577 of 13 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the volume cap mechanism and the provision of information for the purposes of transparency and other calculations.
COMMISSION DELEGATED REGULATION (EU) 2017/579 of 13 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on the direct, substantial and foreseeable effect of derivative contracts within the Union and the prevention of the evasion of rules and obligations.
COMMISSION DELEGATED REGULATION (EU) 2017/580 of 24 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the maintenance of relevant data relating to orders in financial instruments.
COMMISSION DELEGATED REGULATION (EU) 2017/581 of 24 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards on clearing access in respect of trading venues and central counterparties.
COMMISSION DELEGATED REGULATION (EU) 2017/582 of 29 June 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards specifying the obligation to clear derivatives traded on regulated markets and timing of acceptance for clearing.
COMMISSION DELEGATED REGULATION (EU) 2017/583 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives.
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COMMISSION DELEGATED REGULATION (EU) 2017/585 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the data standards and formats for financial instrument reference data and technical measures in relation to arrangements to be made by the European Securities and Markets Authority and competent authorities.
COMMISSION DELEGATED REGULATION (EU) 2017/587 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of shares, depositary receipts, exchange-traded funds, certificates and other similar financial instruments and on transaction execution obligations in respect of certain shares on a trading venue or by a systematic internaliser.
COMMISSION DELEGATED REGULATION (EU) 2017/590 of 28 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the reporting of transactions to competent authorities.
Entry into Force
In order to enable the competent authorities and the investment companies to adapt to the new requirements set forth in the delegated acts, for reasons of consistency and in order to ensure the smooth functioning of the financial markets, the date of transposition of these acts (whenever applicable) corresponds to the date of transposition of the MiFID (3 July 2017) and the provisions contained in the transposition acts and/or in the delegated acts and technical standards shall apply on the date of entry into force of the MiFID and of the MiFIR (3 January 2018).
II LEGISLATION
A. Banking Law: Institutional and Material
Corrigendum to Directive 2013/36/EU of the European Parliament and of the Council of June 26, 2013 OJEU L 20, dated January 25, 2017
The present Corrigendum, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, corrects misleading remissions and inaccuracies in certain concepts.
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Corrigendum to Regulation (EU) No. 575/2013 of the European Parliament and of the Council of June 26, 2013 - OJEU L 20, dated January 25, 2017
This Corrigendum, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, corrects inaccuracies in the original text and in the calculation formula provided in article 284, no. 6, of the original Regulation.
Commission Delegated Regulation (EU) 2017/208 of October 31, 2016 OJEU L 33, dated February 8, 2017
The present Regulation supplements Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for additional liquidity outflows corresponding to collateral needs resulting from the impact of an adverse market scenario in a given institution.
Commission Implementing Regulation (EU) 2017/461 of March 16, 2017 OJEU L 72, dated March 17, 2017
The present Regulation lays down implementing technical standards with regard to common procedures, forms and templates for the consultation process between the relevant competent authorities for proposed acquisitions of qualifying holdings in credit institutions pursuant to Article 24 of Directive 2013/36/EU of the European Parliament and of the Council.
European Central Bank
Decision (EU) 2017/468, of the European Central Bank, dated January 26, 2017, amending the Decision BCE/2010/10, regarding the lack of compliance with provision of statistic information obligations OJEU L 77, March 22, 2017
The present Decision updates the Decision BCE/2010/10 text, harmonizing it with the new Regulations, entered into force subsequently, relating to the statistic and to the accounting of the credit institutions and financial companies. It has also introduced a new provision regarding the term within which agents must answer to the BCE or to the National Central Banks' inquiries in this regard.
Bank of Portugal Notices
Notice No. 1/2017 Portuguese Official Gazette no. 11/2017, Series II, dated January 16, 2017 which has entered into force on January 17, 2017. This Notice revoked the Notice No. 13/2012 of the Bank of Portugal, which established the rules relating to the creation and functioning of bridge banks. The formal revocation of Notice No. 13/2012 of the Bank of Portugal was justified by the fact of the majority of its dispositions being already derogated by a series of subsequent acts.
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Notice No. 2/2017 Portuguese Official Gazette no. 29/2017, Series II, dated February 9, 2017 which has entered into force on February 10, 2017. This Notice amends article 5 of the Notice No. 9/2014 of the Bank of Portugal, dated November 3, on exemptions applicable to large exposures limits. It has reduced the exempt amount of the large exposures limits applicable to the obligations set forth in paragraphs 1, 3 and 6 of article 129 of the Regulation (EU) No. 575/2013 and it has also clarified the ambit of the exemption established in subparagraph e), of paragraph 3 of article 493 of the Regulation (EU) No. 575/2013. The aim of said amendments was to safeguard the necessary stability and predictability of the large exposures provisions.
Bank of Portugal Instructions
Instruction No. 1/2017, which has entered into force on February 16, 2017. This Instruction establishes the proceedings and criteria that the institutions must follow whenever considering the use of the disclosure exemptions provided in numbers 1 and 2 of article 432 of the Regulation (UE) No. 575/2013, of the European Parliament and Council of June 26, 2013; the information that shall be disclosed by the institutions in case of use of said exemptions; as well as the proceedings that must be followed whenever considering the requirement to disclose the information required in Part VIII of the abovementioned Regulation other than on an annual basis.
Instruction No. 2/2017, which has entered into force on March 15, 2017, governs the Internal Credit Evaluation System of the Bank of Portugal (Sistema Interno de Avaliao de Crdito do Banco de Portugal ("SIAC")). The main purpose of the SIAC is the assignment of credit rankings to Portuguese non-financial companies for the purposes of assessing its eligibility as collateral within the scope of the Eurosystem credit transactions. The rating of the referred companies must be assessed whenever these entities act as debtors, guarantors or issuers of the relevant collateral.
Bank of Portugal Circular Letters
Circular Letter No. 96/2016, dated January 16, 2017, lists the values transportation companies as well as the respective cash treatment centers, which are entitled to carry out the activity of recirculation of euro notes and coins.
Circular Letter No. 3/2017, dated February 15, 2017, informs about the reporting models of the Financing and Capital Plans, the description of the macroeconomic and financial scenario and other necessary orientations regarding the execution of the exercise and provision of information, pursuant to no. 9 of the Instruction No. 18/2015.
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B. Insurance Law: Institutional and Material
Commission Implementing Regulation (EU) 2017/309, dated February 23, 2017 OJEU L 53, dated February 28, 2017 The present Implementing Regulation lays down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 31 December 2016 until 30 March 2017 in accordance with Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of insurance and reinsurance.
C. Securities and Capital Markets
Commission Delegated Regulation (EU) 2017/104, dated October 19, 2016 OJEU L 17, dated January 21, 2017
The present Regulation amends the Delegated Regulation (EU) No. 148/2013 supplementing Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards on the minimum details of the data to be reported to trade repositories.
Commission Implementing Regulation (EU) 2017/105, dated October 19, 2016 OJEU L 17, dated January 21, 2017
The present Regulation amends the Implementing Regulation (EU) No. 1247/2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories according to Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.
Corrigendum to Commission Implementing Regulation (EU) 2017/105, dated October 19, 2016 OJEU L 19, dated January 25, 2017
The present Regulation amends the Implementing Regulation (EU) No. 1247/2012 laying down implementing technical standards with regard to the format and frequency of trade reports to trade repositories according to Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories. This Corrigendum aims to correct the amended Regulation, amending the respective date from October 19, 2016, to October 26, 2016.
Commission Delegated Regulation (EU) 2017/323, dated January 20, 2017 OJEU L 49, dated February 25, 2017
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The present Regulation corrects the Delegated Regulation (EU) 2016/2251 supplementing Regulation (EU) No. 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty.
Commission Delegated Regulation (EU) 2017/389, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation supplements the Regulation (EU) No. 909/2014 of the European Parliament and of the Council as regards the parameters for the calculation of cash penalties for settlement fails and the operations of CSDs in host Member States.
Commission Delegated Regulation (EU) 2017/390, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation supplements the Regulation (EU) No. 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on certain prudential requirements for central securities depositories and designated credit institutions offering banking-type ancillary services.
Commission Delegated Regulation (EU) 2017/391, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation supplements the Regulation (EU) No. 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards further specifying the content of the reporting on internalised settlements.
Commission Delegated Regulation (EU) 2017/392, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation supplements the Regulation (EU) No. 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on authorisation, supervisory and operational requirements for central securities depositories.
Commission Implementing Regulation (EU) 2017/393, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation lays down implementing technical standards with regard to the templates and procedures for the reporting and transmission of information on internalised
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settlements in accordance with Regulation (EU) No. 909/2014 of the European Parliament and of the Council.
Commission Implementing Regulation (EU) 2017/394, dated November 11, 2016 OJEU L 65, dated March 10, 2017
The present Regulation lays down implementing technical standards with regard to standard forms, templates and procedures for authorisation, review and evaluation of central securities depositories, for the cooperation between authorities of the home Member State and the host Member State, for the consultation of authorities involved in the authorisation to provide banking-type ancillary services, for access involving central securities depositories, and with regard to the format of the records to be maintained by central securities depositories in accordance with Regulation (EU) No. 909/2014 of the European Parliament and of the Council.
Portuguese Securities Market Commission Regulations
CMVM Regulation No. 1/2017 Portuguese Official Gazette no. 35/2017, Series II, dated February 20, 2017 entered into force on February 18, 2017. This Regulation establishes the disclosure duties applicable to Real Estate Appraisers.
CMVM Regulation No. 2/2017 Portuguese Official Gazette no. 64/2017, Series II, dated March 30, 2017 which will enter into force on May 1, 2017. This Regulation amends the CMVM Regulation no. 4/2015 of January 26, 2015 on audit supervision.
CMVM Regulation No. 4/2016 Portuguese Official Gazette no. 2/2017, Series II, dated January 3, 2017 entered into force on January 1, 2017. This Regulation entails the sixth amendment to the CMVM Regulation no. 3/2003 of August 30, 2003 on the Charges due to the Portuguese Securities Commission.
III RELEVANT COURT DECISIONS
Supreme Court of Justice Decision of January 12, 2017 (Court Suit no. 428/12.3)
In a proceeding concerning the civil liability of the financial intermediary for breach of the duty to provide information, the Supreme Court of Justice considered that it has not been possible to anticipate or foresee the global financial crisis and, accordingly, has decided that it was not possible for the Bank to advise its clients of such risk, therefore concluding that the Bank could not be held liable for providing misleading information to its clients. In addition, the Supreme Court of Justice emphasized that the guarantee of full reimbursement of the invested capital must be analysed considering the credit rating attributed to the entities issuing the securities
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on the date that the investments were made. In addition to that, the Court understood that the higher yield on a financial investment is also associated with higher risks.
Supreme Court of Justice Decision of January 11, 2017 (Court Suit no. 2644/13.1)
The policies of an insurance contract, or its draft after being accepted by the insurer, constituted, in the light of the legal regime applicable prior to the entry into force of the Insurance Contract Law, ad substantiam documents. As far as life insurance products are concerned, the delivery of the policy to the policyholder is an obligation of the insurer that must be performed against the payment of the relevant insurance premium by the policyholder. In the opinion of the Supreme Court of Justice, these obligations are not, however, a prerequisite for the perfection of the insurance contract, which is perfect after the insurer's declaration (express or implied) of acceptance of the draft insurance proposal. Thus, even if the lack of payment of the premium by the policyholder could entitle the insurer to terminate the agreement, said termination could only occur upon notification issued by the insurer aimed at declaring an event of default under the agreement.
vora Court of Appeal Decision of March 9, 2017 (Court Suit no. 1257/10.4)
In this procedure, in which the defendant sustained that, if there is no blank promissory note completion authorization, the promissory note is incomplete and consequently null and void and its completion is abusive, the vora Court of Appeal has decided that such authorization does not have to be express and can be implicit and, if the completion agreement is not defined (that is, if it is itself in blank), then one should assume that the holder of the promissory note is authorized to complete the promissory note in accordance with the underlying relationship and market standards.
Guimares Court of Appeal Decision of February 16, 2017 (Court Sui no. 396/14.7)
This procedure relates to the fact that, after the death of one of the borrowers, the Bank has continued to collect the installments of a mortgage loan until full payment of principal by the Insurance Company with whom a life insurance had been contracted, including accrued interest.
Notwithstanding the Bank's understanding that it should not reimburse the amount collected as interest (as interest was not covered by the insurance contract), the Court has decided otherwise and has convicted the Bank to reimburse all the amounts collected (both as principal and interest) after the date of decease of one of the borrowers, considering that: (a) the life group insurance, whenever covering a mortgage loan, is intended to guarantee the loan granted to the borrowers (insured persons) by the Bank (policyholder/beneficiary), being the Insurance Company obliged to pay to the Bank the principal in case of death of the borrower; (b) this right is held by the Bank, as the beneficiary of the insurance contract, becoming a
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right of the Bank at the time of the decease of the borrower/insured person, and is never held by the insured person or his heirs; (c) upon the decease of the borrower, the obligation to pay principal terminates and consequently the corresponding obligation to pay interest sjall also terminate, as interest is only due to the extent that, and provided, there is an obligation to pay principal.
Supreme Court of Justice Decision of January 26, 2017 (Court Suit no. 656/11.9)
In this decision, the Supreme Court of Justice qualifies as apparent representation (representao aparente - the circumstance where a person does not know, but with due diligence could have known, that someone acts as its representative) the relationship in which the policyholders, being clients of an insurance company for 30 years, have relied on the acts of a person that, for that period, has presented herself as a broker of the insurance company, concluding on its behalf insurance contracts, acquiring customers, presenting insurance proposals, dealing with its employees and attending its offices, considered that during said period of time the Insurance Company has never questioned those acts, circumstances that the Court considers to be similar to the one provided for in article 30, number 3, of DecreeLaw no 72/2008.
As a consequence, the Court concluded that the insurer's negligence and careless conduct has contributed to policyholders' understanding that the "broker" was entitled to execute insurance agreements on its behalf and was acting as a representative of the insurer when advised the policyholders to redeem the balance of all the policies in force and invest said monies in a new policy. Accordingly, the insurer has been held liable towards the policyholders for the damages resulting from the reliance resulting from the apparent representation.
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