The law 31/2011 of october 4, of reform of law 35/2003, on collective
adoption of Directive 2009/65/EC of the European Parliament and the
Council (the “Directive”), on the coordination of laws, regulations and
administrative provisions relating to undertakings for collective
investment in transferable securities, Spain has amended Law 35/2003, on
Collective Investment Schemes. This circular will analyse the most
relevant novelties introduced by Law 31/2011 (the “Law”), which has been
published in the Spanish Official Gazette (BOE) on October 5, 2011 and
will enter into force on the following day.
cross-border marketing of shares of Collective Investment Schemes
1.1 Collective Investment Schemes
harmonised according to the Directive
speaking, the regime of cross-border marketing of shares and
Collective Investment Schemes (“CIS”) harmonized according to the
Directive (“UCITS”) has been simplified.
In this regard,
the marketing in Spain of UCITS will be permitted from the time a
notification from the national supervisor has been filed with the
National Securities Market Commission (the “CNMV”). The filing must
comprise the following documentation (i) notification letter with
information on the provisions and planned types of marketing of the
shares or units in Spain and, as the case may be, of the share classes,
(ii) the UCITS rules or its articles of incorporation, (iii) the
prospectus, (iv) the last annual report and, where appropriate, its
latest annual report and any subsequent half-yearly report, (v) the
key investor information document (the “KIID”) and (vi) the
attestation that the UCITS fulfils the conditions imposed by the
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On the other
hand, the marketing of the shares and units of non-UCITS in Spain
requires providing evidence in advance to the CNMV of the following:
a) That the
Spanish legislation regulates the same category of CIS as that of the
foreign scheme and that the CIS is subject in its home Member State to
a specific legislation which protects the interests of share and
unitholders similar to that of the applicable Spanish legislation.
report of the competent authority of the home Member State which is
entrusted with the control and supervision of the CIS with respect to
the performance of its activities.
Once the above
has been evidenced, the CIS must fulfill the requirements below:
a) Filing and
registration with the CNMV of the documents which evidence that the
CIS and the shares, units or securities which represent its capital or
estate are subject to the relevant legal regime (legislation of place
b) Filing and
registration with the CNMV of the financial statements of the CIS and
its corresponding audit report, drafted in accordance with the
legislation applicable to the CIS.
c) Filing and
registration with the CNMV of a prospectus and a KIID, as well as its
All of the
above documents must be provided together with a sworn translation
In order for
the CIS to market its shares or units in Spain it must be previously
authorized for such purpose by the CNMV and registered in the
corresponding registries of the CNMV.
authorization may be rejected on the grounds of prudence, because (i)
the Spanish CIS are not granted an equivalent treatment in the home
Member State, (ii) the compliance with the rules on the discipline and
order of the securities market cannot be guaranteed, (iii) the
protection of the investors resident in Spain cannot be sufficiently
guaranteed or (iv) there may be distortions in competition between
those CIS and CIS authorised in Spain.
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required to foreign CIS
provide the investors domiciled in Spain with all the information and
documentation that, according to the law of its home member State,
should be provided to investors domiciled in such State. This
information shall be provided in the manner set forth in the Law and
its development regulations.
and the annual and semi-annual reports, as well as their modifications,
shall be filed in Spanish, or in a language customary in the sphere of
international finance, or in any other language accepted by the CNMV.
translation of the information referred to in the above paragraphs
shall be made under the responsibility of the CIS and shall accurately
reflect the content of the original information.
The CIS shall
inform the CNMV in writing and in advance in the event of a
modification of the information notified regarding the planned types
of marketing of shares or units, or in relation to their classes to be
CIS shall also
communicate to CNMV any modification of the documents enclosed with
the notification letter and shall as well inform of the website where
these may be obtained in electronic format.
with the advertising, the Law establishes that “every advertisement
promoting the buying of shares or units of a CIS must indicate the
existence of the prospectus and the KIID, and the places and ways in
which the public may obtain or have access to them”.
As provided in
the Directive, the Law proposes the replacement of the simplified
prospectus with the the KIID as one of the required information
data should be provided in a fair, clear and accurate manner:
identification of the Collective Investment Sheme;
description of objectives and investment policy;
presentation of historical returns or, if necessary, investment return
costs and expenses; and
e) pay or risk
profile of the investment, with appropriate guidelines and warnings
regarding the risks associated with the investments of the CIS.
shall contain a statement of where additional information can be
obtained on the proposed investment, particularly the prospectus and
financial reports, and the language in which this information is
available to investors.
that no liability will be incurred as a result only of the data of the
KIID, or any translation thereof, unless they are misleading,
inaccurate or inconsistent in relation to the corresponding parts of
the prospectus." The CNMV must be notified of any modification.
The KIID and
its amendments shall be drafted in Spanish or another language
accepted by the CNMV.
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developments regarding the managing companies of CIS (“MCCIS”)
domiciled in other Member States
domiciled in other Member States are allowed to operate, provided they
are authorized in their home Member State in accordance with the
Directive. The only requirement of the CNMV in these cases will be (i)
to submit a written agreement with the depositary of the CIS to
regulate the flow of information that it needs to fulfill its
obligations and (ii) to provide information on delegation arrangements
regarding management and administration of the CIS.
The Law also
provides the possibility of collaboration with the supervisory
agencies of other Member States for activities such as collecting
information on MCCIS domiciled in its territory, or notify revocations
authorisation granted by the CNMV must be notified to the newly
created European Securities and Markets Authority. Furthermore, the
CNMV may suspend, restrict or reject, as appropriate, any
authorisation for a MCCIS to be controlled by entities resident
outside the EU when the country where such entity is resident does not
offer the same competition conditions for EU companies. The
authorisation will expire if registration with the CNMV is not
requested within one year of its granting.
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for refusal of the authorisation
existence of severe conflicts of interest between the positions of
the members of the board of the MCCIS and any other positions that
they may hold simultaneously.
article 13 of the Directive, Spain allows the outsourcing of
services and functions of the MCCIS. In such cases, the MCCIS will
have to submit the appropriate documentation to report on the
functions that are to be subcontracted or outsourced, so it is clear
that the authorisation is not distorted by these practices.
the rules of conduct that Article 14 of the Directive leaves to the
discretion of the Member States, there is a new obligation of the
MCCIS to issue certificates of shares in investment funds that are
represented through such instrument. In the case of shares
represented by account entries they may also require the issuance of
the certificates referred to in article 12 of the Securities Market
Law by the agencies responsible for accounting, for and on behalf of
the shareholders. This shall not apply in the event that the shares
are listed in the register of shareholders of the MCCIS on behalf of
the shareholder, identified through its fiscal number and by the
trading entity, in which case the trading entity itself will be in
charge of issuing the certificate of each shareholder. In such case,
the MCCIS shall issue, for each trading entity, a certificate of the
shares traded by the trading entity.
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obligation for the CNMV is included, which is to consult the
competent authorities of the home Member State of the CIS before
revoking the authorisation. It also sets a six-month deadline of for
the resolution of the administrative proceedings.
cases of revocation of authorisation are also established:
serious and systematic breach of obligations in relation to the
during a three month period to comply with the obligations related
to the Deposit Guarantee Scheme.
of an audit with a negative opinion.
withdrawal of the authorisation of an MCCIS in another Member State
will result in the CNMV taking immediate steps to prevent the
initiation of new activities in Spain and to safeguard the interests
of the investors.
In the event
that the revocation falls on a MCCIS residing in a non-Member State,
the branch will also have its authorisation revoked.
of the authorisation
grounds for suspension are added, which are not mentioned in the
breach of obligations in relation to the registries.
failure to comply with obligations with the Deposit Guarantee Scheme.
insolvency of the MCCIS.
authorisation for certain corporate operations
transformation, merger, split-up and spin-off of a business unit,
and other corporate structural transactions performed by a MCCIS or
leading to the creation of a MCCIS, shall require prior
authorisation, with any adaptations that may be set out in the
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activity of a MCCIS
authorized in Spain
marketing in other Member States of shares or units of CISs
authorised in Spain by a MCCIS authorised in Spain will only require
submitting the same information as set out in the first paragraph.
The CNMV will forward the information to the competent supervisory
body of the Member States affected, also including a certificate
that the MCCIS is authorised under the Directive. Some new
provisions for the latter companies are included:
a) The MCCIS
must establish procedures for making relevant information available
to the public and the authorities of the home Member State of the
Compliance with the obligations imposed by the regulations of the
host Member State.
c) The CNMV
must inform the competent regulators of the Member States regarding
the CIS which are to be managed by MCCIS authorised in Spainwithin
ten days, if so requested.
d) The CNMV
may request prospectus and financial reports of the CIS managed by
MCCIS authorised in Spain.
e) If any
problems in the MCCIS are detected, the CNMV will notify the
authorities of the Member States of origin of the CIS.
acting in Spain authorised in another Member State
management entity does not operate in Spain through a branch and
merely aims to market shares or units of a CIS authorised in a
Member State other than Spain, the requirements to be fulfilled will
be only those established in Article 15 of the Law (referred to
marketing of shares or units of CIS)
when the management entity operates through a branch established in
Spain or on a freedom to provide basis then it must follow, in any
case, the Spanish regulations concerning:
establishment and authorisation of CIS;
b) the issue
and redemption of shares;
and limits on investment, including the calculation of overall risk
restrictions on leverage; share loans and overdraft sales;
accounting and calculation of the liquidation value, as well as the
errors in calculation and the subsequent amendment;
distribution or reinvestment of profits;
requirements regarding disclosure of information, in particular in
the prospectus, the KIID and periodic reports;
relationship with shareholders;
restructuring, reorganisation and winding-up of the CIS;
of the register of shareholders;
of fees for the authorisation and supervision of the CIS and the
exercise of voting rights by the shareholder and any other rights
derived from the aforementioned areas.
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with Article 34 of the Directive, the responsibility of the depositary
in relation to the CIS and its shareholders remains subject to
regulation by the Member States. In this regard, Spain has imposed a new
obligation on depositaries to notify the CNMV, after a prior request, of
any information acquired in the course of their duties that the CNMV may
request in order to monitor regulatory compliance by the CIS.
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developments in structural changes
Directive only addresses mergers, the Law has included some new rules
regarding other structural changes:
a) The Law
further develops provisions related to merger transactions, in which
two deadlines are modified. Firstly, the communication to the
shareholders of the CIS regarding the authorisation for a merger of
investment companies will be carried out “after the deposit of the
merger agreement” (formerly it was 10 days from the date of the filing
of the merger agreement with the Commercial Registry). Secondly, a
merger of Investment Funds may now be executed within 40 days instead
of “within one month” from the date of publication of the significant
event notice in the Spanish Official Gazette (BOE) and in two national
newspapers. Furthermore, the merger agreement must be issued by the
management companies themselves and therefore the consent of the
depositary is not required. The merger projects undertaken by
investment funds must also be published on the website of its
companies are not required to seek prior approval from the CNMV to
become companies that do not have the status of CIS.
c) In the case
of companies, notification of such a conversion may be made by
publication in the web page of the management company or in two
newspapers of the province with significant circulation; or by an
individual communication to all shareholders.
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developments in marketing of Investment Funds.
states that, with regard to trading in shares of investment funds, the
last mentioned shares must appear, in the shareholders’ registry of the
management company as in the name of the owner. The owner must be
identified by its tax identification number and indicate the
distributor through which the shareholder has acquired the shares. The
distributor will maintain a registry of all shareholders who have
subscribed for shares through it.
In relation to
the above, some additional requirements are set out: they refer to the
duty of the distributor to communicate the subscription and redemption
of shares to the management company; identifying all the shareholders
and submitting any required information about them. In addition, the Law
provides that future regulations may be issued on the possibility of
entrusting one single trading entity with the centralised registry of
shareholders of a CIS in the event its shares were traded through more
than one trading entity. The “entrusted entity” will carry out the
a) Apply the
appropriate deduction and pay the amount to the Treasury as a
consequence of the transfer or redemption of shares which make up the
overall share capital of the CIS as provided by the Law on Income Tax
for nationals, foreigners and corporations.
b) Advise the
Tax Authorities regarding transactions involving shares in the CIS in
compliance with the provisions of the Law on Income Tax for nationals,
foreigners and corporations.
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and inspection of CIS authorised in other Member States
The powers of
the CNMV in this area are widened, in accordance with the Directive, to
meet the new rules on authorised CIS in other Member States but marketed
collaboration mechanisms allowed in Article 101 et seq. of the
Directive are established for the transfer of information between
supervisory regulators of different Member States. This includes the
possibility of carrying out verifications or investigations within the
territory of another Member State or to request the competent authority
to carry them out by itself. The CNMV may only reject such a request for
cooperation in cases in which it may be detrimental to public policy or
sovereignty, or if there are legal proceedings or final judicial
decision on the same facts and the same persons in Spain.
In any event,
the CNMV may take appropriate measures to protect investors in Spain,
including the prohibition against continued marketing, if it considers
that the actions of the authorities of the home Member State are
inadequate, without prejudice to the possibility of issuing a complaint
before the European Securities and Markets Authority if the authorities
do not collaborate sufficiently.
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provisions of the Directive which grant discretion for transposition by
Member States have not been addressed by the Law, since they are to be
implemented in future regulations, or have already been regulated. Some
of the most important are:
possibility to dispense with the depositary in some cases (not
procedure (provided for under the Law on Structural Changes).
Establishment of techniques and limits to the investment policy of CIS
(already regulated in Royal Decree 1309/2005).
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Circular on the information to be provided by foreign CISs
published Circular 2/2011, which entered into force last July to replace
Circular 2/2006. Its wording is similar, although certain new features
information to be submitted to the home Member State pursuant to
paragraph B of the notification letter in Annex I to Regulation (EU)
584/2010 will be:
Identification of the entity responsible for representing the CIS
before the CNMV.
2. If the
CIS is set up as a corporation, the identification of the
distributor established in Spain.
Identification of the entity domiciled in Spain subsidiary
responsible for payment of fees to the CNMV.
Prospective volume of sale
Circular specifies the changes to be notified to the CNMV on a
in the entities referred to in the section above.
Registration and de-registration of distributors in Spain.
in the details of the CIS.
in the prospective volume of sales.
Deregistration of the CIS.
to the simplified prospectus are reworded in order to refer to the new
KIID, which will replace the simplified prospectus.
d) No mention
is made of any obligation to provide sworn translations, except in the
case of non-UCITS.
communication of the number of shareholders in each sub-fund is no
longer mandatory when this number is below 500.
f) It is no
longer necessary for the representative entity to keep all
documentation of concerning the CIS on files for 6 years, only the
successive financial reports.
marketing memorandum has changed according to a new template which the
CNMV has published on its website.
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The Law modifies
some deadlines for certain procedures with the CNMV, including:
resolution regarding the authorisation for CIS that have appointed a
management company of MCCIS. The deadline has been amended from three
to two months, remaining unchanged for investment institutions that
have not appointed a MCCIS.
b) In the
event of marketing a Spanish CIS in other Member States, the CNMV will
have a period of just ten working days following receipt of
documentation to submit it to the competent authorities along with a
certification stating that the CIS meets the conditions laid down in
the Directive. The previous deadline was two months.
c) In contrast,
the time to issue a resolution regarding an authorisation to initiate
a MCCIS activity is raised from three to six months.
d) Two terms
referred to during a merger process for investment institutions and
investment funds are modified (as explained in paragraph 5).
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