Yesterday, the Official State Gazette published Law 22/2014 of 12 November (the “Law”), implementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards determining types of alternative investment fund managers (“Directive 2011/61”), also known as AIFMD.
This newsletter briefly outlines the main features of its implementation in Spain as well as the changes to the existing regulation on Spanish collective investment schemes (“CIS”), managers and depositaries following the Law’s introduction.
CHANGES AFFECTING VENTURE CAPITAL ENTITIES
The Law introduces a new legal framework for venture capital vehicles and repeals Law 25/2005 of 24 November. It gives greater flexibility to calculate compliance deadlines of mandatory investment ratios and allows dividends and returns to be distributed periodically.
It establishes the private equity-SME (capital-riesgo-PYME), which permits these entities to invest 70 per cent of their assets in small and mid-cap enterprises (“SME”), participate in management and advise the companies. These entities are subject to more flexible financial regulations and can make greater use of both equity loans and debt to provide financing to the SME. The regulations aim to boost the venture capital industry oriented at early stages of business development and to offer these businesses an effective alternative to bank financing.
The scope of the Law comprises any closed-ended CIS with a pre-defined investment policy to distribute their returns among investors. The Law includes those schemes that have been operating in Spain and investing in unlisted securities without having complied with the investment and diversification rules in the former venture capital legislation.
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CHANGES FOR CLOSED-ENDED CIS AND THEIR MANAGEMENT COMPANIES
The Law regulates the conditions of access for Spanish closed-ended CIS management companies as well as the requirements to be observed when these management companies seek to manage and market entities in foreign countries. It also set out the requirements to be met when a foreign management company intends to market foreign CIS in Spain.
Furthermore, in accordance with Directive 2011/61, the Law outlines a regime for cross-border marketing and the management of companies, allowing the use of the European passport for alternative investment funds in EU Member States, managed by managers of alternative investment funds that are authorised in EU Member States under Directive 2011/61.
However, marketing in Spain to professional investors of AIF incorporated in third countries managed by managers authorised under Directive 2011/61, and AIF managed by managers not established in the EU will require prior authorisation from the Spanish Securities Exchange Commission (“CNMV”). Evidence of compliance with certain requirements must be provided with the request for authorisation, which may be refused on any of the grounds provided for in the Law.
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DEVELOPMENTS APPLICABLE TO DEPOSITARIES
The Law sets forth some new rules applicable to depositaries, which will apply to both UCITS and non-UCITS CIS(s).
Among other developments, the Law establishes the need for a ‘written contract’ when appointing a depositary.
Furthermore, the Law sets out in detail and develops the tasks and functions of the depositary with respect to custody, custodiable assets and other assets owned by CIS.
A delegation regime is mentioned, although it refers to subsequent implementing regulations (a draft of which was under public consultation until 7 October 2014).
The Law also establishes liability provisions for depositaries. An identical financial instrument or the corresponding amount must be returned without “undue delay” in the event of the loss of financial instruments held in custody, either by the depositary or by a third party the task has been delegated to. The depositary will not be liable if it can prove that the loss occurred as the result of an external event beyond the reasonable control of the depositary, the consequences of which would have been unavoidable despite all efforts to avoid them.
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ENTRY INTO FORCE
The Law entered into force today (14 November 2014).
In addition, the Law provides that Spanish management companies must send a statement to the CNMV confirming that they have complied with and adapted to the provisions of the Law and, where necessary, have modified their scheduled activities to meet the following deadlines:
- Non-UCITS management companies: three months; and
- UCITS management companies: six months.
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CHANGES AFFECTING VENTURE CAPITAL ENTITIES