Royal Decree 83/2015 of 13 February amending Royal Decree 1082/2012 on Collective Investment Institutions

OFFICIAL STATE GAZETTE No. 39 Saturday, 14 February 2015 Sec. I. Page 12253 I. GENERAL PROVISIONS MINISTRY OF ECONOMY AND COMPETITIVENESS 1454 Royal Decree 83/2015, of 13 February, amending Royal Decree 1082/2012, of 13 July, approving the Regulation for the development of Law 35/2003, of 4 November, on Collective Investment Institutions.

The amendment of the Regulation for the development of Law 35/2003, of 4 November, on Collective Investment Institutions, approved by Royal Decree 1082/2012, of 13 July, only two years after its entry into force, proceeds essentially from the need to complete the transposition of Directive 2011/61/EU of the European Parliament and of the Council, of 8 June, on alternative investment fund managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010, which harmonizes, for the first time, the regulation relating to alternative investment fund managers in the European Union. This transposition was initiated in Law 22/2014, of 12 November, regulating venture capital entities, other closed-type collective investment entities, and amending Law 35/2003, of 4 November, on Collective Investment Institutions.

The aforementioned directive affects management companies of non-harmonized collective investment institutions (CIIs), that is, those not authorized under the regime provided for by Directive 2009/65/EC of the European Parliament and of the Council, of 13 July 2009, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). In this way, new requirements are introduced for the authorization of such management companies and for the marketing of the CIIs they manage. Furthermore, the conduct rules to which they must adhere are established in greater detail, as well as the operational, organizational, and transparency requirements they must meet, with special attention to risk management, liquidity management, and conflict of interest management.

Other issues that complete the transposition of the aforementioned directive are also included. Among others: additional information to be included in the prospectus of non-harmonized CIIs; periodic information that management companies of collective investment institutions must provide to the National Securities Market Commission (CNMV) regarding the main markets and instruments in which they trade on behalf of the alternative CIIs they manage; limits on investment in securitizations; and clarification of the concept of investment management as established in Directive 2011/61/EU of the European Parliament and of the Council, of 8 June 2011, which includes portfolio management and risk control. In this same vein, the requirements for the delegation of functions by management companies are also detailed; the adjustments to the own funds required of management companies to the minimum required by European law; and the incorporation of adequate and coherent procedures to allow for the correct and independent valuation of CII assets.

Special mention must be made of the regulation incorporated into the regulation regarding remuneration policies and the depositary, which will apply to management companies and depositaries of all types of CIIs, taking into account that the treatment these issues receive in Directive 2011/61/EU of the European Parliament and of the Council, of 8 June, and Directive 2014/91/EU of the European Parliament and of the Council, of 23 July 2014, amending Directive 2009/65/EC of the European Parliament and of the Council, of 13 July 2013, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards the functions of the depositary, remuneration policies, and sanctions, is practically identical.

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OFFICIAL STATE GAZETTE No. 39 Saturday, 14 February 2015 Sec. I. Page 12254 Specifically, regarding the depositary regime, a new Title V is drafted with the essential elements to define and regulate the functions and liability of the depositary, taking into account that the interpretation and application of said title must always be carried out in accordance with what is provided in Delegated Regulation (EU) No 231/2013 of the Commission, of 19 December 2012, and in European legislation developing Directive 2014/91/EU of the European Parliament and of the Council, of 23 July 2014. It must also be recalled that some of these essential elements of the depositary regime established in the directives, and now included in Title V of the regulation, were already regulated in our legal system through Order EHA/596/2008, of 5 March, regulating certain aspects of the legal regime of the depositary of collective investment institutions, and specifying the content of position statements. This Royal Decree opts, however, to integrate into a single title the regulatory regulation relating to the depositary, so that its regulation improves in terms of consistency and systematicity. Additionally, for other matters of a more technical nature, many of which will be determined by European Union technical standards, development by the CNMV is enabled. In this way, Order EHA/596/2008, of 5 March, will be definitively repealed once the adjustments developed by the CNMV that complete the regulation of the depositary enter into force.

There are also other novelties that do not stem directly from the transposition of Directives 2011/61/EU of the European Parliament and of the Council, of 8 June 2011, and 2014/91/EU of the European Parliament and of the Council, of 23 July 2014, and which respond to the second reason justifying the amendment of the Regulation of Law 35/2003, of 4 November, which is none other than the permanent evolution and development of the collective investment market in Spain. Indeed, with the emergence of new business opportunities and marketing modalities, it is convenient that the regulation be adjusted to provide legal coverage, legal certainty, and a regime that allows for adequate balance between its development and investor protection. Among these novelties, the following stand out:

First, the active marketing of free-investment collective investment institutions (IICIL) to qualified retail investors is permitted, provided they make a minimum outlay of 100,000 euros and leave written record that they are aware of the risks inherent to the investment. In consonance, the minimum outlay for a retail investor to purchase or subscribe to shares or units of IICIL, that is, through so-called passive marketing, is raised to 100,000 euros.

Second, in line with recent regulatory reforms to promote alternative channels for business financing, different types of IICIL are regulated to accommodate the possibility of investing in invoices, loans, commercial instruments commonly used in the sphere of commercial traffic, and other assets of a similar nature, in financial assets linked to investment strategies with a time horizon exceeding one year, and in financial derivative instruments regardless of the nature of the underlying asset. The active marketing of this type of IICIL is limited exclusively to professionals, and certain additional information requirements and for the adequate management of their risk are added.

Finally, the drafting of several articles is improved and technically adjusted. Among others, certain provisions of the regulation are adjusted to allow the use of omnibus accounts, the assets in which harmonized CIIs can invest are adapted to include those considered suitable by the European Securities and Markets Authority, and the instruments and derivatives in which non-harmonized variable capital investment companies (SICAVs) and non-harmonized financial investment funds regulated in Article 72 can invest are expanded. Furthermore, the regime for agents and attorneys-in-fact and representation is homogenized with that of investment service firms.

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OFFICIAL STATE GAZETTE No. 39 Saturday, 14 February 2015 Sec. I. Page 12255 Paragraphs 53 and following of the single article introduce the second to sixth additional provisions of the Collective Investment Institutions regulation, which contain the regimes for the so-called passports for CIIs and third-country managers, that is, the requirements for cross-border marketing and management when the CII and/or the manager are domiciled or constituted in countries outside the European Union once these passports enter into force. The entry into force of these regimes is established in accordance with the delegated acts adopted by the European Commission regarding them, as set out in Directive 2011/61/EU of the European Parliament and of the Council, of 8 June 2011. In the same vein, the seventh additional provision includes the requirements that a depositary established in a third country must meet.

Paragraph 59 modifies the single final provision of the Collective Investment Institutions regulation, which contains the enabling clause for regulatory development and, specifically, enables the CNMV to develop the communication regime regarding modifications that occur in the conditions of the authorization of collective investment institution management companies; the content and model to which the position statement must adhere; and the legal regime of the depositary.

The Royal Decree contains, finally, a modification in the final part of Royal Decree 1310/2005, of 4 November, partially developing Law 24/1988, of 28 July, on the Securities Market, in matters of admission to trading of securities on official secondary markets, public offers for sale or subscription, and the prospectus required for such purposes, with a double objective. First, to correctly transpose Directive 2003/71/EC of the European Parliament and of the Council, of 4 November 2003, on the prospectus to be published when securities are offered to the public or admitted to trading. For this purpose, it was necessary to specify that, when the final price of the offer and the number of securities to be offered to the public cannot be included in the prospectus, the criteria or conditions that will accompany the determination of said elements must appear in the prospectus, or, in the case of the price, the maximum price. And second, to make a minimal adjustment to adapt the aforementioned Royal Decree to the content of Directive 2014/51/EU of the European Parliament and of the Council, of 16 April 2014, relating to the powers of the European Securities and Markets Authority.

In virtue thereof, upon proposal of the Minister of Economy and Competitiveness, in agreement with the Council of State and after deliberation by the Council of Ministers in its meeting of 13 February 2015,

I HEREBY ORDER:

Single Article. Amendment of the Regulation for the development of Law 35/2003, of 4 November, on Collective Investment Institutions, approved by Royal Decree 1082/2012, of 13 July.

The Regulation for the development of Law 35/2003, of 4 November, on Collective Investment Institutions, approved by Royal Decree 1082/2012, of 13 July, is amended as follows:

One. Paragraph 3 of Article 4 is amended, which shall read as follows:

"3. Regardless of the form of representation of the units: a) The Management Company for Collective Investment Institutions (SGIIC), or the marketer of the units, in the case where the units do not appear in the name of the participants in the registry of the management company, must send to each participant, at the end of the fiscal year, a statement of their position in the fund. When the participant expressly requests it, this document may be sent to them by telematic means.

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OFFICIAL STATE GAZETTE No. 39 Saturday, 14 February 2015 Sec. I. Page 12256 The position statement must contain, at least, information regarding the date of the transaction and the identity of the institution, as well as its management company and its depositary and the participant or shareholder, and any additional information determined by the CNMV. b) The SGIIC of an investment fund may, without prejudice to the right of participants to obtain the certificates referred to in letter a) of the previous paragraph, use, as a management document, receipts by means of which participants are informed of the position they hold in the fund after each of their transactions."

Two. Letter a) of Article 5.14 is amended, which shall read as follows:

"a) That the units are represented by certificates and appear in the registry of participants of the management company or of the marketer through which the units were acquired on behalf of participants and that, consequently, the marketer accredits the ownership of the units vis-à-vis the investor."

Three. Paragraph 5 of Article 6 is amended, which shall read as follows:

"5. However, those companies whose shareholders are exclusively other CIIs regulated in Articles 54 and following, nor those free-investment companies regulated in Article 73, shall not have to meet the requirements mentioned in paragraphs 3 and 4."

Four. Paragraph 2 of Article 7 is amended and Paragraph 4 is repealed, which shall read as follows:

"Article 7. The administration of the company.

1. The bodies of administration and representation of the investment company shall be those determined in its statutes, in accordance with the provisions of the legislation on joint-stock companies. The investment company must have a board of directors.
2. When the company statutes so provide, the general meeting or, by its delegation, the board of directors, may agree on the designation of an SGIIC as responsible for ensuring compliance with what is provided in this regulation. The eventual agreement must be elevated to a public deed and registered in the Mercantile Registry and in the CNMV registry. In the event that the investment company does not designate an SGIIC, the company itself shall be subject to the SGIIC regime provided for in this regulation. The designated SGIIC, or the investment company that has not designated an SGIIC may, in turn, delegate the investment management to one or more financial entities in the manner and with the requirements established in Article 98. In the event that this delegation has been imposed by the investment company, which must be evidenced by the corresponding agreement of the general meeting of shareholders of the investment company or, by express delegation from this, by the board of directors, the delegating entity shall not be liable to the shareholders for damages that may arise from such contracting.
3. The agreement mentioned in the previous paragraph shall not relieve the administration bodies of the company of any of the obligations and responsibilities that current legislation imposes on them."

Five. Letter e) of Paragraph 1 of Article 11 is amended, which shall read as follows:

"e) The designation of an authorized depositary in the case of SICAVs, of Free-Investment Companies regulated by Article 73, Free-Investment CIIs in corporate form, and in the case of real estate investment companies whose management company exceeds the thresholds established in Article 41 bis of Law 35/2003, of 4 November, indicating its name and domicile, as well as the identification data of its registration in the Mercantile Registry. Notwithstanding the foregoing, those REITs (SII) that wish to benefit from the rights recognized under Directive 2011/61/EU may voluntarily adhere to the requirements provided therein, among which is the appointment of a depositary."

Six. Letter r) is added and the last paragraph of Article 13 is amended, which shall read as follows:

"r) Registry of external experts performing the valuation function. Harmonized financial-character investment companies or SICAVs and harmonized financial-character investment funds or FI harmonized shall be considered those that have been authorized in accordance with Directive 2009/65/EC of the European Parliament and of the Council, of 13 July 2009, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). Non-harmonized financial-character investment companies or SICAVs and non-harmonized financial-character investment funds or FI non-harmonized shall be considered those that adhere to the exceptions provided in Article 72."

Seven. Letter b) of Paragraph 1, Paragraph 2, and Paragraph 3 are added in Article 14, which shall read as follows:

"Article 14. Modification of draft constitutions, statutes, regulations, and prospectuses.

1. Modifications to the draft constitution, once authorized, to the statutes or to the regulation of CIIs shall be subject to the CII authorization procedure provided for in Law 35/2003, of 4 November, and in this regulation, with the following specialities: a) Modifications to the company statutes and regulations that do not require prior authorization, according to what is established in Article 12 of Law 35/2003, of 4 November, must be included in the immediate subsequent quarterly report, as well as in the following semi-annual or annual report. The consideration of low relevance in the case of investment funds may be carried out simultaneously with their registration in the corresponding registry of the CNMV. b) When the modification of the prospectus occurs due to the establishment or renewal of guarantees to CIIs that carry out or will carry out management aimed at achieving a specific profitability objective, the information indicated in Article 8.1.a), fourth paragraph, must be sent to the CNMV. c) In the case of modifications to the management regulations, the registration may be carried out ex officio when the modifications derive from regulatory changes or modifications in other CNMV registries. d) In the case of statutory modifications, the authorization request may be made prior to its approval by the corresponding governing bodies of the company. e) The submission to the CNMV of the documentation necessary for the registration of the modifications mentioned in this article must be carried out within a period of three months, counted from the notification of the prior authorization or of the consideration as low relevance. If this period elapses without the registration of the modification having been requested, the registration will be denied and the publicity procedures must be completed again. However, when the modification must meet requirements that necessitate the passage of periods prior to its registration in the CNMV registry, the three-month period may be extended by an additional period not exceeding three months.

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OFFICIAL STATE GAZETTE No. 39 Saturday, 14 February 2015 Sec. I. Page 12258 2. Any modification of the regulation of an investment fund that requires prior authorization must be published by the CNMV after its authorization and communicated by the SGIIC to the participants within 10 days following the notification of the authorization. In these cases, the CNMV will require as a prior requirement for the registration of the modification in its administrative registries the accreditation of compliance with the communication obligation through certification by the SGIIC and the presentation of a copy of the letter sent to the participants. When the modification of the management regulation or, where applicable, of the prospectus or of the document with key investor information constitutes a substantial change in the investment policy or in the profit distribution policy, the substitution of the management company or the depositary, the delegation of the portfolio management of the institution to another entity, the change of control of the management company or the depositary, the transformation, merger, or spin-off of the fund or the compartment, the establishment or increase of commissions, the establishment, increase, or elimination of discounts in favor of the fund to be applied in subscriptions and redemptions, modifications in the periodicity of the calculation of the net asset value, or the transformation into a compartmentalized CII or into compartments of other CIIs, it must be communicated to the participants prior to its entry into force, with a minimum advance notice of 30 calendar days. The entry into force of said modifications will occur at the moment of the registration of the modification of the management regulation or, where applicable, of the update of the explanatory prospectus and/or of the document with key investor information. The change of control of the SGIIC and the depositary, once effected and communicated to the CNMV, must be communicated to the participants within ten days. Modifications referring to the substitution of the depositary as a result of subsequent corporate operations or subject to verification by other bodies may be registered immediately in the CNMV provided that the management company fulfills the obligation to communicate this change to the participants. The following modifications in the investment policy shall not be considered substantial, among others: a) Those aimed at adjusting the credit quality of fixed-income assets to the solvency rating that the Kingdom of Spain holds at any given moment. b) Modifications in duration aimed at adjusting to the categories established by the CNMV. c) Changes motivated by modifications in applicable legislation. In any case, such changes cannot distort the purpose and vocation of the investment fund. Whenever there is a redemption commission or associated expenses or discounts, participants may opt, within a period of 30 calendar days (counted from the sending of communications to participants), for the redemption or transfer of their units, total or partial, without deduction of redemption commission or any expense, at the net asset value corresponding to the date of the last day of the 30 calendar days of information. Likewise, participants in funds whose investment policy is based on investment in a