Royal Decree 1082/2012 approving the Regulation for the development of the Collective Investment Institutions Law 35/2003

ROYAL DECREE 1082/2012, OF JULY 13, APPROVING THE REGULATION FOR THE DEVELOPMENT OF LAW 35/2003, OF NOVEMBER 4, ON COLLECTIVE INVESTMENT INSTITUTIONS.

Ministry of Economy and Competitiveness
"BOE" No. 173, of July 20, 2012
Reference: BOE-A-2012-9716

INDEX

Preamble ................................................................... 3
Articles .................................................................... 7
Repealing Provisions ........................................................ 7
Final Provisions ............................................................ 7

REGULATION FOR THE DEVELOPMENT OF LAW 35/2003, OF NOVEMBER 4, ON COLLECTIVE INVESTMENT INSTITUTIONS. ..................................................... 9
PRELIMINARY TITLE. Scope of application, concept, form and classes .......................... 9
TITLE I. Legal form of collective investment institutions ............................. 10
CHAPTER I. Investment Funds ................................................ 10
CHAPTER II. Investment Companies ............................................. 16
TITLE II. Common provisions.................................................. 17
CHAPTER I. Access conditions and exercise of activity .............................. 17
CHAPTER II. Cross-border marketing of shares and units of CII................. 25
CHAPTER III. Information, advertising and accounting .................................... 27
CHAPTER IV. Rules on dissolution, liquidation, transformation, merger and spin-off of collective investment institutions ......................................................... 35
TITLE III. Classes of collective investment institutions ................................... 44
CHAPTER I. Financial collective investment institutions......................... 44
CONSOLIDATED LEGISLATION

Section 1. Common provisions .............................................. 44
Section 2. Relationship between the principal CII and its subordinate ...................... 52
Section 3. Special provisions ............................................. 64
Section 4. Financial collective investment funds ........................... 71
Section 5. Variable capital collective investment companies ........................... 75
CHAPTER II. Non-financial collective investment institutions ...................... 77
Section 1. Non-financial collective investment institutions ...................... 77
Section 2. Real estate collective investment institutions ............................... 77
TITLE IV. Management companies of collective investment institutions .......................... 82
CHAPTER I. Concept and corporate purpose.............................................. 82
CHAPTER II. Conditions for access to the activity ..................................... 88
CHAPTER III. Conditions for exercise ............................................. 98
CHAPTER IV. Cross-border activity............................................. 105
TITLE V. Depositary.......................................................... 108
CHAPTER I. General provisions ............................................. 108
CHAPTER II. Functions and obligations of the depositary ................................... 108
CHAPTER III. Delegation ..................................................... 113
CHAPTER IV. Other provisions ................................................ 114
TITLE VI. Conduct rules and conflicts of interests ................................... 117
Additional Provisions ......................................................... 122
Transitory Provisions ......................................................... 135
Final Provisions ............................................................ 136
OFFICIAL STATE GAZETTE
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CONSOLIDATED TEXT
Last modification: December 28, 2023

Law 35/2003, of November 4, on Collective Investment Institutions, represented an important milestone by establishing a modern legal framework to regulate the collective investment sector in Spain after nearly twenty years of validity of its predecessor, Law 46/1984, of November 26, regulating collective investment institutions.
The primary purpose of Law 35/2003, of November 4, was to establish a legal framework adapted to its time. To this end, the Law is based on three fundamental principles. First, it provides the sector with adequate flexibility to allow collective investment institutions to adapt to the successive and continuous changes demanded by the market. Second, it establishes the necessary measures and procedures to guarantee adequate protection of investors, recognizing, at the same time, the existence, in certain cases, of different levels of protection depending on the nature and profile of the investor. Finally, the Law advocates for the modernization of the administrative regime, simplifies procedures, and reduces authorization deadlines.

Law 31/2011, of October 4, amending Law 35/2003, of November 4, on Collective Investment Institutions, initiated the adaptation of our legislation to the third reform of harmonized investment funds carried out by Directive 2009/65/EC of the European Parliament and of the Council, of July 13, 2009, on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), and its implementing rules: Commission Directive 2010/43/EU, of July 1, 2010, laying down provisions implementing Directive 2009/65/EC of the European Parliament and of the Council as regards the organizational requirements, conflicts of interest, business conduct, risk management and the content of agreements between depositaries and management companies; and Commission Directive 2010/44/EU, of July 1, 2010, laying down provisions implementing Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions relating to fund mergers, principal-subordinate structures and the notification procedure.

The modifications recently introduced into Law 35/2003, and the obligation to continue the transposition of the aforementioned Directives justify the adoption of a new regulation that repeals the previous one approved by Royal Decree 1309/2005. This development is based on the regulatory authorization made by the legislator in favor of the Government, in the seventh final provision of Law 31/2011, of October 4.

Furthermore, the adoption of this new regulation in compliance with our obligations regarding European Union Law is used to introduce a series of modifications with the objective of strengthening the competitiveness of our industry in a context of greater integration and competition, and to establish measures to improve the supervision of Collective Investment Institutions (hereinafter CII) and CII management companies (hereinafter SGIIC) by the National Securities Market Commission (CNMV hereinafter).

The new implementing regulation of Law 35/2003, of November 4, on Collective Investment Institutions, hereinafter the regulation, contains a series of novelties which are explained below according to the objectives pursued.

First, it is necessary to incorporate into national law the provisions that ensure the correct functioning of the management company's European passport. This passport, which implies the possibility that Spanish management companies manage CII domiciled in other Member States and that Spanish CII are managed by companies from other Member States, is one of the fundamental novelties of Directive 2009/65/EC, of July 13, 2009, which was already introduced into Law 31/2011, of October 4. The technical issues that make this transnational management possible must now be introduced. Thus, an adaptation of the principles governing the relationship between these management companies and depositaries is necessary. Specifically, it is necessary to determine the main elements of the agreement between the depositary and a management company when the latter is established in a Member State different from that of origin. In addition, Law 31/2011, of October 4, already introduced a series of modifications in the regime of the functions and activities of the depositary. This new legal framework is collected in articles 3, 5, 6, 14, 115, 129 and 131 of the regulation.

It is also necessary to ensure that management companies, since they can act throughout the territory of the European Union, are subject to a similar regime in terms of risk management and conflicts of interest, as contained in Directive 2009/65/EC, of July 13, 2009, and developed in Directive 2010/43/EU. In terms of risk management, the obligation to specify the criteria that SGIIC must use to evaluate the adequacy and proportionality of their risk management policy to the nature, scale and complexity of the activities of the SGIIC and the CII managed by it is established. In this way, by clarifying how global risk must be calculated, it is guaranteed that SGIIC respect the limits imposed on investment by Directive 2009/65/EC, of July 13, 2009. This improvement is collected in articles 141 to 143 of the regulation. Similarly, the rules for SGIIC to control and manage personal transactions in which conflicts of interest may arise are intended to be improved, as the employee or a person linked to him or to the SGIIC possesses inside information. In the case of inevitable conflicts of interest, the legislation subject to transposition obliges SGIIC to have adequate mechanisms to guarantee that the CII managed by them receive equitable treatment. Specifically, it is provided that SGIIC must ensure that their senior management or the members of an internal body with competence are informed without delay, so that they can take the necessary decisions to manage the conflict of interest. These provisions are collected in articles 138 and 139 of the regulation.

The introduction of the management passport implies greater competition in the sector, which will result in greater economic efficiency. Consequently, beyond the obligations established by transposition, to ensure that our management companies operate under conditions analogous to those of other Member States, it is advisable to approximate the regulation to the minimum standard determined by the directive in terms of own funds. In this way, management companies will operate under conditions similar to those of countries in our environment without putting financial stability at risk. Therefore, a new regime for the own funds of SGIIC is established in articles 100 to 103 of the regulation.

Secondly, Directive 2009/65/EC, of July 13, 2009, improves the functioning of the marketing passport, which allows harmonized CII to be marketed in any Member State, regardless of where they are domiciled. This possibility already existed, but now the procedures between competent authorities are simplified and deadlines are reduced. After having made the adjustments required by Law 31/2011, of October 4, it is unavoidable to include these provisions in articles 8, 9, 10, 11, 12, 15, 20 and 21 of the regulation.

The determined commitment of the directive regarding the expansion and facilitation of the cross-border activity of CII and management companies in order to achieve a higher degree of competition and excellence makes it necessary to strengthen the mechanisms of cooperation, consultation and exchange of information between competent authorities.

To advance in the achievement of an internal market without barriers, Directive 2009/65/EC, of July 13, 2009, introduced a third element: a harmonized regulation of principal-subordinate structures, which opens up new business opportunities for managers, as these structures will enjoy a passport. The subordinate CII is that which invests at least 85% of its assets in another CII, called the principal. Subordinate CII cannot invest in more than one CII (principal). On the other hand, the principal CII cannot itself be a subordinate CII, in order to avoid the existence of opaque cascade structures. Harmonization allows the principal and subordinate CII to be domiciled in different Member States, guaranteeing that investors better understand this type of structure, and that authorities can supervise them more easily, particularly in a cross-border situation. The Royal Decree incorporates this new regulation on principal-subordinate structures in articles 54 to 70 of the regulation.

As a fourth objective of the Directive, also tending to deepen the internal market, a harmonized regime for cross-border mergers of CII is introduced. The regulation collects these changes, so that CII can merge, regardless of their legal form, with prior authorization from the competent authorities. To give greater guarantees to the investor, it is complemented by the control by the depositaries of the CII involved in the merger project, as well as validation by an independent auditor. These provisions have been incorporated into articles 36 to 46 of the regulation.

Within the framework of this objective, article 37 of the regulation is also inserted, which eliminates the obligation to appoint an external expert to issue a report on the merger project when the resulting CII is an investment fund. This modification stems from the recent reform of Law 3/2009, of April 3, on structural modifications of commercial companies carried out by virtue of Royal Decree-Law 9/2012, of March 16, on simplification of information and documentation obligations for mergers and spin-offs of capital companies. Among the modifications introduced into the Law was the obligation to request a report from the independent expert whenever any of the entities participating in the merger was a public limited company. With the previous wording, this requirement was only necessary in the case where the resulting entity was a public limited company. The preparation of a report on the exchange ratio by an independent expert is unnecessary, as well as excessively burdensome for companies, since, like investment funds, they are subject to the accounting and valuation regulations of the CNMV, valuing their assets daily and subject to an exhaustive regime of periodic information.

The fifth of the objectives pursued by the transposed legislation is to strengthen investor protection. To this end, the mandatory information that the investor must receive is expanded, differentiating it from advertising communications. A series of aspects relating to the "Key Investor Information Document" are specified, which replaces the previous simplified prospectus and presents two substantial novelties with respect to it, in order to help the investor adopt informed decisions. First, it represents a complete harmonization of this document, which allows the investor to compare funds and harmonized companies from any Member State. Second, the data will be presented in an abbreviated and easily understandable form for the investor. In line with the above, Directive 2010/44/EU develops the provisions of Directive 2009/65/EC, of July 13, 2009, regarding the electronic notification procedure of the information that UCITS must supply when marketing their units in Member States different from those in which they are established. The aim is to guarantee the legal certainty of participants and shareholders, which justifies the need to specify the scope of the information to which they must have access by electronic means. Therefore, articles 23, 24, 25, 73, 74, 78, 79, 82 and 98 of the regulation refer to the documents that the management company authorized in another Member State must provide to obtain authorization for the Spanish CII. In order to be coherent with the new wording of article 12 of Law 35/2003 and article 14 of its implementing regulation, article 30 of the regulation equalizes the right to information in the change of control of the manager and the depositary.

There are also other novelties that do not stem directly from the transposition of Directive 2009/65/EC, of July 13, 2009, and its implementing legislation. Thus, in the need to incorporate Directive 2011/61/EU of the European Parliament and of the Council, of June 8, 2011, 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, by July 2013, some adaptations are already introduced. This directive establishes the regime applicable to the continuous exercise of the activity and the transparency of alternative investment fund managers (hereinafter AIFM) that manage and/or market alternative investment funds (AIF hereinafter) in the Union. For the purposes of the aforementioned Directive, an AIF is understood as "Any collective investment undertaking, as well as its investment compartments that: i) raises capital from a series of investors to invest it, according to a defined investment policy, for the benefit of those investors, and ii) does not require authorization in accordance with article 5 of Directive 2009/65/EC". Therefore, any CII that is not harmonized, that is, authorized according to Directive 2009/65/EC, will be considered as an alternative CII. It is therefore necessary to include this same distinction in our national legislation. By virtue of articles 13, 48, 50, 51, 52 and 72 of the Regulation, the identification of CII that comply with Directive 2009/65/EC, of July 13, 2009, and CII that do not comply with it is facilitated. Specifically, article 72 fixes the regime of special provisions applicable to CII that do not comply with Directive 2009/65/EC, of July 13. Article 13, points c) and d), refers to the registration in the CNMV of financial investment companies or non-harmonized SICAV and financial investment funds or non-harmonized investment funds. Article 48.1, point d), refers to the consideration, as suitable assets for investment, of "shares and units of other financial CII not authorized in accordance with Directive 2009/65/EC, of July 13" provided they meet a series of requirements. Finally, article 51.5 and, by reference to this, article 52.4, refer to the limits of risk concentration in the case of CII mentioned in article 48.1.d), not authorized in accordance with Directive 2009/65/EC, of July 13.

At the same time, the rules defining the investment policy of CII are harmonized with those imposed by the directive, which allows them to enjoy a passport. However, those exceptions that are necessary to not harm CII that do not comply with the Directive and that represent an important part of the Spanish industry are maintained, among which are guaranteed CII that can exceed limits, or those that are of interest to allow CII to replicate the IBEX-35 index (index CII) if their components do not adjust to the diversification allowed by the Directive.

Finally, the Royal Decree introduces a series of technical improvements. The aim is to strengthen the competitiveness of our industry in a context of greater integration and competition and, on the other hand, to establish measures to improve the supervision of CII and management companies by the CNMV.

Thus, articles 6 and 78 of the regulation stem from the modification of article 81 of Law 24/1988, of July 28, on the Securities Market, carried out by Law 47/2007, of December 19, which incorporated into the Spanish legal order Directive 2004/39/EC of the European Parliament and of the Council, of April 21, 2004, on markets in financial instruments, amending Directives 85/611/EEC and 93/6/EEC of the Council and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC. As a result of the aforementioned modification, the term "organized trading facility" was replaced by the broader "organized trading systems", so that it includes not only Spanish systems but also those of other Member States of the European Union.

On the other hand, the wording of several articles is improved to facilitate the immediate understanding of the provisions.

An additional provision, four transitory provisions for the adaptation of CII to the new legislation, and a final provision are included in the regulation.

Finally, the project contains a single repealing provision that repeals Royal Decree 1309/2005, of November 4, approving the regulation of Law 35/2003, of November 4, on collective investment institutions, and any other provisions of equal or lower rank that oppose what is established in this Royal Decree.

The Royal Decree project contains six final provisions: the first final provision by which the Regulation on Corporate Tax approved by Royal Decree 1777/2004, of July 30, is modified to adapt the minimum investment percentage requirement required for CII investing in a single fund (currently 80%) to the new minimum percentage established by the Directive (85%); the second final provision by which the second final provision of Royal Decree 217/2008, of February 15, on the legal regime of investment service companies and other entities providing investment services is modified, and the Regulation of Law 35/2003, of November 4, on Collective Investment Institutions, approved by Royal Decree 1309/2005, of November 4, is partially modified; the third final provision by which the validity of the implementing rules of the previous legislation is determined; the fourth final provision which contains the competence title by virtue of which the norm is issued; the fifth final provision relating to the incorporation of Community law; and the sixth final provision ordering the

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