General introduction to the regulatory framework
The Spanish asset management industry is not regulated by all-encompassing legislation applicable across the board, although the Securities Market Law codifies and organises some of the regulations in this field. The existing dispersion in regulations is due, inter alia, to the fact that asset management activities can be carried out in Spain by a wide array of different entities, each of which requires specific regulation. Before giving a brief overview of the rather fragmented asset management regulatory framework in Spain, it is worth noting the remarkable pace of its evolution during the past few years, and the increasing number of amendments to the relatively new laws and regulations in place.
Below is a brief summary of the main regulations applicable to the asset management industry in Spain.
i Investment firms
Such entities, whose main activity is rendering investment services over financial instruments to third parties on a professional basis, are primarily regulated under the Securities Market Law, Royal Decree 217/2008 of 15 February on the legal regime of investment firms (RD 217/2008)7 and Commission Delegated Regulation (EU) 2017/565, and are subject to the supervision of the Spanish Securities Exchange Commission (CNMV).
RD 14/2018 and RD 1464/2018 introduced significant changes to the legal regime applicable to investment firms. The main novelties introduced a focus, inter alia, on the concept of significant investment firms, the combined buffer requirement for investment firms, the provision of investment services by third-country firms, internal organisational measures in relation to asset management and title transfer financial collateral arrangements and inducements. Perhaps one of the most significant novelties in terms of impact on the market is the prohibition to accept or retain inducements when independent advice and discretionary management portfolio services are rendered as well as having to comply with specific requirements if inducements are accepted or retained when rendering other investment services.
With regard to the provision of investment services in Spain by companies from third countries, the main change is that these companies need to establish a branch in Spain to provide investment services or activities to retail clients or professional elective clients. In addition, and this is something that goes beyond the scope of MiFID II, depending on the volume of the activity, the complexity of the products or services, or for reasons of general interest, the CNMV may require that a third-country company establish a branch if it provides or intends to provide investment services or activities in Spain to professional clients per se or to eligible counterparties.8
ii Collective investment schemes
Collective investment in Spain is carried out by means of two different types of scheme, depending on the nature of the commitment assumed by the relevant investors: open-ended schemes, which allow investors to apply for the redemption of their investment against the assets of the scheme at any time, or upon short notice; and closed-ended schemes, where the investor assumes an irrevocable commitment and may not apply for redemption until a certain deadline.
The regulation of these two categories in Spain has undergone a change driven, principally, by two EU directives and their transposition into Spanish Law: the UCITS Directive,9 implemented in Spain by means of Law 31/2011, which amended Law 35/2003, of 4 November, on Collective Investment Schemes (CIS Law); and the AIFMD,10 as transposed in Spain by means of Law 22/2014. These categories are regulated in Spain as follows: Spanish open-ended collective investment schemes and their management companies and depositaries are regulated at a general level under the CIS Law and by Royal Decree 1082/2012, by which the regulation expanding upon the CIS Law was approved (RD 1082/2012);11 and Spanish venture capital entities and closed-ended collective investment schemes as well as their management companies are subject to Law 22/2014.12 Collective investment undertakings that do not qualify as UCITS should be considered AIFs. Therefore, AIFs may take the form of closed-ended schemes, open-ended schemes, private equity firms, venture capital entities (VCEs) and other minority entities. Depending on the form they take, AIFs may be managed by an open-ended schemes management company (SGIIC) or a closed-ended schemes management company (SGEIC).
The entities referred to above are subject to the supervision of the CNMV.
iii Pension funds
Pension funds and their management and depositary companies are regulated by Royal Legislative Decree 1/2002 as amended by, inter alia, Law 22/2014 (Pension Funds Law) and its developing regulation, including Royal Decree 304/2004 (Pension Funds Regulations); and Royal Decree 304/2004, of 20 February, passing the new regulation on pension funds (which substitutes the original one from 1988, partially amended in 1999).
Both pension funds and their management companies are supervised by the Ministry of Economy and Business Support and the General Directorate of Insurance and Pension Funds (DGSFP), which is the same regulator supervising insurance companies.
iv Insurance companies
The management of insurance companies’ assets and their rules are contemplated in Law 20/2015, of 14 July, on Regulation, Supervision and Solvency of Insurance and Reinsurance Entities and Royal Decree 1060/2015, of 20 November, on the Regulation, Supervision and Solvency of Insurance and Reinsurance Entities (jointly, the Private Insurance Regulations).
The Private Insurance Regulations transpose into Spanish law the Solvency II Directive13 aiming to improve the corporate governance of insurance entities. Among other matters, it strengthens the requisites of honourableness and professional skills to perform the effective management of insurance and reinsurance companies; develops the legal framework on risk management and compliance; and strengthens the requirements of solvency and financial transparency.
Insurance and reinsurance entities are supervised by the DGSFP.
v Securitisation funds
Securitisation funds and their management companies are now regulated in Law 5/2015 of 27 April on the promotion of business financing (Law 5/2015), which, among other issues, consolidates into one piece of legislation the dispersed legal framework on securitisation existing before. The entry into force of Law 5/2015 has brought relevant novelties to the landscape of securitisation in Spain, with one of the most significant being the faculty of management companies that manage securitisation funds to actively manage the securitised portfolio of assets of open-ended securitisation funds. As this ability was not previously contemplated under Spanish law, the role of this type of management company was limited to merely passive actions such as monitoring the credits rights securitised, collecting them or, eventually, enforcing them.
Both securitisation funds and their management companies are supervised by the CNMV.
vi Real estate investment listed companies
Real estate investment listed companies (SOCIMIs) are specifically regulated under Law 11/2009, of 26 October (SOCIMIs Law), a regulation inspired by that regulating US real estate investment trusts. The corporate purpose of SOCIMIs is to invest in urban real estate assets for the purposes of leasing them to the public. Subject to certain requirements, profits earned by SOCIMIs on the leasing activities will be subject to a zero per cent corporate income tax rate.
vii Asset management companies
To comply with the undertakings of Spain under the memorandum of understanding (MoU) on financial sector policy conditionality signed by the Spanish and European authorities in July 2012 (MoU), Law 9/2012 and Royal Decree 1559/2012 were enacted. The purpose of these regulations was to set up a comprehensive framework for the restructuring and resolution of credit entities by the Spanish authorities. One of the most prominent instruments of such a framework is the use of asset management companies (AMCs), which are entities intended to manage the ‘toxic’ assets from credit entities in financial trouble. Law 9/2012 and Royal Decree 1559/2012 also contemplated a single AMC – the Company for the Management of Assets proceeding from Restructuring of the Banking System (Sareb) – incorporated to manage the toxic assets from the banks undergoing restructuring or resolution processes since 2012, as well as certain separate pools of assets defined as banking assets funds (BAFs).
Law 9/2012 was partially superseded by Law 11/2015, and only some of its provisions amending other regulations and certain additional provisions remain in force.
Law 11/2015 constitutes a continuation of the regime set forth in Law 9/2012 and shares the same principles as it, replicating, to a great extent, its structure and sections; however, it applies not only to credit institutions but also to investment firms (hereinafter, Law 9/2012, Royal Decree 1559/2012 and Law 11/2015, jointly and as in force in each case, the Credit Entities Resolution Regulations).
Among other amendments introduced by Law 11/2015, there is the reform on securities clearing, settlement and registration, and the creation of the national resolution fund, which received contributions from credit institutions and investment funds and will be replaced by the EU single resolution fund. Credit institutions will need to contribute to the EU single resolution fund in the coming years (investment firms will continue to contribute to the national resolution fund).