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Magazine Issues » March 2021

Legal Ease: Spain’s gold-plated rules

Soraya PortelaHistorically in Spain, the regulation of the fund management industry has been divided in two separate bodies of law: the laws that regulate collective investment schemes – generally, open-end entities – their management companies and depository entities (the CIS Act) and those that govern closed-end investment entities and their management companies (the Closed-End Collective Investment Act).

Implementation of AIFMD required a legislative amendment of the CIS Act and the Closed-End Collective Investment Act. 

While AIFMD purports that all alternative investment funds benefit from a harmonised management framework and cross-border marketing in all EU member states, national rules may end up significantly different between member states, at times owing to national protectionism and at other times, to differences in jurisdictional traditions: “pro-industry” versus investor-protective jurisdictions. Spain has gold-plated certain aspects of AIFMD concerning the national private placement regime (NPPR) and rules on marketing to retail investors of AIFs managed by non-EU AIFMs.  

With respect to the conditions required for marketing of AIFs managed by non-EU AIFMs (Article 42 AIFMD), Spain elected to impose a stricter prior authorisation and registration regime in lieu of the more favourable private placement regime provided in the Directive. The prior authorisation and registration requirement is mandatory for AIFs under the CIS Act and AIFs under the Closed-End Collective Investment Act. 

Similarly, with respect to the conditions required for marketing AIFs managed by non-EU AIFMs to retail investors (Article 43 AIFMD), Spain also introduced additional requirements to those set forth in the Directive, by requiring a similar authorisation/registration process. 

In either case, authorisation is subject to the CNMV’s criteria and may be denied for prudential, state reciprocity principle, investor protection and other reasons.

While in theory, both marketing of AIFs managed by non-EU AIFMs and marketing to retail investors are legally possible, from a practical standpoint, the extra layer of complex requirements above the Directive minimum only serve to thwart any attempt to obtain the CNMV’s authorisation.

Regulatory trends to watch in 2021
Amid concerns about questionable practices by firms relying on reverse solicitation for cross-border distribution of funds in the context of the end of the UK transition period, the European Securities and Markets Authority (Esma) reminded firms of the MiFID II rules on reverse solicitation. It is expected that the CNMV will pay close attention to firms’ distribution practices.

Along similar lines, the CNMV announced its intention to observe Esma’s “Guidelines on performance fees in Ucits and certain types of AIFs” which purport to ensure that performance fee models used by management companies comply with the principles of skill, care and diligence and the best interest of the fund that they manage, in a way that prevents that undue costs are charged to the fund and its investors. The Guidelines also intend to create a common investor disclosure standard in relation to performance fees.

By Soraya Portela, associate at Alter Legal

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