On 29 December, the Official State Gazette published Royal Decree 1180/2023, of 27 December, amending, among others, the Regulation implementing Law 35/2003, of 4 November, on collective investment institutions, approved by Royal Decree 1082/2012, of 13 July (“RD 1180/2023”).

This law, which will enter into force on 17 January 2024, incorporates the Regulation implementing Law 35/2003 of 4 November on Collective Investment Institutions, approved by Royal Decree 1082/2012, of 13 July (the “RCII”), thus completing the reforms initiated in this area by Law 18/2022, of 28 September, on the Creation and Growth of Companies and Law 6/2023, of 17 March, on Securities Markets and Investment Services.

The following are some of the main new features brought about by the amendments to RD 1180/2023 regarding collective investment institutions (“CIIs”).

1. Success fee: the success fee regime has been aligned to ESMA guidelines. Although the percentage limits remain unchanged, it is stipulated, inter alia, that the management company must specify in the prospectus the system for calculating the success fee, for which it may use reference net asset values, reference indexes and/or hurdle rates.
2. Custody and administration fees: changes have been made to the regime for charging custody and administration fees for units in the case of marketing investment funds through omnibus accounts and introducing changes to the fee regime to establish mechanisms to ensure that marketing costs are passed back to the investing fund in case they are incorporated in the management fee of the underlying fund.
3. Running costs indicator: the obligation to require disclosure of a running costs indicator in the prospectus is removed, as it is not required by Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 (“UCITS Directive”).
4. Payments in the event of the dissolution and liquidation of an investment fund: Article 35 of the RCII has been amended to make it explicit that in cases of the dissolution and liquidation of an investment fund it is possible to make payments on account through the redemption of units, provided that the suspension of the unitholder’s right to request redemption is maintained.
5. CII investment in financial instruments that incorporate voting rights over an issuer: in order to bring Spanish regulation into line with European regulations, the amendment to article 51 of the RCII removes the quantitative limits imposed on CIIs for investing in financial instruments that incorporate voting rights over an issuer, maintaining the reference to the possibility of exercising significant influence over the issuer, as established in the UCITS Directive.
6. Liquidity ratio for CIIs: the new wording of Article 53 of the RCII removes the requirement for a liquidity ratio of 1% for CIIs, as it was not a requirement under EU law.
7. Developments applicable to hedge funds:

• (i) The minimum holding periods have been adjusted, with the quantitative limit of one year now eliminated, in order to establish a holding period linked to the period provided for the liquidation of the investments made in hedge funds.
• (ii) The prorating of redemptions will be carried out without making it conditional on their settlement on the next redemption date but rather on the availability of the necessary liquidity. This will make it possible to match the liquidity of Spanish CIIs investing in foreign CIIs which provide for the prorating of redemptions on the same terms.
• (iii) The marketing regime for non-professional investors has been made more flexible in order to assimilate it to the regime that Law 18/2022, of 28 September, on the Creation and Growth of Companies introduced for venture capital companies and other closed-end collective investment entities. As an alternative to the €100,000 investment requirement, marketing to non-professional customers is permitted, provided that:
• they access the investment through the recommendation of an entity authorised to provide the advisory service; and
• where the customer’s financial assets do not exceed €500,000, a minimum initial investment of €10,000 is made which does not represent more than 10% of such assets.

8. Special purpose sub-funds:

• (i) The possibility for these sub-funds to be implemented through a company has been eliminated, as supervisory practice advises using a fund as a vehicle, which is more immediate and appropriate when short-term solutions are required.
• (ii) The minimum amount of the CII assets required for the creation of these sub-funds to be affected by circumstances preventing a valuation or sale at fair value has been reduced from 5% to 1%.
• (iii) The regulation of how redemptions are to occur as the special purpose sub-fund obtains liquidity has been established.
• (iv) Stricter limits have been set on management and deposit fees from the second year onwards.

9. Calculation of the net asset value: Article 78 of the RCII has been amended to give greater flexibility to the calculation of the net asset value, maintaining that subscriptions and redemptions can be dealt with at least fortnightly, as well as to allow fund management regulations to provide for notice periods adjusted to the maximum period for dealing with subscription and redemption requests.
10. Limits on risk diversification of management companies of CIIs: the limits on risk diversification of management companies of CIIs (“MCCIIs”) have been strengthened to include within the 25% limit of concentration in the same entity or entities belonging to the same group not only issued securities, but also all types of financial instruments and cash.
11. Fixed contributions to the FOGAIN: RD 1180/2023 significantly reduces fixed contributions to the FOGAIN for MCCIIs. Specifically, for the discretionary portfolio management service the fixed annual contribution is set at €2,700 and for investment advice at €800 per year, which is well below the currently applicable range of €20,000-40,000.
12. Deadline for adaptation to the new legal regime for contributions to the FOGAIN:

• (i) Financial advisory firms will have a period of three months from the entry into force of this Royal Decree to join the FOGAIN, i.e. until 17 April 2024.
• (ii) Institutions that were already members of the FOGAIN will be able to take advantage of a voluntary system of progressive adaptation to the new contribution system established in RD 1180/2023 amending Royal Decree 948/2001, of 3 August, on investor-compensation schemes.
• (iii) Each institution must notify the management company whether or not it will be availing itself of this regime within two weeks of the entry into force of this Royal Decree, i.e. 1 February 2024. Any institution that does not notify its acceptance of this system within the time and in the manner established by the management company or does not cooperate in the terms requested by the latter will be excluded from this voluntary system of progressive adaptation.

On 9 November, the four Royal Decrees that complete the implementation of the new Law 6/2023, of 17 March, on Securities Markets and Investment Services, were published in the Official State Gazette (“BOE”), transposing various EU directives into Spanish law. You can access the texts published in the BOE below:

• Royal Decree 813/2023, of 8 November, on the legal regime of investment services companies and other entities that provide investment services.
• Royal Decree 814/2023, of 8 November, on financial instruments, admission to trading, registration of marketable securities and market infrastructures.
• Royal Decree 815/2023, of 8 November, which implements Law 6/2023, of 17 March, on Securities Markets and Investment Services, in relation to the official registries of the National Securities Market Commission, cooperation with other authorities and the supervision of investment services companies.
• Royal Decree 816/2023, of 8 November, amending the Regulations implementing Law 35/2003, of 4 November 2003, on Collective Investment Schemes, approved by Royal Decree 1082/2012, of 13 July.

On 28 December, the Spanish Official State Gazette published Royal Decree 1180/2023 amending Royal Decree 948/2001, of August 3, on investor compensation systems and the Regulation implementing Law 35/2003, of November 4, on collective investment institutions, approved by Royal Decree 1082/2012, of July 13.

This Royal Decree introduces several amendments to the collective investment institutions (“CII“) regime, mainly regarding: (i) the operating and distribution regime for hedge funds; (ii) the charging of fees in the case of marketing investment funds through omnibus accounts; (iii) the reduction of contributions to the FOGAIN; and (iv) the adaptation of the regulation of success fees to ESMA guidelines.

On 28 December, the Spanish Official Gazette published Royal Decree-law 8/2023 amending Article 35 on applicable fees and commissions of Royal Decree-law 19/2018, of November 23, on payment services and other urgent measures in financial matters. In addition, this new Royal Decree-law regulates ICT-related risk management obligations for payment system operators, payment scheme operators and electronic payment agreement operators.

Following the formation of the new Government, the Ministry of Economy, Commerce and Enterprise took up the initiative to create the authority for the protection of financial customers by submitting a new draft bill for consultation on 20 December, which will be processed as a matter of urgency. The aim is for the new body to deal with the out-of-court resolution of conflicts between financial institutions and their customers.

Following ESMA’s statement encouraging Member States to accelerate the implementation of the MiCA Regulation in national regulations, on 26 October, the Spanish Ministry of Economic Affairs and Digital Transformation issued a statement announcing the Government’s decision to shorten the transitional period for the application of the MiCA Regulation.

As a result of this decision, the MiCA Regulation will apply in Spain as follows: (i) regarding the issuance of asset-referenced tokens and e-money tokens, as of 30 June 2024; and (ii) regarding the provision of crypto-asset services, (a) as of 30 December 2024, an authorisation will be required for entities that want to start operating; and (b) as of 30 December 2025, an authorisation will be required for entities that were already providing services related to crypto-assets before 30 December 2024.

On 11 October, the CNMV released a communication announcing that it will comply with the Guidelines on MiFID II product governance requirements, thus taking them into account and supervising their application by entities manufacturing or distributing products.

These Guidelines incorporate the new regulatory developments and the most recent supervisory experience into the most recent ones, such as the obligation for producers and distributors to justify and document the decisions made concerning their product governance arrangements, including the identification of the target market and the corresponding distribution strategies. They also establish additional criteria to verify whether products and services are effectively reaching the target market.

On 18 December, the CNMV published a statement informing of the opening of a public consultation on the update of the Technical Guide on Audit Committees of Public Interest Entities. The objective of this update is the handling of information on sustainability and its associated risks.

On 14 November, Circular 3/2023, of 31 October, of the Bank of Spain, was published in the BOE, amending Circular 2/2016, of 2 February, on supervision and solvency for credit institutions. This completes the adaptation of Spanish law to Directive 2013/36/EU and Regulation (EU) No 575/2013, and Circular 1/2022, of 24 January, on liquidity, prudential rules and reporting obligations for financial credit institutions.

The regulation amends Circular 2/2016 on supervision and solvency regarding the provision of services in Spain by non-EU entities without a branch located in Spain and introduces certain assessment criteria for its authorisation process.

On 6 October, the Bank of Spain released its 2022 Complaints Report, which includes all the information on the complaints and queries handled by the institution during this period.

On 27 December, Regulation (EU) 2023/2845 of the European Parliament and of the Council of 13 December 2023 amending Regulation (EU) No 909/2014 as regards settlement discipline, cross-border provision of services, supervisory cooperation, provision of banking-type ancillary services and requirements for third-country central securities depositories and amending Regulation (EU) No 236/2012 was published in the OJEU.

In addition to updating the rules set out in Regulation 909/2014 on aspects such as the authorisation and operational requirements of central securities depositories, it is noteworthy that it includes significant amendments to the settlement discipline regime for CIIs and pension funds.

Directive (EU) 2023/2673 of the European Parliament and of the Council of 22 November 2023 amending Directive 2011/83/EU as regards financial services contracts concluded at a distance and repealing Directive 2002/65/EC was published in the OJEU on 28 November 2023.

Its main novelties include: (i) the mandatory inclusion of the right of withdrawal for customers; (ii) certain amendments aimed at updating pre-contractual information requirements; and (iii) the right of customers to request human intervention in their interaction with the entity providing online financial services. Member States must take the necessary measures to comply with its terms by 19 December 2025 at the latest.

On 29 September, Commission Implementing Regulation (EU) 2023/2083 of 26 September 2023 laying down templates for the information that credit institutions must provide to buyers of NPLs in order to facilitate their sale on secondary markets and reduce barriers to market entry for credit institutions and retail investors wishing to enter into this type of transaction was published in the OJEU on 29 September.

On 15 December the European Commission adopted a Commission Delegated Regulation and a Commission Implementing Regulation specifying the information to be provided and the formats to be used for reporting to competent authorities on the cross-border marketing and management of investment funds and the cross-border provision of investment services by investment fund management companies. Both documents are pending publication in the OJEU.

On 6 November, the EU Council approved the final text of the Proposal for the Directive amending the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD Directive) and the UCITS Directive (2009/65/EC) as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds.

The final text must be approved by the European Parliament before its publication in the OJEU.

On 27 November, the EU Council adopted a Regulation aimed at reducing the financial and regulatory burden on central securities depositories (“CSDs”), as well as enhancing their ability to operate on a cross-border basis. In particular, the Regulation (i) provides for a simplification of the passporting regime applicable to CSDs; (ii) enhances cooperation between supervisors; (iii) regulates CSDs’ access to banking services; and (iv) includes measures to improve the efficiency of securities settlement.

Following this adoption, the Regulation will be published in the OJEU and will enter into force 20 days after its publication.

On 13 December, the Council released a communication informing of the provisional agreement reached with the European Parliament on the creation of a new European authority responsible for the supervision of the prevention of money laundering and terrorism financing (“AML/CFT”).

On 6 December, the European Parliament and the Council reached a provisional agreement on the legislative proposal known as “Daisy Chains”. It consists of a revision of the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) that aims to give resolution authorities the power to set the internal MREL of banking groups on a consolidated basis, provided that certain conditions are met.

The agreement reached will have to be formally approved by the European Parliament and adopted by the Council before publication in the OJEU, and will enter into force 20 days later, although it will become applicable six months after publications.

On 5 December, the European Parliament published a report by the Committee on Economic and Monetary Affairs on the proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of clearing markets in the Union.

On 16 October, the European Commission presented a regulatory package, consisting of two proposals to amend directives and one regulation, aimed at promoting transparency in the information provided to retail investors, as well as ensuring that investment decisions are tailored to the characteristics and particular situation of these investors.

The package focuses on mitigating potential conflicts of interest for advisers and increasing the cost-benefit ratio of retail investments.

On 17 October, the Commission published an initiative to reform Regulations (EU) No 1092/2010, (EU) No 1093/2010, (EU) No 1094/2010, (EU) No 1095/2010 and (EU) No 2021/523. This reform aims to reduce the costs and workload of the current reporting obligations of financial institutions, without undermining the achievement of the objectives of the rules. Regarding financial services, the proposal aims to facilitate and foster the exchange of information between supervisory authorities.

On 13 October, the European Commission announced the following two legislative initiatives, which are scheduled for adoption in 2024:

1. 1. Delegated regulations further specifying certain criteria and fees relating to critical ICT third-party service providers required to implement Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience for the financial sector.
   2. Delegated regulations to be adopted by the Commission under Regulation 2023/1114 on markets in crypto-assets further specifying the criteria for an asset-referenced token to be classified as significant, supervisory measures on product intervention powers, procedural rules for the European Banking Authority’s exercise of its power to impose fines or periodic penalty payments as well as charge fees.

On 5 December, the ESAs jointly published an updated version of their consolidated Q&A document on the Key Information Document (“KID”) for PRIIPs-regulated packaged and insurance-based retail investment products, to include seven additional questions and answers.

It is relevant to highlight that with this update the ESAs stipulate that, as far as investment funds are concerned, the manufacturer of the packaged product will normally be the management company of the investment fund (whether AIF or UCIT) or the fund itself in the event that it is self-managed.

In addition, the Q&A includes an update on product categorisation, calculation of performance scenarios or information to be included in the DFI for multi-option products.

On 15 December ESMA issued an update of its Q&A document on investor protection which includes new developments with regard to the costs and performance of retail investment products. In this regard, ESMA has updated the following sections:

• Question 13, section 9: ESMA specifies how the information on costs and expenses should apply to cases where an all-in fee model is used.
• Question 35, Section 9: ESMA includes a new question clarifying how an investment firm should indicate, in the ex-ante and ex-post costs and expenses information, the portion of costs and expenses that has been paid, or is represented in a foreign currency.

On 14 December ESMA released a discussion paper analysing the digitalisation of retail investment services and its impact on investor protection. The paper proposes a series of recommendations on a number of issues, including accessibility of information, the “influencer” phenomenon and digital marketing and communication practices, and is open for comments until 14 March 2024.

On 19 December ESMA released a final report containing draft regulatory technical standards for the implementation of the ELTIF Regulation. It defines the specific implementing rules and sets out a specific framework for aspects such as the minimum holding period and maximum redemption frequency, the choice of liquidity management instruments, the notice period and the maximum percentage of liquid assets that can be redeemed.

ESMA has submitted the draft regulatory technical standards to the European Commission for adoption and final approval.

On 11 October, ESMA released two articles on decentralised finance (“DeFI”), the first on its developments and risks in the EU market and the second on a methodology for the categorisation of smart contracts. These articles highlight the risks to consumers, new forms of market abuse and potential risks to financial stability that could arise from the adoption and development of this technology in the EU market.

On 8 December, the ESAs launched a public consultation, open until 4 March 2024, in the context of the second regulatory development batch of the DORA Regulation, which aims to obtain the views of market participants on 4 draft regulatory technical standards, one implementing technical standard and two sets of Guidelines on serious ICT incident reporting, digital operational stress testing, ICT third-party risk management and supervision of critical ICT third-party providers.

On 15 December, the EBA released its final guidelines on the assessment of compliance with the knowledge and experience requirements of the members of the management body, and of the management body as a whole, of credit servicers under the NPL Directive.

On 27 November, the EBA published the Final Report on the extension of its risk-based anti-money laundering and combating the financing of terrorism (“AML/CFT”) guidelines for AML/CFT supervisors of crypto-asset service providers (“CASPs”).

These Guidelines are intended to provide guidance on the measures supervisors should take to identify and manage AML/CFT risks in the AML/CFT sector, including guidance on the sources of information to be considered by supervisors in the AML/CFT context.

On 20 December the EBA published its final draft implementing technical standards on amendments to the disclosure and reporting duties of the MREL (minimum required for own funds and eligible liabilities) and TLAC (total loss absorbency requirement). These amendments include an obligation to deduct investments in eligible liabilities instruments of entities belonging to the same resolution group, as well as other updates to the prudential framework. The amendments will be of application in June 2024.

On 7 December, EBA published a consultation paper on draft regulatory technical standards (“RTS”) to specify requirements regarding conflicts of interest policies and procedures for issuers of asset-referenced tokens under the MiCA Regulation. These drafts aim to strengthen the management of conflicts of interest by issuers of asset-referenced tokens and ensure convergence of requirements across the European Union.

Notably, the draft RTSs underline the key role of issuers’ management bodies, which are responsible for defining and adopting policies and procedures on conflicts of interest. They also set out the content of the information that issuers of asset-referenced tokens must make available to the public on their websites.

On 30 November, Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds was published in the OJEU. The Regulation aims to promote these financial instruments and to support the EU’s transition to climate neutrality by establishing uniform rules to combat greenwashing. This allows investors to direct their money more confidently towards sustainable investments and provides issuers with more certainty about the suitability of their bonds for investors who want to add green bonds to their portfolio.

On 20 December 2023, Regulation (EU) 2023/2859 of the European Parliament and of the Council of 13 December 2023 establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability (“ESAP”) was published in the OJEU.

The aim of the ESAP is to make financial and sustainability information on companies and investment products in the European Union available to the public easily, free of charge and electronically. The ESAP will facilitate access to information that has already been published pursuant to the applicable rules or that is submitted on a voluntary basis.

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards, which contains the first set of common standards for sustainability disclosures, the so-called ESRS or European Sustainability Reporting Standards, in the context of Directive 2013/34/EU on corporate sustainability disclosures (CSDR), was published in the OJEU on 20 December.

The European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) published a draft report on the European Commission’s legislative proposal for a Regulation on the transparency and integrity of ESG rating activities. This draft establishes the Parliament’s preliminary position regarding, mainly, the following aspects of the proposal: (i) limits on changes to the scope of application; (ii) a prohibition on bundling ratings on environmental, social and governance ratings within the same parameter; and (iii) provisions on conflicts of interest and ensuring the independence of analysts.

Next, this report will be debated, after which the Parliament will agree upon its final position for the tripartite dialogue phase.

On 3 October, ESMA announced the 2024 launch of a Common Supervisory Action (CSA) with National Competent Authorities on the integration of sustainability into the suitability assessment and product governance processes and procedures of investment services firms.

On 10 October, ICMA released a comprehensive analysis of greenwashing concerns in the sustainable finance market, which includes five recommendations addressed to legislative and supervisory authorities.

The purpose of this document is to promote a constructive dialogue between the market and regulators to address the dangers of greenwashing while avoiding the risk of regulatory overreach and market complacency.

Last November, the FATF-GAFI published a new version of its Recommendations. This document contains the main recommendations to be applied by member countries to combat money laundering and the financing of terrorism.

On 16 November, IOSCO announced the publication of its Final Report on Policy Recommendations for Crypto and Digital Asset Markets, which aims to establish a clear and robust international regulatory basis to ensure that crypto-asset service providers conform to the standards of conduct of traditional financial markets.

The Report covers the following areas: (i) conflicts of interest; (ii) market manipulation; (iii) custody and protection of client assets; (iv) cross-border risks and cooperation between authorities; (v) operational and technological risk; and (vi) retail distribution.

On 7 November, the European Banking Federation (EBF) issued a statement announcing that the European Credit Sector Associations (“ECSAs”) have expressed their concern about the lack of clear guidelines regarding the scope of application of the strong authentication measures (SCAs) provided in the eIDAS 2.0 Regulation.

The ECSAs point out that payment systems and means of payment are already subject to the strong authentication obligations arising from the PSD2 regulation and consider that their inclusion in the scope of eIDAS 2.0 could generate an excessive adaptation cost.

On 20 October, the European Banking Industry Committee (EBIC) submitted a joint letter to the European Supervisory Authorities (ESAs) requesting a postponement of the Basel III implementation date in the European Union, including that of the Capital Requirements Regulation III (CRR III).

The Committee argues that these legislative reforms bring about major changes that require a transitional period of at least 18 months from publication in the OJEU to the date of application.

On 4 December, the Financial Stability Board (FSB) published a report to help financial authorities and institutions improve the management and supervision of third-party risks. In doing so, the Report presents a flexible set of tools that financial authorities and institutions can consider depending on their circumstances, including the legal framework and the specific characteristics of their jurisdictions. At the same time, these tools are intended to promote comparability across jurisdictions.