On 20 September, the Ministry of Economic Affairs and Digital Transformation launched an urgent public consultation for market participants and other stakeholders to submit their input on the proposed drafts. Specifically, the following draft Royal Decrees implementing the Securities Market Act (LMV) were submitted to a public consultation: ​

• Draft Royal Decree amending Royal Decree 1082/2012, of 13 July, approving the Regulations for the implementation of Law 35/2003, of 4 November, on collective investment schemes (“Draft Amendment to the CIS Regulation”).
• Draft Royal Decree on the legal regime for investment firms and other entities providing investment services (“Draft Amendment to the Royal Decree on IF”).
• Draft Royal Decree on financial instruments, admission to trading, registration of negotiable securities and market infrastructures.
• Draft Royal Decree developing the administrative powers and faculties of the National Securities Market Commission.

1. Adaptation to European Union Law

• National regulations are adapted to Regulation (EU) 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs).
• The obligation to report the identity of shareholders or members who reach, exceed or fall below the thresholds considered as significant shareholding to the CNMV on a quarterly basis has been eliminated and the register of significant shareholdings has also been eliminated.
• The 15% limit imposed on collective investment schemes (“CIS”) for investing in financial instruments that incorporate voting rights over an issuer has also been eliminated, maintaining the reference to the possibility of exercising significant influence over the issuer.
• The success fee regime has been adapted to the guidelines of the European Securities and Markets Authority.
• The obligation to require the publication of a current costs indicator in the prospectus has been eliminated.

2. Improved competitiveness and performance of collective investment schemes

• As a consequence of the amendments introduced by Law 18/2022, of 28 September, on the creation and growth of companies (Create and Grow Law) to Law 35/2003 on Collective Investment Schemes: (i) the obligation of collective investment scheme management companies (“SGIIC”), for their acronym in Spanish) to prepare and publish a quarterly report for each of the CIS they manage has been eliminated; and (ii) electronic means have been established as the default form of communication with members and shareholders.
• The obligation for SGIICs to provide the internal rules of conduct during the authorisation process has been eliminated, although any data, reports or background information deemed necessary to verify compliance with the conditions and requirements established therein may be required in accordance with the applicable regulations in force.
• The procedure for expressions of interest in appointing a new manager and/or depositary to replace another manager and/or depositary that is in a situation of insolvency, revocation or suspension is now subject to regulations.
• In cases of dissolution and liquidation of an investment fund, it will be possible, while maintaining the suspension of the member’s right to request redemption, to articulate the payments on account through the redemption of shares.
• The minimum liquidity ratio requirement of 1% has been eliminated for financial CIS.

3. Modifications related to CIS and hedge funds

• The minimum duration of the shareholders or members has been adjusted, with the maximum having been set at one year; the duration may now reach the period foreseen for the liquidation of the investments made in the hedge fund (“IICIL”, for its acronym in Spanish).
• It is stipulated that the proration of IICIL redemptions will be made not conditional on their settlement on the redemption date, but on the availability of the necessary liquidity.
• The regime for marketing IICILs to non-professional investors has been made more flexible. Thus, as an alternative to the requirement of €100,000 of investment, marketing to this type of investor is allowed when they make their investment following the recommendation of an entity authorised to provide advisory services, and, if the client’s financial assets do not exceed €500,000, an initial minimum investment of €10,000 will be made and will not represent more than 10% of these assets.

4. Technical adjustments related to special purpose sub-funds

• The possibility of such sub-funds being made through a legal entity has been eliminated, retaining only the option of using a fund as a vehicle.
• The minimum amount of the CIS assets, whose valuation or sale at fair value must be affected by exceptional circumstances for the creation of this type of sub-funds, has been reduced from 5% to 1%.
• The process of redemptions as the special purpose sub-fund becomes liquid has been outlined.
• A maximum limit has been established for the management fee as from the second-year equivalent to (i) one third of the management fee established in the original CIS; or (ii) 0.20% of the assets under management, if the latter is lower than said percentage.

5. Calculation of the net asset value, subscription and redemption regime and risk diversification

• A provision is made for subscriptions and redemptions to be dealt with at least fortnightly on the dates set out in the prospectus, with the manager calculating the net asset value in such cases at that frequency or at a higher frequency for information purposes.
• In order to facilitate the management of funds with strategies focused on less liquid assets, it will be possible to establish notice periods adjusted to the frequency of the calculation of the net asset value in the prospectus and management regulations of funds of a financial nature.
• The limits to risk diversification of SGIICs are reinforced by including, within the limit of 25% concentration in the same entity or entities belonging to the same group, all types of financial instruments and cash.

6. New developments in sustainability

The amendments introduced in the Draft Amendment to the CIS Regulation in this area derive from Commission Delegated Directive (EU) 2021/1270 of 21 April 2021 amending Directive 2010/43/EU as regards the sustainability risks and sustainability factors to be taken into consideration for Undertakings for Collective investment in Transferable Securities (UCITS):

• A requirement is introduced for SGIICs to establish a suitable and documented risk management policy that considers, among other matters, sustainability risks.
• The board of directors of the SGIIC will be responsible for ensuring that sustainability risks are integrated into its functions.
• A reference has been added to SGIICs’ obligation to effectively integrate sustainability risks into the management of CIS.
• When identifying the types of conflicts of interest, an obligation has been introduced for SGIICs to include those that may arise as a consequence of the integration of sustainability risks in their processes, systems and internal controls.
• Finally, the SGIIC or the CIS will assess each CIS’ exposure to sustainability risks and consider the main adverse effects of the investment decisions on the sustainability factors.

1. Minimum capital requirements

As one of the most notable new elements of the Draft, the minimum initial capital requirements for investment firms (“IF”) are modified, varying according to the type of investment firm and its programme of activities, and will be as follows:

1. Broker-dealers: 750,000 euros.
2. Brokers authorised to hold deposits of clients’ funds or securities, or to manage MTFs or OTFs: 150,000 euros.
3. Other brokers: 75,000 euros.
4. Portfolio management companies and financial advisory firms: 75,000 euros.

2. New regime for the NBFC

A special regime is created for National Financial Advisory Firms (“NBFC”), which will not have a European passport and to which the third-country regime will not apply.

The NBFC (i) must have professional indemnity insurance, guarantee or other equivalent security to cover potential liability for negligence in the conduct of their business; (ii) may provide their services only in respect of transferable securities and units and shares of collective investment schemes, private equity entities and closed-end collective investment schemes; and (iii) in the case of legal persons, must have an initial capital of EUR 50,000.

3. FOGAIN accession regime

The mechanism for joining the FOGAIN is developed for all financial advisory firms: (i) the legal contribution regime is modified in order to achieve a greater link between the contribution of each firm to the Fund and the risk it could entail for the whole system; (ii) a formula is introduced to determine the volume of assets from which the progressive reduction of the contributions to be made by member firms will take place; (iii) the formula for calculating the assets that will trigger the suspension of certain contributions is adjusted; and (iv) a voluntary and progressive regime is introduced for firms to adapt to the new legal contribution regime.

4. Rules of conduct

As regards rules of conduct it introduces a new provision on shareholder engagement in investment firms. In addition, it also transposes Commission Delegated Directive (EU) 2021/1269 of 21 April 2021 amending Delegated Directive (EU) 2017/593 as regards the integration of sustainability factors into product governance obligations.

5. Other relevant developments

• With regard to the cross-border regime for the provision of investment services, the content of the previous legislation is largely maintained, although technical improvements are included, most notably the specification of requirements for investment firms not authorised in a EU Member State that render investment services in Spain.
• The regulation of qualifying holdings is also improved compared to the previous legislation.
• Finally, the regulation of data service providers is adapted, updating the provisions that have been rendered obsolete by the entry into force of several European provisions.

This Royal Decree, which will enter into force on 1 September, implements Act 19/2003 of 4 July on the legal regime governing capital movements and foreign economic transactions, with regard to investments, in order to reduce the burdens, administrative obstacles and response and resolution times.

Regarding collective investment schemes:

• It establishes a regime for reporting foreign investments in Spain to the Investment Register of the Ministry of Industry, Trade and Tourism that includes the acquisition of units and shares in collective investment schemes and closed-end collective investment entities provided that the management company is resident in Spain and that, as a result, a holding equal to or greater than 10 per cent of the equity or share capital of the entity is to be acquired, or is entitled to be acquired.
• It establishes a regime for reporting, to the same registry, Spanish investments abroad that equally includes the acquisition of units and shares in collective investment schemes and closed-end collective investment entities in the event that the management company is not resident in Spain and as a result a participation equal to or greater than 10 per cent of the assets or share capital of the entity is to be acquired, or is entitled to be acquired.

Following the publication in the Official State Gazette on 12 July of the Royal Decree creating the Central Registry of Beneficial Owners and approving its operating regulations, the Ministry of Justice launched the Central Registry of Beneficial Owners last 19 September.

On 18 September, the CNMV updated its questions and answers document on the prospectus regime to be published in public offers and admissions to trading on regulated markets, modifying sections 2, 6 and 9 by virtue of the entry into force of Article 63 of Law 6/2023, of 17 March, on Securities Markets and Investment Services.

The aforementioned article transfers the powers of verification of the requirements for admission of non-equity securities from the CNMV to the governing bodies of the markets where admission is requested.

On 12 July, the CNMV approved the Resolution on intervention measures on the marketing, distribution or sale to retail investors of financial contracts for differences (CFDs) and other leveraged instruments.

The CNMV prohibits CFD advertising aimed at retailers or the general public, sponsorship of events (including sporting events), as well as brand advertising and the use of public figures and certain remuneration systems.

The Resolution also establishes intervention measures on the marketing, sale and distribution of leveraged instruments to retail clients.

On 10 July, the CNMV announced the adoption of six Guidelines on the recovery of central counterparties (CCPs) which implement Regulation (EU) 2021/23 of the European Parliament and of the Council of 16 December 2020 on a framework for the recovery and resolution of central counterparties.

On September 7, the CNMV issued a statement announcing the authorisation of BME Clearing to include index futures linked to the performance of the cryptocurrencies Bitcoin and Ethereum denominated in US Dollars (USD) in its programme of activities. From now on, BME Clearing will be able to clear these products as long as they are aimed at professional clients.

On 7 July, the CNMV published a press release announcing the preparation of a report on the revitalisation of Spanish capital markets led by the OECD and supported by the European Union and the CNMV itself.

On September 21, the European Council published the text of the proposal for the Directive of the European Parliament and of the Council on credit agreements for consumers and repealing Directive 2008/48/EC. The proposed Directive will enter into force 20 days after its publication in the Official Journal of the EU.

The text of the proposal extends its scope of application to cover loans of less than €200 and up to €100,000, unsecured loans for a total amount of more than €100,000, when the purpose of the credit is the renovation of a residential property, and loans granted without interest or other charges. In addition, it covers “buy now, pay later” products, in which the purchase price must be paid without interest or other charges within 50 days from the date of delivery. In addition, new information requirements are introduced that are more adapted to the context of digital services.

On 31 August, Commission Delegated Regulation (EU) 2023/1668, of 25 May 2023, supplementing Directive (EU) 2019/2034 of the European Parliament and of the Council with regard to regulatory technical standards specifying the measurement of risks or elements of risks not covered or not sufficiently covered by the own funds requirements set out in Parts Three and Four of Regulation (EU) 2019/2033 of the European Parliament and of the Council and the indicative qualitative metrics for the amounts of additional own funds, was published in the Official Journal of the European Union.

The Delegated Regulation entered into force on 20 September 2023.

On 6 September, the Official Journal of the European Union published the Delegated Regulation supplementing Regulation (EU) No 575/2013 as regards the reporting methods to be used by financial institutions in relation to their exposures to unregulated entities, also known as “shadow banking entities”.

On 20 July, the Council published a communication stating that a provisional agreement had been reached between the Council and the European Parliament on the revision of Directive 2011/61/EU of the European Parliament and of the Council, of 8 June 2011, on Alternative Investment Fund Managers (AIFMD) and 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) and EU conventional investment funds.

The agreement reached is provisional and still needs to be confirmed by the Council and the Parliament before it can be formally adopted.

On 14 July, the European Commission announced the revision of Commission Implementing Regulation (EU) No 650/2014, of 4 June, laying down implementing technical standards as regards the format, structure, contents list and annual publication date of the information to be published by competent authorities in accordance with Directive 2013/36/EU of the European Parliament and of the Council.

The revision aims to update the Annexes to that Regulation in line with the banking sector package that entered into force in June 2019.

On 14 July, the European Commission presented a proposal for the extension of the suspension of the rules applicable to non-EU benchmarks under Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds.

The application of these rules is currently suspended until 31 December 2023. However, the Commission proposes that it be postponed until 31 December 2025.

On 3 July, the European Parliament published a study analysing the impact that recent regulatory changes have had on the effectiveness of the legal framework for the resolution of credit institutions.

On 3 August, ESMA published the guidelines on the MiFID II product governance requirements. These guidelines, which will enter into force two months following the date of publication in all EU official languages, apply in relation to the manufacturing or distribution of financial instruments and structured deposits.

On 11 July, ESMA updated the Committee of European Securities Regulators (CESR) Q&A document on the interpretation of the concept of advice under MiFID II, in order to align it with new business models and recent technological developments.

On 12 July, ESMA published its Final Report on the contributions received to the call for evidence on pre-hedging practices carried out during 2022.

In said Final Report, ESMA concludes that, although pre-hedging is a voluntary and legitimate market practice, it could give rise to conflicts of interest or abusive behaviour. ESMA does not find arguments to prohibit this practice for the time being, although it warns of its risks and states that they will be considered for future guidelines or decisions on the matter.

On 11 July, ESMA published a Final Report revising the technical standards on the EU passporting regime for investment services pursuant to Article 34 of MiFID II. In this paper, ESMA proposes (i) to amend the technical standards to expand the information that investment firms will be required to provide when applying for the EU passport; and (ii) to renew the passport notification templates in order to provide national competent authorities with more detail on the intended cross-border activities of the applicant investment firm.

ESMA has submitted the Final Report to the European Commission, which must decide whether to proceed with the review.

On 13 July, ESMA published a communication informing market participants of the update to its Q&A documents on:

• Regulation (EC) No 1060/2009 of the European Parliament and of the Council, of 16 September 2009, on Credit Rating Agencies (CRA Regulation): Question 8 on the communication of rating errors to ESMA and to the rated entities affected by such an error is amended.
• Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 establishing a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation (Securitisation Regulation): includes updates to ESMA’s responses and some new guidance on a number of issues, including (i) amendments to transaction documents; (ii) reporting templates in the context of self-securitisation; (iii) delegation of responsibilities for conversion to XML; and (iv) some aspects of communications made with templates.

On 28 September, the ESAs released their second annual report on the extent of voluntary disclosure of major adverse impacts under SFDR. In this report, the ESAs conclude that they have detected a general improvement compared to the previous year, although there are still significant variations in the degree of compliance with the requirements and in the quality of the information, both among financial market participants and across jurisdictions.

On 27 September, the ESAs published a study analysing the market for third-party information and communication technology (ICT) service providers as part of their preparation for the Digital Operational Resilience Regulation (DORA).

The objective of the report is to analyse the sector of third-party ICT service providers to EU entities, to drive the ESAs’ policy making process in line with the European Commission’s request for advice to further specify the criteria for critical third-party ICT service providers and to determine the corresponding supervision fees.

In their study, the ESAs conclude that there is evidence of a high level of market concentration, interconnection and interdependence among suppliers.

On 10 July, ESMA published its new post-trade transparency manual aimed at guiding national competent authorities and market participants in the application of the rules and calculations for compliance with MiFIR’s post-trade transparency requirements.

On 11 July ESMA issued an Opinion in relation to certain product intervention measures implemented by the CNMV, in particular: (i) restrictions on the marketing and advertising of CFDs (contracts for difference); and (ii) the introduction of initial and close-out margin requirements for high-risk financial products that may lead investors to lose more than invested. ESMA’s Opinion considers that the measures adopted are justified and proportionate to their objectives.

In addition, ESMA invites national competent authorities in other Member States to monitor the marketing, sale and distribution of CFDs and the impact of other high-risk products in their national markets to assess whether there are risks to retail investors similar to those identified by the CNMV.

On 3 July, ESMA released its second report analysing national regulations governing the marketing of collective investment schemes (“CIS”).  ESMA concludes that regulatory divergences between Member States have been reduced by the transposition of the Directive on cross-border marketing of CIS and the ESMA Guidelines on communications relating to the marketing of CIS.

On 6 July, ESMA issued a communication on the 2022 common supervisory action and mystery shopping exercises carried out by supervisory authorities. ESMA notes that the investment firms surveyed generally comply with the ex-post cost and expense reporting requirements of the MiFID II Directive. However, shortcomings have been identified that will need to be addressed by the competent national authorities, including: (i) significant differences between institutions and Member States in the format and content of ex-post information; and (ii) shortcomings in the disclosure of information on implicit costs to customers.

On 6 July, ESMA announced a Joint Supervisory Action on the assessment of sustainability information and risks in the investment fund sector, which purpose is to analyse the level of compliance with the SFDR Regulation, the Taxonomy Regulation and the amendments to the UCITS and AIFMD Directives with regard to sustainability disclosures and the integration of sustainability risks.

On 24 July, the EBA published a Report on interdependent assets and liabilities in the calculation of the net stable funding ratio (“NSFR”), aimed at assessing the conditions under which assets and liabilities can be treated as interdependent in the NSFR and the description of the list of activities that are considered to fall within this concept.

On 21 July, the EBA published an updated report on the monitoring of Additional Tier 1, Tier 2 and total loss absorbing capacity (TLAC) and minimum requirement for own funds and eligible liabilities (MREL) instruments of European Union institutions. Overall, EBA has observed a high degree of convergence and standardisation in the drafting of the terms and conditions of instruments and issuance programmes, also as a result of the implementation of previous recommendations issued by EBA.

On 11 July ESMA published a communication on sustainability information to be included in prospectuses for equity and non-equity financial instruments, in which it stresses the importance of non-financial information from issuers as well as sustainability information from companies.

On 25 July, IOSCO announced its adoption of the sustainability disclosure standards of the International Sustainability Standards Board (ISSB), in order to bring further harmonisation of sustainability disclosure standards in the financial markets.

On 17 July, the Financial Stability Board (FSB) published a statement informing that it is in the final stages of preparing a global regulatory framework for crypto-asset-related activities, accompanied by an “umbrella” public note on the composition and functioning of the framework, in which it will include two distinct sets of recommendations:

• High-level recommendations for the regulation, supervision and oversight of global stablecoin arrangements; and
• High-level recommendations for the regulation, supervision and oversight of crypto-asset activities and markets.