Regulation, licensing and registrationPrincipal regulatory bodies
What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?
The CNMV is the main supervisory and regulatory body for ECRs, and has very wide inspection rights within its authority and functions.
The CNMV must be notified of changes in the documents submitted to the CNMV within the authorisation and constitution process, including changes related to directors and top executives of the ECR or its management company (some of these changes may require the CNMV’s prior approval). Also, the CNMV must be regularly provided with accounting information, which has to be submitted to the CNMV in the way of annual accounts after the end of the fiscal year to which they refer, as well as the managers having to provide the CNMV with different documents containing certain economic information related to the ECRs managed by them including the audited annual accounts.
Without prejudice to the above, when, as provided in article 72 of Law No. 22/2014, the management company or the assets of the ECRs managed by it exceed certain size limits (€100 million for leveraged funds and €500 million for unleveraged funds) or are marketed to non-professional investors, additional reporting requirements may apply, the following being the most relevant:
- annual report for investors and the CNMV to be provided no later than six months after the year end;
- audited annual accounts of the management company and the ECR no later than six months after the year end;
- any new measures to manage liquidity as well as any changes in the leverage and guarantees policy of the ECR;
- reports regarding the leverage of the ECR; and
- information regarding the acquisition of significant stakes in non-listed companies not considered small or medium-sized companies.
ECRs and their management companies are also supervised by the Executive Service of SEPBLAC.Governmental requirements
What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?
As previously stated, ECRs must be registered with the CNMV, and only self-managed SCRs require the CNMV’s administrative approval prior to its registration. SCRs, prior to its registration with the CNMV, must be incorporated in a notarial public deed and registered with the Mercantile Registry. Incorporation in a notarial public deed and registration with the Mercantile Registry is not required for FCRs.
The level of investment activity ECRs may have in Spain would not directly make any difference in relation to its registration requirements, although, in order for a new ECR to obtain the regulatory registration (or authorisation in the case of a self-managed SCR), such level of investment activity will be taken into account by the CNMV in order to ascertain the minimum human and material resources that the SCR, SGEIC or SGIIC should reasonably have in order to perform proper management and administration.
Following the above, it must be noted that ECRs or management companies whose ECRs exceed certain size limits or are marketed to non-professional investors, are subject to a more complex and stringent regulatory regime and higher structure requirements, including, specific remuneration policies, conflict of interests procedures, risk management procedures and units, liquidity management systems, periodic asset valuation (by internal or external valuers), additional information requirements, etc.
Therefore, in order to authorise or register (as applicable) these types of ECRs and management companies, the CNMV will usually request more detailed information regarding such matters, as well as a higher degree of human and material resources.Registration of investment adviser
Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?
ECRs and their management companies are registered and supervised by the CNMV, and they are expressly authorised to provide advisory services to entities within the scope of their corporate activity. Consequently, they do not need, for these purposes, to begin a different procedure to register as investment advisers. Directors and officers of SGEICs, SGIICs and SCRs are also subject to regulatory supervision as part of an ECR management company and, therefore, for such purposes, do not need to be registered as investment advisers either.Fund manager requirements
Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?
The board of directors of both SGEICs and SCRs must have a minimum of three directors. The directors and officers of SGEICs and of SCRs must meet certain requirements regarding integrity and reputation. In this respect, they must complete a specific form and questionnaire required by the CNMV. Additionally, the CNMV will require that the directors and officers of SGEICs or SCRs have appropriate knowledge and experience regarding financial or business management. In principle, such experience should include, as a minimum, three years of management or advisory services to financial entities or executive management posts in other public or private companies.Political contributions
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.
There are substantial restrictions under Spanish law in relation to political contributions by individuals or private entities to political parties. Political parties may not accept contributions from private businesses that provide services to public administrations or to companies majority owned by public administrations. Additionally, annual contributions to political parties by an individual or private entity cannot exceed certain very stringent thresholds.Use of intermediaries and lobbyist registration
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.
Usually, the CNMV will request that the management company includes in the ECR’s prospectus the name, if any, of the intermediaries that are marketing the ECR. Likewise, the CNMV may ask or request additional information from the management company or the sponsors during the ECR approval procedure regarding the use of intermediaries or placement agents for the marketing of the relevant ECR. Finally, please note that, in general terms, intermediaries that wish to market or place an ECR among investors must be previously authorised to act as financial intermediaries in Spain pursuant to the applicable legislation.
At the moment, no legislation relating to any register of lobbyists has been approved in Spain.Bank participation
Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.
With the exception of the potential implications deriving from the implementation of the Alternative Investment Fund Managers Directive (AIFMD), as well as potential implications that the Volcker Rule and Basel III may have on Spanish banks, no other regulations may have a material impact with respect to banks investing in or sponsoring private equity funds.