How investment funds and investment companies work in Spain

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1. The law defines Collective Investment Institutions (IIC) as entities that raise money, assets or rights from the public to invest them collectively, and allows two forms: investment fund and investment company. They can be financial or non-financial.
2. Investment funds are separate pools of assets with no legal personality, managed by a management company with a depositary. Fund participants have minimum rights, such as requesting redemption, transferring investments to another fund, and going to the client advocate.
3. A fund must have at least 100 participants and an investment company at least 100 shareholders, although regulations may set a different threshold depending on the type of assets or liquidity.
4. The CNMVCNMV Comisión Nacional del Mercado de Valores, the Spanish public agency that supervises securities markets. authorizes the creation of IIC. If five months pass without a decision, the application is deemed approved through administrative silence. Authorization can only be denied with a reasoned decision.
5. IIC must publish a full prospectus, a simplified prospectus, and annual, semi-annual and quarterly reports. Before subscribing, the simplified prospectus and the latest semi-annual report must be given free of charge, and all advertising must state where to get these documents.
6. Financial IIC may invest in all kinds of financial assets, including derivatives and unlisted securities, but with diversification limits: as a general rule, no more than 5% of assets in securities from a single issuer, or 15% for entities of the same group.
7. Participants can transfer their investments between funds without paying personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. (IRPF) until redemption. The law sets the procedure and maximum deadlines for transfers between entities.
8. Management companies and depositaries are subject to rules of conduct, CNMV supervision and a sanctioning regime with minor, serious and very serious offenses. Very serious sanctions are imposed by the Minister of Economy, except revocation of authorization, which corresponds to the Council of Ministers.

Who it affects

• People who invest in funds or investment companies: They have rights recognized by law: information, redemption, transfers between funds, and complaints to the client advocate.
• Management companies of investment funds: They must be authorized, meet organizational and integrity requirements, and answer to participants for their failures.
• Banks and entities acting as depositaries: They must hold the assets in custody, oversee the management companies' work, and answer for any harm they cause.
• Foreign entities that want to market funds in Spain: They must submit documentation to the CNMV and, in some cases, obtain express authorization.

Words worth knowing

IIC (Institución de Inversión Colectiva)

Collective Investment Institution: an entity that pools money from many people to invest it jointly; each investor's return depends on the collective result.

CNMV

Comisión Nacional del Mercado de Valores, the Spanish public agency that supervises securities markets.

SICAV

Sociedad de Inversión de Capital Variable: a public limited company whose capital can rise or fall through the sale and purchase of its own shares.

Silencio administrativo positivo

Positive administrative silence: if the administration does not answer within the set deadline, the application is deemed approved.

Partícipe

Participant: a person who contributes money to an investment fund and has a right to their share of its assets.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries