Private placement rules and law in Spain

1. Summary of private placement provisions for fund interests (if applicable)

Spanish law distinguishes between open-ended or closed-ended collective investment institutions (“OECII” and “CECII” respectively). OECIIs are regulated by Law 35/2003 of 4 November, on Collective Investment Schemes (“CIS”), and CECII are regulated by Law 22/2014 of 12 November on venture capital entities, other CECII and management companies of CECII and amending CIS (“LECROSI”), the main aim of which was to implement the Directive 2011/61/EU on Alternative Investment Funds (“AIFMD”). 

Nevertheless, all collective investment schemes in Spain, open-ended or closed-ended, can be considered alternative investment funds, in the situation in which they do not fall under the Undertakings for Collective Investment in Transferable Securities (“UCITS”) category, as defined in Directive 2009/65/EC. 

With regards to the private placement, there is not any explicit definition under Spanish law for that regime, and it is generally interpreted as a contrast to public offer as defined by the European Prospectus Regulation (EU) 2017/1129 which is directly applicable in Spain. 

However, for funds, neither the LECROSI nor the CIS contemplates the possibility of marketing funds under a private placement in Spain. Therefore, prior authorization from the Spanish supervisory authority (the “CNMV”) or a passport, as applicable, shall be required in order to market funds in Spain regardless of whether the offer is made to professional or retail investors. 

For that purpose, the CIS and LECROSI define “marketing” of fund interests as the capture of clients by means of advertising activity on behalf of the collective investment institution or any other entity acting on its behalf or on behalf of any of its traders, so these clients contribute with funds, assets or rights. Hence, marketing activity entails making offers at the initiative of the fund managers or on their behalf.

Moreover: 

  1. Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings, which is directly applicable in Spain, and 
  2. Directive (EU) 2019/1160 with regards to cross-border distribution of collective investment undertaking, transposed into Spanish law by means of the Royal Decree-Law 24/2021 without introducing any material amendment, entering into force on November 4, 2021,

introduced new rules relating to the cross-border marketing and distribution of collective investment undertakings within the EU, which include, among others, a “pre-marketing” definition.  In accordance with that, “pre-marketing” in Spain means the provision of information or communication, direct or indirect, on investment strategies or investment ideas by a management company, or on its behalf, to potential investors domiciled or with a registered office in the Spain in order to test their interest in a qualifying fund which is not yet established, or in a qualifying fund which is established, but not yet notified for marketing in Spain, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that qualifying fund. 

Consequently, the management companies of OECIIs or CECIIs need to submit a pre-marketing notification form to the CNMV prior to engaging in pre-marketing activities in Spain. And any subscription of an investor within 18 months of the fund interests shall be considered marketing to which the registration procedure applies.

2. Other forms of possible placement options for fund interests outside fund regulations

The prohibition on marketing does not include a prohibition on the introduction of financial securities in Spain and, therefore, Spanish investors may invest in such products (either directly or through a discretionary investment management agreement), provided that the investment was made at the specific request of the investor (the reverse solicitation exemption).

However, in order to fully comply with the spirit of such exemption, any request for information should be interpreted strictly and dealt carefully. Thus, a request from a potential investor to receive the prospectus for an offer should not be replied to simply by forwarding the prospectus and the application form for such an offer.

3. Consequences of non compliance with placement regimes for fund interests

From a regulatory perspective, marketing fund interests in Spain (whether open or closed-ended) without complying with the relevant placement regime as applicable to the relevant fund could constitute a very serious infringement.

4. Private placement rules for non-fund investments available

Any instruments covered by the Prospectus Regulation may benefit from the “private placement exemption”, understood as the exemption of publishing a prospectus in Spain in accordance with the Prospectus Regulation, in particular, securities (i.e. shares, units, bonds, notes, warrants, certificates etc. issued by ordinary companies, holding companies, securitisation companies etc.).

Under the Prospectus Regulation, the following offerings of non-fund investments, among others, will benefit from the “private placement exemption” and, consequently, do not require the approval of a prospectus in Spain:  

  1. offerings only addressed to qualified investors;
  2. offerings only addressed to 150 legal or natural persons other than qualified investors per EEA State;
  3. offerings requiring a counterparty of EUR 100,000 minimum per investor and per offer;
  4. offerings where the nominal value is EUR 100,000 minimum;
  5. offerings where the total amount is EUR 100,000 maximum.