Documento per la consultazione – Orientamenti di vigilanza della Banca d’Italia e della Consob per le Società di Investimento Semplice

On 30 April 2020, on the website of the respective Supervisory Authorities, the Supervisory Guidelines of the Bank of Italy and Consob for Companies were placed in public consultation (with a deadline of 90 days for any observations, comments and proposals) simple investment (hereinafter, for the sake of brevity, the "SiS") indicating the expectations of the same Authority on the ways in which the SiS will have to comply with the relative discipline (hereinafter, for brevity, the "Guidelines").

As known, in fact, on 30 April 2019 the Council of Ministers approved the text of the so-called DL n.34 (the "Growth Decree"), drawn up by the MEF and the MISE and closely related to the DEF, the Economic and Financial Document, in which a series of fiscal measures are envisaged for the economic growth of the country as well as certain measures for the revival of private investment.

In this regard, in particular, art. 27 of the Growth Decree amended the legislative decree 24 February 1998, n. 58, referred to as the Consolidated Law on Finance (the “TUF”) to regulate the SiS as a new type of Italian closed-ended collective investment scheme (UCI) established in the form of an investment company with fixed capital shares (“Sicaf”).

In particular, art. 1, paragraph 1, lett. i-quater of the TUF establishes that SiS is the Italian alternative investment fund ("FIA") set up in the form of a Sicaf which manages its assets in compliance with the following conditions:

• shareholders' equity does not exceed € 25 million;

• the exclusive object of the activity is represented by the direct investment of the assets raised in SMEs not listed on regulated markets that are in the experimentation, establishment and start-up phase;

• does not use leverage;

• has a share capital at least equal to that provided by the civil code for S.p.A. 

In particular, due to the small size and operational constraints envisaged, the TUF outlines a simplified regime for SiS that originates from the discretion granted to Member States by Directive 2011/61 / EU (so-called AIFM Directive) for the definition of the applicable regime managers whose activities do not exceed certain thresholds (so-called managers below threshold). 

Taking this faculty into account, therefore, without prejudice to the need for the SiS to have an adequate governance and control system to ensure their healthy and prudent management and compliance with applicable provisions, art. 35- undecies, paragraph 1-bis of the TUF, provided for the non-application for the SiS of certain prudential rules adopted by the Bank of Italy and Consob pursuant to article 6, paragraphs 1, 2 and 2-bis of the TUF, with the exception of the provisions dictated by Consob regarding the marketing of UCITS.

Having said this, in order to encourage the uniform and correct application of the new regulation, the Guidelines under discussion have been prepared, with the intention of the Authorities to provide intermediaries with some clarifications on the regulatory framework applicable to SiS as well as indications on the methods with which they should comply with the new discipline.

On the merits, the Guidelines, in taking into account the nature of the customers (ie professional or retail investors) to whom SiS addresses with particular reference to the various protection needs, concern (i) the system of governance and control, (ii) prudential provisions (including professional liability insurance) and decision making, (iii) the handling of complaints and conflicts of interest.

Before analyzing the main contents of the Guidelines, it should be remembered that they are not mandatory and that therefore the SiS have the right to communicate to the Bank of Italy during the authorization phase and, subsequently, to the Bank of Italy and Consob, in the in the context of the information provided on a periodic basis through the report on the organizational structure, the intention to adopt measures other than those indicated in the Guidelines to comply with the regulations applicable to them.

In detail, the Guidelines preliminary recall the regulatory framework applicable to the SiS, making it clear that, with reference to the national regulations, although not expressly regulated or derogated from Articles 1, paragraph 1, lett. i-quater, and 35-undecies, paragraphs 1-bis, 1-ter and 1-quater of the TUF, the SiS are subject to the same discipline applicable to SICAFs - referred to in Part II, Title III, of the TUF on Management collective savings and related implementing provisions - which sets the rules and defines the principles that managers are required to respect in their business for reasons of sound and prudent management and protection of investors. The Guidelines also contain all the secondary implementing rules of the provisions of the TUF applicable to the SiS, while remembering that they are also required to comply with the current national legislation on anti-money laundering and the fight against terrorist financing.

As for the measures of Community matrix directly applicable in the Member States, in the case of SiS whose marketing is aimed at retail investors, Regulation (EU) no. 1286/2014 of 26 November 2014 (so-called PRIIPs Regulation) and related implementation regulation, where relevant as well as (ii) Regulation (EU) 2017/1129 of 14 June 2017 (so-called Prospectus Regulation) and related implementation regulations, where relevant.

With reference to the content of the Guidelines, the following main provisions are grouped by macro-area:

(i) Governance and control system

The Guidelines clarify the role and responsibility of the corporate bodies and provide indications on the risk management and internal control system of the SiS clarifying that the same should be proportionate to the organizational, dimensional and operational complexity of the individual UCI.

In particular, for SiS, like the managers below the threshold, it is possible (a) not to establish the internal audit function and (b) to centralize the management functions risk ion and / or compliance control in a single company permanent and independent control function.

Alternatively, the SiS has the right to assign the control functions to third parties with suitable and proven requirements in terms of professionalism, integrity and independence.

In addition to the above, the Guidelines note that confidential SiS, in consideration of the "professional" nature of their investors, could benefit from further simplifications and, in this way, not provide for the establishment of specific corporate control functions.

In detail, the Guidelines clarify that, for this purpose, the reserved SiS should identify at least one component with specific control powers within the management body that is not the recipient of other powers that affect its autonomy.

Finally, the Guidelines provide general indications in relation to the ways in which these managers, in accordance with the reduced complexity and size of the SiS, can delegate certain essential or important operational functions only to suppliers of third party services equipped with suitable professional requirements, integrity and independence.

In particular, the Guidelines specify that the SiS should delegate the portfolio management function only to intermediaries authorized to provide the collective management or portfolio management service.

It is understood, in this regard, that the SiS should be able to effectively control the delegated function at any time, to give instructions to the service provider and to revoke the assignment with immediate effect to protect the interests of customers.

With regard to the relative delegation of functions contract, the same should identify the minimum guaranteed level of services and the possibility for the Supervisory Authorities to access the systems of the third party service provider.

(ii) Prudential forecasts

As a preliminary, the Guidelines remind that pursuant to art. 35-undecies, paragraph 1-bis, of the TUF, the SiS must ensure that the potential risks deriving from their professional activity are adequately covered by professional liability insurance.

In this regard, the Guidelines point out that in order to cope with the risks deriving from the activity carried out by the SiS, the stipulation of a professional liability insurance which has the characteristics set out in art. 15 of the delegated regulation (EU) 231/2013.

With express reference to the prudential discipline, the Guidelines specify that the SiS, in line with the general principles of the discipline on the collective management of savings, should inspire their management activity to the principle of risk containment and fractionation. With specific reference to non-reserved SiS, the Guidelines suggest intermediaries to adopt certain limits on the concentration of investments that ensure a risk distribution at least equivalent to that resulting from the application of the national regulation on closed AIFs not reserved for professional investors.

The Guidelines also contain some clarifications regarding the criteria and methods for evaluating the assets in which the SiS assets are invested, requesting the definition, in accordance with the applicable accounting principles, of assessment policies and procedures that take into consideration the nature purely illiquid assets subject to investment by the SiS.

(iii) Behavioral forecasts

In this regard, the Guidelines expressly refer to art. 35-decies of the Consolidated Law on Finance in the light of which, inter alia, the SICAFs that manage their assets operate with diligence, fairness and transparency in the best interests of the managed UCITS, of the relative participants and of the integrity of the market and organize themselves in such a way as to minimize the risk of conflicts of interest also between managed assets and, in situations of conflict, act in such a way as to ensure in any case a fair treatment of managed UCIs.

On the merits, the Guidelines highlight that the correct performance of the SiS portfolio management activity cannot be separated from:

• the articulation of the same in different phases which include, among other things, the acquisition of information on investable assets in order to ensure knowledge and understanding of the same and the implementation of investment operations consistent with the objectives, the SiS strategy and risk profile;

• the clear identification of the roles and responsibilities of the actors involved in the different stages of the process;

• the formalization of each phase in order to allow the ex post reconstruction of the process carried out.

Finally, as regards conflicts of interest and the treatment of claims, the Guidelines identify for the SiS guidelines that are consistent with the simplified regime envisaged for managers below threshold by promoting the adoption of (i) suitable safeguards for the identification and management of situations of conflict of interest and communication of the same to the participants in the SiS considering itself appropriate for the SiS an arrangement for the identification and management of conflict situations similar to that envisaged for the managers below the threshold as well as (ii) adequate procedures to ensure a prompt treatment of the claims presented by the investors.