Brexit: CNMV publishes guidelines on interpretation of the Spanish Brexit Measures

On 04 March 2019, the CNMV published various questions and answers regarding Spanish Royal Decree-law 5/2019 of 01 March (RD-law 5/2019), which introduced certain measures in relation to the UK’s withdrawal from the European Union without a deal (a Hard Brexit). This CNMV guidance is of relevance to UK investment firms, AIFMs and UCITS management companies that provide investment services in Spain.

The most relevant aspects which have been addressed by the CNMV are as follows:

  • Existing contracts – The Spanish temporary permission regime (TPR) will allow (for a period of 9 months from the effective date of Brexit) the continued management of existing contracts signed prior to Brexit by firms that hold the relevant passport immediately prior to Brexit. This includes provision of services of an ongoing nature, such as management, investment advice or custody services. However, the TPR will not cover new contracts, nor will it permit renewing or extending existing contracts or introducing amendments that involve the provision of new services in Spain or that affect essential obligations.

  • Third country authorisation – Entities will be allowed to apply for a third country license to operate by means of (i) a subsidiary, (ii) a branch, or (iii) on a cross-border basis (eligible counterparties and per se professional clients only). The granting of third country cross-border licences will be assessed by the CNMV on a case-by-case basis. In some cases, taking into account the volume of activity, the complexity of the products or services, the CNMV may require the establishment of a local branch.

    A specific application form is available for firms seeking the third country licence, which will allow them to continue operating in Spain for an indefinite period. The information required for the application derives from existing Spanish legislation and Commission Delegated Regulation (EU) 2017/1943. UK firms may submit authorisation applications, notwithstanding that the UK is not yet a third country and that a Hard Brexit may not occur.

    Provision of new services in the interim before the CNMV has processed their license application has not been expressly contemplated

  • Compensation scheme requirements – A condition for UK firms to benefit from the TPR is that their services in Spain be covered by an investor compensation scheme. Services not covered by the UK’s Financial Services Compensation Scheme will require adherence to the Spanish Investor Compensation Scheme (FOGAIN). The compensation scheme requirement also applies to firms seeking the third country licence.

  • Access to UK and EU trading venues – There are no additional requirements (other than those already established for EU firms) for those third country firms wishing to apply for a membership to operate in Spanish trading venues.

Although the guidance published by the CNMV only covers the TPR applicable for investment firms regulated under Directive 2014/65/EU, management companies regulated under Directive 2009/65/EU and alternative investment fund managers regulated under Directive 2011/61/EU, already operating in Spain by means of the relevant EU passport, it is likely that other supervisory authorities (Bank of Spain and DGSFP) will provide similar guidance in respect of other entities (such as credit institutions and insurance companies).

The questions and answers already published by the CNMV are not an exhaustive list and could be updated from time to time.

For ease of reference, please find the link to the official CNMV website  here

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.