Disclosure Requirements - Spain
Disclosure Category: 2
Generally speaking, there is limited obligation of disclosure by CBL of customers' holdings, for example, for Spanish Treasury Bills (T-bills) and implicit return on public (stripped securities) and corporate debt securities (zero-coupon bonds with a maturity under 12 months) subject to Royal Decree 1145/2011 for which it is mandatory that CBL sends an annual report to the Spanish Tax Authorities listing the beneficial owners of those bonds held via the books of CBL.
In order to comply with the legislation as mentioned below, customers entering into transactions on T-bills and implicit return on public and corporate debt securities for Spanish underlying beneficial owners must consent and are hereby deemed to consent to disclosure. Such consent further includes the appointment of the requestor (for example, the Bank of Spain) as attorney-in-fact of such customers, under power of attorney to collect from CBL such information as is required to be disclosed.
Moreover, for any corporate events resulting in the Spanish market (CADE) as a purchase, sale or subscription on debt instruments, whether voluntary or mandatory, those purchases, sales or subscriptions are subject to registration requirements under the name of the seller or buyer (that is, the CBL customer). The disclosure of the identity of the CBL customer is therefore required and CBL will disclose this information to the depository for these events.
Customers not willing to disclose the above-mentioned information or give this consent in accordance with the Spanish legal requirements cannot hold such securities in their account with CBL.
Background and legal basis
The basis for the disclosure obligation of all beneficial owners that are Spanish residents for T-bills and for implicit return on public and corporate debt securities is ruled by Royal Decree 1145/20111.
The obligation to register CADE transactions under the name of the seller (or, respectively, the buyer), that is, the CBL customer, is ruled by Royal Decree 505/1987, article 6, point 4 mentioning the reporting obligations of Managing Entities and by Iberclear procedures (F6) describing the procedure to register the non-resident seller (DCVI in Spanish).
The obligation to disclose significant holdings is ruled by Royal Decree 1362/2007 of 19 October 2007 and by Law 5/2009 of 19 June 2009, which modified Law 24/1988 of 28 July 1988, of financial markets, Law 26/1988, of 29 July 1988, regarding discipline and interventions of credit institutions and the rewritten text of the Law of supervision of private insurance, approved by Legislative Royal Decree 6/2004 of 29 October 2004.
Customers should be aware that Royal Decree 1145/2011 establishes annual reporting obligations to be provided to the Spanish Tax Authorities in relation to Spanish resident beneficial owners holding securities issued by the Spanish Treasury and by Autonomous Communities, the Bank of Spain being paying agent for both securities.
In order to comply with the above annual reporting obligations, customers holding T-bills or implicit return on public and corporate debt securities must provide a List of Spanish Beneficial Owners with the information and format specified, as described in the Market Taxation Guide - Spain.
The obligation to disclose falls on CBL, in whose name the securities are registered in the Spanish market, and is to be cascaded down to the final beneficial owners.
In addition, according to the Iberclear Informative Note 5/2007 referring to the “practical action guide for the CADE market”, customers trading with direct participants (Entidad titular de cuenta) on fixed income must provide their identity in order for the trade to settle.
Indeed, with respect to the settlement practice, the information about the ICSD participant (that is, the CBL customer) constitutes mandatory matching criteria. Whenever CBL or its customer instructs a participant number with an unpublished account, for example, for which no BIC code is assigned, the instruction is stopped from STP processing and participant (that is, the CBL customer) disclosure is requested in order to enable CBL's depository to release such instructions.
Also, as a consequence, customers using unpublished accounts and trading with direct market participants must include their name in the narrative field of the settlement instruction. Failure to do so will cause the instruction not to be executed in the market. In line with this, any corporate action settling in the Spanish market (CADE) as a purchase, sale, or subscription is subject to the same registration requirements and CBL customers’ disclosure will in such case be required.
Obligation to report threshold crossings
There is an obligation to report to the issuer and to the Comisión Nacional del Mercado de Valores (CNMV), as follows:
- For voting rights on listed companies in an official secondary market or in another EU regulated market, the threshold to be reported is 3%.
- For voting rights on listed companies and financial instruments,acquisitions crossing 3%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% and 90% thresholds must be reported.
For countries that are considered by the Spanish fiscal authorities to be tax havens, this threshold is set at 1% and multiples thereof (2%, 3% etc.).
- For registered capital or voting rights in credit institutions, insurance companies and investment service entities the reporting requirements are as follows, acquisitions of a qualifying holding of at least 5% of the capital or voting rights must be notified to the relevant supervisory body for information purposes.
Also, the thresholds in increase or decrease in significant holdings of 10%, 20%, 30%, or 50% and acquisitions gaining control of the institution must be reported to the relevant supervisory body before acquisition in order for the Regulator to evaluate it.
The obligation to report significant holdings as defined above falls as follows:
- Entities that render custody and administration services and can exercise voting rights in respect of their holdings in a discretionary manner must report significant holdings to the CNMV;
- Beneficial Owners must report significant holdings to the issuer and to the CNMV.
The CNMV must be notified directly whenever a threshold is exceeded. A form for reporting this information is available on the CNMV website, under Legislación, Jurisprudencia y otras normas / Modelos normalizados / Sociedades emisoras).
The form is designed to be completed online and then printed and mailed to:
Paseo de la Castellana, 19
Financial intermediaries that provide custody and administration services are specifically excluded from reporting significant holdings as long as voting right are exercised only on instruction from their customers.
The CNMV can request such information as it deems necessary from any individual or legal entity to the extent that they are subject to the Securities Market Act 24/1988. In practice, this means that the CNMV has the authority to raise an enquiry.
Until October 2007, CBL had an obligation to disclose details of customer holdings to the CNMV systematically and on a regular basis. This obligation ceased with the enactment of Royal Decree 1362/2007 on 19 October 2007.
According to Law 5/2009 of 29 June 2009, disclosure must be made to the appropriate supervisory entity as follows:
- Credit institutions: to the Bank of Spain and the Credit Institution;
- Investment companies: to the CNMV and the Investment Company;
- Insurance Companies: to the Dirección Nacional de Seguros y Fondos de Pensiones and the Insurance Company.
Non-disclosed Spanish resident holders of T-bills or of implicit return on public and corporate debt securities may be subject to the penalties prescribed by Spanish Tax Law (Ley General Tributaria).
Customers holding T-bills or implicit return on public and corporate debt securities at maturity are deemed to accept any penalties imposed, directly by the Spanish authorities or via CBL, for failure to comply with the above disclosure requirements.
1. Zero-coupon bonds with a maturity above 12 months are not eligible in CBL. Also, customers are not allowed to hold Spanish stripped securities or zero-coupon bonds with CBL on behalf of Spanish resident individual income tax payers. However, there are no holding restrictions for beneficial owners that are Spanish resident corporate income tax payers, for which the above disclosure requirements apply.