Public consultation for a Technical Guide on the reinforcement of CIS’s transparency with the specific performance objective and of fixed income CIS with a buy-and-hold strategy

The Spanish National Securities Market Commission (CNMV) started a consultation on a proposal for a Technical Guide on the reinforcement of CIS’s transparency with the specific performance objective and of fixed income CIS with a buy-and-hold strategy.
This regulation will revise the standards outlined in Technical Guide 1/2017 on the reinforcement of transparency of investment funds with the specific goal of long-term profitability applied only to those with a term longer than three years.
Certain elements need to be strengthened five years after publication to align them with industry best practice, improve investor protection and informed consent, and extend their application to CIS with buy-and-hold strategies.
32 buy-and-hold investment funds and 41 funds with a particular performance goal were registered with the CNMV in 2022.
The following are the Technical Guide’s primary goals:
+ Create standards for the information provided to investors regarding the estimated return (in terms of APR) that can be prudently anticipated on fixed income CISs with a buy-and-hold strategy, should investment be maintained until the maturity of the time horizon of the strategy to provide crucial information to support the investment decision.
+ Modify a few of the Technical Guide 1/2017’s parameters to take into account the supervisory and registration experience that has since been gained.
Establish criteria, in particular, for the cautions investors should receive regarding the possibility of undervaluing some of their transactions during the marketing time and the impact of inflation on nominal returns on investments.
+ Make a strong case for the inclusion of a warning about the cost of liquidity in CIS prospectuses that offer investors fewer than twelve liquidity windows annually (the option of a fee-free refund) as opposed to the four annual windows specified in the 2017 regulation.
+ Demand that buy-and-hold fixed income CIS include the disclaimers about term risk and the expense of the fund’s liquidity.
Instead of the three-year term mentioned in the Technical Guide 1/2017, the criteria of the new technical guide are established generally regardless of the length of the strategy or the time horizon of the funds.