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Law 8/1987 of June 8 regulating pension funds (Planes y Fondos de Pensiones), provides that each fund has a single managing and a single depositary entity. This gives rise to a system of mutual controls between the entities, and the legal regime of the liabilities arising from their actions. The new law allows pension funds to invest in foreign financial assets, where their investments are regulated by the statutory law pertaining to Spanish outward foreign investment and exchange control.

However, the Spanish Ministry of the Economy and Revenue (Ministerio de Economía y Hacienda) prepared a draft Royal Decree to regulate the hiring, by pension funds, of entities domiciled in Spain or other countries, to manage foreign financial assets acquired by the pension funds. The Decree is a response to the deregulation of capital markets and foreign investments, the internationalization of Spanish business, EU rules and the introduction of the euro.

Because of the increasing specialization and integration of the international financial markets, it was deemed appropriate to establish a limited exception to the general rule on the unity of management, on the basis that entities more specialized in foreign markets may be of assistance to the managing entities of pension funds.

The draft establishes the future regulatory framework for contracting out the management of foreign assets held by pension funds, based on the following:

  • agreement by the management entity and depositary entity of the pension fund;
  • the authorization of the fund's supervisory committee; and
  • verification of the sufficiency of the agreements and qualifications of the chosen entities by the Directorate-General of Insurance (Dirección General de Seguros).

A special regime of liability was established giving the managing entity and depositary entity additional obligations and responsibilities, in chief to supervise compliance with the undertakings acquired by the entity administering the foreign assets.

Everything points to the government's quick approval of the Royal Decree; more so because a slight amendment of Law 8/1987 was pushed through in the recently approved Law 66/1997 of December 30.

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