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Before they can be listed on a Spanish exchange, the shares of investment companies and holdings in investment funds must meet a minimum diffusion requirement which stipulates that they must have at least 100 shareholders or unitholders, whose participations must not exceed 25%.

Under Article 15 of the Reglamento de Instituciones de Inversión Colectiva (Regulations for Collective Investment Institutions or RIIC), investment companies and investment funds created by means other than by phases or public offering have a one year period to comply with the requirement. The one year period begins from the date of the entity's registration with the Comisión Nacional del Marcado de Valores (National Securities Exchange Commission or CNMV).

However, Article 32.1 (h) of the Reglamento de Bolsas (Securities Exchange Regulations) allows the requirement to be met by the entity's execution of a public notarial deed setting forth its undertaking to publicly fill purchase and sale orders under market conditions, and providing sufficient security for the effective performance of this undertaking.

The traditional position of the CNMV has been that Sociedades de Inversión Mobiliaria de Capital Variable (SIMCAVs) are not entitled to take advantage of these provisions because the requirements apply as of the time of their creation. Thus, the start-up process for SIMCAVs is slowed considerably, and entities are placed at a disadvantage with respect to those collective investment institutions which can take advantage of the one year period.

Recently, the CNMV has changed its position by Circular 3/1997 dated March 31. The Circular has modified the former rule requiring prior compliance by SIMCAVs with the minimum share diffusion requirement, and deems that SIMCAVs' operating schemes fully ensure compliance with the undertaking assumed by entities as an alternative to prior compliance with the minimum diffusion rule. For this reason, newly created SIMCAVs will qualify for the one year period on an equal footing with other collective investment institutions and as from their registration with the CNMV to attain the minimum number of shareholders required under RIIC Article 15.

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