On 6 July 2021, Consob and the Bank of Italy adopted the supervisory guidelines on Simple Investment Company ("Società di Investimento Semplice" or "SIS") (the "Guidelines").
The Guidelines, which have undergone public consultation, arises from the Decree Law 30 April 2019, No. 34 (converted into Law, with amendments, by Article 1, of Law No. 58/2019) which amended Legislative Decree No. 58/1998 (i.e. the Italian Consolidated Law on Finance) by introducing the discipline of SIS.
SIS are managers of collective investment undertakings which, due to their small size and complexity, fall within the scope of the simplified regime of managers falling below specific thresholds provided for by the Directive 2011/61/EU.
According to the provisions of the Italian Consolidated Law on Finance, SIS is defined as an Italian alternative investment fund, established in the form of a fixed capital investment company ("società di investimento a capitale fisso" or "Sicaf"), reserved or not for professional investors, which directly manages its assets and complies with the following conditions:
- the shareholders' equity does not exceed Euro 25 million;
- the exclusive object of the company consists in the direct investment of the assets collected in SMEs not listed on regulated markets which are in the experimentation, establishment and start-up phase of the activity;
- it does not use financial leverage;
- it has a share capital at least equal to that provided for by Article 2327 of the Italian Civil Code (i.e. at least Euro 50,000).
The Guidelines are structured into the following sections:
(i) Section 2: contains a survey of the main provisions applicable to SIS in order to facilitate the supervised entities in the systematic recognition and interpretation of the sources governing the SIS;
(ii) Section 3: defines some supervisory guidelines, which represent the expectations of the Bank of Italy and Consob on the modalities with which the SIS must comply with the new regulations.
In particular, this section includes indications in relation to the main following aspects:
- General requirements of organization and corporate bodies: after having recalled the importance of an adequate composition and allocation of the competences of the corporate bodies, the Guidelines decline the assignments of the same;
- Internal control and risk management system: SIS should have a risk management and internal control system proportionate to their organizational, dimensional and operational complexity, and describe it in the report on the organizational structure, justifying its adequacy with respect to their own structure;
- Outsourcing: SIS may delegate certain essential or important operational functions only to providers with suitable requirements in terms of professionalism, integrity and independence. In addition, they should be able to demonstrate that the provider is qualified and capable of exercising the delegated functions with the diligence required by the nature of the assignment and to effectively control the function delegated at any time, in particular being able to revoke the assignment with immediate effect for protect the interests of clients;
- Risk containment and splitting: in order to ensure that the management is sound and prudent, SIS should inspire its activities on the principles of containment and fragmentation of risk with consistent with its investment policy and with the types of investors admitted;
- Decision making, conflicts of interest and handling of complaints: the development of the different phases of the decision process should be formalized and the roles and responsibilities of the subjects involved in each phase should be clearly identified. In addition, SIS should adopt measures for the identification and management of conflict of interest and the communication of the same to the SiS' participants and suitable procedures to ensure prompt handling of investors' complaints; and
(iii) Section 4: indicates the procedure applicable in case of non-temporary exceeding of the net equity limit pursuant to Article 1, par. 1, lett.) i-quater, of the Italian Consolidated Law on Finance.
In particular, SIS are required to establish, implement and apply procedures for monitoring of the total value of assets managed in order to comply with the mentioned net equity limit.
If the exceeding of the limit is considered not temporary (i.e. more than 3 (three) months) and SiS intends to request authorization as "regular" manager, it notifies Bank of Italy within 30 (thirty) days exceeding the limit.
A similar communication is given to the Bank of Italy by SiS which, even in the absence of the mentioned exceeding of limit, intends to be voluntarily subject to the SICAF regime (regular or below-threshold regime).
The Guidelines are not mandatory. SIS can communicate to the Bank of Italy - during the authorization phase - and, subsequently, to the Bank of Italy and Consob as part of the reporting disclosure (in particular, within the report on the organizational structure), the intention to take different measures from those included in the Guidelines.
Bank of Italy and Consob verify that these measures are effective and adequate. If those measures are deemed not satisfactory to ensure compliance with the applicable regulations, Bank of Italy and Consob can adopt the supervisory actions required by law.