Les Management Institutions manage the accounts of participants which are not authorised to operate directly through the Book-Entry System. For these purposes, they hold a global account in the Book-Entry System which at all times exactly covers those accounts, known as third-party accounts.
Furthermore, Management Institutions, except for securities brokers, may also be Account Holders under their own behalf in the Book-Entry System. This last status is compulsory when managers wish to stand themselves as counterparty to their customers. Securities brokers, however, may only acquire or hold Public Debt on their own behalf when it has been entered through another Management Institution.
Recognition as a Management Institution is granted by the Minister of Economy, Industry and Competitiveness at the proposal of the Bank of Spain and subject to a favourable report from the Securities and Exchange Commission, to entities belonging to the following categories:
- 1. Securities brokers and companies
- 2. Banks, savings banks, including the Confederación de Cajas de Ahorro and the Instituto de Crédito Oficial
- 3. Credit co-operatives
To become and remain a Management Institution, the following conditions must all be fulfilled:
- 1. A minimum paid-in capital of approx. 900,000 euro (Pta 150 millionand), subsequently, a minimum level of equity in keeping with business volume and risks assumed.
- 2. Acknowledged commercial and professional honesty on the part of all components of its Board of Directors, which shall have no fewer than three members, and on the part of General Managers and equivalent posts.
- 3. No board member or general manager or similar shall have been declared bankrupt or be subject to insolvency proceedings without subsequent rehabilitation, be subject to legal proceedings or have a criminal record for tax fraud, breach of trust in the custody of public records, breach of secrecy, misuse of public funds, disclosures against property rights, or be criminally or administratively disqualified from the exercise of public duties or the directorship and management of financial institutions.
- 4. A majority of board members must be suitably knowledgeable and experienced in securities market-related matters.
- 5. A commitment to maintain an organisational structure and to deploy human and material resources technically qualified for the type and scale of activity to be undertaken and the assurance that this commitment will be met. Applicants should provide evidence of their ability to fulfil such a commitment from the start.
Requests for Management Institutions status must be submitted in writing to the Bank of Spain, specifying if the applicant wishes to operate with its principals on a full or restricted capacity footing.
The Bank of Spain, after receiving the statutory report from the Securities and Exchange Commission, will refer its proposal to the Minister of Economy, Industry and Competitiveness via the General Directorate of the Treasury and Financial Policy.
This Directorate General will notify to the Book-Entry System, if appropriate, the granting of the Management Institution status. The authorisation must also be published in the "Boletín Oficial del Estado" (official gazette).
The Bank of Spain keeps a public record of all companies recognised as Management Institutions.
LThe status of Management Institution may be revoked by the Minister of Economy and Finance at the proposal of the Bank of Spain, subject to a report from the Securities and Exchange Commission, and a hearing with the interested parties, under the following circumstances:
- 1. The level of activity throughout one year is zero or fails to meet the minimum established
- 2. When they fail to comply, ex post facto, with the eligibility conditions laid down
- 3. In cases of temporary receivership or bankruptcy
The revocation of the Management Institution status signifies that, as of that moment, the financial entity or intermediary may no longer carry out any operations other than those resulting in the definitive reduction of the third-party balances it holds in the Book-Entry System. Notwithstanding this, the entity must keep up all its obligations while it continues to manage third-party balances registered in the Book-Entry System.
Likewise, it may be decided under exceptional circumstances to suspend or limit the type or amount of operations transactable by Management Institutions during the time it takes for normal conditions to resume. Such measures must be notified by the Bank of Spain to the Ministry of Economy and Finance for their ratification or lifting by the Minister. Such ratification or lifting must be decided in two days.
The suspension of the Management Institution status in the Book-Entry System has the same force as revocation, although the effects only last for the period specified in the corresponding resolution.
Management Institutions carry out important registral, clearing and settlement functions for their customers.
Among the registral functions, Management Institutions must keep the records corresponding to their third-party balances permanently updated, specifying holder identity, issue data, nominal balances, purchase terms, legal situation and, where appropriate, re-sale commitment. They must also furnish the buyers of Treasury securities with a certificate accrediting the purchase and setting out its terms (type of instrument, amount invested, yield...) when entering them in their records. These certificates only evidence that the operation has been recorded, and are not physical securities which may be bought and sold.
As part of their custody functions, Management Institutions must notify the Book-Entry System on a daily basis of the global balance held for third parties, and send a weekly list of all operations carried out.
Management Institutions can be of two types:
1. Full capacity Management Institutions:
They are authorised to carry out all kinds of operations with their principals, and holding the additional status of Account Holder on their own behalf in the Book-Entry System.
Regulatory requirements: capital of approx. 4.5 million euro (Pta 750 million), and public debt balances of at least 120 million euro (Pta 20 billion) )held in its clients' name.
2. Restricted capacity Management Institutions:
They are authorised only to stand as counterparty to their customers in spot transactions. If they do not hold an account in their own name in the Book-Entry System, they may only operate with third parties on a commission basis.
Regulatory requirement: public debt balances of at least 6 million euro (Pta 1 billion) in their clients' name.