Over the past few years, legislator took care of regulating and facilitating funding by entities other than banks, especially towards small and medium sized companies. The direct credit granted by these entities needs operational coordination with the laws specifically addressing banks.

Article 17 of law decree n.18/2016 formalized operational methods to granting funds, i.e. direct lending by alternative investment funds. Indeed, this decree introduced three articles in TUF (the Italian single act on finance), articles 46-bis, 46-ter, 46-quater, concerning the Undertakings For The Collective Investment Of Transferable Securities, or UCITS.

Decreto Sviluppo, decree n. 91/2014 (converted by the law 116/2014), modifying article 1, paragraph 1, let. k of TUF, have already provided for others kind UCITS the possibility to invest in financial instruments and credits, including those granted directly from the UCITS’ assets. The decree mentioned above also modified this definition, pointing out that these credits granted from the UCITS’ asset have to be granted only in favour of entities other than consumers.

TUF provides a distinction between direct granting of credits by Italians UCITS and by EU UCITS in Italy. In particular, for European funds it provides specific conditions to be respected and an authorization procedure that the funds has to follow if they want to operate in Italy.

Minority doctrine has always said that before the introduction of the decree of 2014, investments funds could grant direct credits because there was no expressed prohibition by the law. This thesis was funded on the provision establishing that investments funds could invest in credits without specifying the origin of these credits. Anyway, this divergence has been eliminated with the introduction of articles 46-bis and 46-ter of TUF.

Article 46-bis, entitled “direct granting by Italian UCITS”, repeating what provided by article 1, paragraph 1, letter k, says that Italians UCITS can invest on credits from their own asset in favour of entities other than consumers, respecting rules of the Italian single act of finance and implementing provisions adopted pursuant to articles 6, paragraph 1 and article 39. The novelty introduced by the decree n. 18/2016 is the provision to grant direct funding; in fact, Italians UCITS were already allowed to purchase credits before.

Decree n. 30/2015 of the Ministry of Economics and Finance, which implements article 39 of TUF, applies to Italian investments funds. Artcile 39 establishes the general criteria that Italian UCITS must respect. In particular, UCITS include investment funds, Sicav (i.e. investment companies with variable share capital) and Sicaf (i.e. investment companies with fixed share capital); the difference is that for Sicav and Sicaf the assets manager is the company itself, while for investment funds the manager is necessarily an asset management service (AMS) with its own personality.

Furthermore, decree 30/2015 clarifies that only closed UCITS can invest on direct credits. The decree doesn’t specify if the fund has to be reserved to professional investors or not, but the regulation of 2015 of Italian Central Bank established that also funds not reserved to professional investors can invest on direct credits.

Instead, article 46-ter provided for EU alternative investment funds both the possibility to grant directly funding to entities other than consumers and to purchase credits. The regulation of Banca d’Italia (Italian Central Bank) of December 23^rd 2016, in force since 5 January 2017, is very important because of the implementation of article 46-ter.

The regulation provides that EU alternative investment funds that want to operate in Italy have to inform Banca d’Italia about their intention by sending a prior communication at least sixty days before starting the activity, in addiction it establishes what documents and information have to be sent to the authority. Banca d’Italia will make a general evaluation of the European fund, verifying, among other conditions, that it has been authorized to invest in direct lending by the member State of origin. Under the “silent approval mechanism”, the fund will start to operate legitimately in Italy after sixty days from communication.

If Banca d’Italia finds negative aspects, it will start an investigative proceeding within thirty days after the first communication, in order to prevent the EU fund from operating in Italy.

Article 46-quater clarifies that, though it concerns Italian or European funds, for credits granted in Italy from their own asset, it is necessary to respect the laws about transparency of contractual terms and relationship with clients provided in the single act on banks. Also administrative sanctions for violating laws, are set forth in this act.

By regulating direct lending in Italy, the legislator aims to introduce new and great financial resources in the market in order to push entities operating in the Italian market for a general and definitive economic recovery. In fact, minibond introduced to facilitate small companies has been shown too expensive for them and not so desirable for banks.

In Italy, regulatory measures for facilitating grant of direct lending are introduced especially for small and medium sized companies that can hardly obtain the cash they need to invest and be competitive in the international market. Indeed, after the credit crunch occured in these years of crisis, banks are reluctant to grant loans especially to small sized companies.

In conclusion, according to experts, these new modalities of funding will be perfectly exploited only with the creation of a market of direct lending different and separate from the banking system. Operators shall create a system which firstly permits to easily spot the companies willing to use these kinds of funding, and secondly this system has to allow to recollect companies information and data in order to assess correctly the financial risk.