Argentina
María Victoria Pavani, Carolina Arroyo, Gabriela Bindi and Carolina Zang
Zang Bergel & Viñes Abogados
- 1.Which laws, regulations and administrative rulings govern the offering and trading of securities and how are they proposed, adopted and amended?
The domestic markets are governed generally by:
- Law No. 17,811, as amended, enacted on 16 July 1968 (the Public Offering of Securities Law);
- Decree No. 677/2001, enacted on 22 May 2001 concerning the transparency within the public offering (the Decree);
- Argentine National Security Commission’s Resolutions (CNV), which are published regularly and are binding to all individuals under its regulatory supervision; and
- rules and regulations (including listing requirements) issued by self-regulated organisations that need to be observed by the issuers. The most relevant are Bolsa de Comercio de Buenos Aires (BCBA) Listing Rules and Mercado Abierto Electrónico SA (MAE) Listing Rules.
In Argentina, laws are enacted by the Congress and published by the Executive Branch. They can be proposed in several ways, as for example, by:
- a member of one of the two chambers (chamber of deputies and upper chamber);
- the Executive Branch; or
- citizens through an initiative that needs to be filed in the chamber of deputies.
For a law to be approved, a project will have to meet the required quorum and votes, and will need not to be vetoed by the Executive Branch. Regarding decrees; usually they are legal instruments issued by the Executive Branch and their main function is to complement the regulation of an existing law. Consequently, they are proposed, adopted and amended by the Executive Branch. In the case of this decree, it has the particularity that it was issued in accordance with the faculties delegated by the Congress to the Executive Branch during the 2001 Argentine crisis. As a result, this decree is mostly considered to have the same status as a law.
In accordance with the Public Offering of Securities Law, the CNV has the authority to issue the rules to which the individuals and legal entities that participate in securities’ public offerings are subject. The resolutions are issued by the board of directors of the CNV, which is appointed by the Executive Branch.
Finally, the rules and regulations of the self-regulated organisations are issued by such organisations and approved by the CNV. In relation to the proposition, adoption and amendment of a self-regulated organisation rules and regulations, they are subject to the terms of the by-laws and rules and regulations of each organisation.
- 2.What is the rationale behind this legislation?
The rationale behind the capital markets-related laws, decrees and rules follow several principles that aim to increase efficiency and transparency in the offering and trading of securities in order to protect the rights and interest of the investors. So as to perform the capital markets’ main targets (such as liquidity, stability, solvency and transparency) the guarantee of a stable legal scheme and investor confidence is a key question. Argentine legal framework aims to protect both investors and financial consumers based on adequate corporate governance practices, which is achieved through the transparency regime, stated under the Decree, in the following manner:
- further disclosure requirements are placed to listed companies,
- intermediaries and other participants;
- individuals or legal entities with inside information shall keep it reserved under stronger penalties;
- certain standards of conduct are expected from intermediaries;
- stricter obligations are imposed to self-regulated organisations; and
- typification of conducts as contrary to transparency.
- 3.Which regulatory authorities oversee capital markets and what is the scope of their jurisdiction?
The CNV is a government entity with jurisdiction over Argentine territory. Its main purpose is to rule the securities public offerings, ensure transparency of Argentina’s securities markets, watch over the discovery price process and protect investors.
The CNV, among other duties, authorise, suspend and cancel public offering of securities; assess the Executive Branch regarding authorisation requests filed by stock exchanges; keep records of stock agents and of persons or entities authorised to make public offering of securities; approve stock exchanges’ and stock markets’ rulings regarding public offering; oversee the regular performance of enforceable public offerings laws, statutes or rulings; and request the Executive Branch to withdraw authorisation to non-complying stock markets and exchanges.
- 4.How is financial fraud and price manipulation in capital markets regulated?
Financial fraud and price manipulation is regulated by the Decree, and also by certain CNV resolutions. These regulations establish that the market participants (issuers, intermediaries, investors, or any other person or entity taking part in the markets of securities or forward contracts, futures and options of any type whatsoever), shall abstain from:
- making, per se, or through an intermediary, in initial offerings or secondary markets, practices or behaviours that may intend or allow the manipulation of prices or volumes of the securities, rights or forward contracts, futures and options, modifying the normal development of the supply and demand; and
- deceitful practices or behaviour that may induce any party taking part in said markets to make an error pertaining to the purchase or sale of any negotiable security in the public offering or of forward contracts, futures and options of any type, either through the use of false, insufficient or inaccurate statements omitting essential events, or through any act, practice or course of action that may have deceitful and detrimental effects on any person in the market.
- 5.What sanctions and remedies can the regulatory authorities impose?
The Public Offering of Securities Law, amended by the Decree, establishes that the CNV may impose the following penalties, in the event of an infringement to its dispositions:
- warnings;
- fines from 1,000 to 1,500,000 pesos that may be increased by up to five times of the amount of the benefit obtained or the damage suffered as a result of the illegal action, if any of them is higher;
- disqualification of up to five years from performing functions as director, manager, auditor, member of the supervisory committee, certifying accountants, external auditors of issuers authorised to make public offering, or to act as such in investment or depository companies of investment funds, rating agencies or companies acting as financial trustees, or to act as intermediaries in public offerings or in any other manner which may be under the control of the CNV;
- suspension of up to a two-year term to make public offerings, or, as the case may be, to act in the sphere of public offerings. In the case of mutual funds, only common administrative acts and attending to redemption requests may be performed, being only able to sell for that purpose under the supervision of the CNV; and
- prohibition of making public offerings of securities or, acting in public offering of securities or forward contracts, futures or options of any nature whatsoever.
For the purposes of establishing the above mentioned penalties, the CNV shall especially take into account: the damage to the capital market’s confidence; the scale of the infraction; the generated benefits or the damages caused by the defaulting party; the operating volume of the defaulting party; the individual performance of the members of the board of directors and other supervision bodies and their relation with the controlling shareholders, especially, the nature of independent or external member of said bodies; and the circumstance of having been previous penalised in the six previous years by the application of the Public Offering of Securities Law.
In the case of the legal entities the following shall be jointly and severally liable: the directors, administrators, auditors or members of the supervisory boards and, in its case, the managers and members of the qualification board, whose individual responsibility was determined in the commitment of the penalised behaviour.
- 6.What are the private remedies an investor may pursue?
The Decree establishing that the self-regulated entities should create a permanent arbitration court to which all entities under the public offering regime shall be subject in a binding way in their relations with the shareholders and investors.
The actions derived from Law No. 19,550, as amended (the Corporation Law), shall be subject to the arbitration jurisdiction, including claims objecting corporate bodies resolutions and liability actions against its members or other shareholders, as well as nullity of bylaws or regulations.
Self-regulated entities shall proceed in the same way with regard to issues set by the shareholders and investors regarding the brokers acting in their scope, except for the discipline power.
Shareholders and investors in conflict with the entity or the agent shall have the right to make an option between arbitration or judiciary courts. In the cases where law establishes the aggregation of claims brought with the same purpose before one court, the aggregation shall be on arbitration court.
- 7.Give details of the frequency and nature of enforcement actions or private actions.
In the event of a breach of the rules and regulations of capital markets, the CNV has the duty of analysing the infringement and bringing a summary proceeding. A summary proceeding may be brought as a result of a denunciation, or by administrative initiative.
All the investigations carried out by the CNV are kept confidential until the summary proceeding initiation is approved by its board of directors. The resolution approving the promotion of a summary proceeding must be published on the web page of the CNV and also in the Bulletin of the BCBA.
During 2011, 11 summary proceedings were promoted, 13 summary proceedings were concluded, seven administrative sanctions were imposed and one transitory suspension of offering to the public securities was imposed.
- 8.What is the legal definition of a ‘security’ and which types of securities are commonly traded?
The term ‘security’ was originally defined by the Public Offering of Securities Law as securities that are issued en masse and that as a result of having the same characteristics and rights within their class are offered generally to the public. The term security under this law was linked to the instrument (the ‘paper’).
In 2001, with the approval of the Decree the definition of ‘security’ was modified. The new concept abandoned the idea related to the linkage with the instrument itself.
As a result of the above mentioned, ‘securities’ is defined by the Decree as the securities mentioned in section 17 of the Public Offering of Securities Law and its amendments, either held in certificate form or those securities filed in a book entry registry, specially including those credit instruments or instruments representing credit rights, shares, unit shares of investment funds, debt bonds or financial trust certificates or certificates of other collective investment tools and, in general, any security or investment contract or homogeneous and fungible credit rights, issued or grouped in series and equally negotiable and with similar effects to securities.
The securities more commonly traded in Argentina are common stocks, corporate bonds (simple and convertible into shares), public bonds, asset backed securities, investment funds, (closed-end funds), short-term securities, deferred cheques, among others.
- 9.How are securities offered and sold to the public?
In accordance with the terms of the Public Offering of Securities Law a public offering is an invitation made to the general public or to specific groups or sectors to perform any kind of legal act with securities, by the issuers or by sole proprietorships, firms or companies either exclusively or partly engaged in the trading thereof, by means of personal offers, newspapers and periodicals, radio or television broadcasts, films, posters, placards or billboards, programmes, circulars and printed communications or any other means of public dissemination.
The Decree modified the scope of the definition including any invitation with regard to legal acts with other financial instruments, whatever their nature may be, traded on an authorised market, such as forward contracts or options.
The public companies must obtain first the authorisation of the CNV and, if desired, the authorisation for listing at a stock exchange.
An issuer might also be able to perform private offerings of securities, which do not require the previous authorisation of the CNV.
- 10.What are the disclosure requirements for securities issuers for both public and private offerings?
Public offering in Argentina requires that, an issuer meet certain regulatory requirements of CNV
regarding assets, operating history, management and other matters, and only securities for which an application for a public offering has been approved by the CNV may be listed on the BCBA. This approval does not imply any kind of certification or assurance related to the merits or the quality of the securities, or the issuer’s solvency.
Filings of unaudited quarterly financial statements and audited annual financial statements are required for public companies, as well as other periodic reports, with the CNV and the BCBA.
With regard to private offerings, there are no disclosure requirements and as previously explained this kind of offerings are not under the supervision of the CNV.
- 11.Are there exemptions from securities registration?
The only exemption is public bonds. If the state, a province or a municipality decides to go public, it will only have to require the authorisation for listing at the exchange. Although it is not an exception, short term corporate bonds have a smoother process of registration, as issuers of this type of securities have a simpler disclosure regime.
- 12.Do your accounting standards differ in significant ways from other jurisdictions’ generally accepted accounting principles?
In December 2009, the CNV issue Resolution No. 562, as amended, by virtue of which since the fiscal period initiated after 1 January 2012, the public companies will have to adopt the IFRS (as defined below). For more information, please see question 13.
- 13.If the International Accounting Standards Committee’s International Financial Reporting Standards have not been fully implemented, is full convergence planned?
The CNV issued Resolution No. 562, as amended, pursuant to which the CNV modified the rules and regulations applicable to the presentation and valuation of the financial statements, in accordance with the International Accounting Standards Committee’s International Financial Reporting Standards (IFRS).
This resolution established that the companies that have their shares or corporate bonds listed shall prepare their financial statements in accordance with the IFRS from the fiscal period initiated after 1 January 2012. The small and medium business (SMBsz) and the companies that are regulated also by other regulatory authorities, such as banks and insurance companies, are excluded from the obligation to adopt the IFRS.
Recently, the CNV issued Resolution No. 592 by virtue of which it was established that the companies with shares or corporate bonds listed may have the alternative to submit its subsidiaries’ financial statements in accordance with IFRS or with the Argentine Generally Accepted Accounting Principles, in this case, with reconciliations of certain items, such as net worth and net income.
- 14.Does your jurisdiction offer policy and tax incentives to invest in the capital markets?
Argentina offers policy and tax incentives to invest in capital markets. Non-Argentine investors holding financial instruments that meet the public offering requirement are tax exempted either on the purchase, holding and sale of the debt security. Interests are also tax exempted.
As far as equity products are concerned, distribution of dividends of Argentine companies to non-Argentine shareholders, are not subject to withholding taxes. Additionally, income derived by a foreign beneficiary from the transfer of shares is tax exempted.
- 15.Please describe the applicable tax withholding regime, the customary exceptions and the commonly used standard tax-planning devices.
Income other than dividends, deemed to be of an Argentine source, paid to a foreign beneficiary, is subject to Argentine income tax withholding by the Argentine payer. The Argentine Income Tax Law imposes different rates of withholding taxes depending on the type of income, applicable on presumed net income. Argentina is a party to double taxation treaties which impose ceilings on the withholding rates imposed by the Argentine Income Tax Law.
- 16.Where and how are securities traded?
The securities market in Argentina is composed of 12 stock exchanges, which are located in the City of Buenos Aires, Bahía Blanca, Corrientes, Córdoba, La Plata, La Rioja, Mendoza, Rosario, Santa Fe and Tucumán. Five of these exchanges (the BCBA, Rosario, Córdoba, Mendoza and Santa Fe) have affiliated stock markets and, accordingly, are authorised to quote publicly offered securities. Securities listed on these exchanges include stocks, corporate and public bonds.
The BCBA, which began operating in 1854, is the main and traditional exchange in Argentina. Bonds listed on the BCBA may simultaneously be listed on the Argentine over-the-counter market (MAE), pursuant to an agreement between BCBA and MAE, that stipulates that equity securities are to be traded exclusively on the BASE, while debt securities (both public and private) may be traded on both the MAE and the BASE. In addition, through separate agreements with the BCBA, all of the securities listed on the BCBA may be listed and subsequently traded on the Córdoba, Rosario, Mendoza, La Plata and Santa Fe exchanges.
Most securities are traded within Mercado de Valores SA (Merval), a corporation whose 183 shareholder members are the only individuals and entities authorised to trade, either as principal or as agent, in the securities listed on the BCBA. Trading on the BCBA is conducted by continuous open outcry, or the traditional auction system, from 11.00 am to 5.00 pm each business trading day of the year. Trading on the BCBA is also conducted through SINAC, which is a computer trading system for debt and equity securities. SINAC is accessed by brokers directly from workstations located at their offices.
- 17.Where and how do securities clear?
The Merval performs as clearing house and central counterpart (CHCC) in the settlement and netting of transactions. The settlement system used by the Merval complies with the G-30 Report on Clearing and Settlement in Global Securities Markets and the subsequent reports of the Technical Committee of the International Organisation of Securities Commissions (IOSCO) and the Iberoamerican Federation of Stock Exchanges.
The transactions that are settled are: spot transactions, forward transactions and securities loans. The settlement system ensures the compliance of the delivery versus payment (DVP).
In order to perform the settlement of the above mentioned transactions, the Merval uses the accounts held with Caja de Valores SA, which acts as the central securities depository and ensures the existence of the securities and the transfer between the involved parties, and also financial institutions through which the payments are received and made.
- 18.Please provide a general description of securities settlement systems in your jurisdiction.
There are commonly two groups of transactions:
- spot transactions; and
- forward transactions.
The spot transactions allow investors to buy or sell certain securities (as stocks, public bonds, and corporate bonds) at an agreed price are settled on T+3 basis.
The forward transactions are conveyed to be settled after T+3. This extended term of liquidation implies more risk and as a result; the participants will require to set up guarantees.
- 19.What are the distinguishing characteristics of your debt and equity capital markets?
Both debt and equity capital markets have very similar regulation and have to comply with very similar disclosure requirements. Notwithstanding the foregoing, most of the market participants prefer to issue debt, as corporate bonds, instead of stocks. Among the principal reasons for this, we find that on the shareholders side, they are not comfortable with accepting a new investor that can interfere in the decision making of the company.
On the investor side, investors feel more comfortable acquiring bonds rather than stocks, as bondholders positioned better than shareholders during times of economic turbulence.
From January 2000 to December 2011, the companies have obtained funds principally through the issuance of corporate bonds (46.8 per cent), secondly, through the structuring asset backed securities (45.7 per cent), and thirdly, through issuance of shares (7.5 per cent). (Source: Instituto Argentino de Mercado de Capitales (IAMC)).
- 20.Where and how are derivatives traded?
Derivatives are traded in the Mercado a Término de Rosario (Rofex), MAE and Mercado a Término de Buenos Aires (MATBA). They are exchanges organised under the laws of Argentina and operate as self-regulatory organisations under the supervision of the CNV. Regarding Rofex, transactions can be performed through their e-Rofex platform. Typical products of this market are:
- soy;
- wheat;
- corn;
- dollar currency;
- euro currency;
- real currency; and
- gold.
MAE is an electronic platform that processes over-the-counter transactions. It is an electronic exchange where both government securities and corporate bonds are traded through spot and forward contracts. The MAE has 90 brokers or dealer members, which include national banks, provincial banks, municipal banks, private national banks, foreign banks, cooperative banks, financial institutions, foreign exchange entities and pure brokers and dealers (exclusively engaged in brokerage activities). Both Argentine or foreign capital banks and financial institutions may be the MAE’s brokers or dealers. Securities to be traded must be registered with the pertinent supervising authorities and may be traded in the MAE, in other exchanges or in both of them concurrently. Typical products of this market are:
- dollar currency futures;
- different rates; and
- index futures.
Lastly, MATBA is also a self-regulated exchange, with the participation of the Agriculture, Livestock, Fishing and Food Secretary. Transactions can be performed by any registered agent via the outcry system through MATBA net. Typical products of this market are futures and options related to agribusiness.
- 21.Can you explain development of structured finance instruments in your country?
Structured finance products are much used in Argentina. Of such instruments, the more frequently issued and traded are asset-backed securities.
The asset backed securities are generally issued through financial trusts, also supervised by CNV. At the beginning, financial trusts were subject to certain tax exemptions and fewer requirements of information.
In 2008, the tax exemptions were removed and harder and stricter obligations were imposed on the trustor and trustee. Nevertheless, the figures show that the investors are deeply involved with these structured securities as they consider them secure and cost effective (the trading volume of financial trust was 4.4 million pesos in 2008, 5.79 million pesos in 2009 and 3.5 million pesos in 2010. Source: IAMC).
- 22.How are institutional investors defined and regulated?
The institutional investors are regulated by CNV Rules. There are certain securities, as short term bonds and shares and corporate bonds of SMBs that can only be acquired and traded by institutional investors, as they accomplish with simpler information requirements. The institutional investors are:
- the state, provinces, municipalities, their self-regulated entities, banks and financial institutions of the state, state entities, state enterprises, legal entities subject to public law;
- limited liability companies and corporations;
- cooperatives, mutual benefit associations, health insurance (mandatory affiliation through trade unions), civil associations, foundations and labour organisations;
- brokers;
- investment funds;
- individuals with residence in the country, with a net worth above 700,000 pesos;
- legal entities with residence in the country with a net worth above 1.5 million pesos;
- foreign legal entities and individuals with residence outside of the country; and
- the National Security Social Administration.
- 23.What is the definition of ‘insider trading’? Outline the major developments in insider trading law giving details of any recent cases.
Insider trading has been defined by Resolution No. 227 of the CNV. This resolution forbids controlling stockholders, directors and managers to use non-public material information in order to gain any advantage, whatsoever, for them or for a third party. Also, the Decree states the duty of confidentiality concerning directors, managers, trustees, supervisory board, controlling stockholders and professionals involved, regarding information not yet released to the public and that, for the nature of its importance, may affect the underwriting or trading of securities subject to public offering regulation. In Comisión Nacional de Valores v Establecimiento Modelo Terrabusi SA, the Commercial Court revoked the monetary sanction rendered by the CNV against the directors of a listed company for trading securities based on inside information, but at a further stage, the Supreme Court confirmed the sanction against the implicated subjects. This case turned out to be the first leading case in Argentina concerning insider trading practices. Under our local legislation, insider trading is not considered as a crime but as a serious administrative infraction. Recently, the Criminal Code was amended by Law 26,733 (the Law) that was passed in December 2011. The Law introduced insider trading and market manipulation as criminal offences. The Law establishes: prison (from 1 up to 4 years); a fine (equal to the amount of the operation involved) and special disqualification (up to 5 years) as punishment. The condition of being director, auditor or employee of self regulated entities or rating agencies rates as an aggravating circumstance with respect to those criminal offences.
- 24.What are the roles of the authorities when a foreign issuer makes a public offering? Who has jurisdiction over the public offering?
Public offering of securities is under the jurisdiction of the CNV. In the event that a foreign issuer decides to make a public offering of its shares in Argentina, it will have to comply with all the procedures and requirements of local companies. If the country of incorporation of the foreign issuer has an agreement with the CNV, as described in question 24, the process will be easier and smoother.
- 25.Is there a formal understanding with other jurisdictions to share information and provide reciprocal assistance in enforcement matters? If so, which jurisdictions?
The CNV has entered into several Memorandums of Understanding with securities and exchange commissions of different jurisdictions such as Germany, Bolivia, Brasil, Chile, China, Colombia, Republic of Costa Rica, Ecuador, Salvador, Spain, United States, France, Israel, Italy, Malaysia, Mexico, Panama, Paraguay, Peru, Poland, Portugal, Quebec, United Kingdom, Dominican Republic, South Africa, Thailand and Taipei.
- 26.Please describe the framework for corporate governance
Corporate governance is regulated by the Decree, denominated as ‘Public Offering Transparency Regimen’. The scope of this regulation is to strengthen the level of protection of the capital market investor (financial consumer).
It states the obligations to inform of certain relevant facts that may affect the collocation of securities or their trading, certain statements on publicity and on the information contained in the prospectus, sanctions for false information, conditions to public offering and voluntary retirement, and describes the actions that affect public offering transparency.
Most of its reforms introduced by the Decree are in line with world trends pertaining to corporate governance practices that have already been adopted by many markets.
In 2011 the CNV launched a Corporate Governance Code proposal for public comment. Basically, the proposal strengthens the obligations and reporting activities of public companies, this time not only offering stocks but also offering corporate bonds.
- 27.Which governing bodies must public companies have and what are their main duties?
Governing bodies for a public company are stated by the Corporation Law, and the Decree. The Corporation Law, section 255 enforces public companies to have at least three directors on their boards. Their main duty concerns the management of the company. Section 268 states that the president of the board of director shall be the one that legally represents the company among third parties. Section 269 enables the constitution of an executive committee subject to its approval by the company’s by-laws; their main duty shall only include the execution of ordinary business. Pursuant to section 270, the board of directors can designate general or special managers, qualifying as directors or not, in order to delegate the executive matters of the administration of the company. Pursuant to section 284, a public company must have an odd-numbered supervisory committee with at least three members.
Also, pursuant to sections 233, 234 and 235, shareholders’ meetings are essential, having as their main duties to:
- consider the company’s financial statements;
- consider directors and managers’ appointments;
- consider an increase of capital stock;
- consider a merger or acquisition; and
- issue bonds, among other tasks.
Section 15 of the Decree sets out that public companies must have an audit committee with a minimum of three members, with most members being independent and having as their main duties to:
- decide the designation of the external audit committee;
- oversee the internal control systems and accountable and administrative systems; and
- oversee information policy regarding the company’s risk management.
In order to comply with this same section, the company will need to appoint an external audit committee with independent members that will audit the financial statements.
- 28.Are there any laws governing capital markets that are unique to your jurisdiction?
Although it is not ‘unique’, the Corporation Law establishes that, in the event that a corporation decides to increase its capital stock, the pre-emptive rights of the shareholders are mandatory and can only be suspended in certain and limited cases. The scope of this right is to protect the current shareholders of a company from dilutive practices of the controlling shareholders (friendly dispute arrangers). The decree may also be considered ‘unique’ for the varieties of issues covered by it. According to some legal opinions the scope and seriousness of the recent Criminal Code amendment could be considered ‘unique’ in the region.
- 29.How do authorities and issuers resolve matters that are not expressly provided for in the securities laws and regulations?
In the case arbitration disputes they may be solved using equity principles and reasonable, just and fair criteria, a form of arbitration known as amigables componedores.
- 30.Which types of companies may make public offerings in your jurisdiction?
The only type of company that can trade its shares are corporations. With regard to corporate bonds, they can be issued by corporations, cooperatives and civic associations.
- 31.Which economic activities or segments are the most active in the capital markets in your jurisdiction?
The most active segments of our economy in capital market are:
- oil and gas;
- banks;
- telecommunications;
- metallurgical industry;
- energy;
- retail; and
- consumer financing.
- 32.Describe the main stock exchanges and OTC networks.
The most relevant stock exchanges and OTC markets are the Merval and MAE. As of December 2011, Merval had an average volume of US$836.1 million, including US$39 million regarding stocks and US$537.8 million of government debt bonds; it had a total capitalisation of US$1.611 billion and an average free float in relation to Argentine companies of around 31.5 per cent. Concerning MAE, for the period of 2010, it had 65,013,687 floating government bonds in its market and 437,916 notes from private companies.
- 33.Describe recent initiatives undertaken by the government to improve the regulation and efficiency of its capital markets.
The latest government initiative refers to money laundering and terrorism funding. The Financial Information Unit (UIF) issued several resolutions, being relevant on this matter. General Resolution 229/11 and 34/11, both refer to agents and brokerage houses, investment funds’ managers, OTC agents and all intermediaries regarding buying, leasing or loan on securities. The resolutions state a number of duties referring to systematic reports based on unusual and suspicious operations.
As an example, obligated subjects will have to give information about: the amounts, the frequency and nature of an operation that has no proportion between the client’s background and its economic activity; and unusual amounts or complex schemes for the performance of a transaction, among others.
Another initiative was the adoption of the IFRS for the listed companies. Such an initiative will facilitate the analysis of the local companies by foreign investor and will also allow easier access for such companies to the foreign markets. See question 13.
Recently, the Criminal Code was amended by Law 26,733 (the Law) that was passed in December 2011. The Law introduced insider trading and market manipulation as criminal offences. The Law establishes: prison (from 1 up to 4 years); a fine (equal to the amount of the operation involved) and special disqualification (up to 5 years) as punishment. The condition of being director, auditor or employee of self regulated entities or rating agencies rates as an aggravating circumstance with respect to those criminal offences. See question 23.
- 34.Describe the main obstacles that a company may confront in your jurisdiction when it is trying to become public.
The common obstacles include:
- public companies having to accomplish several requisites and requirements of information, and additional paperwork, that increases their fixed costs, making operations more costly;
- a cultural problem of local major shareholders being afraid of losing control of the decision-making of the company, when in the exchanges the stocks are acquired by unknown investors;
- a lack of substantial tax incentives; and
- a risk of overregulation.
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