The Argentine Securities and Exchange Commission (“CNV”) issued Regulation No 711-E/2017, calling the public for comments on a proposed regulation on securities indexed by inflation.
The general principle under Argentine law is that contractual provisions which provide for the indexation of the obligations are void.[1] However, there are certain exemptions to such prohibition. Among those exempted obligations are securities (valores negociables) with or without public offering with a maturity no shorter than two years, which can be indexed by the: (i) Coeficiente de Estabilización de Referencia (“CER”), an index that reflects inflation, or (ii) Unidad de Valores Adquisitivo (“UVA”), which is adjusted by inflation in the same manner of the CER or (iii) Unidades de Vivienda, which is adjusted by the construction cost index.[2] The securities can be adjusted by these indexes or can be denominated in UVA or UVI (e.g. the issuer would pay the value in pesos of a certain amount of UVA or UVI).
This exemption for securities was introduced by Decree 146/2017 in March 2017, and the purpose of regulation proposed in Regulation 711-E/2017(Regulation 711) is to incorporate these securities to the CNV´s regulations this securities.
The proposed regulation is for three new instruments: (i) Negotiable Obligations (obligaciones negociables) denominated in UVA and UVI; (ii) Debt Securities issued by Financial Trusts denominated in UVA and UVI; and (iii) Mutual Fund Quotas denominated in UVA and UVI. The regulations provided that all these instruments must be issued with an amortization term not shorter than 2 years from the issuance day.
Comments can be made within 15 business days of the publication of Regulation 711. The deadline is December 13, 2017.
[1] Section 7 and 10 of Law No 23,928.
[2] Decree 146/2017
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