Securities Trading or Foreign Exchange Transaction?

On December 21, 2012 Division B of the Criminal Court of Appeals for Economic Matters nullified a resolution dated May 16, 2012 issued by the Criminal Court for Economic Matters No. 8. The resolution of the above mentioned Court had convicted a bank and its officials to the payment of a fine of approximately 1% of the largest infringement on the basis of the selling of securities in Argentine pesos and their purchase in U.S. dollars, to one client, and the same transaction, the other way round, to another client, pursuant to simultaneous transactions carried out in 2005. Such transactions were executed prior to the enactment of Communication “A” 4864 (November 3, 2008) which established that securities should remain in the seller’s portfolio for at least 72 business hours.

In order to reach this conclusion, the Criminal Court considered valid certain internal opinions of the Central Bank of the Republic of Argentina which deemed such transactions as foreign exchange transactions (even when one of the opinions specifically states that the alleged transactions did not constitute foreign exchange transactions under a restrictive interpretation and, further, were not prohibited by foreign exchange regulations). Moreover, the resolution does not analyze the “foreign exchange trade concept”.

The bank appealed the resolution raising the issue of nullity because of lack of legal grounds, the atypical nature of the behaviors penalized, impairment of the principle of legality and inapplicability of analogy principles in criminal matters, among other defenses.

The majority of the members of Division B of the Criminal Court of Appeals for Economic Matters considered the arguments raised by the bank were valid and declared the nullity of the resolution since through its analysis it was not clear with respect to the reasoning that led the Criminal Court to consider that securities trading transactions constituted foreign exchange transactions; therefore, considered said resolution lacked sufficient grounds.

The minority vote, stated by the Honorable Mr. Repetto went even further, and directly proposed reversal of the resolution under appeal and acquittal of the accused based, among other aspects, on the fact that the behaviors, subject-matter of the charge, were atypical (that is to say, they were not specifically listed as prohibited foreign exchange transactions), and, following the principle established by the Argentine Supreme Court in the leading case Esterlina, a broad interpretation of the concept of “foreign exchange transaction” cannot be applied as such analogy is prohibited.

As a result of the decision entered by the Criminal Court of Appeals, this matter will have to be the subject of a new resolution to be entered by another Criminal Court for Economic matters.

Nevertheless, the Criminal Court of Appeals resolution constitutes a favorable precedent and reinforces the interpretation that a criminal law so called “norma penal en blanco” (a criminal rule which does not completely describe the criminal conduct sanctioned but rather defines it indirectly by reference to another law that is not of a criminal nature), such as the Foreign Exchange Criminal Law, should be enforced under an express and accurate regulation issued by the Central Bank of the Republic of Argentina. Therefore, a broad interpretation of an exchange transaction would not be admissible, in particular when it broadens the criminal type therein contained.