Consultation Procedure to Create a Safe Harbor for Securities Offered to Employees

On June 12, 2024, the Argentine Securities Commission (CNV) issued General Resolution 1009, submitting to public consultation a new regulation of Private Placement of Securities Offers Directed to Employees within the framework established in the Capital Markets Law.

 

Through the Resolution, the CNV seeks to provide legal certainty to those offers of securities that may be considered as private placements (because they are addressed to either a limited number of investors or employees), regulating specific cases and considering the means and mechanisms of dissemination, offering, and distribution, and the number and type of investors to whom the offer is addressed. The Resolution also provides a safe harbor for offshore offers carried out outside Argentina and that do not have sufficient points of contact with this commission.

 

The CNV also stated, that internationally, it is a common practice to establish specific regulations that provide the parties involved with legal certainty. If they strictly comply with the requirements in them, they will be exempt from the comptroller of the competent authority. Such regulations are known as “safe harbor.”

 

According to the Resolution, to the effects of this safe harbor, an offer will be considered a Security Offer to Employees when it meets all these criteria:

1. The offers are made by a company, residing or not in Argentina, that is the employer of whom the offer is destined to, or by any company, residing in Argentina or not, that is a company of the employing group.
2. The invitations to carry out transactions with securities can only be received by persons who are employees, officers, or non-independent members of the board of directors of the issuer or of a company of the employing group.
3. The following may be offered:

(i) any security issued by the employer or any company in the employing group, including

(a) call options on these shares,

(b) shares certificates of trusts, mutual funds constituted outside of the Argentine Republic, and VPUs, provided the equity securities and cash deposits represent at least 90% of the value of the underlying assets,

(c) synthetic securities or contractual rights (such as phantom stock) that replicate any of the aforementioned equity securities or instruments.

4. There is no limit to the price of the securities received by employees, officers, or non-independent members of the board of directors of the issuer. It also does not matter if the addressee of the offer is a qualified investor or not.

Likewise, the dissemination must be carried out exclusively through these authorized means of dissemination:

1. Written or oral communications by the issuer to the employee, officer, or non-independent members of the board of directors of the issuer, including meetings,
2. Internal means of communication that persons that are not employees, officers, or non-independent members of the board of directors do not have access to, such as the intranet of the employer or the company of the employing group, circulars, internal bulletins, and other usual means of communication between the employer and the addressee of the offer.

At the request of the employee, at the moment of acquiring the securities or beforehand, the issuer must provide the investor with the following information:

•          The latest financial statements of the issuer of the securities (if this is regarding a trust, it would be those of the trustee).

•          Any information that is relevant to the offer.

•          The most recent annual financial statements presented before regulatory entities of foreign capital markets, if any.

•          If the issuer operates under the framework of public offerings, it must clarify this to the investor when it delivers the documents.

The persons that execute the offer must inform this in the purchase documentation or in a written notification:

•          That they may not transfer these securities or rights during the six months after the subscription period of said securities. This does not apply when the transfer is carried out outside Argentina and for trusts that issue securities once the public offering authorization is obtained.

•          That the issuer is under the public offer framework.

•          That this is regarding a private placement and that it is not object to CNV’s audits, nor is it subject to the informational framework and the audit included in the CNV’s regulations.

Transparency: the issuer and all the participants in the primary placement must comply at all times with the regulations regarding transparency foreseen in article 117 of Law 26831 and those in the CNV’s regulations.

 Confidentiality: it will apply to the issuers and all the participants in the corresponding offer, and investors can expressly waive it.

The private placement that meets these  dispositions will not be considered public offers according to the Capital Markets Law, and will be considered private placements. Thus, these will not be considered irregular or unauthorized public offers, nor will they be subject to disciplinary sanctions corresponding to the irregular or unauthorized public offering of securities, nor will they be automatically subject to disciplinary sanctions corresponding to irregular public offering of securities.  Infraction will apply solely in the case of securities as defined and regulated by Law 26831 and the CNV’s regulations. This must be assessed for each specific case. If so, only offerors and, in solidarity, market agents who participated in the emission will be responsible for any irregular public offer.

The Resolution, likewise, submits these sub-regimens to public consultation:

1. Private Placement of Securities (for more information, see the following article),

      Securities Offers without Sufficient Contact with Argentina (for more information, see the following article).