Development of Regional Economies: the CNV Approves a New Regime

On November 20, 2020, the Argentine Securities and Exchange Commission (the “CNV” after its acronym in Spanish) issued General Resolution No. 870 (the “Resolution”) submitting to public consultation new regulations for promoting productive development, regional economies and value chains.

 

The Resolution was preceded by Resolution No. 858, which submitted the preliminary General Resolution to public consultation.

With the purpose of providing tools for the development, financing and investment in real economy products, including value chains, and the aim of improving productivity levels, environmental performance and/or promoting the development of capacities of relevant economic actors and sectors in Argentina, the CNV implemented a stimulus regime for Cooperatives with Productive Purposes (the “Cooperatives”) and a new Special Regulation applicable to Collective Investment Products to promote productive development and local economies (the “CIP” for its acronym in Spanish).

 

The Resolution mainly sets forth the following provisions to ease access to the capital market for Production Cooperatives of certain activities detailed therein and through the issuance of notes:

 

• the possibility of requesting authorization from the Commission for the issuance of notes either individually or under global programs, with requirements according to their capacity and size;
• the establishment of a differentiated quarterly information regime, which releases Cooperatives from submitting quarterly financial statements;
• the presentation of the annual Financial Statements and the Report in the terms and manner provided by the Argentine Social Economy Agency (the “INAES” after its acronym in Spanish);
• the maximum issuance amount determined by the Cooperatives’ corresponding bodies may not exceed, in pesos or in any other currency in which the issuance was made, an amount equivalent to thirtyfive million units of purchasing value; and
• notes issued within the framework of this regime must be traded on authorized markets and may only be acquired and transferred by qualified investors.

 

The main provisions in the Resolution regarding the CIP, applicable both to closed mutual funds (the “Mutual Funds”) and to financial trusts (the “Trusts”) to promote productive development and regional economies, are the following:

 

• the possibility of creating CIPs with a great diversity of underlying assets linked to the objective pursued under the new regime;
• the possibility of reducing to one business day the diffusion period when the initial public offering is directed to qualified investors;
• the possibility of giving collateral over the underlying asset by mutualguarantee companies and/or public guarantee funds created by national or provincial laws; and
• the incorporation of financial institutions as possible guarantors by endorsement, together with reciprocal guarantee companies and public guarantee funds.

 

The main provisions in the Resolution regarding Mutual Funds are the following:

 

• the minimum content required in management regulations and issuance prospectuses under the new regime, depending on the particularities of the investment;
• when the Mutual Fund invests in companies or vehicles with connections to participants of that Mutual Fund, its managers and/or economic group, an independent technical advisor must be appointed; and
• the incorporation of an information regime consistent in: (i) a quarterly report, by the Fund manager, on the evolution of eligible investments and the application of funds, indicating the level of compliance with the investment plan and any deviations detected during its implementation; and (ii) a monthly report on the composition of the Fund’s asset portfolios.

 

Finally, the main provisions in the Resolution regarding Trusts are the following:

 

• the possibility of waving the requirement to identify the settlors on those Financial Trusts Global Programs that exclusively foresee the creation of Trusts as direct investment funds, provided that the investment object is duly described and defined;
• the spectrum of Trusts intended to finance Small and Mediumsized Enterprises (“PYME” after their acronym in Spanish) is expanded to those in which human persons, who have the status of PYME, participate in accordance with the particularities provided in the projected regulations;
• the possibility of increasing the issuance amount authorized under the Trust and/or issuing additional debt securities and/or certificates of participation when doing so is essential to accomplish its purpose, provided that this is included in the original trust agreement or the trustee has the unanimous consent of the holders of the debt securities and certificates of participation;
• when the Trusts are created individually, the issuance or placement of new tranches is possible if the trust asset allows it; and
• the use of simplified prospectuses and supplemental prospectuses for those Trusts in which a mutualguarantee company or a public fund endorses its underlying asset.