The CNV Expands Permissible Investments for Real Estate Closed-End Mutual Funds

On April 13^th, 2022, the Argentine Securities Commission (“CNV”, after its acronym in Spanish) issued General Resolution No. 927, which included an exception for real estate closed-end mutual funds (the "Funds") with respect to the general prohibition of Article 4 in fine of the Mutual Funds Law No. 24,083 (the "MFL").

Resolution 927 approved -with certain modifications- the draft regulation published by General Resolution No. 920 on January 27, 2022 (https://www.marval.com/publicacion/la-cnv-propone-ampliar-las-inversiones-permitidas-a-los-fondos-comunes-de-inversion-cerrados-inmobiliarios-14174&lang=en).

Currently, the MFL forbids Management Companies from carrying out any type of transaction for the mutual funds under their management with companies belonging to the same economic group as the Management Company and/or the Depositary, unless a specific exception is provided in the MFL and the CNV regulations.

The Resolution mainly sets forth the following:

• In order to guarantee the transparency of the transactions and mitigate risks of conflict of interest, the offer documents must identify the investment asset, the real estate project, as well as the acquisition price and/or valuation method used;
• In such cases, the acquisition of the real estate asset is required to be at a value equal to or less than that determined by two independent appraisals, which must be included in the issuance prospectus;
• The Management Company and the Depositary (the latter only with respect to the investment linked to a company in the same economic group), through their respective management boards, shall expressly address the terms of the transaction, verifying that the transaction is carried out under reasonable terms, in accordance with customary market conditions;
• The investment decision must have the favorable opinion of the Investment Committee, with the abstention of members that are related parties, and/or of the independent third party appointed to advise on the execution of the investment policy, if applicable. The report must be published through the CNV's Financial Information Reporting System (“AIF,” after its Spanish acronym).
•  Participating developers and/or Real Estate Administrators related to the Management Company and/or the Depositary must be identified in the offer documents, indicating the terms of the contract, which must be expressly considered by the Management Company and the Depositary through their respective management boards, and that their participation is carried out under reasonable terms and in accordance with customary market conditions as evidenced by the presentation of a report from an independent consultant published through the AIF;
• For those funds lacking predetermined initial assets, or an identified real estate developer/administrator, once the investment has been made, the Management Company must comply with the dissemination of all the information required by the regulations through the AIF.
• In the event of coinvestment of the fund with a company belonging to the same economic group as the Management Company and/or the Depositary, certain precautionary measures must be implemented, including the individualization of the investment together with the terms of the agreements and the accreditation that the transaction is carried out under market conditions.
• Finally, in no case may the Management Company carry out, for the funds under its administration, any transactions with assets owned by the Management Company, the Depositary or by their directors, managers, employees, members of the supervisory boards or their controlling companies, or the individuals that hold a controlling interest in the Management Company, the Depositary or their controlling companies.