New CNV Regulation on Collective Investment Products for Development of Public Infrastructure Released for Comments

On August 26, 2020, the Argentine Securities and Exchange Commission (the “CNV” after its acronym in Spanish) issued Resolution No. 852 (the "Resolution") subject to public consultation. The CNV has set a term of 15 business days to issue opinions and/or proposals, which must be submitted through its website.

The Resolution proposes a special regime for the constitution and authorization of closed mutual funds (“CMF”) and financial trusts (“FT”) that directly or indirectly finance, invest and / or develop public infrastructure works at a national, provincial and municipal level through the capital markets. Thus, the regulation defines Public Infrastructure as engineering or architectural public work projects of construction of goods aimed for public use of urban, road, transportation, logistics, ports, railways or similar.

The Resolution sets forth the following provisions, among others, that would be applicable to both CMFs and FTs:

• The name of the CMF and the FT must include the expression "Public Infrastructure".
• The public work must be duly tendered and awarded.
• The state entity that tenders and contracts the infrastructure work in its jurisdiction is considered the sponsor of the work.
• When the development of a work is foreseen, the company that acts as "Contractor" must be identified, and detailed information in relation to it must be included in a special section of the prospectus or prospectus supplement. Likewise, a project auditor must be appointed, which will be an independent technical professional who will be in charge of preparing quarterly reports regarding the progress of the work, which must be published in the CNV’s online information reporting system.
• The underlying asset will be constituted, directly or indirectly, with the development, construction and/or financing of public infrastructure, and/or through vehicles created exclusively for the purpose of developing infrastructure projects and/or instruments related thereto and/or negotiable obligations whose purpose is the financing of public sector projects and/or other collection rights and/or credits that are assigned with respect to the object of the structure in question. Public work certificates, public deeds, instruments of recognition of term collection rights, etc., may be incorporated, which may be guaranteed with assets or flows contributed by the Sponsor.
• The securities issued by the FT and CMF may only be acquired by qualified investors.

Concerning FTs, the Resolution proposes the modification of the general regime with respect to existing relations between the trustee and the trustor by establishing that they must not have common shareholders holding 10% or more of the capital of the trustee or trustor or of the controlling entities of the trustee or the trustor, nor may the trustee be a company related to the trustor or shareholders holding more than 10% of the capital of the trustor. Such limitation is not applicable when the above-mentioned relationships are with the Argentine Government, the provinces, the City of Buenos Aires, municipalities, autonomous entities, entities or companies with a majority state participation or where the state in its different levels has the corporate will and other entities that are part of the national, provincial or municipal public sector.

Likewise, regarding the special FT regime for the Development of Public Infrastructure, the Resolution establishes the possibility of (i) creating them as “direct investment funds” in accordance with Article 40 of Chapter IV of Title V of the CNV Regulations, and (ii) issuing trust securities in tranches, so as to adapt the fundraising mechanisms to the particular characteristics of this type of fiduciary structure, subject to the analysis of the CNV and compliance with certain additional requirements.

Furthermore, regarding FTs for the Development of Public Infrastructure whose purpose is to assist the provinces, municipalities and the Argentine State in the financing of infrastructure works with economic and/or social impact, the regulation establishes that in addition to complying with the present regime, they will be considered to be included in the special regime established for solidarity financial trusts pursuant to Section XXIV of Chapter IV of Title V of the CNV Regulations.

Regarding CMFs, the Resolution encourages to establish, in addition to the content provided in the general regime applicable to them, the minimum content of the Management Regulations and the Prospectus for this type of mutual funds, depending on the  features of investment.