New Guidelines on Simultaneous Performance as Mutual Funds Manager and Broker

On January 21, 2021, the Argentine Securities and Exchange Commission (the “CNV,” after its acronym in Spanish) issued General Resolution No. 880 (the “Resolution”), by means of which it approved new regulations governing Mutual Funds Managers who are also simultaneously registered as Brokers (or “ALyC,” after its acronym in Spanish).

The Resolution was preceded by a prior resolution (No. 869), which submitted the preliminary General Resolution to public review.

For the purpose of regulating simultaneous performance as Broker and Mutual Funds Manager, the CNV released the applicable organization and performance requirements for review.

 

The Resolution mainly:

 

• authorizes Mutual Funds Managers to conduct placement activities, provided they are registered as Integral Mutual Funds Placement and Distribution Agents;

 

• establishes functional and administrative segregation guidelines, allowing such companies to function as autonomous and independent operating or business units based on the different categories in which they are registered with the CNV;

 

• outlines the necessary steps and procedures for companies to prioritize the interests of their clients when performing as Brokers, as well as the collective interests of the quota holders and the Mutual Funds that they manage as Mutual Funds Managers;

 

• establishes such companies’ duty to avoid any possible conflicts of interest with their clients arising from their prioritization in the placement and distribution of the shares that Mutual Funds manage and/or the placement and distribution of shares of Mutual Funds managed by other Mutual Funds Managers, without that prioritization being founded on technical criteria or analysis and without adjusting it to their clients’ risk profiles;

 

• establishes restrictions to the company’s range of action, which may not intervene in the arrangement, registration, settlement and offsetting of operations connected to the collective portfolios of the Mutual Funds that it manages as Mutual Funds manager;

 

• mandates that the company registered as Mutual Funds Manager and Broker have appropriate personnel as qualified advisors registered with the CNV (Registro de Idoneos) with individualization of each operating unit in which they conduct their business;

 

• mandates that the company report in its financial statements the net income for its fiscal year of each of the operating units linked to the activities conducted under each of the categories registered with the CNV; and

 

• mandates that the Person Responsible for Regulatory Compliance and Internal Control oversee and evaluate that the agent and the employees assigned to the different operating or business units comply with their duties while performing each activity under Law No. 26,831 and CNV Regulations.