Consultation Procedure to Create a Safe Harbor for the Private Placement of Securities

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, within the framework of the provisions of the Capital Markets Law.

Through this 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 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, an offer of securities is considered a private placement, to the effects of this safe harbor, when it meets all of these conditions:

1. The offer is carried out by the issuer of the securities or any person vested to do so, whether  resident in Argentina or not.
2. The offer is addressed to a maximum of 35 persons, taking into account all the dissemination media.
3. The transaction is executed with a maximum of 20 investors, of which no more than 10 may be considered unaccredited investors (all investors that are already holders of shares of the issuer are excluded from this calculation). The counterparty that executes the sale transaction with the investor will be solely responsible of verifying if the investor is considered qualified or not, and of the compliance with the maximum quantity of investors.
4. This does not apply to units of mutual funds in Argentina, nor to shares of publicly offered companies.
5. The agents registered before the CNV who participate in the offer cannot carry out  a public offering.

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

1. In-person or virtual promotional meetings with up to 10 unaccredited or accredited potential investors at once.
2. Sending and delivering to a registered documentation agent related to the securities (offering memoranda, or similar documents, and informational sheets), either in person or remotely, by any electronic, digital, or physical means, whether or not the agents are registered in Argentina.
3. Sending documents related to the securities at the request of one or more qualified investor. The request must be regarding a specific security and subscription to mailing lists is insufficient.

At the request of the investor, at the moment of acquiring securities or earlier, the issuer must provide the investor this information:

• The latest financial statements of the issuer of the securities (if this is regarding a trust, it would be the settlor’s).
• Any information relevant to the offer.
• The most recent annual reports 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.

Those who carry out the offer must inform the following in the sale documentation or in a written notice subscribed by the investor:

• That they may not transfer these securities or rights to them during the six months after the subscription period of said securities. This limitation does not apply when the transfer is carried out outside of Argentina and for trusts that issue securities once the public offering authorization is obtained.
• If the issuer is under the public offer framework.
• That this is regarding a private placement and that it is not object to the CNV’s supervision, nor is it subject to the informational framework and the audit foreseen by 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 in article 117 of Law 26831 and those in the CNV’s regulations.

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

The private placement that meets these conditions will not be considered public offers according to the Capital Markets Law, and will be considered private placement. Thus, these placements will not be considered irregular or unauthorized public offers, nor will they be subject to any disciplinary sanction 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. Infractions will apply only if there is a public offering of securities as defined and regulated by Law 26831 and the CNV’s regulations. This must be assessed on a case-by-case basis. If so, only issuers and registered agents who participated in the emission will be responsible for irregular public offers.

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

1. Securities Offers Directed to Employees (for more information see the following article).
2. Securities Offers without Sufficient Contact with Argentina (for more information see the following article).

Finally, the Resolution repeals General Resolution 955.