Simultaneous Brokerage and Management Companies are Subject to New Regulations

On November 17, 2020, the Argentine Securities and Exchange Commission (the “CNV” after its acronym in Spanish) issued General Resolution No. 869 (the “Resolution”), by means of which it submitted to public consultation the new regulation applicable to those Mutual Funds Managers which are simultaneously registered under the category of Broker (the “ALyC” after its acronym in Spanish).

With the purpose of regulating simultaneous action as Broker and Mutual Funds Managers, the CNV opened to comments the organization and performance requirements applicable to Mutual Funds Managers registered under the category of Broker.

The Resolution’s main provisions include the following:

• the establishment of functional and administrative segregation guidelines, which allow affected companies to function as autonomous and independent operating or business units according to the different categories in which they are registered before the CNV;
• the obligation to take necessary steps and procedures for the company to be able to prioritize the interest of its clients as Broker, as well as simultaneously prioritizing the collective interests of the quota holders and the Mutual Funds that it manages as Mutual Funds Manager;
• the establishment of limitations on the company’s action, including the following: (i) intervening in the management, settlement and offsetting of operations connected to the portfolios it manages as Mutual Funds manager; and (ii) giving advice on the Mutual Funds that it manages or in which it develops placement and distribution activities;
• the company that is registered as Mutual Funds Manager and Broker must have its own appropriate personnel for each operating or business unit, and must be registered as a qualified advisor (Registro de Idoneos) with the CNV and detailing the operating unit in which it develops its activity;
• the company must report in its accounting statements its gross profit for each fiscal year and each of the operating units linked to the activities corresponding to each of the categories under which it is registered before the CNV;
• the person responsible for Regulatory Compliance and Internal Control must oversee and assess compliance, on the part of agents or employees working with each different operating or business unit, with the obligations set forth under Law No. 26,831 and CNV Regulations; and
• those legal entities registered simultaneously under the categories of Broker, Mutual Funds Manager and Integrated Placement and Distribution Agents of Mutual Funds, must adapt their registration before March 31, 2021, under penalty of having their authorization to operate as an Integrated Placement and Distribution Agent of Mutual Funds revoked.