Consultation Procedure to Create Different Safe Harbors 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.”

 

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

 

According to the Resolution, an offer of securities is considered a private placement, to the effects of this safe harbor, when it meets all 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.

 

2. Consultation Procedure to Create a Safe Harbor for Securities Offered to Employees

 

According to the Resolution, to the effects of this safe harbor, an offer will be considered a Security Offer to Employees when it meets all these criteria:

1. The offers are made by a company, residing or not in Argentina, that is the employer of whom the offer is destined to, or by any company, residing in Argentina or not, that is a company of the employing group.
2. The invitations to carry out transactions with securities can only be received by persons who are employees, officers, or non-independent members of the board of directors of the issuer or of a company of the employing group.
3. The following may be offered:

(i) any security issued by the employer or any company in the employing group, including

(a) call options on these shares,

(b) shares certificates of trusts, mutual funds constituted outside of the Argentine Republic, and VPUs, provided the equity securities and cash deposits represent at least 90% of the value of the underlying assets,

(c) synthetic securities or contractual rights (such as phantom stock) that replicate any of the aforementioned equity securities or instruments.

4. There is no limit to the price of the securities received by employees, officers, or non-independent members of the board of directors of the issuer. It also does not matter if the addressee of the offer is a qualified investor or not.

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

1. Written or oral communications by the issuer to the employee, officer, or non-independent members of the board of directors of the issuer, including meetings,
2. Internal means of communication that persons that are not employees, officers, or non-independent members of the board of directors do not have access to, such as the intranet of the employer or the company of the employing group, circulars, internal bulletins, and other usual means of communication between the employer and the addressee of the offer.

At the request of the employee, at the moment of acquiring the securities or beforehand, the issuer must provide the investor with the following information:

•          The latest financial statements of the issuer of the securities (if this is regarding a trust, it would be those of the trustee).

•          Any information that is relevant to the offer.

•          The most recent annual financial statements 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.

The persons that execute the offer must inform this in the purchase documentation or in a written notification:

•          That they may not transfer these securities or rights during the six months after the subscription period of said securities. This does not apply when the transfer is carried out outside Argentina and for trusts that issue securities once the public offering authorization is obtained.

•          That the issuer is under the public offer framework.

•          That this is regarding a private placement and that it is not object to CNV’s audits, nor is it subject to the informational framework and the audit included in the CNV’s regulations.

 

 

3. Consultation Procedure to Create a Safe Harbor for Securities Offers Without Sufficient Contact with Argentina

 

According to the Resolution, for an offer to be considered a security offer without sufficient contact with Argentina, to the effects of the safe harbor, the security offer must be made by one or more persons that residents of a foreign country. Thus, no Argentine resident may participate in the offer.

There is no established limitation in terms of how many securities may be offered, as long as the issuer is not an Argentine resident. There are also no limits on the number of potential investors or on the total value of the securities acquired by the investors, whether qualified or not.

Likewise, regarding the dissemination of said securities, it is explicitly regulated that, in a non-excluding manner, the following actions do not generate sufficient contact with the Argentine jurisdiction:

1. The organization, participation, or sponsorship of educational events or events related to economic or financial news, local or global, provided that no information on securities in particular is offered.
2. Institutional advertising in any media considered unauthorized, provided that such advertising does not include websites that allow access to the negotiation of securities nor physical addresses nor any form of contact within Argentina.
3. Allowing the downloading of material on securities or services related to such securities from a website or platform that is not directed to residents.
4. Sending summaries and/or account statements, confirmation of transactions, or other documents related to the operation of your account to customers by a registered agent of a foreign regulatory agency or a foreign financial institution.
5. Promotional meetings held in or outside of Argentina between non-residents and agents registered exclusively before the CNV, to provide information on securities issued, or financial products and services provided, by persons who reside outside of Argentina.

The investor must be advised, in the sale documentation or in a written notice, that this is an offering without sufficient contact with Argentina, that it was not subject to the CNV’s audit, and that it is not subject to the information and control regime provided by the CNV’s rules.

 

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, in order to utilize any of the previously mentioned safe harbors.

 Confidentiality: it will apply to the issuers and all the participants in the respective offer. Investors can expressly waive it.

 

The private offers that meet these previously mentioned dispositions, that are applicable according to the safe harbor that has been opted for, will not be considered public offers according to the Capital Markets Law, and will be considered private offers. Thus, these will not be considered irregular or unauthorized public offers, nor will they be subject to disciplinary sanctions 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 solely in the case of securities as defined and regulated by Law 26,831 and the CNV’s regulations. This must be assessed for each specific case. If so, only offerors and, in solidarity, registered agents who participated in the emission, will be responsible for any irregular public offer.

Finally, General Resolution 955 is repealed.