Development of Regional Economies: CNV Released New Promotion Regime for Comments

On September 25, 2020, the Argentine Securities and Exchange Commission (the “CNV” after  its acronym in Spanish) issued Resolution No. 858 (the “Resolution”), by means of which it submitted the new regulations to promote productive development, regional economies and value chains for public consultation.

With the purpose of providing tools that allow for the development, financing and investment in real economy products, including value chains, with the aim of improving productivity levels and/or promoting the development of capacities of the main economic actors and sectors in Argentina, the CNV implemented a stimulus regime for Cooperatives with Productive Purposes (“Cooperatives”) and a new Special Regulation to be applicable to Collective Investment Products to promote productive development and local economies (“CIP”).

The Resolution mainly sets forth the following regulations regarding the regime to ease access to the capital market for Production Cooperatives of certain activities described there, through the issuance of notes:

• the possibility of requesting authorization from the Commission for the issuance of notes either individually or under global programs, with requirements according to their capacity and size;
• the establishment of a differentiated quarterly information regime, which releases the Cooperatives from submitting quarterly financial statements;
• the presentation of the annual Financial Statements and the Report in the terms and manner established by the Argentine Association and Social Economy Agency (INAES, after its acronym in Spanish);
• the maximum issuance amount determined by the corresponding bodies of the cooperative may not exceed, in pesos or in any other currency in which the issuance was made, an amount equivalent to THIRTYFIVE MILLION UNITS OF PURCHASING VALUE (UVAs 35.000.000); and
• notes issued within the framework of this regime must be traded on authorized markets and may only be acquired and transferred by qualified investors.

Among the main regulations implemented by the Resolution regarding CIP, applicable both to closed mutual funds (the “Mutual Funds”) and to financial trusts (the “Trusts”) to promote the productive development and the regional economies, are the following:

• the possibility of constituting CIP with a great diversity of underlying assets linked to the objective pursued under the new regime;
• the possibility of reducing to one business day the diffusion period when the initial public offering is directed to qualified investors; and
• the possibility of constituting a collateral over the underlying asset by mutualguarantee companies and/or public guarantee funds created by national or provincial laws.

Among the main regulations implemented by the Resolution regarding Mutual Funds, are the following:

• the minimum content of the management by laws and the issuance prospectus under the new regime, depending on the particularities of the investment;
• that when the Mutual Fund invests in companies or vehicles that maintain links with participants of that Mutual Fund, its managers and/or economic group, an independent technical advisor must be appointed; and
• the incorporation of an information regime consistent in the quarterly publication, by the Fund manager, of a report on the evolution of the eligible investments and the application of funds, indicating the level of compliance with the investment plan and any deviations detected during its implementation.

Finally, among the main regulations found in the Resolution regarding Trusts, are the following:

• the possibility of waving the requirement to identify the settlors on those Financial Trusts Global Programs that exclusively foresee the constitution of Trusts as direct investment funds, provided that the investment object is duly described and defined;
• the spectrum of Trusts intended to finance Small and Mediumsized Enterprises (“Pequeñas y Medianas Empresas” or “PYME”, after their acronym in Spanish) is expanded to those in which natural persons, who have the status of PYME, intervene in accordance with the particularities provided in the projected regulations;
• the possibility of increasing the issuance amount authorized under the Trust and/or issuing additional debt securities and/or certificates of participation when this is essential to accomplish with its purpose, provided that this is included in the original trust agreement or the trustee has the unanimous consent of the holders of the debt securities and certificates of participation;
• when the Trusts are constituted individually, the issuance or placement of new tranches is possible if the trust asset allows it; and
• the use of simplified prospectus and supplemental prospectus for those Trusts in which a mutualguarantee company or a public fund endorses its underlying asset.