The CNV Promotes Venture Capital Development

On November 17, 2020 the Argentine Securities and Exchange Commission (the “CNV” after its acronym in Spanish) issued Resolution No. 868 (the “Resolution”), by means of which it created a new legal regime applicable to Collective Investment Products for venture capital.

The Resolution was preceded by Resolution No. 854, by means of which the preliminary General Resolution was submitted to public consultation.

With the purpose of promoting venture capital development, allowing the allocation of savings to investment opportunities with efficiency, the CNV issued the Resolution and created the new legal regime applicable to closed mutual funds (the “Mutual Funds”) and financial trusts (the “Trusts”) the purpose of which is to finance or invest in venture capital.

The Resolution mainly sets forth the following provisions applicable both to Mutual Funds and Trusts:

• the underlying asset must consist of capital investments, directly or through convertible instruments or bonds, in companies that are in an early stage of development or in an expansion stage, and that at the time of the investment are not authorized to make public offerings of their negotiable securities in the country or abroad;
• the Collective Investment Products issued under this new legal regime must contain in their name the expression “Venture Capital”;
• a restriction on the issuance of certain securities, allowing only the issuance of certificates of participation for Trusts and condominium quotas for Mutual Funds;
• this regime is exclusively directed to qualified investors and, consequently, allows the reduction of the diffusion phase in the public offerings of negotiable securities to one business day;
• the mandatory participation of a Professional Manager in the selection and management of the invested assets;
• the possibility of forming an Investment Committee, with powers to advise on the investment and divestment policy and on the selection and analysis of eligible assets;
• the possibility of setting up a Control Committee aimed at monitoring investment management, compliance with the respective investment policies and the analysis and identification of conflicts of interest;
• the obligation to submit a quarterly valuation report of the companies in which to invest, within a period of no more than fortytwo calendar days as from the closing date of each quarter;  
• an extended term for the submission of the annual accounting statements, in both instruments, to one hundred and twenty days; and
• a restriction on investments in the same company, which cannot exceed twenty percent of the Mutual Fund or Trust assets or thirtyfive percent in the case of investments in companies of the same economic group.

From among the Resolution’s main provisions on Mutual Funds, what stands out is the restriction against investing the Fund’s assets in the corporate capital or vehicles, where appropriate, of companies that have or have had connections over the last twelve months with the Management Company, the Depository Company, and/or their directors and/or economic groups to which they belong.

Finally, its main provisions with respect to Trusts include:

• the possibility of deferring payment of the subscription price of the trust securities, indicating in the prospectus or supplement an estimative timeline; and
• the appointment of a Control and Review Agent is not mandatory.