CNV Proposes to Expand Allowed Investments for Real Estate Closed-End Mutual Funds

On January 27, 2022, the Argentine Securities Commission (“CNV”, after its acronym in Spanish) issued General Resolution No. 920, which submitted to public consultation a draft regulation (the “Draft Resolution”) proposing to exempt real estate closed-end mutual funds (the "Funds") from the general prohibition of Article 4 in fine of the Mutual Funds Law No. 24,083 (the "MFL").

Currently, the MFL forbids Management Companies from carrying out any type of transaction for the mutual funds under their management with companies belonging to the same economic group as the management company and/or the depositary company, unless a specific exception is provided in the MFL and the CNV regulations.

The Draft Resolution mainly sets forth the following:

• To guarantee the transparency of the operations and mitigate risks of conflict of interest, the offer documents must detail the investment asset, the real estate project, as well as the acquisition price and/or valuation method used.

• In such cases, the acquisition of the real estate asset must be at a value equal to or less than that determined by two independent appraisals, which must be included in the issuance prospectus.

• The Management Company and the Depositary Company, through their respective management boards, shall expressly address the terms of the transaction, verifying that the transaction is carried out under market conditions, at all times prioritizing the common interest of the Funds.

• The investment decision must have the favorable opinion of the Investment Committee, with the abstention of the related members, and/or of the independent third party appointed to advise on the execution of the investment policy, if applicable. The report must be published through the CNV's Financial Information Reporting System (“AIF,” after its Spanish acronym).

• The Developers and/or Real Estate Administrators related to the Management Company and/or the Depositary Company that participate must be identified in the offer documents, indicating the terms of the contract, which must be expressly dealt with by the Management Company and the Depositary Company through their respective management boards. It also must be specified that the offer is carried out under market conditions as evidenced by the presentation of an independent assessor’s report published through the AIF.

• Finally, in no case may the Management Company carry out, for the Funds under its administration, transactions with assets owned by the managing company or the depositary company, by their directors, managers, employees and members of the supervisory boards of the management company or the depositary company, neither by the directors, managers, employees, and members of the supervisory boards of the controlling shareholders.