CNV Proposes New Definition of Qualified Investor

Originally, the definition of Qualified Investor was used to define investors who could purchase certain securities issued by Small and Medium-Sized Enterprises. However, the Argentine Securities and Exchange Commission (“CNV” after its Spanish acronym) has been expanding the use of the definition of Qualified Investor. For instance,  brokers do not need a practicing certificate to work with Qualified Investors. In addition, the amendments introduced to the Capital Markets Law by the recently enacted Productive Financing Law, provide certain specific regulations applicable to Qualified Investors. For instance, it authorizes the CNV to waive certain regulatory requirements for mutual funds offered exclusively to Qualified Investors and to issue private placement regulations, which typically have references to Qualified Investors.

Therefore, the definition of Qualify Investor is likely to become more important in the next few months.

According to the proposed regulations, the following persons will be considered as “Qualified Investors”:

1. The Argentine Government, the Provinces and Municipalities, autarchic agencies, banks and official financial institutions, state-owned companies, state enterprises, international organizations and public law persons;
2. The Argentine Social Security Administration (Administración Nacional de la Seguridad Social or ANSeS);
3. Pension Funds (Cajas Previsionales);
4. Financial Entities;
5. Clearing  Brokers (i.e. full licensed broker-dealers known as “Agentes de Liquidación y Compensación” or “ALyC”) ;
6. Trading Brokers (i.e. limited licensed  broker-dealers known as “Agentes de Negociación” or “AN”);
7. Mutual Investment Funds;
8. Financial Trusts with public offering;
9. Insurance Companies;
10. Individuals who have passed the CNV’s practice examination and/or have been registered, definitively, in the Register of Persons with a Practicing Certificate (Registro de Idoneos) of the CNV;
11. Individuals or legal entities, other than those listed in the preceding paragraphs, that at the time of making the investment have investments in securities and/or deposits in financial institutions for an amount equal to or greater than ARS 6,000,000 (Six Million Argentine Pesos); and
12. Legal entities established abroad and individuals with a real domicile abroad.

The major changes to the existing definition of Qualified Investor are as follows: (i) it expressly includes financial institutions, financial trusts with public offering, the Argentine Social Security Administration, foreign residents, pension funds and insurance companies, (ii) cooperatives, foundations, corporations and limited liability companies were deemed Qualified Investors per se but, now, will qualify if they have investments in securities and/or deposits for at least ARS 6,000,000, and (iii) it changes the criteria for individuals residing in Argentina, who under the current definition qualify if they have a net worth of ARS 700,000.under the new definition would have to have investments in securities and/or deposits for at least ARS 6,000,000.

The period for comments is 15 business days after publication and the deadline is June 13, 2018. Comments have to be made on the website www.cnv.gob.ar.