Private Placement of Securities Now Regulated

On September 18, 2024, the Argentine Securities Commission (CNV) issued General Resolution 1016, which had been submitted for public consultation by means of RG 1009.

The CNV clarifies that, as of this regulation, any offering that does not comply with the specified requirements will not be deemed an irregular public offering, nor will it necessarily incur sanctions. Instead, each case will be assessed individually to determine whether it qualifies as a private or offshore offering, even if it does not fully comply with the safe harbor provisions. Conversely, if the established conditions are met, it will be certain that an irregular public offering is not taking place and no crimes are being committed.

The Resolution covers: 
1.    Private offerings (either because they are addressed to a limited group of investors or employees), specifying regulations for these cases and considering the means and mechanisms of dissemination, offering, and distribution, as well as the number and type of investors involved. 
2.    Offshore offerings exempted from the CNV's oversight, made outside the territory of Argentina with insufficient points of contact with Argentina.

Private offerings under this Resolution are categorized into two sub-regimes to regulate the most common scenarios. These sub-regimes are:
1. private offerings to restricted group of investors, without using mass media,
2. private offerings to employees, which must be directed solely to eligible persons, using means that limit access to those outside that category.

The Resolution also regulates offshore offerings, which, provided certain requirements related to the means of contact and the destination of the offer, will be totally outside the CNV’s control.
 
I.    Safe Harbor for Private Placement of Securities
 
According to the Resolution, any securities offering qualifies as a private placement under this safe harbor, when it meets these conditions:
 
1.    The offer is made by the issuer of the securities (who may or may not be a resident) or by an authorized  representative; or in a secondary market by the person who has acquired them, without acting on behalf of the issuer, in which case such person will have the obligations provided for the issuer.

2.    Any security may be offered, provided that a) it is not authorized for public offering under the terms of the Capital Market Law or the Mutual Funds Law; and b) existing regulations do not require a public offering.

3.    The number of purchasers and potential investors receiving the offering  is limited as follows:

a) Unlimited offers to 
•    Financial Entities included in the Financial Entities Law 21526, 
•    Non-Financial Credit Providers, 
•    Qualified Agents, 
•    Mutual Guarantee Companies (SGRs), 
•    Insurance Companies authorized to operate as such by the National Superintendence of Insurance (SSN).

b) Offers to a maximum of 35 qualified investors, and 15 non-qualified investors.

c) The transaction is executed with a maximum of 35 investors, where no more than 10 can be unaccredited investors (existing shareholders of the issuer are excluded from this calculation). The entity executing the sale is solely responsible of verifying if the investor is considered qualified or not, and the compliance with the maximum quantity of investors.

(iv) In cases involving a) units of open Mutual Funds and products managed by Mutual Fund Management Companies that are not Mutual Funds, as well as other structures created under the Mutual Funds Law; and b) securities that may be subscribed at any time (evergreen) issued by non-resident portfolio managers, financial assets or collective investment products, the maximum number of potential investors and the maximum number of investors must be calculated: 
•    for each of the collective investment products offered, and not per issue, 
•    considering the potential investors contacted, as well as the acquirers, during the 365 calendar days immediately following the date on which the potential investor is contacted.

(v) Except as provided above, if there is more than one issuance  within a maximum of three months following the end of each issuance’s subscription period, the maximum number of investors will be computed jointly for all issues carried out in such period as if it were a single issue. For the purpose of such calculation, in the case of financial trusts, the trustor (and not the trustee) will be considered an issuer.

4.    Agents registered before the CNV, involved in the offer, cannot make public offerings.

5.    The price and quantity of the securities acquired by the investors must be freely determined by the offeror, without any limitation whatsoever.

Dissemination must occur solely via authorized means, including:
 
1.    In-person or virtual promotional meetings with up to 35 potential investors, adhering to the specified limits, excluding qualified agents who may participate in the meetings without limitation.
2.    Sending and delivering documentation related to the securities to a registered agent (offering memorandum, white papers, or similar documents; and informational sheets), or any informative document including all the relevant details of the offering, either in person or remotely; by any electronic, digital, or physical means; whether or not the agents are registered in Argentina.
3.    Providing documents upon request of potential investors, which may not be expressed through generic expressions of interest (such as subscribing to a distribution list) or in response to an unsolicited call. The request must be for a specific security. 
4.    Personalized invitations to trade in securities delivered in person or remotely, by any electronic, digital, or physical means (including, but not limited to, emails, telephone calls, instant messaging, pop-ups, or instant messages from applications and other similar means).
5.    Invitations to carry out transactions with securities advertised in social networks, websites, applications, or similar platforms, provided that access is restricted (through passwords, keys, or similar mechanisms).
 
Except these above, invitations may not be made through mass media of general scope in Argentina. It is expressly clarified, by way of example only, that the following means will be considered mass media of general scope in Argentina:

a)    Web advertising directed at residents.

b)    Advertising or dissemination (that is not web advertising directed at residents) in nation-wide media, whether printed or digital; or in international media, when circulated in Argentia, if the advertising clearly includes residents among the intended audience.

c)    Promotional meetings involving more potential investors than permitted.

General invitations may also not be made in Argentina through automated and mass procedures such as automated emails, automated calls, email distribution lists, messages or social networks, and similar means.

Upon request, at the moment of acquiring securities or earlier, issuers must provide investors with:
 
•    The latest financial statements of the issuer (or the settlor in case of a trust).
•    Relevant information about the offer.
•    Most recent annual reports submitted to foreign capital markets regulatory entities, if applicable.
•    Clarification if the issuer operates under a public offering framework. This, to the investor, when it delivers the documents.
 
Offerors must inform in any sales documentation or in a written notice, which must be subscribed by the investor, that:
 
•    Securities cannot be transferred to qualified investors within three months, or to non-qualified investors within the six months following the end of the subscription period, or from their acquisition date if it is not a primary placement. 
•    If the issuer is under the public offer regulations.
•    This pertains a private placement, it is not supervised by the CNV, and it is exempt from its informational and audit regulations.
 
II.    Safe Harbor for Securities Offered to Employees
 
An offer will be considered a Security Offer to Employees under this safe harbor if it meets all these criteria:

1.    The offers are made as part of a retention or employment incentive plan or similar 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.    Invitations are sent to employees, officers, or non-independent board members of the issuer or of a company of the employing group.

3.    The following may be offered:

(a) any security issued by the employer or affiliated company, including
(i) call options on these shares,
(ii) shares certificates of trusts, mutual funds constituted outside of Argentina, and VPUs, provided the equity securities and cash deposits represent at least 90% of the value of the underlying assets,
(iii) synthetic securities or contractual rights (such as phantom stock) that replicate any of the aforementioned securities.

4.    The price and amount of the securities acquired by employees, officers, or non-independent board members are determined freely by the offeror, without limitations.

Dissemination must occur exclusively through these authorized means:

1.    Meetings, written or oral communications between the issuer and the employee, officer, or non-independent board members,
2.    Internal communication methods inaccessible to non-employees, officers, or non-independent board members, 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.

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

•    The latest financial statements of the issuer (or the settlor for trusts).
•    Relevant offer information.
•    Most recent annual financial statements submitted to foreign capital markets regulatory entities, if any.
•    Clarification if the issuer operates under a public offering framework.

Offerors must inform investors in the purchase documentation that:

•    Securities or rights cannot be transferred for six months after the subscription period. This does not apply when the transfer is carried out outside Argentina, except to the offeror under a retention or work incentive plan. This limitation is independent of any limitation the employee may have in the applicable plan.
•    That the issuer is under the public offer framework.
•    That this is a private placement exempt from CNV audits and regulatory information requirements.

III.     Safe Harbor for Securities Offers Without Sufficient Contact with Argentina
 
To qualify as offering without sufficient contact with Argentina under this safe harbor, the security offer must be made by individuals residing in foreign countries. No Argentine resident may participate as offerors.

There are no established limitation on the number of securities offered, nor on potential investors, prices, or total acquisition value.

The following dissemination actions do not generate sufficient contact with the Argentine jurisdiction:

1.    Organizing, participating, or sponsoring educational events or events related to economic or financial news, local or global, without specific securities offers.
2.    Institutional advertising in any media that does not include addresses nor any form of contact within Argentina or web addresses that allow access to the negotiation of negotiable securities, unless access is limited by password (or similar mechanisms).
3.    Allowing downloads of securities or services-related material  from websites, apps, or platforms not aimed at residents.
4.    Sending summaries and/or account statements, confirmation of transactions, or other related documents by a registered agent from foreign regulatory agencies or foreign financial institutions.
5.    Conducting promotional meetings in or outside Argentina involving non-residents or residents, to provide information on securities issued, or financial products and services provided, by persons who reside outside Argentina.
6.    Promotional meetings with registered agents in Argentina aimed at obtaining information and resources to provide capital market advisory services to their clients.
Investors must be informed—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, or its information and control regime.
 
Transparency: issuers and all participants in the primary placement or secondary market must comply at all times with the regulations regarding transparency in article 117 of Law 26831 and those in the CNV’s regulations, to utilize any of the previously mentioned safe harbors.

 Confidentiality: it will apply to the issuers and all the participants in the corresponding offer. Investors can expressly waive it. It may also be waived by the Issuer and/or the other participants in the corresponding offering in favor of the investors.
 
Private offers meeting these requirements under the chosen safe harbor will not be considered public offerings according to the Capital Markets Law, and will be considered private offers. Thus, these will not be considered irregular or unauthorized public offers, or unauthorized intermediation, 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 26831 and the CNV’s regulations. This must be assessed on a case-by-case basis. If so, only offerors and, jointly, qualified agents who participated in the placement will be responsible for any irregular public offer.

In the event of non-compliance with any of the remaining requirements for the corresponding safe harbor, the offeror will be subject to the applicable sanctions and will be excluded from the benefits of the safe harbor under the Private Offering for two years as of the occurrence of the non-compliance, or from the date the CNV noted the non-compliance, whichever occurs last. However, this exclusion will not affect prior issuances made by the offeror in compliance with this Private Offering regime, which will continue to enjoy the benefit of the safe harbor.

Finally, the Resolution allows market agents to participate in the Private Offering of Securities and the Offering of Securities without Sufficient Contact with Argentina.