The Argentine Securities Exchange Commission inquires about private banking activity

On October 5, 2006, by Resolution No 15,484 (the “Resolution”), the Argentine Securities Exchange Commission(Comisión Nacional de Valores, “CNV”) decided to initiate a formal investigation into a foreign company and the individual representing such company in Argentina, on the basis that they may have intermediated in the public offering of securities without proper authorizations, without being registered with a self regulated entity and could have affected transparency in the public offering.

As background to the investigation, the Resolution mentions a complaint by an individual, two judicial proceedings and certain investigations carried out directly by the CNV by virtue of which the CNV accessed the corporate group’s website and discovered that such global website, in which the negotiation of securities was offered, had a special link for non-US clients which identified an office and representative in Argentina.

Linked to such investigation, the CNV requested the investigated company to cease any intermediation in the public offering of securities in Argentina. The local representative argued that the corporate purpose of the company it represents is the provision of services to another member of the group, a corporation registered in the US as a “broker-dealer” that renders securities related services (the “US Broker”). He indicated that the services rendered by the company it represents to the US Broker include the receipt and transfer of orders for the acquisition and sale of securities by the US Broker, that is, services rendered from Argentina related to the private banking activity of a foreign company.

As can be read in the Resolution, the CNV considered that such facts were sufficient to initiate a formal investigation of the alleged illegal intermediation in the public offering of securities due to the alleged infringement of public offering and transparency in the public offering regulations. The CNV also believed that such activity infringed regulations of the Mercado de Valores de Buenos Aires S.A. (“Merval”) concerning transactions that local authorized brokers may carry out abroad following their clients instructions.

The formal investigation will be carried out by the CNV and, if the CNV board final resolution imposes sanctions stronger than a warning (in this case, a fine, disqualification or prohibition on the public offering of securities), such resolution could be reconsidered by the Commercial Court of Appeals.