Bill To Reform The Capital Markets Law

Author:Mr Santiago Carregal, Juan M. Diehl Moreno, Sergio Talamo and Maria Manuela Lava
Profession:Marval O'Farrell & Mairal

On November 16, 2016, the Argentine Executive Power sent a bill to Congress to reform the current Capital Markets Law No. 26,831, which seeks to modernize the entire regulatory framework applicable to the Argentine capital market, incorporating current international practices to contribute to its development.

The Bill to reform the current Capital Markets Law No. 26,831 (hereinafter, the "Capital Markets Bill") aims to achieve the development of the Argentine capital market by increasing the number of investors and companies that are financed in the market, within the framework of a market with clear and transparent rules, to finally achieve a modern financial regulatory framework that contributes to the development of Argentina's economy. Through the reforms introduced by the Capital Markets Bill, the following laws will be modified and changes will be introduced in the subsequent regulations:

The Capital Markets Law No. 26,831 (hereinafter, the "CML"); Law No. 24,083 of Common Investment Funds and its amendments; Law No. 23,576 of Negotiable Obligations and its amendments; Law No. 20,643 on the Tax Relief Regime for Private Securities and its amendments regarding Caja de Valores; Law No. 27,264 of Productivity Recovery Program and its amendments regarding the regulation of the promissory note; Law No. 25,246 and its amendments regarding persons obliged to provide information to the Financial Information Unit; and Adequacy of tax provisions and incorporation of regulations regarding derivatives' transactions and the promotion of a program of financial inclusion. The most important reforms and regulations introduced by the Capital Markets Bill are analyzed below.

Regulation of the figure of investment managers

The Capital Markets Bill incorporates "investment managers", who are defined as those who provide regular financial advice and investment management services authorized by the Comisión Nacional de Valores ("CNV") in accordance with the regulations to be issued by the CNV.

This incorporation allows for the return of private banking activity to Argentina, by regulating its activity and promoting to place it under the control and audit of the CNV.

Changes in the powers of the CNV

With the purpose of attenuating the prerogatives granted to the CNV, the Capital Markets Bill proposes several modifications to section 20 of the CML, which was one of the most controversial sections when the last amendment of the CML was enacted. In effect, the new text proposes the derogation of the powers set forth in subsection a), sections I and II of section 20, which currently grants the CNV the power to designate "supervisors" with veto power over the resolutions adopted by the board of directors or managers of publicly traded companies and the separation of the board of directors or managers for a maximum term of one hundred and eighty (180) days. This has been decided on the understanding that the current text grants extraordinary rights to the CNV.

On the other hand, the Capital Markets Bill includes the CNV's power to initiate administrative proceedings and impose sanctions under the terms of the CML. Correlatively, the amendment of section 19 (i) is proposed, by eliminating the power of the CNV to declare, without initiating prior administrative proceedings, irregular and ineffective for administrative purposes the acts subject to its control, when they are contrary to law, the regulations of the CNV, the bylaws or the rules issued by entities and approved by the CNV. Under the proposed text, such declarations must be reasoned and require initiating prior administrative proceedings.

CNV's sources of funding

The Capital Markets Bill modifies the sources of funding and the origin of the resources of the CNV. On the one hand, it proposes an increase in funding sources to optimize the functioning of the CNV, by incorporating the tariffs for authorization of the public offer of securities and registration of agents, markets, clearing houses and derivatives' registration entities and those from the provision of other services, which must be fixed by the Ministry of Economy and Public Finance at the proposal of...

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