Legal Alert/ CMF consults standard to establish requirements for the registration of debt titles under the automatic registration modality
On November 30, 2020, the Financial Market Commission put in consultation the draft text of the general rule that will regulate the possibility of registration in the Securities Registry, through the automatic registration modality contemplated in article 8° ter of Law No. 18. 045 of the Securities Market (1), bonds, securitized bonds, convertible bonds, trade bills and, in general, any short or long term debt security, except for those regulated by Articles 55 and 55 bis of Decree with Force of Law No. 3 of 1997, of the Ministry of Finance (the General Banking Law). The comments and observations to the norm in consultation may be submitted to the Commission itself until December 11 of the current year..
The general norm that was put in consultation comes in compliance with the legal mandate established in article 8° ter already referred to since, by it, the Financial Market Commission determines those issuers will be able to take advantage of the modality of automatic registration concerning the debt instruments that they issue and which documents or antecedents must be presented for such effects.
In this sense, the proposed regulation establishes that to benefit from the automatic registration modality, the issuer must be registered in the Securities Registry and its registration must have been in force uninterruptedly during the 12 months before the date on which the registration of the securities is requested. Likewise, in the case of mutual funds and investment funds supervised by the Financial Market Commission, which wish to opt for this modality, it will be sufficient to comply with the condition indicated above – current registration in the Securities Registry – that, at the time of making the application, the respective fund has the minimum equity and number of participants required in article 5 of article 1 of Law No. 20.712.
For issuers to register the debt securities they issue under the automatic registration modality, the issuer must submit to the Financial Market Commission, through the SEIL module, a digitalized copy of the following background:
a. Public deed of issuance of the debt security or, in the case of a debt security line, the public deed of both the line and the complementary line against which the security will be issued, and their respective amendments, if any.
b. Minutes of the board meeting in which it was agreed to issue the debt security and register it under the Automatic Registration mode.
c. Minutes of the meeting of contributors where it was agreed to issue the debt security, in case this matter has been submitted to the approval of the meeting in the internal regulations of the respective fund, in those funds that, by law or internal regulations, must hold such meetings.
d. A public deed containing the minutes of the shareholders’ meeting in which the issuance of the debt security was agreed upon, in the case of a convertible bond, or in which the agreement concerning the restrictive covenants referred to in article 111 of the Securities Market Law is recorded.
e. Annotation at the margin of the social inscription in the trade register of the deed containing the limiting agreements referred to in Article 111 of the Securities Market Law, if applicable; and
f. The risk classification certificate(s) of the debt security to be registered.
Once the application for registration has been filed, and after the issuer has made the declaration that the digitized copies provided are a true copy of the original, that if the issuer is not in a liquidation proceeding and that the entity meets the necessary conditions to register debt securities under the automatic registration modality, the Financial Market Commission will proceed to the registration of the debt securities in the Securities Registry, issuing the corresponding certificate, upon payment by the applicant of the registration fees.
The proposed regulations provide that the automatic registration system will not be available to issuers or administrators of funds who, at the time of application, have been charged with a possible violation of Article 65 of Law No. 18. 045 of the Securities Market (2), and while the corresponding sanctioning procedure is pending; or in respect of which a sanctioning resolution has been issued by the Financial Market Commission, for having made public offerings of securities through antecedents that induced error or misunderstanding to the public, unless, from the date the sanction was issued, three years or more have elapsed. Nor may those issuers or funds that have pending the sending of their financial statements, following the provisions of the applicable regulations that govern them, request the automatic registration of securities.
Finally, the regulation in consultation reminds that the automatic registration modality, only refers to the process of registration of the debt securities and the modifications to such registration, but that, in no case, it exempts from the other information obligations that in other regulations are required to the issuers and registered securities, or for the cancellation of the same.
(1) Article 8° ter of Law No. 18.045 provides that “Debt securities issued by issuers already registered in the Securities Registry and that comply with the characteristics or conditions established by the Commission for the Financial Market through a general rule, whether concerning the issuer, the issue, the placement or the investor to whom the offer is addressed, among others, may be subject to the automatic registration modality established in this article. For such purpose, the issuer must accompany its request for automatic registration, the risk classification or classifications referred to in article 8° bis of this law, the copy of the public deed required by articles 104 or 137 of the same, according to the type of security in question, and the rest of the documentation that the Financial Market Commission establishes, using a rule of a general nature, concerning the debt securities or line of debt securities and, if applicable, the respective amendments. As from the working day following the payment of the fees for the application for registration, the debt securities of registered issuers whose request and payment of the corresponding fees is made through the system or procedure of automatic registration established by the Financial Market Commission for such purpose will be registered in the Securities Registry by the sole ministry of the law.”
(2) Article 65 provides that “Advertising, propaganda, and dissemination made by any means by issuers, securities intermediaries, stock exchanges, securities brokerage corporations and any other persons or entities participating in a securities issue or placement may not contain statements, allusions or representations that may mislead, confuse or mislead the public as to nature, prices, profitability, redemptions, liquidity, guarantees or any other characteristics of publicly offered securities or their issuers. The prospectuses and information leaflets used for the dissemination and advertising of a securities issue must contain all the information determined by the Financial Market Commission and may not be disseminated if they have not been previously submitted to the securities registry. The Financial Market Commission shall be empowered to issue the rules of general application that are conducive to ensuring compliance with the provisions of the preceding paragraphs and may, in case of violation of the provisions of this article or of the general rules it may have issued on the matter, order the offender or the director responsible for the media to modify or suspend the advertising without prejudice to the other sanctions that may be applicable.”
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