CFCL Investment regulation - Argentina
Regulatory structure
Please refer to the CBL Market infrastructure - Argentina for the complete information about the regulatory structure.
Holding restrictions – CSD Market - Argentina
Disclaimer
It remains the sole responsibility of the client to ensure compliance with local disclosure requirements. If a local requirement is not met, it is the client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
Generally, each time a reporting obligation exists under the local law and CFCL has to comply with such reporting, the client undertakes to provide CFCL with any relevant information required by CFCL in order to ensure compliance with those local requirements, and CFCL shall not be liable for any damages suffered by the client and/or the beneficial owner that may result from such disclosure or other measures taken by CFCL. The client will hold CFCL harmless from, and indemnify CFCL for any liability resulting from the client’s failure to provide complete and accurate information in relation thereto.
Holding restrictions
There are applicable limits for foreign investments regarding media and communication sector companies under Argentine laws.
Foreign investors can invest in up to 30% of the capital and votes of an Argentine media and communications entity. Media and communication companies comprise newspapers, magazines, publishing companies, broadcasting services, production of visual and digital contents, advertising companies, and internet providers. In the particular case of broadcasting companies, no foreign individual can directly purchase stock.
Some limits are applicable on gas and energy sector companies for local and foreign investors.
The Comisión Nacional de Valores (CNV), the local SEC, published General Resolution Nr 841 on 25 May 2020.
This resolution establishes a minimum holding period of five (5) business days on securities counted from the actual settlement date of the credit in the local custodian’s safekeeping account at the central securities depository (CSD). Once the five (5) day hold is met, the investor can transfer those securities to an international central securities depository (ICSD) or sell the securities against foreign currency in the local market.
From a custody perspective, the minimum holding period will not apply when it is related to a purchase of securities in foreign currency in the local market and a subsequent sell of securities, also executed against foreign currency in the local market, both within the same jurisdiction.
The resolution states that the Clearing and Settlement Agent (ALYC in Spanish) shall verify compliance of the holding period for each of the above-mentioned trades.
All investors will have a minimum holding period of 5 (five) business days effective on the settlement date at the local CSD, in order to be able to transfer those securities to an international central securities depository (ICSDs) or sell them versus foreign currency in the local market. The ALYC will control compliance with the holding period. This applies to both equity and fixed income instruments.
Transfer and repatriation of capital
Effective 17 December 2015, the Central Bank introduced some modifications (Communication “A” 5850 and Resolution 3/2015) on foreign exchange regulations applicable to foreign investors in Argentina. Please refer to CFCL General information - Argentina for more information.
Disclosure requirements
Introductory information and categories
This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.
Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.
Disclosure requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.
For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.
In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.
In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.
The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.
Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.
N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.
Disclosure categories
Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:
Category 1
Markets where disclosure by Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;
Category 2
Markets where disclosure by Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;
Category 3
Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Banking, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.
Disclosure requirements – CSD Market - Argentina
Disclosure Category: 2
Local law and regulations may require Clearstream Fund Centre S.A. (“CFCL”), upon request and in specific circumstances, to disclose to the Argentinian regulator, the Comisión Nacional de Valores (CNV, National Securities Commission), information relating to holdings of Argentinian securities.
Consent
In order to comply with the applicable legislation, clients entering into transactions in the Argentinian domestic market consent, and are hereby deemed to consent, to disclosure and to the appointment of the requestor as their attorney-in-fact, under power of attorney, to collect from CFCL directly or through any custodian such information as is required to be disclosed. Clients who do not want to grant such authority to CFCL should refrain from holding such securities in their account with CFCL.
Disclosure Requirement
Beneficial owners, that is CFCL, are required by law to disclose:
- their tax ID to the local tax authority:
The Administración Federal de Ingresos Públicos (AFIP), the local tax authority, issued Resolution 3210 of 28 October 2011, as amended by Resolutions 3356 of 3 August 2012 and 3421 of 26 December 2012 by which it is required to CFCL’s relevant counterparties (e.g., a local bank, the local securities clearing system - Caja de Valores S.A.) to disclose, through an electronic filing with the tax authority: (i) CFCL’s tax ID1; (ii) information with respect to the foreign exchange transactions executed by CFCL in Argentina; and (iii) all transactions related to the securities held by CBL in the local clearing system. - that they are non-residents of Argentina when they want to repatriate portfolio investments in Argentina under the exceptions to repatriation limit:
Since 11 February 2002, repatriation of portfolio investments by non-Argentine residents is subject to foreign exchange controls and regulations imposed by the Argentine Central Bank. CFCL only offers the possibility to repatriate proceeds of settlement in local markets of portfolio investments of non-Argentine residents when available pursuant to the regulations set forth, from time to time, by the Argentine Central Bank, which varies depending on the type of investments (for example, Sovereign Securities issued by Argentina, equity or bonds issued by private issuers). In all cases, CFCL will have to evidence that its clients are non-Argentine residents.
Since foreign exchange criminal regime applies to CFCL, its directors, legal representatives, agents, and attorneys in fact, CFCL must ensure to comply with Argentine foreign exchange rules and requirements in order to avoid any fines and penalties.
Background and legal basis
Under Argentine law the disclosure obligation falls on the account holder, in this case CFCL, which unless otherwise specifically provided, is considered in this market to be the final beneficial owner of securities held by CFCL clients on their accounts opened with CFCL.
Foreign ownership limits
Under Argentine law, there are applicable foreign investment limits for certain sector of activities:
Media and communication
Foreign investors are only allowed to hold shares representing up to 30% of the capital and/or votes of an Argentine media and communication entity, as long as this percentage does not give the foreign investor the direct or indirect control of the local entity (Article 20 of Law No. 26,522). Such percentage may be increased only in case of reciprocity that is, if and to the extent to which the country of origin of the foreign investor permits an Argentinian investor to participate in media companies located in its own country in excess of that limit (Article 2 of Law No. 25,720).
Media and communication companies comprise newspapers, magazines, publishing companies, broadcasting services, production of visual and digital contents, advertising companies, and internet providers. In the particular case of broadcasting companies, no foreign individual can directly purchase stock. If the purchaser is a non-resident legal entity, specific advice should be sought.
The acquisition of shares of a media and communication company by a foreign legal entity requires the prior approval of the federal communications authority named Autoridad Federal de Servicios de Comunicación Audiovisión (AFSCA). For that purpose, the foreign legal entity acquiring the shares shall make the applicable filings with AFSCA. The regulations require disclosing the information regarding the final beneficial owner that will hold the shares. Non-compliance with the foreign investment thresholds are deemed a serious fault and the controlling authority shall terminate the local company’s license.
Gas and energy
Although there is not a legal specific limitation for foreign investments, the regulations do not allow gas/energy generator or distributor companies to have a controlling interest in a gas/energy transportation company, irrespective of the place of incorporation or nationality of the shareholders of the local companies). Any acquisition of shares of a gas/energy company requires the prior approval of the respective controlling authorities, Ente Nacional Regulador del Gas (ENARGAS) and Ente Nacional Regulador de la Electricidad (ENRE). To that end, the local company shall make the relevant filings with the authorities, including but not limited to the information of the final beneficial owner that will hold the shares. Upon non-compliance of the limitations set forth in this paragraph, the authorities will terminate the respective licenses and impose fines on the local company.
Rural lands
Under the Rural Lands Law No. 26,737, the direct or indirect foreign ownership and possession of rural land are restricted and require the prior approval by the Rural Lands Registry. For purposes of the Rural Lands Law, “foreign ownership” means any acquisition, transfer or assignment of rights over rural land (including minority equity interests) performed in favour of any of the following, among others: (i) foreign individuals other than those exempted by the law; (ii) legal entities where more than 51% of the stock is directly owned by foreign individuals or entities or in which the latter control the entity’s decision-making process; and (iii) legal entities which are controlled by foreign entities or individuals through a number of votes sufficient to prevail in the local entity’s decision-making process.
The most relevant restrictions under the Rural Lands Law are as follows: (i) foreign ownership or possession of rural land shall not exceed 15% of the total amount of rural land in the Argentine territory. This percentage is to be calculated also in relation to the territory of the province or municipality where the relevant land is located; (ii) foreign owners from the same nationality cannot hold rural land exceeding 30% of the 15% mentioned in (i) above at the national, provincial and municipality levels; (iii) ownership or possession by the same foreign owner shall not exceed (y) 1,000 hectares in the “core area” of Argentina, or (z) certain number of hectares in other regions of the country (which number of hectares must be set by the regulator vis-à-vis the 1,000-hectare threshold applicable in the “core area”); and (iv) foreign entities or individuals are prevented from becoming owners or possessors of rural lands that comprise or are adjacent to “permanent and significant bodies of water”.
Pursuant to the Rural Lands Law, the transfer of proprietary or possessory rights over rural land in favour of foreign entities or individuals requires the prior approval by the Rural Lands Registry. Note that the transfer of shares between parent companies holding direct or indirect control of an entity owning or possessing rural land in Argentina should also be disclosed to the Rural Lands Registry.
In case of a breach of its provisions, the Rural Lands Law sets forth the sanctions that would apply in addition to the absolute, total and incurable nullity of the relevant transaction. Depending on the seriousness of the infringement and the background of the offender, the sanctions applied by the Rural Lands Registry to the parties of the transaction and the professionals that intervene in the transaction are: (i) warnings; (ii) fines: for an amount equal to up to 1% of the value of the transaction or the fiscal value of the rural land, whichever is higher; (iii) disqualification for 6 (six) months to 2 (two) years to request the prior approval from the Rural Lands Registry.
Regulatory prior authorisations
Under Argentine law, the acquisition of equity securities (including shares and ADSs) or assets of companies involved in certain industries (broadcasting, banks, insurance companies, privatized companies) must secure the prior authorization from the applicable controlling authorities.
Financial institutions
When a foreign or local investor wishes to acquire shares, or ADSs of a local bank or financial institution, which a) exceeds 5% of the capital stock of the relevant local bank or financial institution, or b) at the criteria of the Argentine Central Bank, may alter the structure of the relevant shareholdings of such local bank or financial institution, the transaction will be subject to the prior approval from the Argentine Central Bank. In addition, in the event of a public offering of a local bank or financial institution, after the offering takes place, the relevant local bank or financial institution will be required to disclose to the Argentine Central Bank the name, nationality and address of any investor who has purchased shares or ADSs representing more than 2% of its capital stock.
Insurance companies
With respect to insurance companies, transactions such as mergers and acquisitions, acquisition of equity securities (including shares and ADSs), or purchase of certain assets, as defined on Article 46 of the Insurance Companies Law No. 20,091, issued on 11 January 1973, must be authorised by the Argentine insurance regulator, named the Superintendence of Insurance Companies, prior to the effective transfer of the shares or the assets, as applicable.
Privatised companies
When referring to privatised companies, depending on what was established in the terms and conditions of the bidding process, certain restrictions may be imposed on the acquisition of shares of the privatised companies (for example, that a percentage of the shares must be owned by the State). However, this process must be analysed on a case-by-case basis.
Non-financial reports to the Argentine Central Bank
Local companies must report to the Argentine Central Bank, through an electronic filing with a local financial institution, whenever they register participations of non-residents equal to or higher than 10% of their stock or votes (that is, foreign direct investments).
This report is mandatory only when the equity value of the local company reaches at least USD 500,000. It must be made twice a year, and includes personal and accounting information about the foreign shareholder.
Additional disclosure requirements
Reports to the Comisión Nacional de Valores ("CNV") (the Argentine Securities Commission)
Individuals or legal entities acquiring or selling, by any means, directly or indirectly, shares that give the right to 5% or more of the voting rights at a shareholders meeting of a public company must report the terms and conditions of the transaction to the CNV immediately after the trading, within the same trading day, as per paragraph (g) of Article 99 of the Capital Market Law No. 26,831. Further details may be found on the CNV regulations under Article 12, Section VI, Title X entitled "Transparency in the Public Offering Environment".
Mandatory Tender Offering Rules
Under the Capital Market Law, and the rules issued by the CNV, any investor seeking to obtain direct or indirect control of a public company by acquiring a "significant interest" (see below) in the voting shares, pre-emptive rights, options, convertible notes or any similar securities that can give the right to own or buy, or can be turned into, shares, must file a public offering or a securities exchange addressed to the holders of these securities. A "significant interest" is an interest equal to 15% or 51% or more of a company's shares and votes, depending on the circumstances. The mandatory tender offer regime applies as follows: (a) If a bidder (whether or not a shareholder) intends to obtain an interest of 15% or over, it must launch an offer to acquire at least 50% of the target's shares; (b) If a shareholder already holds at least a 15% interest, but less than 51%, and seeks to obtain a 6% or more additional interest within a 12 month period, it must make an offer to acquire at least 10% of the target's shares; and (c) If a bidder (whether or not a shareholder) intends to obtain an interest of 51% or over, it must make an offer to acquire 100% of the target's shares. Further details may be found on the CNV regulations sections 9 to 12, Chapter II, Title III entitled "Takeover bids and mandatory redemption".