23 Sep 24 The Argentine Exchange Comission regulates the private placement of securities

By Agustín L. Cerolini, Martín Chindamo and Valentina Circolone.

By means of General Resolution No. 1,016 (hereinafter, the “Resolution”), published in the Official Gazette on 19 September 2024, the Argentine Exchange Commission (hereinafter, for its acronym in Spanish, the “CNV”) regulated the rules governing the private placement of securities, pursuant to the third paragraph of section 82 of the Capital Markets Law No. 26,831 (hereinafter, the “Capital Markets Law”).

The article 82 of the Capital Market Law states that “securities issued or grouped in series that have the same characteristics and grant the same rights within their class and are offered in generic form and are identified at the time the respective contract is executed, and all those financial instruments authorised by the CNV, may be offered to the public”. The third paragraph of this article grants the CNV the power to establish and regulate the specific cases in which an offer of securities is considered a private placement, taking into consideration the means and mechanisms of dissemination, offering and distribution and the number and type of investors for whom the offer is intended.

In this context, on 12 July 2024, the CNV published General Resolution No. 1,009, by means of which the regulation of the rules on private placements of securities was submitted to public consultation, which led to the subsequent approval of the Resolution.

In this regard, the Resolution establishes a framework for private placements of securities, divided into the following sub-regimes:

• Private placement: it may be made by any person, resident or non-resident. The Resolution also establishes limitations on the maximum number of investors (up to 35 qualified investors and 15 non-qualified investors) and the means of dissemination through which they may be offered, prohibiting mass media such as social networks, websites, print and digital media, among others. Finally, within this subcategory, the Resolution includes the private issuance of trust securities among a reduced group of investors, including those issues of financial trusts that are perfected with the purpose of pre-financing them until the authorisation for public offering is obtained.
• Private placements to employees: may be made by a resident or non-resident company to employees or non-independent directors, and also by a group company, as part of an employee retention, incentive or similar scheme. They must be targeted exclusively at eligible persons, using means that limit access to individuals outside the group.
• Extraterritorial offerings: these are made by non-residents and are exempt from CNV control, as they are made outside the territory of the Argentine Republic and do not have sufficient points of contact with it.

To the extent that the aforementioned requirements and characteristics are met, the CNV will grant a “‘safe harbor” regime to such offers, preventing them from being considered as an irregular public offer.

In addition to the guidelines to fall within each safe harbour mentioned above, the Resolution establishes obligations of transparency, confidentiality and limitations to the transfer of the securities acquired.

It is also important to note that both private placements and extraterritorial offerings are exempt from prior authorisation by the CNV and do not require any post-placement notification.

On the other hand, the offers that do not comply with the requirements to be considered safe harbours will not automatically be considered irregular public offerings and will not automatically be subject to the disciplinary sanction applicable in such a case. Consequently, the existence of an infringement will be established only in the event that the offering is considered a public offering of securities as defined in the Capital Markets Law and the CNV Rules, which will have to be assessed in each specific case.

It is worth mentioning that it is an international practice to provide for specific regulations, known as ‘safe harbours’, which provide legal certainty to those administered that, in case of strict compliance with the requirements set forth therein, they will be exempted from the control of the competent authority.

Examples include: (i) Regulation D of the United States of America and NCG No. 452/2021 of Chile, whereby certain public offerings of securities are exempted from the registration requirement; (ii) Decree No. 767/2016 of Colombia, which establishes which offerings shall not be considered public offerings; (iii) article 8° of the Mexican Securities Market Law, which establishes the requirements that private placements of securities must meet; and (iv) Instruction No. 476/2009, as amended by Instruction No. 160/2022 of Brazil, among others.

In conclusion, the Resolution is a regulatory breakthrough, which is in line with the global trend, as it establishes a regulation that provides certainty, precision, reliability and generates a secure regulatory framework for private placements of securities and extraterritorial offerings.