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Decree amending, repealing and adding several provisions of the Securities Market Law ("LMV") and the Investment Funds Law ("LFI")


Decree amending, repealing and adding several provisions of the Securities Market Law ("LMV") and the Investment Funds Law ("LFI").

On December 28, 2023, the Decree amending, repealing and adding several provisions of the Securities Market Law and the Mutual Funds Law (the "Amendment Decree") was published in the Official Gazette of the Federation.

The main objective of the Amendment Decree is: (i) the incorporation of the figure of Simplified Registration of Securities, (ii) the strengthening of the Principle of Disclosure, (iii) amendments to the regime of securities market companies, (iv) include clauses to protect against hostile takeovers, (v) the power of the National Banking and Securities Commission (the "CNBV" or the "Commission") to perform the cancellation of securities in the National Securities Registry (the "Registry") even when issuers do not comply with the requirements of the LMV to do so, (vi) establishing additional requirements for the registration and cancellation of the Registry of Investment Advisors, (vii) authorizing Investment Advisors that are incorporated as corporations to act as a founding partner of Hedge Investment Funds and (viii) the creation of Hedge Investment Funds.

In this regard, the most important aspects of the Reform Decree are the following:

A. Securities Market Law

1. The figures of simplified issuer are included, which will be the legal entity that maintains the simplified registration of its securities in the Registry; and simplified registration, which consists of a new procedure for the registration of securities that allows medium and small companies to participate in the stock market in order to reduce the high costs currently incurred by companies to structure a transaction in the stock market, whose requirements, among others, would be that they be offered exclusively to institutional or qualified investors, In this case, the brokerage firms would participate in the structuring of the operations of the companies that intend to become simplified issuers, in the review of the necessary documentation and in the subscription of the application to the CNBV to become a simplified issuer, where only the favorable opinion of the stock exchanges of such application would be sufficient for the CNBV to proceed with such registration.

2. It is established that public offerings of securities will require the prior authorization of the Commission, except for those made with securities subject to simplified registration. Likewise, legal entities that intend to obtain the simplified registration of their securities may not request to the Commission their preventive registration, in any of its modalities.

3. The dissemination of information related to securities subject to simplified registration for promotion, marketing or advertising purposes will not require the approval of the CNBV, provided that it is made through a stock exchange and complies with the other requirements set forth in the LMV.

4. The obligation to become a stock exchange stock corporation ("SAB") within 10 years or when the stockholders' equity exceeds 250 million Investment Units in the case of stock exchange investment promotion stock corporations ("SAPIBs") that request the registration of their shares in the Stock Exchange Registry is eliminated, based on the idea that the maturity process of corporations depends on several factors that are beyond the control of their management, so there should be no pressure and they should even have the option to remain in such regime.

5. Following up on the previous paragraph, it is proposed to eliminate the requirement for SAPIBs to have a program that provides for the progressive adoption of the regime applicable to SABs. Likewise, it is proposed to repeal the requirement that the stock exchanges must periodically verify the degree of progress and compliance with said program.

6. The shareholders' meeting may delegate to the board of directors the power to increase the capital stock and determine the terms of the subscription of shares, including the exclusion of the preemptive subscription right, and the prohibition to offer differentiated packages of shares to shareholders is eliminated. Only in the event that such shares are offered exclusively to institutional and qualified investors or shareholders with preemptive subscription rights, their placement will not require a placement prospectus, nor the prior update in the Register. The purpose of this is to provide greater transactionality and liquidity to the shares, which will result in greater value for shareholders, while facilitating decision making and protecting minority investors.

7. The Ministry of Finance and Public Credit will acquire a commitment in matters of sustainability and gender equity, since it will issue general provisions applicable to the members of the board of directors of the participants of the securities market in relation to the corporate governance of the corporate regimes.

8. With respect to the protection clauses against hostile takeovers, the voting quorum against the inclusion of such clauses in the bylaws of SABs is reduced from 5% to 20% or more of the shareholders present, in order to avoid restricting the hostile takeover. Likewise, other additional requirements are eliminated in order to avoid restricting such hostile takeover.

9. The obligation for SABs to only issue common shares is eliminated and to issue shares other than common shares only when authorized by the CNBV.

10. Even when the legal requirements to cancel the registration of securities in the RNV are not complied with, such as the obligation to have the favorable opinion of 95% of the capital stock of an issuer or when there are failures to deliver periodic information that must be disclosed to the investing public, the CNBV is empowered to cancel certain securities in the RNV in order to prevent them from remaining registered indefinitely, regardless of the sanction procedures that must be followed against the persons responsible for the cancellation, The CNBV is empowered to cancel certain securities from the Register in order to prevent them from remaining registered indefinitely, regardless of the sanction procedures to be followed against the persons responsible as a consequence of the non-compliance and provided that the interests of the investing public are safeguarded.

11. The only requirement for SABs to be able to acquire shares representing their capital stock without the prohibition established in the General Law of Mercantile Corporations being applicable is that they must comply with the maintenance obligations of the stock exchange where the securities are listed, in order to provide greater flexibility.

12. Investment advisors that are incorporated as corporations may apply to the Commission for authorization to act as founding partners of hedge funds, subject to certain requirements. The aforementioned investment advisors may provide to such investment funds the asset management service referred to in the Investment Funds Law, making investment decisions in the name and on behalf of such funds, being able to charge management and performance fees. The above, in order to modernize the corporate structure for hedge funds.

13. Given the increase in recent years in the number of investment advisors and their importance in the securities market, it is proposed that the certification, which must be granted by a self-regulatory body, be regulated in the provisions applicable to investment advisors issued by the Commission in order to provide greater legal certainty. In this sense, it also incorporates the obligation that persons who intend to acquire shares or corporate shares of a legal entity investment advisor must comply with the requirements applicable at the time of registration, given that a practice was created, consisting in that several legal entities, once registered, have transferred shares or corporate shares, without any further regulation, other than the fact of giving a simple notice to the Commission, which has put at risk the soundness in the management of the investment advisor, as well as the quality standards in the provision of services to its clients.

14. The transitory articles establish that the CNBV and Banco de México must issue the general provisions referred to in this Decree within 365 calendar days from the date following its entry into force.

B. Investment Funds Law.

15. In the LFI, the nomenclature of investment companies is changed to investment funds.

16. Limited purpose funds are eliminated, and hedge funds are included. Due to the need to expand the options of collective investment mechanisms in the Mexican market in order to compete at an international level, the creation of hedge funds is proposed in order to create new investment and financing alternatives of greater scope.

17. With the introduction of the simplified registration of securities and simplified issuers, investment funds may be the holders of such securities, thus being called upon to play a role of primary importance in channeling the country's investment and, to the extent that such sector develops, it will be able to channel an increasing amount of resources to investment projects, financed through the issuance of debt and equity in the securities market of this type of issuers.

18. In order to have a transparent valuation process for hedge funds, it is foreseen that such funds may hire a price provider, a legal entity independent from the investment funds and founding partners (investment fund operating company or investment advisor authorized to manage funds of this nature) whose only activity is to value the instruments that make up their portfolios and, in the special case that their assets are not securities or stock market securities, but rather shares of companies that are not listed on the stock market, and therefore where the price providers are not the appropriate instance for their valuation, a valuation committee appointed by the board of directors of the funds is foreseen, In the special case where their assets are not securities or stock market securities, but rather shares of companies that are not listed on the stock market, and therefore where price vendors are not the appropriate valuation authority, the existence of a valuation committee appointed by the board of directors of the founding partner of the hedge fund is provided for.

19. The CNBV will establish by means of general provisions the frequency with which the valuation of the shares representing the capital stock of hedge funds must be performed.

20. It is established that shares representing the capital stock of hedge funds may only be offered to qualified and institutional investors.

21. The transitory articles establish that the CNBV and Banco de México must issue the general provisions referred to in this Decree within 365 calendar days from the date following its entry into force.


This press release is provided for informational purposes only and does not constitute legal advice applicable to any particular case or situation.
If you have any questions concerning this press release, please contact
please contact Mauricio Basila, mbasila@basila.mx,
or Antonio Reyna, areyna@basila.mx
(5255)5520-3063
 

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