New Compliance Rules For The Securities Market

Aiming to protect investors and to maintain a fair, organized and efficient securities market, on July 18, 2017, Law 5,810/17 was enacted to replace Law 1,284/98 "On the Securities Market" (Del Mercado de Valores) and, among other things, to effectively prevent and punish wrong conducts in the securities market by establishing administrative and criminal sanctions.

1. Administrative Sanctions

   They can be classified in low, severe and very severe. The affected companies along with their directors, administrators, corporate comptrollers, risk raters and securities operators have to answer for the same (art. 183). In this trend, the National Securities Commission (Comisión Nacional de Valores or "CNV") is able to apply sanctions such as: reprimands, fines of up to 200 minimum salaries (approximately PYG 400 million or USD 70,000); suspension or ban to perform as administrator or comptroller of supervised entities; prohibition to publicly offer securities for up to two years or definitively; and cancelation of the license to participate in the securities market (art. 195).

   (i) General Misconducts (Art. 184)

   The following are considered general misconducts in the securities market: a) Mishandling information and records; b) Lacking reports of independent external auditors; c) Obstructing inspections and supervisions of the CNV; d) Breaching rules regarding privileged or confidential information or the duty of secrecy; e) Carrying out activities outside a company's exclusive purpose; f) Carrying out activities supervised by the CNV without a license; g) Not submitting on time information required by the CNV; h) Failing to comply with CNV's observations or warnings; and i) Failing to report essential facts to the CNV.

   (ii) Specific Misconducts

   On its side, articles 185 to 192 set forth specific misconducts within the securities market.

   In this way, the following are misconducts for securities issuers: a) Distorting free price formation or not transferring property of negotiated securities; b) Not submitting on time information required by the CNV; c) Not submitting to CNV the contract with its external auditors; d) Lacking continuous risk rating reports or enough reserves; e) Providing CNV with incorrect, incomplete or inconsistent information; f) Not submitting CNV relevant information on situations that may affect the prices of securities issued; and g) Failing to communicate to their shareholders and corporate comptrollers sanctions of CNV when...