New CNV Regulations Applicable to Broker-Dealers

On March 11, 2022, the Argentine Securities Commission (“CNV”) issued General Resolutions No. 924 and 925 by  which it approved new regulations applicable to broker-dealers (“ALyC”).

Resolution 924 approved -with certain modifications- the draft regulation of the ALyC subcategory called Agro-industrial Broker-dealer (“ALyC I AGRO”), published by General Resolution No. 914 on December 2, 2021.

Pursuant to Resolution 924, ALyC I AGRO will be able to carry out, in addition to the activities allowed for integral broker-dealers, the brokerage of grains, general agricultural and agro-industrial activities, as well as their accessory activities.

Resolution 924 establishes, among others, the following provisions:

• Exchanges and clearing agents authorized by CNV that engage in the intermediation of futures, options and derivatives of agricultural or agro-industrial products, shall implement, at least once every quarter, the audit procedures applicable to the ALyC I AGRO. This requirement is not mandatory for those markets and clearing agents that do not engage in the intermediation of the aforementioned instruments;
• Upon the client’s account opening, the ALyC I AGRO shall require an express authorization stating that, after thirty calendar days from the accreditation of clients’ funds (or conforming liquid balances) in the agent's accounts for an amount exceeding the equivalent of 1,500 Units of Acquisition Value (“UVA”), the funds must be transferred to the client's bank account or invested according to client’s instructions and risk profile.

 

• Entities that request their registration as ALyC I AGRO must: i) be authorized and/or registered in the registers of the Ministry of Agriculture, Livestock and Fisheries for the development of the abovementioned complementary activities, and ii) be a member of at least one exchange authorized by CNV and participate in the intermediation of futures, options and derivatives of agricultural or agro-industrial derivatives, submitting proof of compliance with this requirement within three months from the date of registration in CNV;

 

• ALyC I AGRO must open the necessary custody accounts to maintain a clear segregation and individualization of their own assets, the client’s assets, other agent’s assets and other agent’s clients’ assets. Further, a scheme of bank accounts shall be implemented (and submitted to CNV) allowing a clear distinction between: (i) the accounts used for commercial and operative transactions; (ii) the accounts intended for operations within the framework of their brokerage of grains, general agricultural and agro-industrial activities, as well as their accessory activities, and (iii) those used for the receipt and application of funds for transactions carried out through the capital markets;
• Further, ALyC I AGRO must keep records of the express consent of the clients on the movements of funds owned by third party principals, transferred to the agent to be applied in the capital market and permanently update the asset and management accounting in relation to the administration of its own funds and of the universe of its third party clients;
• The minimum net worth required for ALyC I AGRO shall be the equivalent to 1,175,000 UVA;
• The registered ALyC or the legal entity requesting its registration in the ALyC I AGRO subcategory, a minimum of 40% of the minimum net worth amount, must be liquid;
• Within three business days following the closing of each week, the ALyC I AGRO must submit the information related to the total amount of third parties’ liquid balances;
• Unlike the rest of the ALyC, by virtue of the customer account opening agreement, ALyC I AGRO must include an additional section expressly stating that it performs activities that are not regulated by the CNV;
• ALyC I AGRO must implement procedures to ensure the existence of measures, records and accounts clearly defined and divided according to the different activities carried out by the entity, setting aside clients’ funds;

 

• Among other functions, the compliance and internal control officers of ALyC I AGRO must oversee compliance and application of procedures aimed at safeguarding clients’ and regulatory investments’ liquid balances. The officer issuing the report on an ALyC I AGRO must explicitly and compulsorily rule on the existence or non-existence of activities carried out by the agent that may exceed those expressly regulated for this subcategory.

Finally, in line with the announcement of the new subcategory, Resolution 925 formalizes a new extension of the schedule for the adaptation of the corporate purpose of ALyCs.

Those ALyCs that do not comply with the corporate purpose established in General Resolution CNV No. 898, must opt, until June 30, 2022, to either:

- evidence the filing to reform the corporate purpose;

- request the change of the category in which they are currently registered; or

- request the cancellation of registration in the ALYC category.