Draft Amendments to the Law on Public Offering

Javier CanosaPartner, Canosa Abogados

The Ministry of Economy is currently considering a bill (“Bill”) originated in the National Securities Commission (“NSC”) which seeks to amend the current law applicable to Public Companies No. 17,811 (“Law on Public Offering”) enacted in 1968.

This amendment to the Law on Public Offering, far from being a novelty, began to be considered years ago during the administration of Eduardo Hecker, former head of the CNV. The reform of the Law of Public Offering re-emerges as part of the system of measures established by the National Government to adapt to the premises stated by Financial Action Task Force (“FATF”) and the increasing pressures on Argentina to increase the controls and measures against money laundering.

One of the main amendments introduced by the Bill is the free exchange of information among regulatory agencies of the State, such as the CNV, the Financial Information Unit (“FIU”), the Tax Authorities, and the Central Bank of Argentina.

Thus, activities that are protected by the stock secret could be exercised freely if the Bill is approved by the National Congress. The head of the CNV, Alejandro Vanoli, indicates that this measure would lead to prevent crimes and violations related to insider trading, market manipulation, and issues related to the prevention of money laundering and financing of terrorism.

The elimination of the stock secret implicates that the regulation entities would have access to information about the ownership of shares, bonds and other securities, which highlights the greater power of regulation and control which the CNV would have. This measure is strongly opposed by a sector of the stock market, however, has it counts with the support of the FIU and the FATF.

Another important change that attempts to correct the strong criticism of the FATF, who referred to the lack of controls by the National Government in the capital market in its report in late 2010, is to invest the CNV of police power in punitive action.

If the Bill is approved, it would grant the NSC the authority to sanction stockbrokers if irregularities are detected, and if a violation of the provisions, statutes and regulations of these entities takes place.

Thus, it would bet set aside the concept of the self-governing of the market that has ruled for over forty years, a situation highly questioned by many economists who believe that it is the market that can exert the greatest control against money laundering.

These measures are intended to summarize the international experience, particularly the cases of Chile and Brazil, and integrate the country into the group of countries that meet the international standards of the International Organization of Securities Commissions (“IOSCO”), objective which finds its origin in the international pressure addressed to the National Government.