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INTERNATIONAL SECURITIES LAW AND REGULATION

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Release 4 • 2015

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INTERNATIONAL SECURITIES LAW AND REGULATION

Second Edition

DENNIS CAMPBELL General Editor

JURIS

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(Release 4 – 2015)

Table of Contents

Argentina Introduction ......................................................................................... ARG-1

Regulatory System—Legal Sources ................................................... ARG-2

Legal Order and Regulatory Interests ................................................. ARG-7

Australia Introduction ......................................................................................... AUS-1

Legal Order and Regulatory Interests ................................................. AUS-9

Jurisdictional Conflicts ....................................................................... AUS-40

Austria Introduction .......................................................................................... AUT-1

Authorities and Procedure .................................................................... AUT-5

Capital Market ..................................................................................... AUT-7

Disclosure Requirements ..................................................................... AUT-39

Jurisdictional Conflicts ........................................................................ AUT-58

Belgium Institutional Framework and Organisation of Regulated Markets ...... BEL-1

Belgian Offering and Listing Regulations .......................................... BEL-7

Disclosure Requirements .................................................................... BEL-13

Trading Rules ...................................................................................... BEL-19

Disclosure of Substantial Holdings and Public Take-Over Bids ......... BEL-22

Insider Trading .................................................................................... BEL-33

Brazil Introduction ......................................................................................... BRA-1

Securities Market ................................................................................ BRA-4

Securities Distribution System ............................................................ BRA-6

Trading of Securities ........................................................................... BRA-7

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Negotiation on the Stock Exchange and the Over-the-Counter Market ................................................................................................. BRA-8

Publicly Held Corporations ................................................................. BRA-12

Portfolio Management and Custody of Securities ............................... BRA-13

Independent Auditors, Securities Analysts, and Consultants .............. BRA-14

International Financial Reporting Standards ....................................... BRA-14

Investment Funds ................................................................................ BRA-15

Market Makers .................................................................................... BRA-16

Foreign Exchanges .............................................................................. BRA-16

Enforcement Attributions of the CVM................................................ BRA-17

Crimes against Capital Markets .......................................................... BRA-19

Anti-Money Laundering Regulations.................................................. BRA-19

Canada Introduction ......................................................................................... CDN-1

Legal Order and Regulatory Interests ................................................. CDN-5

Jurisdictional Conflicts ....................................................................... CDN-25

Chile Introduction ......................................................................................... CHL-1

Legal Order and Regulatory Interests ................................................. CHL-2

Jurisdictional Conflicts ....................................................................... CHL-13

China Introduction .......................................................................................... CHA-1

Legal Order and Regulatory Interests .................................................. CHA-10

Securities Industry................................................................................ CHA-36

Acquisition of Listed Company ........................................................... CHA-59

Conclusion ........................................................................................... CHA-76

Colombia Introduction .......................................................................................... COL-1

Foreign Investment and Crossborder Financial and Securities Services ................................................................................................ COL-8

TABLE OF CONTENTS v

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Trading of Securities in Stock Market — Secondary Market .............. COL-28

Approaches to Jurisdictional Conflicts ................................................ COL-33

Cyprus Introduction .......................................................................................... CYP-1

Issuer Requirements ............................................................................. CYP-5

Registration of Public Offerings .......................................................... CYP-8

Registration of Placements ................................................................... CYP-8

Periodic Disclosure .............................................................................. CYP-9

Trading Rules and Trading Environment ............................................. CYP-10

Capital Markets and Financial Services .............................................. CYP-12

Germany Introduction ......................................................................................... GER-1

Legal Order and Regulatory Interests ................................................. GER-7

Public Take-Over Bids ........................................................................ GER-43

Greece Introduction .......................................................................................... GRE-1

Admission to Athens Stock Exchange ................................................. GRE-3

International Accounting and International Financial Reporting Standards .............................................................................................. GRE-6

National Treatment and Reciprocity .................................................... GRE-8

Hong Kong Introduction .......................................................................................... HK-1

Legal Order and Regulatory Issues ...................................................... HK-8

Trading Rules and Market Conduct ..................................................... HK-59

Multilateral Approaches ....................................................................... HK-83

India Introduction .......................................................................................... IND-1

Securities Market: Legal and Regulatory Order ................................... IND-7

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Foreign Participation in the Securities Market ..................................... IND-21

Jurisdictional Conflict ......................................................................... IND-27

Ireland Introduction ......................................................................................... IRE-1

Admission to the Irish Stock Exchange .............................................. IRE-3

Securities ............................................................................................. IRE-9

Periodic Disclosure ............................................................................. IRE-19

Trading Rules ...................................................................................... IRE-32

Insider Trading and Fraud—Extraterritorial Application .................... IRE-43

Liabilities for Insider Trading and Fraud ............................................ IRE-44

Public Take-Over Bids ........................................................................ IRE-45

Jurisdictional Conflicts ....................................................................... IRE-49

Israel Introduction .......................................................................................... ISR-1

Procedures ............................................................................................ ISR-6

Registration for Trade .......................................................................... ISR-40

Debt Arrangements .............................................................................. ISR-139

Insider Information .............................................................................. ISR-147

Purchase Offers ................................................................................... ISR-152

Italy Introduction .......................................................................................... ITA-1

Entities Qualified to Render Investment Services ................................ ITA-9

Regulated and Multilateral Trading Facilities ...................................... ITA-22

Public Offers of Financial Products .................................................. ITA-24

Japan Introduction ......................................................................................... JPN-1 Legal Order and Regulatory Interests ................................................. JPN-23

Appendix ............................................................................................. JPN-29

TABLE OF CONTENTS vii

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Latvia Introduction ......................................................................................... LAT-1

Legal Order and Regulatory Interests with Special Regard to Foreign Elements .............................................................................................. LAT-4

Trading Rules ...................................................................................... LAT-18

Jurisdiction Conflicts .......................................................................... LAT-25

Lebanon Introduction ......................................................................................... LEB-1

Legal Order and Regulatory Interests ................................................. LEB-3

Jurisdictional Conflicts ....................................................................... LEB-14

Lithuania Introduction ......................................................................................... LIT-1

Legal Order and Regulatory Interests ................................................. LIT-22

Luxembourg Introduction ......................................................................................... LUX-1

Organisation of Security Market and Regulations .............................. LUX-4

Jurisdictional Conflicts ....................................................................... LUX-10

Malaysia Introduction ......................................................................................... MAL-1

The Authorities ................................................................................... MAL-3

Legal Order and Regulatory Interests ................................................. MAL-14

Jurisdictional Conflicts ....................................................................... MAL-48

Mexico Introduction .......................................................................................... MEX-1 Legal Order and Regulatory Interests .................................................. MEX-4

Public Take-Over Bids ......................................................................... MEX-20

Jurisdiction Conflicts ........................................................................... MEX-22

The Netherlands Introduction ......................................................................................... NL-1

Admission ........................................................................................... NL-11

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Market Participants ............................................................................. NL-11

Periodic Disclosure ............................................................................. NL-42

Trading Rules ...................................................................................... NL-48

Jurisdictional Conflicts ....................................................................... NL-63

New Zealand Introduction .......................................................................................... NZ-1

Legal Order and Regulatory Interests .................................................. NZ-7

Jurisdictional Conflicts ....................................................................... NZ-37

Nigeria Introduction ......................................................................................... NIG-1

Legal Order and Regulatory Interests ................................................. NIG-10

Jurisdictional Conflicts ....................................................................... NIG-50

Norway Introduction ......................................................................................... NOR-1

Legal Order and Regulatory Interests ................................................. NOR-3

Jurisdictional Conflicts ....................................................................... NOR-14

The Philippines Introduction ......................................................................................... PHI-1

Public Offerings .................................................................................. PHI-2

Securitisation Act of 2004 ................................................................... PHI-22

Portugal Introduction ......................................................................................... POR-1

Portuguese Markets ............................................................................. POR-3

Market Participants ............................................................................. POR-14

Public Offerings .................................................................................. POR-18

Criminal Offences ............................................................................... POR-31

Jurisdictional Conflicts ....................................................................... POR-33

TABLE OF CONTENTS ix

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Romania Introduction ......................................................................................... ROM-1

Legal Order and Regulatory Interests ................................................. ROM-4

Trading Rules ...................................................................................... ROM-15

Jurisdiction Conflicts .......................................................................... ROM-22

Russia Introduction ......................................................................................... RUS-1

Legal Order and Regulatory Interests ................................................. RUS-6

Singapore Introduction ......................................................................................... SGP-1

Legal Order and Regulatory Interests ................................................. SGP-7

Jurisdictional Conflicts ....................................................................... SGP-32

Spain Introduction ......................................................................................... SPA-1

Legal Regime ...................................................................................... SPA-6

Switzerland Introduction .......................................................................................... SWI-1

Legal Order and Regulatory Interests .................................................. SWI-6

Approaches to Jurisdictional Conflicts ............................................... SWI-37

Taiwan Introduction ......................................................................................... TWN-1

Legal Order and Regulatory Interests ................................................. TWN-6

Disclosure Obligations ........................................................................ TWN-18

Trading Rules ...................................................................................... TWN-26

Public Tender Offers ........................................................................... TWN-29

Conclusion .......................................................................................... TWN-34

United Kingdom Introduction ......................................................................................... UK-1

The New Regulatory Regime .............................................................. UK-1

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United Kingdom Regulatory System .................................................. UK-2

Legal Order and Regulatory Interests ................................................. UK-11

Jurisdictional Conflicts ....................................................................... UK-45

United States Regulatory System .............................................................................. USA-1

United States Markets and Market Listing Requirements ................... USA-9

Public Offerings by Foreign Issuers .................................................... USA-25

Private Placements by Non-United States Issuers ............................... USA-45

Investment Outside the United States and Cross Border Transactions ........................................................................................ USA-52

Trading of Non-United States Securities ............................................ USA-62

Jurisdictional Conflicts ....................................................................... USA-71

Conclusion .......................................................................................... USA-74

Venezuela Introduction .......................................................................................... VEN-1

Legal Order and Regulatory Interests ................................................. VEN-6

European Union Introduction ......................................................................................... EU-1

Conditions for Admission of Securities to Listing .............................. EU-1

Rules Relating to Listing Particulars ................................................... EU-8

Rules Relating to Prospectus When Transferable Securities Are Offered ................................................................................................ EU-14

Insider Dealing .................................................................................... EU-18

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Authors List

Argentina Javier G. Pereira-Amigo Baker & McKenzie LLP Av Leandro N Alem 1110 - Piso 13 C1001AAT Buenos Aires Argentina Tel: (54 11) 43102200 Fax: (54 11) 43102299 Email: [email protected] Australia Andrew Hay Clayton Utz Level 28, Riparian Plaza 71 Eagle Street Brisbane Queensland 4000 Australia Tel: (617) 3292 7000 Fax: (617) 3003 1366 Email: [email protected] Austria Otto Wächter, Philipp von Schrader, and Rachael Pelletter Graf & Pitkowitz Rechtsanwälte GmbH Stadiongasse 2, 1010 Vienna Austria Tel: (43 1) 40117 Fax: (43 1) 4011740 Email: [email protected]; [email protected] Belgium Luc Wynant Van Olmen & Wynant Avenue Louise 221 1050 Brussels Belgium Tel: (322) 644 0511 Fax: (322) 646 3847 Email: [email protected]

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and Kristof Macours Generale Bank Warandeberg 3, 1000 Brussels Belgium Tel: (322) 565 4727 Brazil Adriana Maria Gödel Stuber and Walter Douglas Stuber Walter Stuber Consultoria Jurídica Rua Tabapua, 474, 6 andar, conj. 66, Itaim Bibi 04533-001 Sao Paulo SP Brazil Tel: (55 11) 30780933 Fax: (55 11) 30789026 Email: [email protected]; [email protected] Canada Robert T Stuart and Mark A Trachuk Osler, Hoskin & Harcourt PO Box 50, 1 First Canadian Place Toronto, Ontario Canada M5X 1B8 Tel: (1416) 362 2111 Fax: (1416) 862 6666 Chile Nicolás Cubillos Ovalle, Cubillos & Labarca Huérfanos 1189, Piso 5 Santiago Chile Tel: (562) 672 5560 Fax: (562) 696 7929 China Wei Shen Professor of Law KoGuan Law School, Shanghai Jiao Tong University 800 Dongchuan Road Minhang District, 200240 Shanghai China Tel: (86 21) 34204627 Fax: (86 21) Email: [email protected]

AUTHORS LIST xiii

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Colombia Carlos Fradique-Méndez, Luis Gabriel Morcillo, Adriana Ospina, and Carlos Andrés Múnera Brigard & Urrutia Calle 70 A #4-41 Bogotá Colombia Tel: (57 1) 3462011 Fax: (57 1) 3100609 Email: [email protected] [email protected] [email protected] Cyprus Elias Neocleous Andreas Neocleous & Co LLC Neocleous House 195 Makarios III Avenue PO Box 50613 3608 Limassol Cyprus Tel: (357 25) 110000 Fax: (357 25) 110001 Email: [email protected]

and

Achilleas Malliotis Andreas Neocleous & Co LLC Neocleous House 195 Makarios III Avenue PO Box 50613 3608 Limassol Cyprus Tel: (357 25) 110000 Fax: (357 25) 110001 Germany Linklaters Oppenhoff & Rädler Mainzer Landstraße 16 60325 Frankfurt am Main Germany Tel: (4969) 7100 30 Fax: (4969) 7100 3333

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Greece Panos Koromantzos Bahas, Gramatidis & Partners 26 Filellinon Street 105 58 Athens Greece Tel: (30210) 331 8170 Fax: (30210) 331 8171 Email: [email protected] Hong Kong Kingsley T W Ong Eversheds LLP 21/F Gloucester Tower The Landmark 15 Queen's Road, Central Hong Kong China Tel: (852) 2186 3239 Fax: (852) 21863201 Email: [email protected]

and

Eugene Y C Yeung Mayer Brown JSM 16-19th Floors Prince's Building 10 Chater Road, Central Hong Kong China Tel: (852) 28432211 Fax: (852) 28459121 Email: [email protected] India Ankit Mishra Nishith Desai Associates 93-B Mittal Court Nariman Point 400 021 Mumbai India Tel: (91 80) 66935000 Fax: (91 80) 66935001 Email: [email protected]

AUTHORS LIST xv

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and

Sangeeta Rana Nishith Desai Associates 93-B Mittal Court Nariman Point 400 021 Mumbai India Tel: (91 80) 66935000 Fax: (91 80) 66935001 Email: [email protected] Ireland O’Donnell Sweeney One Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland Tel: (3531) 664 4200 Fax: (3531) 664 4300 Israel Doron Shinar, Nir Weissberger, Ziv Keinan, Gregory Irgo and Arik Bottner Eitan Mehulal & Sadot Advocates and Patent Attorneys 10 Abba Eban Boulevard PO Box 2081 Herzlia 46120 Israel Tel: (972 9) 9726000 Fax: (972 9) 9726001 Email: [email protected] [email protected] [email protected]; [email protected] Italy Francesco Paolo Crocenzi Studio Legale Crocenzi e Associati Lungotevere degli Altoviti, 1 100186 Rome Italy Tel: (39 06) 8091291 Fax: (39 06) 8072477 Email: [email protected]

xvi INTERNATIONAL SECURITIES LAW

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Japan Takashi Yoneda, Yoshiaki Ikeda, Yasutaka Nishikori, and Daichi Takayama Fukuda Nishimura & Asahi Ark Mori Building, 29th Floor 12-32, Akasaka 1-Chome Minato-Ku, Tokyo 107-6029 Japan Tel: (813) 5562 8500 Fax: (813) 5570 8711 Email: [email protected]; [email protected] [email protected] Latvia Mārtiņš Rudzītis Sorainen Valdemara Centre, 4th Floor Kr. Valdemara 21 1010 Riga Latvia Tel: (371 ) 67 365 000 Fax: (371 ) 67 365 001 Email: [email protected] Lebanon Mohamed Y. Alem Alem & Associates Barristers & Solicitors 126 Foch Street Beirut Central District 2012 6609 Beirut Lebanon Tel: (961 1) 999717 Fax: (961 1) 999607 Email: [email protected] Lithuania Gediminas Dominas and Sarunas Basijokas Dominas & Partners Vilniaus str. 31 01402 Vilnius Lithuania Tel: (3705) 232 1111 Fax: (3705) 234 1111 Email: [email protected]; [email protected]

AUTHORS LIST xvii

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Luxembourg Yann Baden Baden & Baden Centre Neuberg 7, Place du Théâtre 2613 Luxembourg Luxembourg Tel: (352) 475 061 Fax: (352) 462 517 Malaysia Wai-Ming Yap Lee Ong & Kandiah Suite 2.07–2.10 2nd Floor Wisma Mirama Jalan Wisma Putra 50460 Kuala Lumpur Malaysia Tel: (603) 244 8336 Fax: (603) 244 7336 Mexico Mauricio Martinez González, Pedro Félix Castañeda, and Gerardo Bacelis-Sotomayor Félix, Martínez y Bacelis, S.C. Bosque de Radiatas No 6, Despacho 502 Bosques de las Lomas 05120 Mexico, D.F. Mexico Tel: (52 55) 2167-0080 Email: [email protected] [email protected] [email protected] The Netherlands Mark S A van Dam and Gÿs C L van Leeuwen Houthoff Buruma Parnassusweg 126 1076 AT Amsterdam The Netherlands Tel: (3120) 577 2000 Fax: (3120) 577 2700

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New Zealand Tim Williams Chapman Tripp ANZ Centre 23–29 Albert Street PO Box 2206 Auckland New Zealand Tel: (649) 357 9000 Fax: (649) 357 9099 Email: [email protected]

Nigeria KPMG Professional Services 22A Gerrard Road, Ikoyi PO Box 51204, Falomo Lagos Nigeria Tel: (2341) 2694 6604 Fax: (2341) 2691 248

Norway Peter Brechan Haavind Vislie Bygdoy Allé, PO Box 359 Sentrum 0101 Oslo Norway Tel: (4722) 433 000 Fax: (4722) 433 001 Email: [email protected]

The Philippines Vicente D. Gerochi IV SyCip Salazar Hernandez & Gatmaitan CyCip Law Center 105 Paseo de Roxas 1226 Makati City Philippines Tel: (63 2) 9823500 Fax: (63 2) 8173896 Email: [email protected]

AUTHORS LIST xix

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Portugal Luís Roquette Geraldes and Nuno Araújo Sobreira Morais Leitão, Galvão Teles, Soares da Silva & Associados Rua Castilho, 165 1070-050 Lisbon Portugal Tel: (351 21) 3817400 Fax: (351 21) 3817496 Email: [email protected] [email protected] Romania Laura Toncescu D&B David si Baias SCPA Lakeview Building 301-311 Barbu Vacarescu Street 020276 Bucharest Romania Tel: (40 21) 2253000 Fax: (40 21) 2253600 Email: [email protected] Russia Andrey Bushev St Petersburg State University Law School, Business Law Department 7, 22 Liniya, VO 199026 St Petersburg Russia Tel: (7812) 329 2826 Fax: (7812) 329 2800 Email: [email protected]

and

Ilya Nikiforov Egorov, Puginsky, Afanasiev & Partners 22–24 Nevsky Pr Suite 132 191186 St Petersburg Russia Tel: (7812) 322 9681 Fax: (7812) 322 9682 Email: [email protected]

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Singapore Lee Eng Beng and George Chiong Rajah & Tann 4 Battery Road #26-01 Bank of China Bldg 049908 Singapore Tel: (65) 6535 3600 Fax: (65) 6535 8598

Spain Juan Carlos Machuca Siguero Uría & Menéndez 125 Old Broad Street 17th Floor London EC2N 1AR England Tel: (44 207) 2601800 Fax: (44 207) 2601812 Email: [email protected]

and

Tomás José Acosta Álvarez Uría & Menéndez Príncipe de Vergara, 187 Plaza de Rodrigo Uría 28002 Madrid Spain Tel: (34 91) 5860618 Fax: (34 91) 5860471 Email: [email protected]

Switzerland Christian Stambach Bratschi Wiederkehr & Buob Vadianstrasse 44 Postfach 262 9001 St. Gallen Switzerland Tel: (41 58) 2581410 Fax: (41 58) 2581499 Email: [email protected]

and

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Marc Ryser Bratschi Wiederkehr & Buob Bahnhofstrasse 70, 8021 Zurich Switzerland Tel: (41 58) 2581000 Fax: (41 58) 2581099 Email: [email protected]

and

Rolf H. Weber Bratschi Wiederkehr & Buob Bahnhofstrasse 70, 8021 Zurich Switzerland Tel: (41 58) 2581000 Fax: (41 58) 2581099 Email: [email protected] Taiwan Yen-ling Liu Winkler Partners 12F, No. 86 Chongcing South Road, Section 1 10045 Taipei Taiwan Tel: (886 2) 23112345 Fax: (886 2) 23112688 Email: [email protected]

and

Chih-Shan Lee Winkler Partners 12F, No. 86 Chongcing South Road, Section 1 10045 Taipei Taiwan Tel: (886 2) 23112345 Fax: (886 2) 23112688 Email: [email protected] United Kingdom Michael Hatchwell and Anthony Fiducia Davenport Lyons 30 Old Burlington Street London W1S 3NL England Tel: (44207) 468 2600 Fax: (44207) 437 8216

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United States Robert A Solomon Solomon Blum Heymann LLP 40 Wall Street 35th Floor New York, New York 10005 United States Tel: (1212) 267 7600 Fax: (1212) 267 2030 Email: [email protected]

and

Clifford R Pearl Hensley Kim & Holzer, LLC 1660 Lincoln Street Suite 3000 Denver, Colorado 80264 United States Tel: (1720) 377 0770 Fax: (1720) 3770777 Email: [email protected] Venezuela Diego Lepervanche Mendoza, Palacios, Acedo, Borjas, Páez Pumar & Cía Edificio ABA, Calle Veracruz Urb. Las Mercedes 1060 Caracas Venezuela Tel: (58 212) 9091600 Fax: (58 212) 9931237 Email: [email protected]

and Luisa Acedo de Lepervanche Mendoza, Palacios, Acedo, Borjas, Páez Pumar & Cía Edificio ABA, Calle Veracruz Urb. Las Mercedes 1060 Caracas Venezuela Tel: (58 212) 9091600 Fax: (58 212) 9931237 Email: [email protected]

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European Union Lothar Hofmann Rechtsanwaltskanzlei Dr Hofmann Johannesgasse 15 1010 Vienna Austria Tel: (431) 518 88 Fax: (431) 518 8815 Email: [email protected]

Argentina

Introduction................................................................................................. ARG-1

Regulatory System—Legal Sources............................................................ ARG-2 Authorities .................................................................................... ARG-3

Legal Order and Regulatory Interests ......................................................... ARG-7 Admission ..................................................................................... ARG-7 Periodic Disclosure ....................................................................... ARG-17 Issuers of Registered Securities .................................................... ARG-18 Proxy Disclosure........................................................................... ARG-19 Trading Rules................................................................................ ARG-21

Argentina

Javier G Pereira-Amigo

Baker & McKenzie

Buenos Aires, Argentina

Introduction

After a financial and political crisis that developed in December 2001, Argentina enacted

a complex and radical monetary change during 2002 that included abandoning the

Convertibility Regime (A $1 = US $1) which had prevailed during 1990 to move into an

exchange control scheme. Investors were required to structure their business to fit them to

the new rules.1

Notwithstanding the foregoing, the Argentine securities market continued the transforma-

tion in the 1990s. The Executive Branch issued Executive Order Number 677/01, regarding

Transparency in the Public Offering for Securities. The Executive Order introduced

changes to the former legal framework, including Public Offering Act Number 17,811 and

the regulatory framework passed by the National Securities Commission (Comisión

Nacional de Valores), ie, the New Rules and Regulations Amended Text 2001,2 adding

innovative proceedings and legal institutions to those formerly in existence.

Despite the deep crisis mentioned above, the Argentine Gross Domestic Product experi-

enced an outstanding increase during the 2003–2006 period at an average rate of 8.875

per cent due to certain political and economical decisions taken by the Argentine Govern-

ment and a favourable international environment for the export of Argentine

agro-industrial products and commodities. This re-emerge of the Argentine industry was

reflected in its securities market activity, with an increasing amount of new debt securities

notes and securitisations.

However, in addition to the Global Financial Crisis in 2008, a deep change in the Argen-

tine Retirement and Pension System seriously affected Argentine capital markets.

Pension funds, the major institutional investors in the Argentine market, ceased to exist.

On 20 November 2008, the Argentine Congress posed Law Number 26,425 by which the

formerly existing dual Retirement Pension System formed by the private pension funds and

the State Administrative Authority (Administración Nacional de Seguridad Social,

ANSES) has changed into a new single system (the Integrated Argentine Retirement

System, SIPA), that eliminates the system of capitalisation. Since their creation, the

private pension funds had become the largest institutional investor in the financial and

capital markets of Argentina. As of October 2008, the total value of investments made by

1 The author acknowledges the collaboration of Juan Ignacio Sgaramella.2 General Resolution Number 368/01.

them amounted to AR $84,816,769,760, of which approximately 56 per cent was invested

in transactions of credit for the Argentine state and public bonds. AFJP also was a strong

investor in private companies.

Law Number 26,425 provides the terms for the resources which integrate the individual

capitalisation accounts of the members of the private capitalisation system of the SIJP, to

the traditional administration for social security (ANSES), in order to contribute such

amount to the guarantee funds of the Public Pension Regime (Fondo de Garantía de

sustentabilidad del Régimen Previsional Público de Reparto, FGS). The FGS has the aim

of investing surplus in the Public Pension Regime, is managed by the ANSES, and is

authorised to make a wide variety of investments. The amendments to the Pension System

caused a reduction of the volumes of the transactions made in the capital markets, affect-

ing the value of assets traded thereon and the future issuing of new securities, and a

decrease in the demand for securitisation instruments traded in the capital markets, caus-

ing a negative impact in the consumer and mortgage credit market.

Regulatory System — Legal Sources

The Argentine legal framework for securities basically consists of Public Offering Act

Number 17,811, the National Securities Commission Rules and other regulations passed by

the National Securities Commission, the stock exchange rules and regulations mainly

based on the Buenos Aires Stock Exchange’s (Bolsa de Comercio de Buenos Aires) circulars

issued by the securities markets (Mercado de Valores)adhering tostockexchanges, resolutions

of the official registration entity, the Caja de Valores SA, and regulations from the Mercado

Abierto Electrónico SA, the electronic reporting system for trading securities.

From time to time, the Argentine Congress, through the amendment of the Public Offering

Act, as well as the enactment of a new Bill, or the Executive Branch by means of an Execu-

tive Order, may introduce changes to the Argentine legal framework for securities.

The Executive Branch issued Executive Order Number 677/01, dealing with Transparency

in the Securities Market, on 22 May 2001. The goal pursued by Executive Order Number

677/01 is to protect investors as consumers of financial products. Executive Order Number

677/01 sets forth changes to the Public Offering Act as from 1 June 2001. However, two

groups of stipulations included in Executive Order Number 677/01 must be distinguished.

The first includes self-executive provisions, and the second consists of certain sections

requiring the issuance of regulations by the National Securities Commission.

The National Securities Commission issued General Resolution Number 400 and Gen-

eral Resolution Number 401/02 on 5 April 2002, regulating Executive Order Number

677/01. The latter (the ‘Public Offer Resolution’) specifically deals with public cash

offers and public exchange offers describing and regulating public offer bids and proce-

dures. In addition to these regulations, there are certain laws that govern the securities

market, directly or indirectly. These include:

• The Commercial Companies Act,3 governing corporations and other legal entities;

ARG-2 INTERNATIONAL SECURITIES LAW

3 Act Number 19,550, as amended.

• The Registered Corporate Securities Act, Act Number 20,643, as amended by ActNumber 23,299, which provides that securities issued by private entities in the form of

a series must be registered, non-endorsable instruments and that bearer securities must

be converted into registered securities;

• The Foreign Investments Act,4 which establishes the framework for investments madein Argentina by foreign capital or persons;

• The National Securities Commission’s Duties and Powers Act,5 assigning duties to theNational Securities Commission for controlling compliance with corporate govern-

ment requirements by public companies;

• The Bonds Act,6 providing the requisites for issuing bonds in Argentina;• The Mutual Funds Act,7 establishing the legal framework for mutual funds;• The Integrated Retirement Pension System,8 establishing requirements for pension

funds to invest in the securities market;

• The Trust Act,9 regulating the creation of trusts;• The Legislative Powers Delegated to the Executive Branch on Certain Administrative

Matters Act,10 which granted certain powers to the Executive Branch on certain matters

originally delegated to Congress by the Constitution;

• The Money Laundering Act;11 and• The Leasing Act.12

Authorities

National Securities Commission

The National Securities Commission is the principal authority in the securities market. The

Public Offering Act provides for the National Securities Commission’s authority, duties,

and obligations as the controller of the securities market in Argentina. The National Securi-

ties Commission is a self-regulated public entity with jurisdiction throughout the country.

Currently, the relationship of the National Securities Commission with the Executive

Branch is held through the Secretariat of Finance (Secretaría de Finanzas) and the

Sub-Secretariat of Financial Services (Subsecretaría de Servicios Financieros).

The National Securities Commission’s functions are carried out by a Board of Directors

currently consisting of three members appointed by the Executive Branch, which also

appoints the Chairman and Vice Chairman of the Board and two assistant members. Staff

ARGENTINA ARG-3

4 Act Number 21,382.5 Act Number 22,169.6 Act Number 23,576.7 Act Number 24,083.8 Act Number 24,241, as amended by Act Number 26,425.9 Act Number 24,441.

10 Act Number 25,148.11 Act Number 25,246.12 Act Number 25,248.

members are appointed, suspended, and removed by the Board. Any expenses required

for the operation of the National Securities Commission are obtained from allowances

provided for in the National Budget.

As a result of the enactment of the National Securities Commission’s Duties and Powers

Act, the National Securities Commission is in charge of controlling compliance with cor-

porate governance requirements of public companies. Closed companies continue to be

controlled by the Public Registry of Commerce in Argentina. The National Securities

Commission’s principal activities consist of:

• Authorising public offerings of securities;• Advising the Executive Branch on applications for registration submitted by both stock

exchanges and securities markets;

• Keeping a record of all issuers authorised to publicly offer their securities and of stock-brokers registered with the securities markets;

• Approving the rules and regulations of stock exchanges and those of securities markets;• Supervising compliance with applicable laws, rules, and regulations in all matters

within the scope of the Public Offering Act;

• Requesting the Executive Branch to revoke the authorisation to function of stockexchanges and securities markets when such institutions have failed to comply with

the functions assigned to them and according to the provisions of Executive Order

Number 677/01; and

• Declaring irregular and ineffective, for administrative purposes, the acts subject to theNational Securities Commission’s control when they are against the law, regulations

passed by the National Securities Commission, or by-laws.

The National Securities Commission is in charge of issuing the rules to be complied with

by natural persons or legal entities when making a public offering of their securities. In

exercising these functions, the National Securities Commission may:

• Require reports and carry out inspections and investigations;• Request the assistance of law enforcement agents; and• Report crimes or prosecute in court.

In addition, the National Securities Commission is in charge of determining the

application of penalties set forth in the Public Offering Act. According to amendments

introduced by Executive Order Number 677/01, individuals and legal entities violat-

ing the provisions of the Public Offering Act and the regulations thereof will be

subject to the following penalties, without prejudice to the applicable civil or criminal

actions:

• Warning;• Fines, ranging from A $1,000 to A $1.5 million, which may be increased up to five

times the amount of the obtained benefit or the damage suffered as a consequence of the

illegal action, should any of them be higher than the established fine;


• Suspension of up to five years to act as directors, managers, auditors, members ofthe supervisory council, members of the qualification council, public accountants

that have given their professional opinion, external auditors, or managers of issuers

authorised to publicly offer their securities, or to act as such in investment or depository

companies of mutual funds and in rating agencies or in companies developing the

activity of financial trustees, or to act as intermediaries in the public offering or in any

other manner which may be under the control of the National Securities Commission;

• Suspension of up to two years from publicly offering securities or of the authorisationto act in the public offering;13 and

• Prohibition from publicly offering securities or to act in the public offering of securi-ties, forward contracts, futures, or options of whatsoever nature.

In the case of legal entities, the following individuals shall be deemed jointly and

severally liable:

• The directors;• The administrators;• The auditors;• The members of the supervisory board; and• The managers and members of the qualification board.

When a systematic risk practice, or any other serious financial threat, is identified, the

National Securities Commission, or the respective self-regulated entity, may suspend

the public offering or the negotiation of securities. When the suspension affects self-regulated

entities, stock exchanges, or securities markets, the National Securities Commission

decision may be extended for a maximum of 30 days, except when the suspension is

extended by the Executive Branch.

Sections 14 and 15 of the Public Offering Act, as amended by Executive Order Number

677/01, set forth the proceedings for appealing the National Securities Commission’s final

decisions imposing any penalty cited above. Any penalty other than fines, the statute of lim-

itations of which is three years, will be extinguished six years as from the prohibited act.

Stock Exchanges

According to the Public Offering Act, stock exchanges must be incorporated as

non-profit organisations or as corporations. Stock exchange regulations must stipulate

the cases and the conditions under which such institutions secure that performance of

their transactions is carried out. Stock exchanges may organise clearinghouses to settle

transactions.

Stock exchanges intending to list securities for public trading must obtain prior

authorisation to act as such from the Executive Branch through the National Securities

ARGENTINA ARG-5

13 In the case of mutual funds, they may only perform administration acts and act, on request, forpurposes of repurchasing quotas, being able to sell for that purpose the assets in the portfoliocontrolled by the National Securities Commission.

Commission, notwithstanding any other requirement set forth by other national or

provincial bodies. Stock exchange rules and regulations must provide, for the purpose of

listing securities, for matters concerning:

• Authorisation, suspension, and cancellation of the listing of securities;• Requirements to list securities while the relevant authorisation remains in effect;• Compliance with existing laws and regulations by listed corporations;• Rules and measures necessary to ensure the accuracy of the financial statements and

other reporting documentation that listed corporations are to file or publish; and

• Issuance of regulations ensuring the accuracy of recorded listings and the publicationof such listings and their current prices.

Any security to be listed for public offering and traded on a stock exchange must be previ-

ously authorised by the National Securities Commission. The stock exchanges quoting

securities for trading are authorised by the Public Offering Act to collect listing fees from

the issuing corporation, as well as trading fees from the parties to any transaction. Appeal

of a stock exchange resolution rejecting, suspending, or cancelling a listing of securities

on the ground of violation of regulations may be made, within 15 days of issue, to the

Ordinary Appellate Courts of the pertinent jurisdiction.

Securities Markets

Trading in securities listed on a stock exchange is conducted through a securities market

(mercado de valores) affiliated with a stock exchange.

As with the stock exchanges, the securities markets must obtain authorisation to act as

such from the Executive Branch through the National Securities Commission, notwith-

standing any other requirement set forth by other national or provincial bodies. Securities

markets must be organised as corporations. Securities markets may allow trading only of

those securities the listing of which has been authorised by the stock exchange to which

they belong and those transactions ordered by a court. Securities markets are authorised

by the Public Offering Act to collect the trading fees payable by the parties to a

transaction.

The internal rules of each stock exchange for its affiliated securities market establish

conditions for listing securities, admitting brokers, conducting trades, and controlling the

truthfulness of any information required to be reported in connection therewith.

Securities markets are in charge of keeping a registry of stockbrokers and controlling

stockbrokers’ activities, books, and records. No natural or legal persons may trade on a

securities market, use the designation stockbroker, or carry out stockbroker activities

unless they are registered with the relevant securities market. Securities markets must

report to the National Securities Commission any information concerning new stockbro-

kers entered in their registry, any cancellation of such registrations, and any changes in

connection therewith. Any violation of the Public Offering Act and its regulations by a

stockbroker is subject to the disciplinary powers of the securities markets.


Legal Order and Regulatory Interests

Admission

Market Participants

Domestic Exchanges. As of 30 October 2009, there were six stock exchanges in Argen-

tina, with affiliated securities markets authorised to quote securities, ie, Buenos Aires,

Rosario, Córdoba, Santa Fe, Mendoza, and La Rioja. La Rioja Stock Exchange has the

authorisation, but it is not operating.

Buenos Aires Stock Exchange. The Buenos Aires Stock Exchange (Bolsa de Comercio

de Buenos Aires) is the oldest and largest Argentine stock exchange, having been founded

in 1854. Approximately 90 per cent of all the securities in Argentina are traded on the

Buenos Aires Stock Exchange. As of 31 December 2008, there were approximately 95

companies trading equity on the Buenos Aires Stock Exchange, five of which are

foreign companies (ie, Telefónica, SA; Banco Santander Central Hispano, SA; Repsol,

SA; Tenaris SA; and Petrobras (Petroleo Brasileiro SA)).

The Buenos Aires Stock Exchange operates through various mechanisms, these being

floor trading (en el piso) and the Integrated Computer-Assisted Trading System (Sistema

Integrado de Negociación Asistida por Computador, SINAC) which, when coinciding in

trading time, form what is known as the ‘concurrent method’, and the continuous trading

session.

The securities admitted for trading on the Buenos Aires Stock Exchange are corporate

stocks, bonds, convertible bonds, small business bonds, trust certificates, Argentine

Depositary Shares (Certificados de Depósito Argentino, CEDEARs), government bonds,

and investment funds. The trades conducted on the Buenos Aires Stock Exchange may be

divided into cash and forward transactions. Forward transactions include forward, repos,

carryovers, options, securities loans, futures, and short sales. At present, cash trades are

settled in 72 hours. Trades may be executed to be settled in pesos, dollars, or transfer

dollars between accounts located abroad.

Buenos Aires Securities Market. There are six securities market authorised by the National

Securities Commission to participate in the Argentine market for securities. The Buenos

Aires Securities Market (Mercado de Valores de Buenos Aires SA, Merval) is the largest

and most important.

The Buenos Aires Securities Market regulates, coordinates, and implements stock exchange

trading, types of securities and trading mechanisms, and terms and conditions of payment.

It also has implemented a stock-watch facility to monitor all transactions in real time.

Transborder Electronic Trading Systems. The Caja de Valores is a private corporation

owned by the national stock exchanges and securities markets. Its principal shareholders

are the Buenos Aires Stock Exchange and the Buenos Aires Securities Market.

ARGENTINA ARG-7

Caja de Valores acts as depository/custodian of government and corporate securities

under Act Number 20,643 and its regulatory decrees and as registrar and transfer agent

for corporations and governmental entities.

Caja de Valores has entered into agreements with international clearing and settlement

organisations such as Clearstream (formerly CEDEL), Euroclear Operations Centre, and

the Depositary Trust Company (DTC) to act in transborder transactions in securities.

Caja de Valores also has executed an agreement with the Sociedad Compensadora y

Liquidadora de Valores, SA, of Spain, mainly as a result of the trading of Spanish com-

pany securities on the Argentine stock exchanges and securities markets.

Off-Market Transactions. Securities also may be traded in Argentina through over-

the-counter market brokers who must be linked to an electronic reporting system. The

activities of such brokers are controlled and regulated by Mercado Abierto Electrónico SA.

The Mercado Abierto Electrónico is an electronic exchange where both government

securities and corporate bonds are traded through cash and forward contracts. Securities

to be traded must be registered with the pertinent supervising authorities and may be

traded on the Mercado Abierto Electrónico, on other exchanges, or concurrently. The types

of securities traded on the Mercado Abierto Electrónico are government securities, cor-

porate bonds, treasury bonds, Treasury bills, and provincial bonds. Due to an agreement

with the Buenos Aires Stock Exchange, corporate shares are not traded on the Mercado

Abierto Electrónico. Mercado Abierto Electrónico members include national banks, pro-

vincial banks, municipal banks, private national banks, foreign banks, cooperative banks,

financial institutions, foreign exchange entities, and brokers/dealers.

Securities

National Treatment and Reciprocity. Argentine law accords reciprocal treatment to for-

eigners who invest capital promoting, supplementing, or developing economic activity in

Argentina.14 ‘Economic activity’ includes all industrial, mining, agricultural, commercial,

financial, and other activities related to the productions or trade of goods and services.

Act Number 21,382 considers ‘foreign investors’ to be any person, either an individual or

a legal entity, domiciled outside Argentina who owns a foreign capital investment, any

foreign capital domestic company with investments in other domestic companies, and

Argentine individuals or legal entities domiciled outside Argentina. A ‘foreign capital

domestic company’ is any company domiciled in Argentina in which individuals or com-

panies domiciled abroad own, directly or indirectly, more than 49 per cent of the capital

stock or control a number of shares whose voting rights are sufficient to prevail at share-

holders’ meetings.

Emergency and Exchange Regulations Reform Law Number 25,561 of 6 January 2002

and Executive Order Number 214/02 terminated the Convertibility Regime established in

1991 by which the value of the Argentine peso was pegged to the United States dollar. An

exchange control regime has been introduced.


14 Act Number 21,382, as amended by Executive Order Number 1853/93.

Currently, a single, free currency exchange market is in force. However, the Central Bank

of Argentina may intervene in the market by selling and buying United States dollars to

influence the currency price. Additionally, there are limits on purchasing United States

dollars per individual or corporation per month.

Transfers of United States dollars abroad are restricted by Executive Order Number

1570/2001, as amended, allowing only such transfers expressly included in its excep-

tions and by certain limitations imposed by the Central Bank of the Republic of

Argentina on the purchase of foreign currency.

For purposes of avoiding the influence of volatile capital in the market, and to create the

necessary instruments to follow and control the remittance of funds in and out of Argen-

tina, on 10 June 2005, the Executive Branch issued Executive Order Number 616/2005,

imposing certain limitations on the repatriation of funds transferred into Argentina for

investment purposes as from such date. Limitations imposed by Executive Order

616/2005 are basically the following:

• Non-residents cannot repatriate their funds before 365 days counted as from theirtransfer into Argentina; and

• On entry of funds into Argentina, non-residents must deposit with a local financialentity an amount in United States dollars equal to 30 per cent of the funds that have

been remitted into Argentina.15

Securities Requirements. Formal requisites on securities vary, depending on the type

of securities. Shares may be represented by certificates or be registered in accounts kept

by either the issuer, the Caja de Valores (the Securities Depositary and Clearance Agent),

or a commercial or investment bank. Most issuers tend to use book-entry securities.

As regards securities certificates issued in a physical form, the Buenos Aires Stock

Exchange requires that issuers meet strict security standards concerning paper quality,

printing process, and controls over preparation for certificates by the printing company.

Ultraviolet ink and magnetic recognition bands or other similarly effective safeguards are

required.

Prior to printing, a model of the certificate and a description of the proposed security pro-

cedures should be submitted to the Buenos Aires Stock Exchange. Printing of certificates

with facsimile signatures requires approval by the National Securities Commission. If the

company chooses to issue book-entry securities through a computer-based registration

system, the requirements provided in the Rules should be complied with, except where

maintenance of the register is assigned under a contract to the Caja de Valores.

The Buenos Aires Stock Exchange requires issuers to provide a detailed description of the

system they intend to use for book-entry registration of shares. Such system should afford

reasonably safe conditions for certification, exercise, and transfer of rights on the shares.

ARGENTINA ARG-9

15 This mandatory deposit may neither accrue interest nor be used as guarantee or collateral ofcredit transactions of any kind. Such deposit should be made for one year. After such one-yearterm, it can be either repatriated or exchanged for local currency. Certain exceptions to thisregime have been gradually introduced.

Section 4 of Executive Order Number 677/01 requires that, notwithstanding special

provisions applicable to each security or those established in the issuance documents, the

following legal system be applied to registered or book-entry recorded securities:

• The creation, issuance, or transmission of interests, liens, provisional remedies, or anyother assessment on the rights granted by the security must be filed in special registries

kept by the issuer or, on behalf of the issuer, by an authorised securities depository or

commercial or investment banks, or appointed registration agents, and must have legal

effects enforceable to third parties as from the date of said registration;

• The authorised entity keeping book-entry registry of the securities must give theholder a certificate of the account opening and of any movement therein. Holders

must have the right to have been delivered, at any time, a certificate of the account

balance, at their own expense. Certificates must specify the date, time, type, number,

and issuer of the securities, and any other information that may identify the issue; the

holder’s complete identification, interests, and provisional remedies levied on the

securities; and evidence of the issue of the account balance certificates and type,

specifying the date of issuance and their maturity dates;

• The issuance of an account balance certificate for the purposes of transferring securitiesor creating interests on them will cause the account to be blocked for 10 days;

• The issuance of account balance certificates for attending shareholders’ meetings orexercising voting rights will cause the account to be blocked until the day immediately

following the one when the corresponding meeting was held. If the shareholders’meet-

ing is adjourned or is held on a different date or time, new certificates must be issued in

the name of the same persons who have been authorised by the issuance of the original

certificates; and

• Account balance certificates may be issued to authorise the holder to file legal claimsor file arbitration proceedings, as the case may be, including summary proceedings if

applicable, to submit credit verification applications, or to participate in universal

actions, for which purpose the certificate will be considered as conclusive evidence,

without further authentication or requirement. Its issuance will cause the respective

account to be blocked, except for recording acts of disposition by the holder, for 30

days, unless the holder returns the certificate or receives within the term an order to

extend the time during which the account should be frozen, issued by a judge or arbi-

tration court. Certificates must indicate such circumstances.

Athird party purchasing book-entry registered or recorded securities for a valuable con-

sideration from a person that, pursuant to the corresponding registry, is legally capable

of transferring them will not be subject to repossession unless such person, when pur-

chasing the securities, has acted in bad faith or fraudulently.

Global certificates representing securities may be issued in favour of the persons having

a stake in them. The account blocking will only affect those securities mentioned in the

certificate. Certificates must be issued by the domestic or foreign entity in charge of the

administration of the collective deposit system where the global certificates are registered.

When the entities in charge of administering the collective deposit system participate in


global certificates registered in collective deposit systems administered by another

entity, the former can directly issue certificates. In the case of global debt certificates,

the trustee, if any, must obtain the authorisation mentioned above by proving the

respective appointment.

Corporate Governance. The Commercial Companies Act provides for the basis of

corporate governance of all legal commercial entities. The National Securities Com-

mission Rules supplement the regulations for public companies. A legal entity making a

public offering of its securities must have an administrative body (board of directors), a

supervisory body (statutory auditors or supervisory council), and an audit committee

(Comité de Auditoría).16 In addition, the issuer is required to retain external independ-

ent auditors for preparing and filing required periodic documentation.

The National Securities Commission has approved the ‘Suggested Ethic Code for Corpo-

rate Governance and Good Practices’. The purpose of the Code is to assure that issuers

incorporate certain principles to their day-to-day operations, such as full disclosure,

transparency, efficiency, protection of investors, and equal treatment among investors.

The Code is mandatory and issuers must include in their financial statement an explana-

tion of the reasons why they have decided not to adopt a code for corporate governance

and good practices if the board of directors takes such decision.

Shareholders’ Meeting. An ordinary shareholders’ meeting must be held annually to

approve the financial statements (which should, in turn, be filed with the National

Securities Commission and the stock exchange where the securities of the company are

traded), appoint directors and consider their performance and fees, and authorise a capital

increase. An extraordinary shareholders’ meeting can be held at any time, provided that

prior publications and notices are rewarded in accordance with the applicable regulations.

The holding of the ordinary annual shareholders’ meeting at the first summons requires

the presence of shareholders representing the majority of the voting shares of the com-

pany. At the second summons, the shareholders’ meeting must be considered held when

the requisite number of shares is present. Resolutions in both cases are to be taken by the

absolute majority of votes present, except when the by-laws require a greater number.

Pursuant to Executive Order Number 677/01, shareholders representing at least two per

cent of the corporate capital may deliver comments or proposals related to the company’s

business corresponding to the fiscal year up to five days before the date established for the

ordinary meeting. The board of directors must inform the shareholders that such comments

or proposals are at the main office or that they may be consulted through electronic means.

To those matters that the ordinary shareholders’ meetings of public companies must

decide, Executive Order Number 677/01 added the following:

• The disposition or encumbrance of all or a substantial part of the corporate assets of thecompany when not carried out in the ordinary course of the company’s business; and

ARGENTINA ARG-11

16 Executive Order Number 677/01.

• The execution of management agreements or any other agreement in which the goodsor services received by the company are totally or partially paid with a percentage of

the company’s income, results, or profits if the amount is substantial, taking into

account the business and the shareholders’ equity.

In principle, an extraordinary shareholders’meeting at the first summons requires the pres-

ence of shareholders representing at least 60 per cent of the shares with the right to vote, if

the articles do not require a higher quorum. At the second summons, the attendance of

shareholders representing 30 per cent of the voting shares is required, unless the by-laws

provide for a higher or lower quorum. Resolutions in both cases are to be taken by the

majority of votes present at the meeting, except when the by-laws require a greater number.

In the event of dealing with conversions into another legal entity, premature winding up

of the company, transfer of the company’s domicile abroad, fundamental change of the

purpose, and the total or partial reimbursement of capital, both in the first and in the

second summons, the resolutions are to be taken by vote of the majority of voting shares

of the company, without applying the plurality of votes. This stipulation is to be applied

to decide on mergers or splits, except with respect to the company being taken over

which is governed by stipulations on the increase of capital.

Board of Directors. Directors of an Argentine corporation are appointed by the

shareholders at the incorporation process and, subsequently, by ordinary shareholders’

meetings. Public companies must have at least three directors. Alternate directors may be

appointed in accordance with the company’s by-laws. Alternate directors replace

principal directors in case of vacancy.

The term for directorships must be provided for in the company by-laws. The term cannot

exceed three years, but directors may serve subsequent terms. If nothing is provided for in

the by-laws, the Commercial Companies Act considers that the maximum term has been

chosen. Except otherwise provided by the company’s by-laws, a board of directors must

meet at least once every three months, and a majority of its members must be present to form

a quorum.

The directors and the president of a corporation may be foreigners; however, a majority of

the members of the board of directors must be resident in Argentina. All directors have a

right to compensation pursuant to the Commercial Companies Act. Compensation may

be set in the by-laws of the company or by the shareholders at a shareholders’ meetings

and cannot exceed 25 per cent of the profits of the corporation, or five per cent if no divi-

dends have been declared. All directors of a corporation are subject to a standard duty of

loyalty and diligence. Non-compliance results in an unlimited joint and several liability

for damages arising therefrom. Directors of a corporation have a duty to:

• Disclose any conflict of interest to the board of directors and statutory auditors;• Abstain from voting in any deliberation related to such conflict; and• Refrain from competing with the company.

Directors are jointly and severally liable for the negligent performance of their duties, or

for violations of the law or of the by-laws or regulations of the company. Directors who file


written objections promptly and give notice to the statutory auditors before the proceedings

are initiated against acts of the board of directors are exempt from any consequences

arising therefrom.

Directors may be exonerated from liability with respect to the company by a subsequent

approval of the shareholders’meeting, provided that they have not violated the law or the

by-laws, and shareholders representing five per cent or more of the company’s capital do

not object to such exoneration.

Statutory Auditors. The shareholders’ meeting must appoint statutory auditors in odd

numbers (a minimum of three) to act as the internal controlling body of the company

(comisión fiscalizadora). Statutory auditors must be attorneys or public accountants, or

civil organisations thereof, and live in Argentina. Directors, managers, or employees of

the company or a subsidiary or the company’s controlling company cannot be appointed

as statutory auditors.

Statutory auditors are jointly and severally liable for non-complying with their duties and

obligations, as provided for in the by-laws and by law. In addition, statutory auditors are

jointly and severally liable for directors’ violations of the law or the by-laws or regula-

tions of the company when the damage caused would not otherwise have occurred.

Audit Committee. Executive Order Number 677/01 creates a new body for public com-

panies, the audit committee (Comité de Auditoría). Those companies making a public

offering of their shares must establish an audit committee formed by three or more

members of the board of directors, the majority of whom must be independent pursuant to the

criteria established by the National Securities Commission. The audit committee must submit

an annual plan for the fiscal year to the board of directors and the supervisory council.

Registration of Public Offering. Under an agreement between the National Securities

Commission and the Buenos Aires Stock Exchange, effective 10 July 1992, applications

for registration with the National Securities Commission also must be filed with the

Buenos Aires Stock Exchange. The Buenos Aires Stock Exchange must submit its pre-

liminary opinion as to whether the issuer complies with the requirements established in

the Public Offering Act within 20 business days. The 20-day term is interrupted should

the Buenos Aires Stock Exchange require additional information to the issuer. The Bue-

nos Aires Stock Exchange submits its findings and a preliminary opinion to the National

Securities Commission for a final decision once the Buenos Aires Stock Exchange has

completed all necessary investigations and reviews.

Thereafter, the National Securities Commission has 10 business days for analysing the

issuer’s request. If the National Securities Commission does not require additional informa-

tion or no observations are made on the issue’s petition, the issuer is deemed to be registered

to make a public offering of its securities. Companies intending to make a public offering

are required to submit an application signed by the chairman of the board of directors to the

National Securities Commission. In addition, the following documentation must be filed:

• Name of the issuer, main business, registered office, administrative headquarters,telephone and telefax number, and e-mail address;

ARGENTINA ARG-13

• Particulars regarding incorporation, registration, and amendments to the by-laws;• Number of shareholders and names and addresses of shareholders owning more than

five per cent of the corporate capital stock;

• Composition of the capital stock (classes and number of shares and a description oftheir different rights, if any);

• Statement of irrevocable capital contributions, with a detailed list of contributors,relationship with the company, kind of contributions made, capitalisation conditions,

and date of approval by the company;

• Description of the issuer, closing date of the fiscal year, a description of the economicgroup to which it belongs, if any, affiliates, controlling and controlled companies, and

stock exchanges on which the company must list its securities;

• Financial statements for the three most-recent fiscal years;17 and• Information as to any material events influencing the development of the company or

likely to have an effect on its economic or financial performance and condition, other

than those disclosed in the financial statements.

The application also must include:

• A copy of the special shareholders’ resolution to apply for registration of the companywith the National Securities Commission;

• A copy of the by-laws and a statement of amendments thereto, if any, pendingapproval;

• An independent public accountant’s report, evidencing that the corporation is anongoing concern and that it has an administrative structure capable of meeting the

requirements established for companies going public;

• A listing of the members of the board of directors and statutory auditors (regular andalternate) and top managers, stating in detail their personal and special domiciles and

positions held in other companies or entities;

• A prospectus complying with the requirements of chapter VIII of the National Securi-ties Commission Rules; and

• Any other information or documents required under stock exchange rules and regulations.

Section 36 of Executive Order Number 677/01 prohibits taking part in a public offering

without authorisation. All individuals or corporations taking part in a public offering of

securities, forward contracts, futures, and options without the authorisation of the

National Securities Commission or in violation of Executive Order Number 677/01 and

the Public Offering Act will be subject to the penalties established in section 10 of the

Public Offering Act, as amended by Executive Order Number 677/01.

Foreign Companies. The National Securities Commission General Rule (chapter VII1a)

provides that companies incorporated in foreign countries may offer shares to the public


17 If the latest financial statement is older than five months as of the application date, specialfinancial statements as of a date not later than three months prior to the application date mustbe submitted.

in Argentina under the same conditions and requirements as those applicable to Argentine

issuers. The issuers must establish a permanent representation and a domicile in Argentina

and file data with the Public Registry of Commerce, complying with requirements of sec-

tion 118 of the Commercial Companies Act. They must specify whether they make public

offerings of securities in foreign countries and, if so, detail all initial and ongoing disclo-

sure requirements to which they are subject.

The National Securities Commission Special Rule (chapter VII1 b) allows the National

Securities Commission to establish less extensive requirements for companies authorised

to make public offerings of shares in countries with which cooperation agreements have

been executed or where, failing such agreement, the National Securities Commission

deems that existing regulations provide reasonable protection for domestic investors and

ensure an adequate disclosure system.

Argentine Depositary Receipts Issuance Programmes. Argentine Depositary Receipts

Programmes (CEDEARs) are the second mechanism provided for in the Argentine secu-

rities market regulations allowing foreign investors to access the Argentine market. The

National Securities Commission Rules (chapter VII3) provide for the authorisation of

CEDEARs. CEDEARs represent deposited securities of foreign companies not author-

ised to make public offering of them within the territory of Argentina. Underlying

securities must be listed within a Mercosur market or other foreign markets whose regula-

tory authorities have executed an agreement with the National Securities Commission.

CEDEARs may be issued by the Caja de Valores, commercial or investment banks, and

finance companies authorised by the Central Bank. CEDEAR issuers must meet an A$30

million minimum capital requirement. Authorised depositaries may be:

• The CEDEAR issuer;• The Caja de Valores;• The central depositary in the country of issue of the securities represented by CEDEARs; or• Acustodian bank in the country of issuance of the underlying securities with an A$200

million minimum shareholders’ equity.

International clearing houses, such as Clearstream or DTC, also may act as depositaries.

Adepositary may not acquire ownership or use of the underlying securities represented by

CEDEARs, which are held under a regular deposit agreement. The depositary may not be

changed unless a majority of CEDEAR owners so decides. Neither an advanced nor a

general consent to change the depositary may be admitted.

CEDEAR issuers must maintain an amount equivalent to the underlying securities. On a

case-by-case provisional basis, the National Securities Commission may authorise issu-

ance of CEDEARs without underlying securities, in so far as prior guarantee is furnished.

CEDEARs are freely exchangeable, at the owner’s request, for the underlying securities

at any time and/or at the programme’s expiration. CEDEARs must be cancelled and

destroyed against delivery of underlying securities. As of 30 October 2009, there were 22

authorised CEDEARs trading on the Buenos Aires Stock Exchange.

ARGENTINA ARG-15

Prospectus Requirements. Chapter VIII of the National Securities Commission Rules

establishes rules that issuers must follow in preparing and filing prospectuses, depending

on the characteristics of the proceedings being followed with the National Securities

Commission. Foreign issuers also must include additional information already filed with

foreign markets authorities.

The National Securities Commission Rules state that a prospectus constitutes the basic

document of the offer and, therefore, it must be an easy-reading document which may

allow unsophisticated investors to understand its terms and conditions. The prospectus

must be signed by persons capable of binding the issuer.

Executive Order Number 677/01 establishes that issuers of securities, jointly with members

of the board, statutory auditors as to matters for which they are competent, the offeror of

securities as regards information related to them, and persons signing the prospectus for the

issue of securities will be liable for all information included in the prospectus registered

with the National Securities Commission. The intermediary entities and agents in the mar-

ket taking part as arrangers or underwriters of a public offering for the sale or purchase of

securities must review the information contained in the offering prospectus. Experts or third

parties giving an opinion on certain sections of the prospectus, as attorneys or public

accountants, will be liable only for the information on which they have given an opinion.

While the issuance of securities is being analysed by the National Securities Commission

for approval, the issuer may distribute a preliminary prospectus. The issuer must complete

any modification to the filed prospectus required by the National Securities Commission

within 10 business days following notification. The prospectus must contain:

• Information on the directors, managers, legal and financial counsel, and statutoryauditors;

• Statistical data (number of securities to be offered, price or method to determine it,amount expected to be received, percentage that the new issuance must represent in the

capital stock, and ratio price/book value of the securities);

• The programme for the offer (period of the offer and the right of the offeror to extend or toreduce the period, underwriters, places where the purchase or subscription forms must be

received, deadline and way to pay-in the securities by the acceptant of the offer and to

deliver the securities by the offeror, including proceedings to exercise pre-emptive rights,

if any, and date and means of publication of the outcome of the offer);

• Issuer financial information (consolidated financial data; for the last three fiscal years, oras from the incorporation of the issuer, whichever occurs first; ratios and principal ratios

for the last three fiscal years, or as from the incorporation of the issuer, whichever occurs

first, describing liquidity, creditworthiness, locked-up capital, and profitability;

and capitalisation and incurred indebtedness, purposes of the offer and uses of the

amounts to be raised, and risk factors);

• Information on the issuer (history and development of the issuer, structure and organi-sation of the issuer’s business group, corporate information, operating and financial

review and prospects, operating results, liquidity and capital resources, research, trade

mark and licence development, and business trends);


• Information as to directors, senior management, and employees (director and seniormanagement compensation, shareholding and stock option plans, statutory auditors

and special committees, number of employees of the last three fiscal years, significant

change in number, and agreements granting participation in the capital stock);

• Information as to major shareholders and related-party transactions (list of sharehold-ers owning at least five per cent of every class of shares with voting rights of the capital

stock, or less if so required by the foreign law should the issuer be a foreign company,

and information as to any significant change in the capital stock and related-party trans-

actions for the last three fiscal years);

• Financial information; and• Offer and listing information (listing details, describing the class of securities being

offered, par value, rights thereon, restrictions on free conveyance of title to securities and

credit rating, distribution plan, markets where the securities will be offered, differ-

ence in the price of offered securities and prices paid by directors and senior managers

in the last five years, and costs and expenses incurred by the issuer in the offer).

Periodic Disclosure

Official Trade

Chapter XXI, section 22, of the National Securities Commission’s Rules establishes

obligations for stock exchanges and securities markets where securities are traded regard-

ing information to be made available to investors.

Stock exchanges and securities markets must adopt measures to secure free access to

information, accuracy, and diffusion, without prejudice to the powers of the National

Securities Commission. They must publish on a daily basis the details of all the transactions

carried out, specifying their nature, price, and the hour, minute, and second of completion.

Foreign Issuers with Primary Admission

According to Chapter VII of the National Securities Commission Rules, foreign corporations

must comply with the disclosure and reporting requirements applicabl

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