By Marco Antonio Tena
The financial landscape of Mexico underwent a transformation with the comprehensive Amendment of its Securities Market Law and the Investment Funds Law (the “Amendment”), published in the Official Gazette of the Federation on December 28, 2023.
This Amendment is not merely a regulatory update; it signifies a new era in the country’s financial markets, introducing innovative concepts and aligning with global trends in sustainable development and gender equity. For this purpose, the National Banking and Securities Commission (CNBV) and the Bank of Mexico (Banxico) have a period of 365 days to issue the secondary regulation.
SIMPLIFIED ISSUERS
At the heart of this Amendment lies the introduction of “simplified issuers” in the National Securities Registry (RNV), a concept designed to foster inclusivity in the securities market.
The Amendment simplifies the process for these entities, offering a more accessible path to market participation through the provisions issued by the CNBV.
For this purpose, companies wishing to be considered as simplified issuers must jointly apply to the CNBV and the respective stock exchange for the registration of their securities in the RNV, and a favorable opinion from the stock exchange suffices to proceed with the simplified registration of the securities.
Brokerage houses participating as placing intermediaries and subsequently the respective stock exchange will be responsible for reviewing the necessary documentation and information for the listing of securities of simplified issuers. In this understanding, the CNBV does not participate in its supervision.
Only the offer of securities subject to simplified registration to institutional or qualified investors will be allowed, through a public offer or through the placement procedure without an intervening public offer, without the participation of companies already participating as issuers in the securities market.
Stock exchanges listing the securities subject to simplified offer will establish the rules for the disclosure of information to the investing public about these issuers, based on the information provided by the general rules issued by the CNBV, which will establish the minimum contents to be met.
Through general provisions, the CNBV will establish special regulations on financing capacity, characteristics and transparency of corporate governance, equity capital, and requirements for registration in the RNV for the emissions that simplified issuers may carry out.
Simplified issuers are prevented from requesting the CNBV for the preventive registration of the securities to be issued under a simplified offer.
Lastly, brokerage houses participating in the placement of simplified securities must comply with obligations to update operational manuals.
SECURITIES MARKET COMPANIES
Without receiving special authorization from the CNBV, publicly traded stock companies (SABs) and investment promotion stock companies (SAPIBs) may issue capital shares with different rights. It allows the union of various categories of shares and the possibility of financing without compromising control.
When it comes to subscribing shares by institutional or qualified investors, the shareholders’ assembly of SABs and SAPIBs may delegate to the board of directors the authority to increase the share capital and determine the terms of the share subscription.
SAPIBs: The existing obligation to become a SAB is eliminated within a period of 10 years or when its equity capital exceeds a certain threshold of 250 million Investment Units.
SABs: a progressive adoption program applicable to the SAB for the listing of shares is established.
It also seeks to strengthen mechanisms to allow shareholder control and prevent hostile takeovers, increasing the percentage of votes required in an Extraordinary Assembly to 20% for the acquisition of shares by third parties that grant control.
Those intending to register to provide services as investment advisors, whether individuals or legal representatives of a legal entity, must obtain certification granted by a trade association recognized by the CNBV.
Additionally, they may request CNBV authorization to act as founding partners of Hedge Investment Funds with special requirements according to Articles 225 and 225 Bis of the LMV.
ADDITIONAL ASPECTS
The CNBV is allowed to dispense with the requirement to carry out a public purchase offer for those issuers whose listing of shares representing the share capital or credit titles representing them is suspended, to cancel the registration of securities in the RNV of issuers that have committed serious or repeated infractions to the LMV.
INVESTMENT HEDGE FUNDS
The creation of investment hedge funds is proposed in Mexico through the LFI, known as hedge funds in other regions, with the intention of having an adaptable investment system and being able to acquire securities issued by simplified issuers, according to their own policies and investment strategies.
The sale of shares representing the share capital of hedge funds will only be allowed to institutional and qualified investors, and not to the general investing public.
They are exempt from the obligation to establish a maximum number of shares per shareholder.
SUSTAINABILITY
The SHCP, with the approval of the CNBV and Banxico, is expected to establish general norms on sustainable and sustainable development, as well as the strengthening of gender equity. These norms are intended to promote, inform, and evaluate the adoption of best practices in this area by issuers and other participants in the securities market.
