02 Feb Amendments to the Securities Market Law (Ley del Mercado de Valores) and the Investment Funds Law (Ley de Fondos de Inversión).
On December 28, 2023, the Mexican government published a decree amending, adding, and repealing various provisions of the Securities Market Law and the Investment Funds Law (the “Decree”). The purpose of such amendments is to increase competitiveness in the Mexican market and enable small and medium-sized enterprises to participate in the stock market.
Among the most relevant amendments are:
1. Creation of the “Simplified Registration” of securities. Such registration will allow Simplified Issuers (as defined in the Decree) access to the stock market with fewer requirements an bureaucratic formalities, streamlining the process of registering securities before the National Securities Registry ("RNV", by its acronym in Spanish) as long as they comply with certain requirements determined by the National Banking Securities Commission (“CNBV” by its acronym in Spanish) and other applicable provisions.
Furthermore, specific obligations are established for brokerage houses participating in the placement of securities related to simplified registration, acting as auxiliary for investors in the securities exchange market.
2.Amendments to the corporate regime applicable to the Publicly Listed Companies (“SAB” by its acronym in Spanish) and to the Stock Market Investment Promotion Corporations (“SAPIB” by its acronym in Spanish). The following obligations on SAPIBs were repealed: (i) to adopt the SAB modality within 10 (ten) years from their registration in the RNV or before that period if the company’s equity, at the end of the fiscal year, exceeded 250 (two hundred and fifty) million Investment Units (Unidades de Inversión); and (ii) to establish a progressive adoption program for the regime applicable to SABs to list their shares or debt securities on stock exchanges. As consequence of the above, certain obligations applicable to brokerage houses for the review and verification of the requirements that SAPIBs had to meet were also excluded.
Additionally, among other amendments, the percentage of the voting quorum is increased from 5% (five percent) or more to 20% (twenty percent) or more for shareholders of SABs to vote amendments in their bylaws to establish measures (poison pills) aiming to prevent and avoid the hostile takeovers.
The reform also states that SABs may issue shares with differentiated rights, including restrictions to their characteristics, whereas previously authorization from the CNBV was required to limit or restrict voting rights. SABs only need to disclose to the brokerage houses where they are listed, the characteristics of their capital stock integration and the rights and restrictions by series or class of shares.
3. Sustainable Development (ESG). The Ministry of Finance and Public Credit must establish general provisions in the areas of ESG and gender equity. The intention is to guide, inform, and evaluate the adoption of best practices in these matters by the entities and institutions regulated by the LMV.
According with the amendments to the Investment Funds Law, the figure of “Limited Purpose Investment Funds” is removed and the concept of “Hedge Funds” is introduced as an investment vehicle that provides greater flexibility.
In addition to the above, some of the main characteristics of Hedge Funds are the following: (i) shares which represent their capital stock may only be offered to qualified and institutional investors, meaning they cannot be offered to the general public; (ii) they are exempted from establishing maximum limits on shareholdings in accordance with Article 14 of the aforementioned law; (iii) they are required to engage the services of an independent external auditor, and (iv) they can be operated by authorized investment advisers and, by contrast, are not required to have an investment fund management company.
In addition to the above, Hedge Funds will be subject to the regulatory framework determined by the CNBV through general provisions and the public information prospectuses.
Furthermore, additional requirements for investment advisers are introduced; these are individuals that, without being market intermediaries, regularly and professionally provide portfolio management services, make investment decisions on behalf of third parties, and provide investment advice on securities.
It’s worth noting that the Decree entered into effect on December 29, 2023, and both the Bank of Mexico and the CNBV have up to 365 (three hundred sixty-five) days to issue the general provisions referred to in the Decree.
With this reform, we are facing new changes looking forward for a more competitive stock market. It encourages the participation of small and medium-sized enterprises in the market by offering financing alternatives that promote their growth and simplify their securities registration. Additionally, the goal is to enhance and diversify investment approaches, potentially attracting more individuals to invest in various companies and contribute to the country’s economic growth.
Our members of the Banking and Finance area in Cuesta Campos, have the expertise to advise our clients with any matter related to the implementation of this reform. If you have any inquiry or comments, please do not hesitate to contact us.
Contact
Mauricio Castillo
Héctor Valladares
Fionna Folino
THE ABOVE IS PROVIDED AS GENERAL INFORMATION PREPARED BY PROFESSIONALS WITH REGARD TO THE SUBJECT MATTER. THIS DOCUMENT ONLY REFERS TO THE APPLICABLE LAW IN MEXICO. WHILE EVERY EFFORT HAS BEEN MADE TO ENSURE ACCURACY, NO RESPONSIBILITY CAN BE ACCEPTED FOR ERRORS OR OMISSIONS. THE INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED ON AS LEGAL, ACCOUNTING OR PROFESSIONAL ADVICE BEING RENDERED.