Fintech Department Report | Argentina Fintech Legal News | #8
Dear Sir or Madam,
In this newsletter, you can find a brief summary of the recent legal developments that we consider relevant for the Fintech environment in Argentina.
Reporting regime for PSPs
On a monthly and quarterly basis
On March 13th, 2020, the Central Bank of Argentina (“BCRA”) issued Communication “A” 6929, regulating the reporting regime for the Payment Service Providers (PSPs) that offer payment accounts, as already anticipated by Communication “A” 6885 (point 3.2) that established the initial regulation for this activity.
The information regime is divided into three sections: (i) “Section A” for purposes of BCRA supervision; (ii) “Section B” for statistical purposes and (iii) “Section C” for audit and verification of compliance.
Under Section A, on a monthly basis, PSPs must inform to the BCRA, among others, the balance of funds credited into customer payment accounts, the number of customer payment accounts, and the data and balances of the banking accounts in which the PSPs keep deposited the balance of the payment accounts of their clients. Likewise, if PSPs offer to their clients the possibility of investing their balances in money market funds, the PSPs are required to inform the balance invested by clients, the number of clients who opted for this tool, and specific data regarding the money market funds in question. From all this information, the PSPs must keep the corresponding supporting documentation available to the BCRA.
Under Section B, also on a monthly basis, the PSPs must inform to the BCRA, among others, the number of verified operations during the month subject to information, as well as the total amount of said operations. Moreover, the operations will be classified according to whether it is an inflow or outflow of funds, according to the type of crediting account, according to the method of initiation, means of payment and payment scheme. In the case of transfers, they should be segregated whether they are CVU-CBU, CBU-CVU or CVU-CVU. And in each case, it must also be detailed the number of clients and the commercial or personal purpose of the operations involved.
In the case of Section C, on a quarterly basis, the PSPs must submit to the BCRA a special external auditor report certifying compliance with the BCRA’s PSP regulations and the integrity of the information contained in Section A of the reporting regime.
It is worth mentioning that Sections A and B must be submitted on the 20th of each month (with respect to the previous calendar month), and Section C must be presented on the 20th of the month following the termination of each calendar quarter. In each case, the BCRA provides the templates to be used for such reporting. Although the information regime has been in force since March 1st, 2020, the BCRA clarified that, in due course, it will issue the operative instructions and the due dates for the first presentation.
In principle, the regulation does not establish that the information provided by the PSPs will be disclosed to the public, but it cannot be ruled out that, within its powers, the BCRA may prepare market reports or issue new regulations based on the volume detected for the different operations.
Prohibition to pay remunerations in virtual accounts
Even if the employee has requested said option
Throughout Resolution 179/2020, published on March 11th, 2020, the Ministry of Labor derogated its previous Resolution 168/2018, issued by the former Administration, which allowed the payment of salaries through the use of mobile communication devices or other electronic media (that is, by depositing into virtual accounts or e-wallets).
In the recitals of the new Resolution, the current Ministry of Labor (in open contradiction with the former authorities) now understands that the deposit of wages in e-wallets does not comply with any of the mandatory payment methods provided in Section 124 of the Labor Law 20,744 (which are, basically, “cash”, “check” or “deposit in bank account”) and, moreover, establishes that this option could not be enabled even if the employee has requested it, because, according to the Ministry, the Labor Law only allows the employee to choose for payment in “cash” and this means – also according to the Ministry – payment in “paper money”.
Beyond this restrictive interpretation, which leads to a debate over the meaning of the term “cash” and over the scope of the employees’ consent, it is also remarkable that, to justify the opportunity of its new measure, the Ministry makes a strong criticism to electronic means of payment, arguing that they do not generate “any real advantage to citizens or economic activity” (sic), and that they leave employees and employers totally “helpless” and “unprotected”, because, according to the Ministry, virtual accounts are not regulated by the BCRA, nor would they be covered by any information or user protection regime, nor by prudential regulations regarding solvency and liquidity.
A relevant sector of the industry raised the voice against this new Resolution, alleging that the arguments used by the Ministry seem to ignore the new regulations issued by the BCRA for PSPs, as well as other regulations issued in recent years by other government agencies (e.g. AFIP, CNV, UIF, etc.), that established specific information and supervisory regimes for the activity, promoting electronic payments (and even forcing their use) as a way to reduce informality and to foster financial inclusion.
Although the new prohibition has been in force since March 11th, 2020, there is a non-extendable adapting period of 90 working days for those employers who have obtained in the past the consent of the employees to deposit their wages in virtual accounts.
Caselaw denies access to executive procedures for electronic signature
For the enforcement of online loans granted by fintechs
During February 2020, several national commercial courts have decided about the possibility to enforce, via executive procedures, loans granted by a fintech company through electronic signature. Except for an isolated case, the majority of courts denied this possibility.
For instance, on February 13th, 2020, the National Commercial Court No. 24, Secretary 240 (in charge of judge Héctor Chomer) issued a ruling in the case re “Wenance S.A. c. Melgarejo, Sandra Isabel s/ Ejecutivo”, in which it declared the inability of the “electronic signature” to access the executive procedure route for the collection of a loan granted remotely by a fintech company.
To issue this judgement, the judge recalled that, unlike the “digital signature”, which is the legal equivalent of the holographic or handwritten signature (since it requires having a digital certificate issued by a licensed certifying entity), in the case of the mere “electronic signature” (e.g. acceptance by a “click”), the authorship cannot be presumed and requires a verification process that exceeds the limited scope of an executive procedure.
The judge also pointed out that, in this case, when the granting of the loan is subject to the cash deposit in the borrower’s account, the existence of a liquid or easily liquidated sum is not verified either (as could happen, for example, with a promissory note or an acknowledgment of debt physically signed), therefore denying the possibility to access an executive procedure.
Even though the court leaves the door open for the plaintiff to resort to an ordinary process for the enforcement of the debt, it denies the possibility of accessing the executive route for such purpose, which is usually faster and less expensive, given that the executive procedure grants fewer defense oppositions to the defendant.
We note that, in the cases in which the executive procedure has been denied, the plaintiff has also been denied access to appeal to a second instance of judgement, due to the low amount of the execution, so it is expected that this caselaw will remain in force until cases of greater amount appear.
It is also worth mentioning that this negative stand for the access to the executive procedure is in line with the risk factors reported by some fintech companies in their electronic-loan securitization prospects, as they already anticipated their investors about the constraints of accessing the executive route for the recovery of this type of debt.
Higher requirements for SAS
Shareholders information. Restricted corporate purpose. Initial capital.
By Resolution 3/2020, published on February 26th, 2020, the General Inspection of Justice of the City of Buenos Aires (“IGJ”) imposed on Simplified Corporations (“SAS”) the obligation to publish at the time of its constitution or amendment of its bylaws (e.g., in a capital increase) the information on the ownership of each shareholder, including cases of shares acquired by assignment.
On the other hand, throughout Resolution 5/2020, published on March 11th, 2020, the IGJ reestablished the requirement of having a restricted corporate purpose (which must now be again “precise and determined”, “concrete and specific”), prohibiting multiple-purpose companies, save for ancillary or accessory activities that may be foreseen. Likewise, said Resolution also reestablished the IGJ’s power to demand a greater “initial capital stock” (including, in particular, in the case of SAS), if the IGJ notes that, by virtue of the nature or characteristics of the activities included in the corporate purpose, the capital stock is clearly insufficient.
In line with the foregoing, on March 16th, 2020, the IGJ published Resolution 9/2020, by means of which, among others, it required the submission of an accounting certificate and a business plan for cases in which the IGJ considers that the initial capital stock is insufficient, it derogated the possibility of computing incorporation expenses against such initial capital, and it introduced a legality control over governance provisions in SAS by-laws.
These last modifications can significantly alter the effectiveness of the SAS, since originally they could be constituted with multiple purposes, with a symbolic capital stock and with a broad flexibility for governance provisions, which resulted in the preferred option for the constitution of several fintechs, mainly at the start-up level.
It remains to be seen whether this latest Resolution generates any debate regarding the IGJ’s regulatory powers to limit these substantial benefits, given that they had been established by law, mainly the one regarding the multiple corporate purpose (see Section 36 (4), Law 27,349).
Finally, we inform that, in recent days, there have been rumors and public statements about the possible suspension of the online procedures for the incorporate and the performance of acts related to SAS for a period of 180 days, so that they would be carried out physically during said period. However, as of today, this suspension has not yet been published in the Official Gazette.
Do not hesitate to contact us should you require any further information on these matters.
Pablo J. Torretta
This report contains a summary of regulations published in Argentina. The summary as such is not complete and does not imply advice of any kind. Do not hesitate to contact us shall you require assistance on these matters.