SEPTEMBER 16, 2020

Operations with securities: Communication BCRA “A” 7106 and CNV General Resolution No. 856.

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Banking and Financial Institutions and Capital Markets Departments report | Operations with securities: Communication BCRA “A” 7106 and CNV General Resolution No. 856

Dear Sir or Madam,

The Central Bank of Argentina (“BCRA”) has issued Communication “A” 7106 (the “Communication”), by means of which it established certain restrictions to the transactions with securities, in their different modalities.

In this regard, by means of General Resolution No. 856 (the “Resolution”), the National Securities Commission (“CNV”) has also adopted measures that modify the regulation of the negotiations with securities within the stock market.

In summary, the following measures were adopted:

I. SALES AND TRANSFERS ABROAD

Pursuant to the Communication, section 3.8.6. of the FX Regulatory Framework (which established 5-day parking for physical persons to use the acquired foreign currency for the purchase of securities in the stock market) was replaced for the following one:

“The entity must have an affidavit from the client by means of which it undertakes not to enter into securities transactions in the country, with settlement in foreign currency, from that day and for the subsequent 90 calendar days” (our translation).

Although this restriction was already in force under Communication “A” 7001 (as amended), it should be noted that the access to the FX market for the payment of consumptions made by credit card in foreign currency are not expressly excluded from the affidavit (as it was established under Communication “A” 7030).

though the BCRA reported that it was not their intention to include credit card consumptions, there is no provision that expressly excludes it. It is likely that this will be further clarified by the BCRA.

Likewise, although Communication “A” 7106 does not clarify it, we consider that the affidavit should include that the client has not carried out these transactions during the 90-day period prior to the access to the FX Market, as established by Communication “A” 7030.

II. NON-RESIDENTS OPERATIONS

Section 5 of the Communication states that non-residents cannot execute in the country sales of securities with settlement in foreign currency.

Thus, the BCRA restricts the possibility for non-residents to carry out transactions with securities generally identified as “Dólar MEP”, which consists of the purchase and subsequent sale of different types of securities, making an intermediate portfolio investment.

However, this restriction does not apply to the sale of securities that have been acquired in the country with settlement in foreign currency, and that remained in the portfolio for a period of no less than one year.

III. SETTLEMENT IN LOCAL CURRENCY

The BCRA established that: “Securities transactions arranged abroad and securities acquired abroad may not be settled in pesos in the country” (our translation).

Even though it is not clear from the language, we understand that the BCRA is indicating that no transactions can be carried out where someone pays in local currency securities that are settled abroad, without them being transferred from Argentina.

IV. PORTFOLIOS PARKING

The Resolution established the following measures were taken with respect to the holding period (parking) of securities.

(i) It was revoked the 5-business day parking period, previously foreseen for the purchase or securities with settlement in foreign currency by physical persons.

Thus, transactions generally known as “Entry Dollar MEP” are allowed, whereby those who acquire assets through settlement in foreign currency may sell them in the local market (against local currency) without any parking period, promoting that local players act in the local financial markets.

Unlike before, now there is no differentiation between physical and legal persons in this respect.

(ii) The 5 working days parking is maintained for:

(a) sale transactions of securities with settlement in foreign currency (i.e. “Exit MEP” transactions); and

(b) the settlement of sale transactions of securities in the local market, with foreign currency settlement, when such securities were transferred from offshore depositary entities.

(iii) The parking period is extended from 5 to 15 business days for:

(a) the transfer of securities with settlement in local currency to offshore depositary entities (i.e., “outflow of blue-chip swap transactions”), except for the primary placement of securities issued by the National Treasury; and

(b) the settlement of transactions of the transferable securities which were transferred from depository entities abroad to depository entities in the country –(i.e. “inflow of blue-chip swap” transactions) in local currency in the local market- except for shares and/or CEDEARs with trading in markets regulated by the CNV.

In every case, the parking period is considered from the moment the securities are accredited by the depositary agent.

With respect to purchase and sale transactions with settlement in foreign currency, and those arranged by agents with their own portfolio in foreign markets may only be carried out in markets authorized and regulated by a government entity that does not belong to non-cooperating countries for tax transparency purposes, with which the CNV has an understanding agreement for mutual assistance, collaboration and information.

Finally, it is established that the final net purchase/sale amounts, including transaction costs and/or conversion of species involved in the operations, must be considered for the purposes of calculating the net intermediation position that the agents must maintain at the close of each week.

The measures are in force as of September 15th, 2020.

Please, do not hesitate to contact us should you require any further information on this matter.

Sincerely,

Luciana Denegri
Pablo J. Torretta