Argentina: New Criminal Sanctions Applicable To Some Financial And Stock Market Activities

Laws No. 26,733 and 26,734, published in the Official Gazette on December 28, 2011, were passed by Argentine Congress to impose criminal sanctions applicable to terrorist financing, insider trading, stock market manipulation and unauthorized financial and stock market activities. Both laws introduce amendments to the Argentine Criminal Code.

1. Terrorist Financing

The new Section 306 of the Argentine Criminal Code, as amended by Law No. 26,734, establishes a criminal penalty –imprisonment and fine– on the person who collects goods or funds, either directly or indirectly, with the intention or knowing that such goods or funds will be used to finance crime or will be used by a criminal organization or an individual who commits crimes or participates in crimes, and such crimes are aimed at terrorizing the population or at forcing federal authorities or foreign governments or agents of an international organization to do or to refrain from doing something.

The Financial Information Unit (UIF) will be in charge of the analysis, use and communication of information for prevention of crimes committed with the abovementioned purpose. Federal Courts will have jurisdiction over those crimes.

The criminal penalties established by Section 306 shall be applied irrespective of whether (i) the crime for which the financing is intended has been actually committed and (ii) the goods or funds provided were actually used to commit such crime. Section 306 shall also apply when the financed crime occurs outside of Argentina or when the individual or the organization committing the crime is located abroad, provided that the financed crime is penalized in the jurisdiction competent to judge over said crime.

2. Insider Trading

New Section 77 of the Argentine Criminal Code, as amended by Law No. 26,733, establishes that privileged information shall include all information that is not made available to the public, the disclosure of which could have a material impact on the stock market.

Section 307, introduced by Law No. 26,733, sets forth criminal penalties –imprisonment, fine and special disqualification– applicable to directors, members of supervisory bodies, shareholders, shareholder's representatives and whoever by means of his/her job, profession or position at an issuing company, either directly or through an intermediary, provides or uses privileged information to which he/she had access as a result of his/her activities, for the negotiation, pricing, purchase, sale or liquidation of securities.

Penalties shall be increased when the privileged information is used or provided on a regular basis; when the use or supply of the privileged information causes an economic benefit or impedes an economic damage to those using it or to third parties; when the use or supply of privileged information causes severe damage to the stock market; and when the crime is committed by directors, members of the supervisory body, officers or employees of a securities market or a rating agency, or whoever practices a profession that requires a license, or a government official.

3. Stock Market Manipulation

New Section 309 introduced criminal penalties –imprisonment, fine and disqualification– applicable to persons carrying out transactions which impact the price of securities based on false news, fake negotiations, or coalition of the main holders, with the purpose of causing the appearance of higher liquidity or establishing a benchmark for the price. Criminal penalties are also imposed on the persons offering securities on the basis of misleading information or disguising or concealing facts.

Criminal penalties are also applicable to managers or supervisors of companies which are under a duty to establish private supervisory bodies, who provide shareholders or partners with misleading information which is relevant to assess the economic condition of the company or who record false or incomplete data on balance sheets, fiscal year reports or other financial records.

Section 310 and 311 set forth criminal penalties –imprisonment, fine and disqualification- applicable to officers of financial institutions and of institutions operating in the stock market who (i) by inserting false data or by mentioning non-existing facts, record an active or passive credit transactions or securities negotiations in the accounting books, with the intention of obtaining benefit or causing damage, either for themselves or for others; (ii) omit to make entries or due records of any of the transactions mentioned; or (iii) improperly receive any other economic benefit, as a condition to enter into credit, financial or stock exchange transactions.

4. Unauthorized financial and stock market activities

New Section 309 imposes criminal penalties –imprisonment, fine and special disqualification– on the persons who carry out financial intermediation activities without the required license issued by the relevant regulatory authority, or who accept savings from the public in the stock market or who provide intermediation services for the acquisition of securities without proper license required and issued by the relevant authority.

5. Sanctions Applicable to Legal Entities

When the abovementioned criminal acts are committed on behalf of, or with the participation of, or for the benefit of a legal entity, the following sanctions shall be imposed on the company jointly or alternatively: fines ranging from two to ten times the value of the goods; total or partial suspension of activities; suspension to participate in public bids; cancellation of the company; and/or publication of an extract of the condemnation.

6. Conclusion

The abovementioned amendments to the Criminal Code introduced to combat money laundering and market manipulation reflect the recommendations made to Argentina by the Financial Action Task Force (FATF), a body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing.

The amendments regarding securities markets establish criminal sanctions in connection with acts that were previously punished through administrative sanctions set forth by the Rules of the Argentine Securities Commission (CNV).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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