On November 16, 2016, Argentine government has sent to Congress a bill for the reform of Law No. 26,831 as amended (the "Capital Markets Law"). The reform is aimed at developing the weak Argentine capital markets, taking advantage of the boost derived from the ongoing tax-amnesty program, and opening-up to international private banking.
Among the main relevant topics of the reform, we can outline:
- The powers of the Argentine Securities and Exchange Commission (Comisión Nacional de Valores or "CNV") to intervene listed companies shall be significantly reduced from the current very broad scope that has been generally regarded as inconvenient for the market. As from the reform, intervention shall only be allowed in cases of violation of minority shareholders' rights.
- The severe restrictions for the sale of stock held by the Argentine State through the State Official Pension Fund ("ANSES") are suppressed.
- Tax treatment of mutual investment funds in general is modified to provide broad tax exemptions concerning VAT and Income Tax. Tax treatment of closed-end mutual investment funds is modified to incentivize investment of money derived from the ongoing tax-amnesty program. The Income Tax shall not be levied on the funds themselves but on their investors, thus permitting set-off deductions.
- The "economic and financial crimes law", which had modified the Penal Code to contemplate several conducts of asset managers and market analysts as crimes, will be repealed (abrogated).
- There is a new definition of market agents, including, but not limited to, asset managers (they shall be those acting on a usual basis in rendering financial advice or asset management services comprising assets authorized for public offering by the CNV). Scope and extent of the activities shall have to be further regulated by the CNV, thus opening the market once again to international private banking.
- Sales and other dispositions of stock of listed companies and other listed securities performed by foreign companies and non-residents at markets authorized by the CNV shall be exempt from Income Tax (even in cases where such exemption ultimately results in a benefit for a foreign tax authority).
Experts tend to agree that success of the reform shall highly depend on coupling it with other necessary measures: the government needs to provide a clear signal to the market on the government's firm commitment towards the development of the market, including but not limited to, implementing policies aimed at providing legal certainty and safety, clear and transparent institutional policies and rules, tax incentives, and a simplified access for minor investors.
In any case, the government is very determined to make a big push for Congress to pass the law before the end of the year, and if it cannot be dealt with within the ordinary sessions that will conclude soon, extraordinary Congress sessions are already being projected for mid-December. The project may face certain resistance from the opposing party, but there are widely spread rumours that in order to have this bill converted into a law the government is willing to trade off a reform to the Income Tax Law that has been demanded by the opposition during the last few months.
A new opportunity arises for international private banking under this new scenario, where it shall be looked upon with new, friendlier, eyes. Institutions and external asset managers are already planning their landing.
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