Answer ... General: As outlined in question 1.2, AIFs structured as public AIFs must be managed by authorised FMs, whereas those structured as private AIFs may be managed either by authorised FMs or by private FMs.
Authorised FMs: Authorised FMs, must be formed as special corporations (sociedades anónimas especiales) in accordance with the Corporations Act (18,046). Authorised FMs are authorised, regulated and supervised by the CMF.
Private FMs: Private FMs must be formed as private corporations in accordance with the Corporations Act.
Answer ... Authorised FMs: Special corporations are subject to the rules applicable to public corporations (sociedades anónimas abiertas) and have a restricted object: their sole purpose must be the management of investment for the account of clients. However, the Single Funds Act empowers the Comisión para el Mercado Financiero (CMF) to expand the object of authorised FMs through general regulations. In General Regulation 383, the CMF authorised these fund managers to carry out certain ancillary activities, including (but not limited to) insurance brokerage, distribution of investment funds issued by third parties, investment advice and management of foreign funds.
Private FMs: Private FMs must be enrolled on the register of reporting entities held by the CMF. Private FMs are subject to a much lighter regulatory regime as compared to authorised FMs, but cannot manage public AIFs or any other public non-AIFs (e.g. mutual funds).
Answer ... Authorised FMs: Yes. Authorised FMs must be authorised by the CMF.
Private FMs: No, but they must be enrolled on the register of reporting entities held by the CMF.
Answer ... Authorised FMs: Authorised FMs must satisfy the following criteria to obtain authorisation:
- be incorporated as special corporations (see question 4.1);
- include in their name the words ‘Administradora General de Fondos’;
- have a minimum capital of 10,000 UF (approximately $350,000); and
- have policies, procedures and controls to adequately protect the interests of investors and the assets of the fund.
In addition, the authorisation of authorised FMs is subject to the following condition subsequent: within one year of authorisation by the CMF (and thereafter on an ongoing basis), the authorised FM must have at least one fund meeting the conditions set out in question 3.2.
Private FMs: Private FMs must be enrolled on the register of reporting entities held by the CMF in accordance with the Securities Market Act (18,045). The enrolment is subject to meeting the requirements set out in General Regulation 284.
Answer ... Authorised FMs: As special companies, authorised FMs must:
- be formed through the execution of a public deed;
- obtain a resolution from the CMF in which it authorises the authorised FM’s existence;
- register an abstract from the CMF resolution in the commercial register; and
- publish the abstract in the Official Gazette within 60 days of the date of the CMF resolution.
On average, these steps take approximately six to eight months.
Private FMs: As private companies, private FMs must:
- be formed through the execution of a public deed;
- register an abstract from the public deed in the commercial register; and
- publish the abstract in the Official Gazette within 60 days of the date of the public deed.
Further, private FMs must be enrolled on the register of reporting entities held by the CMF. On average, these steps take approximately six months.
Answer ... Authorised FMs: Authorised FMs must provide a guarantee in favour of each Public AIF they manage. Initially, this guarantee will be for 10,000 UF (approximately $350,000). The guarantee shall become effective on the day the authorised FM deposits the relevant fund’s bylaws with the CMF and will remain in force until the dissolution of the relevant fund. The guarantee may be cash, a performance bond or an insurance policy. In the event that the guarantee is not provided, the authorised FM and its directors shall be jointly and severally liable for any losses caused to the investors of the respective fund. The amount of the guarantee is reset yearly in accordance with the size of the fund.
The Single Funds Act sets out prohibitions and restrictions on certain transactions between:
the authorised FM and the public AIF; and
parties connected with the authorised FM and the public AIF.
Where applicable, the Single Funds Act sets out the requirements that must be met for the transactions to be permitted. Where public AIFs are distributed exclusively among qualified investors, however, their internal bylaws may enable them to operate more flexibly.
One year after the creation of a private AIF, neither the authorised FM nor its connected persons may hold – collectively – units which represent more than 20% of the assets of the private AIF managed by it.
Private FMs: One year after the creation of a private AIF, neither the private FM nor its connected persons may hold – collectively – units which represent more than 20% of the assets of the private AIF managed by it.
The private FM must provide the CMF with periodic information regarding the private AIFs it manages (see question 7.2).
Answer ... Authorised FMs: Yes. Authorised FMs may impose restrictions on the issue, redemption or transfer of fund units in the bylaws of a public AIF or private AIF. In the case of public AIFs, where redemptions are restricted or prohibited, the bylaws must explicitly state so.
Notwithstanding the provisions set out in the relevant bylaws, no investor may hold fund units which represent more than 35% of the value of a public AIF. Authorised FMs must refuse any transfer requests in breach of this percentage and must ensure that no issuance of units results in an investor exceeding such limit. The fund units held in excess of the 35% limit will lack voting rights and will not count towards any quorum. The foregoing limitation does not apply to institutional investors (ie, banks, financial companies, insurance companies, local reinsurance companies, fund managers authorised by law and any other institutions that qualify as such as determined by the CMF), but is without prejudice to special laws which may impose stricter concentration limits on investments made by certain classes of institutional investor.
In the event of a capital increase, a public AIF must offer the new fund units to those investors which appear on its register of investors on a day which is five business days before issuance of the units (‘cut-off date’). The offer must be made at least once, for a term agreed by the investors at a general meeting and must be made pro rata to the investors’ holdings as of the cut-off date. This pre-emption right is waivable and transferable, and may be disapplied by unanimity at the same general meeting where the capital increase was agreed.
Private FMs: Yes. Private FMs may impose restrictions on the issue, redemption or transfer of fund units in the bylaws of the relevant private AIF.
Answer ... Authorised FMs: No. However, authorised FMs which are subsidiaries of banks supervised by the CMF may not invest in certain asset classes set out by the CMF.
Private FMs: No.
Answer ... Authorised FMs: Whether authorised FMs may delegate their services to third parties is left to the bylaws of each AIF (public or private). Nevertheless, where the authorised FM delegates the management of all of part of the assets of a public AIF to a third-party manager, the Single Funds Act provides that the costs associated with such delegation must be borne by the authorised FM, not the public AIF. The authorised FM shall remain liable notwithstanding such delegation.
Private FMs: Whether private FMs may delegate services to third parties is left to the bylaws of each private AIF.
Answer ... Authorised FMs: Authorised FMs may manage public AIFs or private AIFs. Authorised FM may also manage other types of funds regulated by the Single Funds Act. This is because the authorisation granted by the CMF is a general one. This is evidenced in the proposition ‘General Fund Manager’ (‘Administradora General de Fondos’), which forms part of the name of each authorised FM. Authorised FMs may also provide investment management services as this is explicitly permitted by the Single Funds Act.
Private FMs: Private FMs may only manage private AIFs other private funds regulated by the Single Funds Act. Private FMs may provide investment management services if they are enrolled on the asset management register kept by the CMF.