On September 14, the resolution issued by the National Securities Authority (CNV by its Spanish acronyms) No. 30/21 (the “Resolution”) came into force and resolves to nullify several resolutions issued by the CNV from December 2019 to date, thus unifying the general securities market regulations in a single resolution.
However, the Resolution also included some changes that are detailed below:
1. Title 3. Corresponding to Brokerage Houses:
In this title, the CNV changes mainly affect over-the-counter operations and private placements. Thus, it is important for brokerage houses to know that from now on:
1.1. They must communicate daily about the over-the-counter operations they carry out.
1.2. They can consider three new financial instruments for the calculation of their portfolio, which are: (i) securities delivered when the brokerage house acts as a reporter in a repurchase agreement (repo) for less than or equal to 3 days; (ii) securities received when the brokerage house acts as a reporter in a repurchase agreement (repo) longer than three days; and, (iii) when they are not repurchased agreements (repo), financial instruments delivered as collateral, whether in operations where the brokerage house acts as a borrower and other types of involvement.
1.3. there are new issuance conditions for private placements:
1.3.1. Securities: they can only be securities placed locally in the Republic of Paraguay and by locally constituted legal entities. The securities must be promissory notes or debentures.
1.3.2. Issuer: it must not be registered with the CNV, and it cannot be a financial or banking entity, cooperative or credit institution.
1.3.3. Restrictions: (i) an issuance cannot exceed the value of five thousand minimum wages (Gs. 11,446,620,000). The exception to this rule is in the case of real estate investments in which it can be increased to fifteen thousand times the minimum wage (Gs. 34,339,860,000).
(ii) After the first issuance, the issuer will no longer be able to issue securities privately again, with the intermediation of any brokerage house, for six years.
(iii) Only up to 35 qualified investors may participate.
1.3.4. Rating: every issuance must have a risk rating or risk opinion. For more information about the risk opinion, please see number 5 of this document.
1.3.5. Information: brokerage houses must report the private placement issuance no less than ten days before the placement date. Likewise, while an issuance is not fully paid, the brokerage houses must report within the five days following the end of the month about the placement and its status.
If there are no activities in a month, the brokerage houses must still report in this regard.
2. Title 4 and 7. Corresponding to issuer companies and the issuance of
The changes directly affect small and medium-sized enterprises (SMEs) and are as follows:
2.1. Registration: to register as an issuer with the CNV, SMEs must submit, in addition to the documents and information already requested, the indication of relations with some people or economic groups when they have a participation of more than 10%; and the sworn declaration of corporate income tax (IRE by its Spanish acronyms) corresponding to the last two fiscal years.
Likewise, for the registration of issuance of debt securities, it is necessary that the SMEs also submit the sworn declaration of the value-added tax (VAT).
2.2. Limitations: for the public issuance of debt securities, they must have a real estate guarantee, either trust or a mortgage, free of encumbrances, for the value equivalent to 150% (one hundred and fifty percent) of the quick sale value according to an appraisal. The appraisal may not be valid for less than 12 months from its preparation to the date of registration of the issuance.
2.3. Information: SMEs must send both the CNV and the stock exchange, where they are registered, the IRE declaration within 120 (one hundred and twenty) calendar days at the end of each fiscal year and must also send the monthly VAT declaration.
3. Title 12. Corresponding to debt securities under the global issuance program scheme and its registration
The Resolution establishes the possibility of modifying the Global Issuance Program (PEG by its initialism in Spanish) to increase its amount. For the amendment, a new registration must be requested with the CNV attaching: the document stating the issuer's decision to increase the amount of the PEG and the characteristics of the issuance together with the complement of the PEG that is planned to be modified.
To request the modification, it is necessary that the PEG is current and that the issuer has a current risk rating.
This same change was made in Title 14, corresponding to multilateral organizations.
4. Title 19. Corresponding to Mutual Fund Managers Corp. (Administradoras de Fondos Patrimoniales de Inversión S.A.)
For this type of company, the Resolution establishes that integrating assets that represent a cash deposit and have high liquidity is equivalent to integration in cash. For cases in which the assets are in foreign currency, the reference exchange rate of the Central Bank of Paraguay minus 10% must be used.
Likewise, in terms of information, the new periodicity is established daily and no longer monthly.
5. Title 20. Corresponding to risk rating agencies
The last change introduced by the Resolution is one of the most relevant since it establishes the obligation for the issuances to have a risk rating, or to fail that, a credit opinion.
The credit opinion is an immediate assessment of the repayment capacity of a company, and it is private, except for opinions that are formulated for public offering.
The credit opinion is an exception to the rating, and it will be required in issues:
(i) Without guarantee: for issues that do not exceed 100% (one hundred percent) of the issuer's net profit, nor absolute values of USD 1.000.000 (United States dollars one million) or its equivalent in guaraníes. The calculation must be made at the time of the issuance decision making.
(ii) With guarantees equal to or greater than the amount issued: when the amount does not exceed 100% (one hundred percent) of net profit or absolute values of USD 3.000.000 (United States dollars three million) or its equivalent in guaraníes. The calculation must be made at the time of the issuance decision making.
(iii) Those structured through trusts of less than USD 1.000.000 (United States dollars one million) or its equivalent in guaranies.
(iv) Short-term bonds: In this case, the amount of the issuance plus other current issuances of the issuer must not exceed 100% (one hundred percent) of the issuer's net profit, nor absolute values of USD 1.000.000 (United States dollars one million) or its equivalent in guaraníes. The calculation must be made at the time of the issuance decision making.
(v) Under the SME regime.
Further information: Carlos Codas (email@example.com) and Pamela Lezcano (firstname.lastname@example.org).