The Securities Act of Chile prohibits insider trading and the
misuse of privileged information. It states that all people who
have access to privileged information, resulting from their office,
position, activity or relationship, must keep it confidential and
may not use it for their own benefit or that of a third party. Nor
may they acquire securities for themselves or for a third party,
directly or indirectly, based on such privileged information.
Tipping privileged information is also prohibited, and those who
handle privileged information have the obligation to control and
supervise that their employees and related third parties abide by
this rule.
Privileged information is defined as any information which: (i)
is related to one or more issuers, their businesses or one or more
securities issued by them; (ii) has not been disclosed to the
market: and (iii) is sufficiently relevant to influence the price
of issued securities. Also included in the definition of privileged
information is essential information which a board of directors has
agreed to keep confidential pursuant to the Securities Act and the
Corporations Act. Any information regarding the purchase or sale of
securities carried out in the market by institutional investors
also falls within that definition.
Any person who handles privileged information will be deemed an
"insider". The Securities Act lists those people to whom a
presumption of access to privileged information attaches. These
include directors, managers and administrators. They also include
the liquidators of issuers and institutional investors or of
certain of their affiliates, brokers, auditors, rating agencies and
their controllers, partners and administrators. Individuals who
have family relationships with directors, managers, administrators
and liquidators of issuers or institutional investors are also
considered insiders. Resignation from a position giving insider
status does not release a person from the obligations imposed on it
by these provisions.
Brokers and dealers are not exempt from the insider trading
rules. They are permitted, however, to trade securities related to
privileged information they possess if they comply with the
following requirements: (i) trading must be on behalf of third
parties; (ii) the purchase or sale order must be given by that
third party; and (iii) that third party must not have received any
advice or recommendation from the broker or dealer relating to the
securities traded.
The Securities Act provides a number of mechanisms for the
control and enforcement of insider trading provisions. It requires
auditors to give their opinion in respect of the mechanisms that a
company has implemented to enforce prohibitions on insider trading.
The Act also states that any person who participates in decisions
and transactions related to securities carried out by institutional
investors and intermediaries of securities (including people who,
due to their office or position, have access to privileged
information relating to the transactions carried out by such
entities) must inform the company's management about any and all
purchases or sales of securities to which that person was party, no
later than 24 hours after the transaction was made.
The Securities Act states that corporations whose shares are
registered in the Securities Registry must inform the
Superintendent of Securities and Insurance (SVS) and the stock
exchanges of all transactions involving their shares carried out by
"related entities". The criteria used to determine which people or
entities are related to each other are: (i) whether there is an
ownership relationship between them (ownership of 10% of the voting
stock of a corporation or the right to appoint at least one member
of its board of directors is enough to deem entities and or
individuals as related to each other); (ii) whether they share a
controlling entity; (iii) whether one person or entity has a
material influence on the management of the other, and (iv) whether
two people or entities have an express or implied agreement to
manage a third entity jointly.
Any person or entity adversely affected by violations of insider
trading restrictions and rules is entitled to claim damages. Even
if there are no actual damages that stem from insider trading, the
law provides that any benefit received by the violator(s) from such
insider trading must be forfeited to the state treasury. The law
makes it a crime for any person or entity to whom a presumptive
access to privileged information attaches to use that privileged
information for its own benefit or for the benefit of a third
party, through transactions involving publicly-offered securities,
either in the securities market or in private transactions.
Cristián Eyzaguirre