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Provision of link services for offshore internet-listed securities transactionsClaro y Cia, Santiago

Effective August 10 2000, Chile's Superintendency of Securities and Insurance (SVS), issued Regulation No 1493 regarding the provision of link services through the internet in the sale and purchase of securities outside Chile. The regulation sets out the minimum requirements that Chilean and foreign brokers must comply with when providing financial services through a website, in particular regarding securities transactions in foreign markets.

According to the regulation, when the investor is selling or purchasing foreign securities using the internet, the Chilean broker is deemed to be acting only as a link between the client and the foreign broker. Link services are defined as all kinds of services which allow the investor to access a foreign broker's website from a local broker's website in Chile, and give the foreign broker specific instructions regarding the sale and purchase of securities.

Under this process, the Chilean broker is obliged to inform the clients clearly that the foreign securities are not registered in Chile and, therefore, that Chilean law is not applicable to the transaction. Moreover, the Chilean broker should recommend that clients gather all possible information about the securities involved in the transaction, and its general condition, before making any investment decision. The Chilean website should include the necessary means to assure that clients are duly informed about the liability assumed by the investors.

Before providing any link services with foreign brokers, the Chilean broker must submit to the SVS information about the foreign broker who will be involved in the transactions, and submit to the participating stock exchanges an original copy of the link services contract, and copies of the contracts signed by the entities providing custody services. The respective stock exchanges must be duly informed of any amendment to these contracts within the next three working days.

The contract between the Chilean and foreign broker should, at the very least, include the following information:

  1. a detailed explanation about the custody system, compensation and liquidation of the securities, the registration system to be followed, requirements and conditions needed for the trading of securities, and the liability assumed by the investors in the transaction;
  2. a clear explanation of the fees and costs between the parties; and
  3. information on whether the transactions will be covered under a Chilean or a foreign insurance system, and the terms of the coverage.

The authorization to provide these link services does not allow the Chilean broker to make any public offering in Chile of foreign securities not listed in the Securities Registry kept by the SVS. Therefore, if all these requirements are met, the trading of foreign securities through a Chilean website will not constitute a public offering in Chile.

The Chilean broker is obliged to include in its website different security features, such as authentication, access control, confidential treatment, integrity and others. Under this security regime, it is imperative that the Chilean website has a secure website certification, issued by a formal certification entity. Additionally, all the documents submitted by electronic means must include a digital signature which must also have the approval of a certification entity. The Chilean broker will periodically provide the clients with all the necessary information to alert them about the security policies that have been implemented.

Access to the foreign broker's website will be possible only from the Chilean broker's website, which will allow the local broker to maintain adequate control of every transaction. Once the client has selected a foreign link, the Chilean website must display a new website specially designed for this kind of transaction. After the investor has confirmed and accepted all the information provided, the website will ask for the investor's user number and password, or otherwise retain all the necessary personal information required to identify the client.

The Chilean website must contain specific notes providing that:

  1. the investor acknowledges that the foreign securities are not listed in Chile and, therefore, that Chilean law is not applicable;
  2. the investor should get information about the securities and its conditions before making any investment decision;
  3. the Chilean broker is not liable for the economic standing of the company or the securities' profitability;
  4. the Chilean broker is liable for the money received from the clients for their respective transactions;
  5. the Chilean broker is not liable for any currency fluctuations;
  6. the Chilean broker is not liable for currency remittance when the local law of the country where the transaction took place imposes restrictions on the purchase or remittance of such currency; and
  7. the Chilean broker is not liable for transactions that the client carries out directly through a foreign broker's website, without using the Chilean broker's service.

Additionally, the Chilean brokers will be liable for the existence and identity of the foreign broker, its legal capability, and for the integrity of the securities offered through its website.

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