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Public offering and private placement under Securities Law

Drawing the line between public offering and private placement normally entails subtle distinctions.

The Securities Market Act (Law No. 16,749 of May 30 1966) defines private placement as "the offering of securities which: (i) explicitly states its private nature, (ii) is directly placed with certain and concrete individuals or legal entities, through intermediaries or not, (iii) is not quoted at a stock exchange, and (iv) no publicity is made for its distinction or placement" (Article 2).

Under the same provision, public offering is defined as the invitation addressed to the public in general or to certain sectors or groups of the public, for purposes of acquiring the securities.

Private placement has been excluded from the scope of the Securities Market Act so that securities offerings qualifying as private placement are not required to fulfill the registration requirements established under the Securities Market Act for their distinction. Expanding further the concepts of public offering and private placement contained in Article 2 of the Securities Market Act on July 29 1998, the Uruguayan Central Bank issued Circular No. 1,603 aimed at providing additional guidelines to distinguish between public offering and private placement.

Under the circular, a public offering of securities means an invitation meeting any of the following requirements:

  • it is addressed to the public in general or to certain sectors or groups of the public, which at the time of making the invitation are indeterminate;
  • it is undertaken through a stock exchange or with the involvement of a stock exchange;
  • it becomes public in any manner, such that it becomes known by the audience indicated above. This includes the retention of publicity in any media.

The circular also provides that the Central Bank may require entities participating in private placements to inform the Central Bank about the characteristics of the transaction, submitting at least:

  • a copy of the securities offered;
  • evidence the placement has been private, directly addressed to pre-determined individuals or legal entities; and
  • evidence that it has been duly clarified that the placement is not registered with the Central Bank.

Jonás Bergstein

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