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The Securities and Exchange Commission of Argentina (the CNV) enacted General Resolution No. 291/97. This authorizes the trading in Argentina of depositary receipts representing securities issued by foreign entities not qualified by the CNV to offer their securities directly to the general public in Argentina. The new regime — which comes into force on September 1 1997 — attempts to introduce new financial products in the local markets and to attract foreign investors.

The depositary receipts (Certificados de Depósito Argentinos or CEDEARs) can be issued by clearing houses authorized to operate as such in Argentina, and by commercial or investment banks and financial institutions authorized to do business in Argentina by the Argentine Central Bank. All entities issuing CEDEARs must have a net worth exceeding P30 million (US$30 million).

Securities can qualify to be represented by CEDEARs if the issuer of the securities (the underlying issuer) satisfies any of the following requirements:

  • it is admitted to public offering and listing in a market supervised by an official agency that has executed a memorandum of understanding with the CNV concerning mutual cooperation, information and assistance;
  • it is admitted to public offering and listing in a stock exchange or securities' market of Brazil, Uruguay, Paraguay or Chile; and
  • the securities that are issued are expressly admitted by the CNV and are declared to be eligible as underlying assets to the CEDEARs.

CEDEARs must be issued in registered non-endorsable form (ie bearing the identification of the beneficiary), and are freely transferable. The CEDEARs constitute securities in themselves and can be deposited with any of the following entities:

  • the issuer of the CEDEARs;
  • a clearing house that meets the requirements of Argentine Law No. 20,643;
  • the major securities depositary of the country where the underlying securities were issued; and
  • a custodian bank of the place where the securities were issued, provided the bank has a minimum P2 million net worth (or equivalent in other currencies).

Programmes for the issue of CEDEARs can, but need not, be sponsored by the underlying issuer. Underlying issuers who sponsor a CEDEAR programme must be registered with the CNV and will be subject to periodic reporting requirements substantially similar to the requirements the CNV imposes on companies that publicly offer their securities in Argentina. Underlying issuers who do not sponsor a CEDEAR programme are required to provide limited information to the CNV.

Ignacio Nicholson

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