This November 23, the National Securities Commission (CNV) left open a
process of public consultation, that will end on December 15, regarding
three new regulatory projects: a) the authorization for the issuance of
securities denominated in UVA / UVI; 2) the implementation of changes
in securities lending regulations that would allow short selling; and
3) the redefinition of the concept of Independent Director in
accordance with internationally accepted criteria. Next, an analysis is
made on the first two proposals.
Through General Dispositions N° 711 to N° 713, in November 16, the National
Securities Commission (CNV, by its Spanish acronym) resolved to submit
regulatory proposals regarding various objects under its jurisdiction,
which are being submitted to a process of non-binding public consultation.
The presentation of opinions and / or proposals can be made between
November 23 and December 15 for two of the projects, while for the one that
refers to the redefinition of the Independent Director the opening and
closing date are one day delayed / postponed.
The General Disposition N ° 711, in view of the new
diffusion of savings and credit instruments based on "real" units such as
Housing Units (UVI, by its Spanish acronym) and Purchasing Value Units
(UVA, by its Spanish acronym), proposes to regulate the issuance of
securities denominated in said units. It should be remembered that the
value of the UVI is updated according to a chapter of the Construction Cost
Index published by The National Institute of Statistics and Censuses
(INDEC, by its Spanish acronym), while the UVA is updated by the Reference
Stabilization Coefficient, (CER, by its Spanish acronym) which, in turn, is
adjusted based on the variation of the Consumer Price Index (CPI) published
The development of products based on these units has been a central axis in
the credit policy of the national government. According to statistics of
the Central Bank of the Argentine Republic, (BCRA) the totals of mortgage
and pledge loans in national currency have grown by 71.7% and 70.9%
year-on-year, respectively, at the end of September.
Among the titles denominated in UVA and / or UVI that provides the proposed
standard included in the General Disposition No. 711 are the Negotiable
Obligations (private debt instruments), the Fiduciary Debt Securities and
Fixed income Mutual Funds Shares.
The development of securities nominated in these units could satisfy the
demand of savers and investors interested in placing funds in inflation
adjusted assets, a segment that has not shown dynamism in the banking
system (according to BCRA statistics, only 0.26 % of time deposits have a
CER clause) and that in the capital market is only served by some
placements of public debt.
In turn, this would allow transferring the risk from the writers of the
assets (credits) to institutional investors, thus lowering the cost of
financing with inflation adjusted products. However, the risks inherent to
debt securitization mechanisms must be taken into account in scenarios
where the risk of the underlying assets is not adequately appreciated and
conflicts of interest may arise. Although this risk is not exclusive to
loans with adjusted capital in real terms, the fact that the latter have
greater access between sectors with lower income may be a relevant factor.
On the other hand, General Disposition No. 712 of the CNV
proposes changes to the regulations that govern the lending of securities
to enable short selling. This transaction consists of the sale of
securities that are not in the seller's power (usually borrowed in a
"covered" short sale), which is done with the purpose of obtaining a gain
through a buyback to a minor price. In the G.D. No. 712, the CNV argues
that an adequate regulation of short selling could "provide the Argentine
capital market with greater dynamism, liquidity and depth".
In the case of the purchase of a security (one share for example), the
holder is not contractually obligated to make future payments on account of
potential losses. If they exist, they will correspond to a sale price lower
than that originally acquired by the asset. In contrast, whoever makes a
short sale of negotiable securities faces the risk of having to make a
future payment to be able to repurchase the loaned title in case it has
risen in price. For this reason, authorizing the realization of this type
of transactions requires the establishment of a system that guarantees risk
management in the spirit of those that are used for trading in futures
markets. Emphasis should be placed on this aspect, since if this aspect is
not adequately regulated, the risks to the investor, both in individual and
systemic terms, can be high.