/ Fintech Law: New Rules Under Consultation

Investment consulting services will be the first to be regulated as part of the new licensing system in Chile.

Felipe Cousiño
Partner

Felipe von Unger
Associate Attorney

Alessandri Abogados

Within the framework of the implementation of Law No. 21,521 (“Fintech Law”), which becomes effective as of February 3, 2023, as of January 16, the Chilean securities, banking and insurance regulator, Comisión para el Mercado Financiero (“CMF”) has put out for public consultation two regulatory proposals. The first one, regarding the registration of  investment consultants (in Spanish, asesores de inversión) in the Registry of Financial Services Providers (“RPSF”). The second, on the procedure and requirements to apply for  authorization from the CMF to provide investment consulting services.

Once published, both general applicability rules shall be supplementary parts of a two-step registration and accreditation system. Investment consultants (and other providers of the services indicated in Article 5 of the Fintech Law) that meet the conditions set forth in said law, must first register in the RPSF, and then, through the Online Reporting System (“SEIL”), request the CMF to authorize the provider to commence their investment consulting services.

Both procedures (registration and authorization) applicable to investment consultants, naturally present differences between them, and also with respect to the registration process currently in force, the latter established in Article 3 of  Law No. 21,314, of April 13, 2021, and in CMF Rule NCG 472. In relation to the former, it should be noted that registration in the RPSF involves the submission of general information on the individual or legal entity requesting registration, and certain sworn statements regarding, among others, not being subject (the applicant and its main partners, directors and managers) to the disqualifications indicated therein. In its application for authorization submitted to the CMF, the investment consultant (once registered in the RPSF) shall include material documentation on its policies, procedures and controls, a code of conduct, academic and accreditation background, among other information.

As for the differences that can already be noted between the CMF’s proposal and the current registration process, for the time being there are two that seem particularly interesting to us. On the one hand, the model contained in the text under consultation is structured on the basis of a double evaluation, where the second constitutes a real authorization by the supervisory body. Although in practice this is not expected to mean a major change in relation to the way in which the registry currently operates before the CMF, a question mark remains as to whether or not this innovation will lead the authority to carry out more qualitative analyses of the applications, impacting on the grounds provided to support a possible rejection of an application for authorization.

On the other hand, in line with the provisions of Article 4 of the Fintech Law, in its proposal the CMF exempts certain individuals from the requirement to incorporate as legal entities whose exclusive business is the provision of investment advisory services. The requirements that must be met for the above are:

1. That the person is not in the circumstances referred to in the second paragraph of Article 6 of the Fintech Law (certain sanctions);

2. That they only provide investment consulting services to specified persons; and

3. That the number of specific persons to whom they provided advice through any of the social networks used for this purpose, in the last twelve months, does not exceed 100,000 persons.

The regulation under analysis also contains a regime of validity that seeks to ensure the continuity of the records currently in force. To this end, it establishes that investment consultants registered in the current Registry of Financial Consultants (“RAI”) referred to in Law No. 21,314, as of the date of entry into force of the Fintech Law, shall be deemed to be registered in the RPSF and authorized to provide services as of that same date; that is, these persons shall automatically be included in the RPSF, without any additional procedure. However, there is a deadline of February 3, 2024 to submit to the CMF the background information required by the new rules governing the registry, in order to keep the registration in force. This is a point that should be clarified by the CMF.

In turn, applications for registration in the RAI that are pending prosecution at the date of entry into force of the Fintech Law shall continue to be processed in accordance with the provisions set forth in CMF Rule NCG 472.

Finally, it can be said that, although the CMF has tried to maintain, at least in the immediate future, most of the requirements currently in force applicable to the registration of investment consultants, so as not to generate serious disruptions to the operators, these will surely undergo amendments in light of the issues that may arise in the course of the implementation of these rules and the standards brought by the Fintech Law.