/ New Law: Independent Financial Advisors (albeit not all) will now be regulated in Chile.13 April, 2021
The New Law will regulate for the first time independent investment/financial advisory services in Chile.
The CMF will have until April 13, 2022 to issue the implementing regulations.
Today, April 13, 2021, Law 21,314 on Market Agents (“the New Law”) has been published in the official gazette (Diario Oficial) of Chile regulating for the first time independent investment/financial advisory services, as well as granting more powers to the Chilean securities regulator (CMF) and granting rewards and protections for whistle-blowers.
The New Law has received much press in relation to investment advice provided on a large scale to the public, such as via social media, causing mass transfers between different types of pension funds, but it also refers to investment advisory services (servicios de asesoría de inversión) which are not specifically related to the Chilean pension fund statute law. Under Article 3 those that provide services or offers of products related to investments in financial instruments of any nature to the public or to specific sectors (“sectores”) of the public shall be required to register with the CMF. The point here is what will be understood by “the public or specific sectors of the public”.
The language used is similar to that which is used in the Chilean securities market law (Ley de Mercado de Valores) when defining public offers of securities. If we were to apply the same logic that the CMF has been using when defining when an offer of a security is not public we should then consider that financial advisory services being provided to more than 50 non-qualified investors, albeit provided on a private one to one basis, would subject the service provider to registration with the CMF. The same would apply to services being provided to more than 250 qualified investors listed in sections 7 and 8 of CMF NCG 216 (broadly speaking, qualified investors that trade via a registered broker or whose investment decisions are taken by a qualified investor, but which are neither institutional investors, do not have a discretionary account agreement with another qualified investor, nor have investments in public offer instruments over UF 10,000- approximately US$ 380,000). The CMF will at some point have to issue guidance to clarify these points to determine the scope of the New Law.
Under the New Law the CMF will have the power to set the rules in relation to solvency, risk management, skill/integrity and conduct. The New Law does not provide any guidance in this respect, so the CMF has been given a great deal of discretion to regulate these matters. The CMF will have 12 months from today (i.e. until April 13, 2022) to issue the rules.