The Market Agents Law granted the CMF the authority to establish the minimum disclosures that must be included in the standard operating policies of open stock corporations and special stock corporations, and the disclosure of related party transactions to both shareholders and the general public.
Until October 31, the CMF put out for public consultation the regulatory proposal that aims to raise the standards for transactions with related parties.
The initiative seeks to improve the standards that entities must take into consideration for certain operations as habitual and typical of the ordinary course of business and, in addition, to make transparent the operations that have been carried out within the framework of the habituality policy and those outside it.
The present consultation is made after the first proposal was modified as a result of the public consultation process that took place between July 10 and August 4 of this year. The current proposal takes into account the comments received on that occasion.
The new proposal establishes that the normal operating policies of open stock corporations and special stock corporations must include, as a minimum, the following matters:
- Date of approval of the policy by the Board of Directors and date of the last modification to the policy.
- Justification of the need to have a regularity policy considering the particular case of the company.
- Characteristics and conditions to be met by transactions in order to be carried out under the regularity policy: types of counterparties to transactions based on the nature of the relationship with the company; criteria to be met by transactions in order to be considered ordinary; maximum amount per transaction; and other restrictions imposed by the Board of Directors.
- Control mechanisms to which transactions intended to be carried out or carried out under the policy shall be subject.
- Responsible for compliance with the control mechanisms indicated by the policy, including the circumstances that safeguard their independence of judgment.
- Disclosure mechanisms.
Regarding the dissemination of information, the proposal establishes that companies must prepare a semiannual report of all transactions made with related parties and disseminate it on their web page within the month following the semester in which they report.
With respect to its effectiveness, it is established that the provisions will become effective the semester following the one in which they are issued. Thus, companies will have a period of six months to comply with the regulations. Subsequently, as from that date, the customary policies that do not comply with the new provisions will be null and void and must be adapted and approved by the board of directors.
For our part, we emphasize that the regulator is on the right track by introducing this type of regulation, which is necessary to reestablish confidence in the financial markets that have been so hard hit in recent times; and also with the purpose of correcting a series of problems observed, such as, for example, the following:
- The policy is not available for consultation by shareholders or other stakeholders.
- That it describes in generic or ambiguous terms what would be the usual operations, covering a wide diversity of these.
- That it is not reviewed and updated on a recurring basis.
Further details of this new proposal can be found in the Regulation in Consultation section of the CMF website (www.cmfchile.cl); and to discuss the implications of this proposal, please contact our Corporate and Business team:
Álvaro Rosenblut | Partner | arosenblut@az.cl
Vicente Martínez | Senior Associate | vmartinezw@az.cl
Juan Pablo Vieira | Associate | jvieira@az.cl
Raimundo Busquet | Associate | rbusquet@az.cl
