An assessment conducted by the International Monetary Fund (IMF) in 1999 pointed out that Argentina's legislation comports with the majority of the Objectives and Principles of Securities Regulation promulgated by the International Organization of Securities Commissioners (IOSCO). The National Securities Commission (CNV) regulates the securities markets in Argentina. It is an autonomous entity but is linked to the Executive, and its budget is a part of the national budget. The CNV regulates stock exchanges, rating agencies, mutual funds, open market operators, financial trusts, and the public offering of securities. Nevertheless, the CNV regulatory and supervisory powers over different market participants are notably asymmetric. In particular, the CNV has limited capacity to sanction stockbrokers when the legal and regulatory framework is violated, and enforcement is mainly under the control of the stock exchange. However, no further information on the actual level of implementation of this standard is publicly available.

General Overview

An assessment conducted by the International Monetary Fund (IMF) in 1999 found that Argentina's legislation was in line with the majority of the Objectives and Principles of Securities Regulation as promulgated by the International Organization of Securities Commissioners (IOSCO). A 2007 Doing Business Guide for Argentina by the U.S. Department of Commerce states that securities and accounting standards are transparent and consistent with international standards. According to the Deloitte & Touche (DT) report of 2006, the National Securities Commission (CNV) was created in 1968 and is governed by Law No. 17.811 which also sets forth the legal framework for the functioning of public offerings. The CNV regulates stock exchanges, stockbrokers, rating agencies, mutual fund and open market operators, and public offerings of securities. The CNV operates through General Resolutions (RG) contained within the body of the CNV's Rules (NT). The CNV oversees compliance with legal and regulatory securities trading standards and may impose disciplinary sanctions on issuers. It can start legal proceedings and can impose disciplinary sanctions such as censure or fines. It can suspend or even prohibit the public offering of securities. Per the 2005 Center for Financial Stability (CEF) Policy Note No. 5, the CNV lacks sufficient independence and resources to effectively enforce the legal and regulatory framework. The formal implementation of some regulations contained in Executive Decree No. 677 passed in 2001 was still pending as of the publication date. The Decree aims to improve capital market transparency, public investor protection, and fair treatment among all classes of investors. As stated in the 2003 La Porta et al. working paper, CNV regulations are not generally subject to the approval of other governmental authorities. However, Section 20 of the Public Offering of Securities Law allows the Central Bank of Argentina (BCRA) to limit the public offering of new securities.

Public securities are traded in the Buenos Aires Stock Exchange (BCBA). According to the 2006 Deloitte and Touche report, although there are other stock exchanges, the BCBA accounts for more than 95% of all public securities trading in Argentina. The BCBA is a non-profit association and it is self-regulated. The market capitalization of BCBA was approximately 33.4% of GDP at the time of publication. Oil and gas, banks, and telecommunications are the largest sectors in terms of market capitalization. As of 2007, there were 108 listed companies in the BCBA. Derivative financial instruments are mainly traded at the BCBA and the Rosario Futures Exchange. The Open Electronic Market (MAE) is also a market where government bonds and private securities are traded. It is also regulated by the CNV. The CNV is a member of IOSCO but has not yet signed the IOSCO Multilateral Memorandum of Understanding (MoU) Concerning Consultation and Cooperation and the Exchange of Information. Nevertheless, as stated in the CNV website, the CNV has signed 26 MoUs with foreign regulators.

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

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As stated on its website, the main purpose of the CNV is to ensure the transparency of Argentina's securities markets. Its mission is to guarantee transparency in market price formation in both the primary and secondary securities market, with the purpose of protecting investors. Moreover, the CNV supervises issuer's activities and market participants in public offering and trading of securities and derivatives. The powers of regulation and supervision are assigned by law to the CNV. The listing of securities is regulated by the BCBA. The BCRA can also limit the public offering of new securities. The CNV issues regulations dealing with individuals and entities involved in the public offer of securities.

According to the CEF 2005 Policy Note No. 5, the CNV authorizes the public offering of securities in accordance with the issuing standards laid out in Law No. 17.811. This Law governs such CNV functions as the authorization of public offerings of stocks, private bonds and other marketable securities; advising the Executive Branch's licensing requests filed by stock exchanges and securities markets; controlling and keeping records on the registered brokers; keeping a register of all agents authorized to make public offerings and prescribe the rules that such persons and those acting on their behalf must observe; approving the regulations relating to public offering or securities markets; and supervising compliance with current regulations. Additionally, the CNV deals with the issues of capital increase, merger or spin-off, and dissolution of the companies. In addition, the CNV approves the operational rules and regulations of supervised institutions and oversees their self-regulatory activities. To exercise these functions, the CNV may require reports and carry out inspections and investigations related to suspicious processes, request the aid of law enforcement agencies, and prosecute cases in the court. However, there is insufficient information publicly available as to Argentina's compliance with this principle.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

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According to the 2003 working paper by La Porta et al., "the CNV is the authority in charge of the supervision and regulation of the securities market" and its regulatory activity is usually not subject to the approval of other government authorities. The Public Offering of Securities Law No. 17.811 of 1968 creates the CNV as an autarkic entity, having jurisdiction over the entire territory of Argentina. Its communication with the Executive Branch is conducted through the Ministry of the Economy and Production (MECON). Its functions are carried out by a Board of Directors consisting of qualified members appointed by the Executive Branch. Board members serve a seven-year term and they may be re-elected. Executive Decree No. 677 of 2001 states that the regulator has an autonomous budget. Executive Order No. 1526 of 1998 permits the CNV to partially cover its expenses through fees charged for oversight, control, and registration fees. The fees are fixed by the MECON´s Resolution No. 87 of 2001. In addition, Section 10(2) of Act No. 17.811 states that fines imposed by the CNV shall be transferred to the National Treasury. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with this principle.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

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According to the 1999 IMF report regarding Argentina's observance of the Objectives and Principles of Securities Regulation promulgated by IOSCO, this principle was not met. However, this finding was reported in a self-assessment by local authorities and not verified by IMF staff. The report adds that while the CNV has powers to exercise its functions, it is not independent from the government. In fact, the CNV's income comes from the national budget. The CNV's funding is usually inadequate to support the CNV's legally mandated functions. Still, there is insufficient information publicly available as to Argentina's compliance with this principle. The CNV website states that it is also authorized to collect a control rate, paid by all those agents subject to its supervision, and can collect an authorization tariff, paid by the issuers of securities and public offering instruments.

4. The regulator should adopt clear and consistent regulatory processes.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

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The 2005 CEF Policy Note reports that the CNV has only indirect enforcement powers with respect to individual brokers and member firms. The Buenos Aires Securities Market possesses primary oversight power, as a result of the robust "self-regulation" concept held by the Buenos Aires Stock Exchange. Nonetheless, there is insufficient information publicly available as to Argentina's compliance with this principle.

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

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The CNV can conduct investigations for violations of securities regulations, according to the 2005 report by La Porta et al. It is thus empowered to command the delivery of documents and testimony of witnesses. However, there is insufficient information publicly available as to Argentina's compliance with this principle.

9. The regulator should have comprehensive enforcement powers.

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According to the IMF's 1999 report, the CNV is empowered to take disciplinary actions and dictate penalties. However, the CNV's punitive powers against agents under its supervision are limited. The CNV can bring cases to court if an individual or entity under its jurisdiction fails to comply with its regulations. According to the CEF's 2005 Policy Note No. 5, the CNV supervises securities trading according to the established securities trading standards. It may impose disciplinary sanctions on issuers in case of breach. The CNV may initiate legal proceedings. In addition, the CNV can impose disciplinary sanctions that include censure, fines, and a suspension from making public offerings. It may also directly prohibit a public offering. Further CNV's supervisory and regulatory functions are contained in Executive Order No. 677 of 2001 and General Resolution No. 400 of 2002. Nonetheless, there is insufficient information as to Argentina's compliance with this principle.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

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According to the 1999 IMF assessment, the CNV has powers to demand information from foreign regulators, even when there is no breach of Argentine regulation or law, although this power is subject to some limitations. The CNV can also share information with foreign securities commissions or similar regulators. The CNV website discloses that as of September 2007, the CNV has signed Memoranda of Understanding with 26 foreign regulators. However, there is insufficient information publicly available as to Argentina's compliance with this principle.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

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The CNV website discloses that, as of September 2007, the CNV has signed Memoranda of Understanding with 26 foreign regulators. Still, there is insufficient information publicly available as to Argentina's compliance with this principle.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

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According to the CNV's website, the CNV has increased its exchange of information, cooperation, and technical assistance competences with international regulatory bodies, including IOSCO and the Council of Securities Regulators of the Americas which, since 1998, has been developing an Inter-American Campaign to Protect Investors. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with this principle.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

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According to a Progress Report for Argentina, described in the 2003 White Paper for Latin America by the Organisation for Economic Co-operation and Development (OECD), there has been some progress in harmonizing local accounting standards with international standards. Transactions between related parties are disclosed and the legal definition of "related parties" has been clarified. Procedures by which corporate boards should deal with related party transactions are also defined. Such transactions must be brought before the Audit Committee (with a mandatory majority of independent directors) and eventually submitted to independent appraisal. Also, the report of the Audit Committee must be disclosed. In addition, regulations also cover situations in which a board member possesses company shares. Changes in controlling groups must be disclosed. Nonetheless, there is insufficient information publicly available as to Argentina's compliance with this principle.

15. Holders of securities in a company should be treated in a fair and equitable manner.

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Article 13 of the Companies Law No. 19.550 provides that no shareholders shall receive special treatment or benefits such as to restore contributions, to assure shareholder capital, or certain kinds of incomes. Decree No. 677 of 2001 and CNV General Resolution No. 400 of 2002 incorporate the new transparency regulations for capital markets in order to establish better practices for corporate governance. The provisions of the Decree are applied to those persons participating in a public offering and to self-regulated entities. Still, there is insufficient publicly available information that addresses Argentina's compliance with this principle.

In October 2007, the CNV issued General Resolution No. 516 of 2007, which sets forth minimum criteria for good governance practices applicable to listed firms. These criteria are found in the Code of Good Corporate Governance Practices. Firms must adopt the code, or explain why they have chosen not to, effective for fiscal years beginning on January 1, 2008. The Code deals with related party transactions, adoption of the Code into corporate bylaws, board responsibilities, board composition, evaluation of board activities, director training, independent directors, appointment of senior executives, proportion of independent directors, independent directors meetings, disclosure to shareholders, shareholder assistance to shareholders, minority shareholder participation in shareholders meetings, corporate control market, dividend policy, relationships with other stakeholders, independent chairs for the audit committee, internal comptrollers and/or external auditor rotation and roles, compensation schemes, establishment of an appointment and corporate governance committee, and non-discrimination policies with regard to board composition.

The 2005 CEF Policy Note states that the Companies Law provisions covering publicly-traded companies are extremely general and ineffective for the complexities which characterize capital markets, and impractical with regard to minority shareholder rights. Decree No. 677 extends resources to minority investors in order to protect their rights to redress if damaged by related-party transactions carried out in violation of the procedure set forth in the Decree. Minority shareholders also have the right to file a claim in case of squeeze out or removal from the registration and listing system and where minority shareholders are not paid a fair price for their shareholdings and the right to recover profits obtained by insiders who make use of privileged information.

According to the OECD's 2005 Progress Report, Argentine legislation has been improved by the passage of Decree No. 677. This decree determines procedures for significant shareholder participation in the firm (owning 35% or more of the stock). In such cases the tender offer shall be open to all shareholders in proportion to their holdings. When no shareholder owns 35% or more of the firm, the principle of free negotiation between parties prevails. The regulation imposes some criteria of price fairness but lets the offer determine the price. Nevertheless, the CNV may object to a price if it believes it to be unfair. The board may issue an opinion of the offer in order to advise shareholders. However, there is insufficient information publicly available as to Argentina's compliance with this principle

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

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According to the 2006 KPMG report, Argentina's accounting standards are moving toward convergence with US Generally Accepted Accounting Principles and the International Financial Reporting Standards (IFRSs). In 1998, the governing board of the Argentine Federation of Professional Councils in Economic Sciences decided to adapt Argentine professional accounting standards with International Accounting Standards (now IFRSs) issued by the International Accounting Standards Committee, now known as the International Accounting Standards Board. In accordance with Resolution No. 284 of 2003 of the Federation of Professional Councils of Economic Sciences, a project was approved to facilitate the adoption of International Standards on Auditing as issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants.

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

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Since March 2007, mutual funds are required to submit weekly information about their portfolios to the CNV, using standard reporting forms. This rule aims to improve mutual fund transparency and information disclosure. The required information shall be disclosed no later than ten days after the closing week. This allows investors to compare the real yield rate of return for each fund. As a result, mutual funds post their portfolio composition and costs information on the CNV's website. CNV Resolution No. 498 of 2007 sets forth new regulations on mutual fund investment policies and risk diversification. This must be incorporated into the Management Manual of each mutual fund and the manual must be made available to investors. According to the CNV's website, these regulations enhance information disclosure of mutual funds in Argentina. However, there has been no assessment as to whether these new regulations comport with IOSCO principles. Therefore, there is insufficient information publicly available as to Argentina's compliance with this principle.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

21. Regulation should provide for minimum entry standards for market intermediaries.

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According to a report prepared by Deloitte and Touche in 2005, in order to list securities on an Argentine stock exchange an entity must be authorized by the CNV. The approval to list securities implies neither any kind of assurance of the quality of the securities offered nor the solvency of the issuer. Still, there is insufficient information publicly available as to Argentina's compliance with this principle

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

27. Regulation should promote transparency of trading.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

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There is insufficient information publicly available as to Argentina's compliance with this principle.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

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There is insufficient information publicly available as to Argentina's compliance with this principle.