Entrepreneurs: green light for the collective financing system

The National Securities Commission (CNV) regulated the collective financing system, known as crowdfunding, a term that describes the use of small amounts of money, obtained from a large number of people or organizations, to finance projects.

The CNV formalized the regulation of the initiative through General Resolution 717-E / 2017 published this Wednesday in the Official Gazette.

Although the Civil and Commercial Code admits the contracting through digital channels of collective financing, there was no specific regulation in Argentina that determines a regime of rights and obligations of the parties, as well as the protection of investors and lenders.

Platforms. The standard introduces the figure of the “Collective Funding Platform (PFC)” in charge of a public limited company authorized and registered by the CNV, which will be the control, regulation, inspection and enforcement authority.

According to the regulations, each platform must have a legal structure, social status, corporate purpose, name, registered addresses, shareholders’ register, own website and e-mail, among other requirements.

The social object of the platforms “shall indicate, among its activities, that which consists of contacting, in a professional manner and exclusively through web portals or other analogous means, a plurality of human and / or legal persons who act as investors with human and / or legal persons who request financing, “says the regulation.

Registry. The platforms must be registered in a register that will be created for this purpose, will be public, and will be in charge of the CNV, which will separately take the registration of the corporations that are registered under the figure of PFC.

Heritage. The platforms must have permanently a minimum net worth of 250 thousand pesos, which should arise from their annual financial statements.

Requirements. Among other requirements, the platforms are obliged to “expose in all their publications and in a prominent place on their website in a clear and concise manner the existing risks for collective financing entrepreneurs and investors regarding income and performance within the PFC “.

They will also have to “prepare a collective financing project selection guide that must contain the criteria and / or methodologies that the PFC will apply for the analysis, selection and publication” of the same.

In addition, they have to “develop channels of communication and direct consultation of investors and of these with collective financing entrepreneurs, electronically and / or by telephone, which must be public access for investors registered in the PFC”.

Also, conditions are set on the operation of the website, resale market (secondary), information for investors and minimum data of the entrepreneur projects.

Commissions. The fees charged by the platforms for their services “must be published and updated”, presented “clearly and unequivocally” in such a way that the investor and the entrepreneur “can reliably know the cost of participation”.

Limits on investment. Investors may not allocate, within the same calendar year, for the acquisition of collective financing instruments, gross annual revenues that represent more than 20 percent in accordance with the last closed fiscal year.

In addition, they may not participate in more than five percent of the subscription of a project, or in an amount greater than 20 thousand pesos, unless they are investors categorized as qualified, for whom only the limit of five percent runs.

Prohibited. The platforms will not be able to “provide financial advice and / or investment recommendations in relation to the projects” promoted. Neither highlight some to the detriment of other projects or present their own initiatives to raise funds.

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