The draft Securities Market Law contains a section aimed at promoting the access of foreign investors and the interconnection of markets, according to Rolando San Román, general director of the National Stock Exchange.
Among the incentives that will be sought Granting foreign investors include access to the national market through local stock agents from other countries, expeditious processes for the settlement of operations and greater diversity of instruments.
San Román mentioned that these specific regulations will allow access from foreign investors and interconnection of markets. This, he added, will be possible based on emitters or collective investment institutions with agents from other jurisdictions.
In addition, the creation of a market regulatory entity is contemplated. Currently, the draft is waiting for a favorable opinion on the tax section.
San Román recalled that the Securities Market Law dates from 1996. “It has suffered very few modifications,” he said, and pointed out that international standards have evolved more quickly.
Incentives for foreigners
San Román said that among the incentives that are sought with this new proposal are the following:
- Access to the Guatemalan market through local stock agents from other countries: As explained by San Román, local bag agents from interested countries must only request an order for the acquisition or sale of values in a market of another jurisdiction. “It is as if we could have access to Salvadoran or Panamanian stock market agents who would receive investor orders from these countries,” he deepened, adding that this mechanism would facilitate the issuance of orders.
- Expedite processes for operations settlement: San Román said that when the bags are interconnected by local and international stock market agents, the proper connection between depository plants is facilitated, allowing efficient liquidation of operations. “That is, the delivery of the values and the delivery of the funds is carried out efficiently,” he said. According to the General Manager of the National Stock Exchange (BNV), this leads to a greater number of investors interested in a product, which could facilitate the collection of resources and the creation of more competitive rates.
- Access to various financial instruments: San Román stressed that investors could have access to both local market instruments and other bags. This, he said, would contribute to risk diversification.
On the other hand, he explained that the local regulator will be able to verify if a foreign jurisdiction has an adequate level of regulation in capital markets in accordance with international standards.
He also mentioned that regional integration facilitates the collection of resources to execute larger and more sophisticated projects, which require greater capital. “These processes in general allow improving the capitalization of the country, which leads to greater productivity and greater development,” he concluded.
What will the law have?
San Román says that there are six main points within the draft law discussed at the technical table. “In general terms, stock markets must always be adapted to the last and developments, not only of the industry, but also to international standards,” he said, adding that they have evolved considerably in the last 20 years.
For this reason, he explained that one of the key objectives of the preliminary draft is the incorporation of international standard standards. For its application, it argued that it is necessary to create a regulatory entity with economic, financial and legal independence, which allows all market actors to be supervised.
In addition, he stressed that the law seeks to establish clear standards for the proper functioning of entities such as bags and other market infrastructure. The third element, as indicated, is the development of regulations related to collective investment institutions. “These are the entities that group the investments of small and medium investors and that are managed by experts in the stock market,” he explained.
He also noted that the draft includes titration processes to allow emissions backed by specific assets. It also contemplates the inclusion of financial instruments oriented to the development of the stock market.
For his part, Valeria Prado, Vice Minister of Investment and Competition of the Ministry of Economy (Mineco), stressed that, due to the waiting of the opinion by the Superintendence of Tax Administration (SAT), it is estimated that in a month there will be a clearer panorama about what the document will contain. “The document is not yet an initiative; it is a document that we are working between different institutions and that is still being analyzed,” he said.
Technical opinion, pending
Currently, the Ministry of Economy (Mineco) requested a technical opinion to the Superintendence of Tax Administration (SAT), specifically on the tax section of the draft.
Valeria Prado, Vice Minister of Investment and Competition, said that it has worked with the SAT to identify the most appropriate mechanisms of applicability in tax matters, so the document was submitted for consideration of that entity. “In the specific chapter in tax matters, we are waiting for us to answer what the considerations are,” he said.
As he explained, they are waiting for the SAT to determine what are the tax and tax implications that each of them entails and if the Superintendency considers them acceptable.
Prado clarified that the opinion was requested about a month ago and it is expected to have an answer within two weeks. The SAT was consulted on the status of the opinion, but at the close of this note he had not responded.
In addition, he reaffirmed that this law proposal seeks to establish the necessary conditions to have a robust capital market in the country. Among these conditions, he highlighted the inclusion of specific legal figures that can function as investment vehicles.
What is needed?
Once there is the favorable opinion of the Superintendence of Tax Administration (SAT), Prado said that a final review of the writing and legal technique will be carried out. “These are issues purely,” the Vice Minister stopped, who is confident that, in terms of background aspects, everything is resolved.
San Román complemented that the technical table must review the final product after the discussion of the tax section and evaluate the effects it has had on other parts of the draft.
Once the consensus on the final wording was reached, Prado said that the process could begin so that the document becomes a law initiative.