On December 28, 2023, a Decree was published in the Federal Official Gazette introducing significant reforms to the Securities Market Act and the Investment Funds Act (Reform). These modifications seek to modernize the Mexican stock market, providing greater flexibility and tools that create a more accessible and dynamic environment for all participants. The Reform not only facilitates access to the capital market, but also establishes new responsibilities for intermediaries and regulators, promoting a more competitive and transparent market. Understanding these new regulations is essential so that all market players can adapt and take advantage of the opportunities they offer.
Main Amendments to the Securities Market Act
The Reform introduces the concept of “Simplified Issuers”, a mechanism designed for small and medium-sized enterprises (SMEs) to access the Mexican stock market more quickly and with lower costs. This figure is available both to legal entities and to trusts that meet the requirements established by the National Banking and Securities Commission (CNBV) and offer their securities exclusively to institutional or qualified investors. LACNBV will define the specific conditions and the registration process through general provisions, ensuring the transparency and accessibility of the process.
The Simplified Enrollment process requires Simplified Issuers, together with a placement intermediary, to request the listing of their securities on the corresponding exchange. This request must include approval of the stock exchange and the submission of a placement prospectus or an informational supplement; if there is no public offering, an informational brochure detailing the issue is required. Although the CNBV delegates some of the supervision to intermediaries and exchanges, it maintains its authority to sanction serious breaches or cancel its registration in the National Securities Register (RNV) if issuers fail to meet their obligations.
Taken together, the Simplified Inscription democratizes access to the capital market in Mexico, allowing more companies to benefit from stock market financing, while ensuring a solid regulatory framework that protects market integrity.
The Reform introduces greater flexibility in the capital structure of Public Limited Companies Promoting Stock Investment (SAPiBS) and Public Limited Companies (SABs). Now, these entities can apply for the registration of their shares or securities in the RNV without the obligation for SAPIBs to be transformed into SABs after a certain period or after exceeding certain capital thresholds, providing them with greater stability and operational freedom.
In addition, the Reform allows SABs and SAPIBs to issue shares with specific characteristics, such as restrictions on transmission, rights to exclude members, shares without the right to vote or with restricted voting, and veto rights, among others (currently there are some differences in the interpretation of the provisions applicable to the issuance of shares without voting or with limited voting). It also eliminates the need for prior authorization from the CNBV to issue shares with differentiated rights, allowing companies to structure their capital more strategically.
With regard to the prevention of takeovers, the Reform makes the provisions more flexible, allowing SABs to adopt preventive measures in their corporate statutes with a more flexible approval threshold. These changes provide companies with greater protection against unwanted acquisitions and allow them to design capital structures that are better suited to their strategic needs.
In addition, the Reform removes previous restrictions that limited SABs in the issuance of shares with differentiated rights. Previously, these companies required prior authorization from the CNBV to issue shares other than ordinary shares, but now they can issue this type of share at a percentage greater than 25% of the paid share capital, without the need for prior authorization. This allows them to structure their capital more strategically and in line with their business objectives.
Finally, the shareholders' meeting may delegate to the Board of Directors the definition of the terms and conditions of share capital increases, and may even exclude the right of preference.
The Reform also transfers much of the oversight of Simplified Issuers to underwriting intermediaries and stock exchanges, reducing the direct role of the CNBV in this process. Now, these intermediaries are responsible for ensuring that the information and documentation of the Simplified Issuers complies with relevant regulations. In addition, they must manage the disclosure of relevant information without the need for prior approval by the CNBV.
To support this transition, the CNBV and the stock exchanges will issue provisions that will define the obligations of Simplified Issuers and the requirements of the simplified registration process. Not only does this approach streamline access to the market, but it also reinforces the responsibility of intermediaries, ensuring strong and efficient regulatory compliance.
The Reform also brings about significant changes to the Investment Funds Act (LFI), with the introduction of Hedge Investment Funds, known as Hedge Funds, which offer a more flexible investment regime. These funds will be able to operate with a wider variety of financial products, facilitating the maximization of returns and better risk management.
Public limited companies that act as investment advisors can now request authorization from the CNBV to become founding partners of these funds, in addition to actively managing investment portfolios. With this Reform, the concept of Limited Object Investment Funds is eliminated and Hedge Investment Funds are established, which will operate with assets defined in their statutes or prospectuses. The shares in these funds will be available only to qualified or institutional investors.
The CNBV will issue provisions to regulate these funds, which seek to diversify investment options and increase liquidity in the Mexican market. Hedge Funds represent a valuable opportunity for investors who want to diversify their portfolio and access more sophisticated investment strategies.
The Reform also promotes sustainability and gender equity in issuer companies. The Ministry of Finance and Public Credit, in coordination with the CNBV and the Bank of Mexico, will establish general provisions to promote best practices in the area of sustainable development and gender equity.
These provisions will seek that companies adopt policies that promote environmental sustainability and equal opportunities within their organizations. Full implementation will depend on the issuance of secondary regulations by the CNBV and the Bank of Mexico, who have one year since the entry into force of the Reform to adapt existing provisions.
These new regulations reflect a commitment to a more sustainable and inclusive future, encouraging companies to integrate these values into the core of their operations.
Strategic Implications and Opportunities
Opportunities for SMEs
The introduction of Simplified Registration is a significant step forward for SMEs, facilitating their access to and participation in the Mexican stock market. This mechanism reduces operational burden and registration costs, allowing SMEs to diversify their sources of funding. In addition, by simplifying the registration process, the Reform opens up a landscape of competition and diversification in the stock market, promoting financial inclusion and contributing to economic growth.
Attracting Institutional Investors
The Reform also offers greater opportunities for institutional investors, who will be able to diversify their portfolios with more options in the market. This increases the attractiveness of the Mexican stock market, positioning it as a more competitive and dynamic destination for investments.
Challenges for Financial Intermediaries
However, the Reform also brings with it challenges, particularly for underwriters and stock exchanges. These actors will need to take a much more active role in overseeing Simplified Issuers, which implies greater responsibility for regulatory compliance and the need to make adjustments to their internal operations and processes.
Conclusion
The Reform is transforming the Mexican stock market, making it more accessible and competitive. This new phase presents both opportunities and challenges, requiring a deep understanding of the regulatory framework and a clear adaptation strategy. In this context, it is essential that companies are prepared to comply with new regulations and take advantage of changes in an increasingly dynamic and transparent market.
This document is a summary for informational purposes. It does not constitute any opinion and cannot be used or quoted without our prior written authorization. We assume no responsibility for the content, scope or use of the document. For any comments regarding this note, please contact any partner of our Firm.
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