Securities and Capital Markets_news
Panama, June 22, 2020. Partners Francisco Arias G. and Ricardo Arias, contributed with the Panama Chapter of The Legal 500: Securitisation Country Comparative Guide 2020, a publication that provides an overview of the law and practice of securitization law across a variety of jurisdictions.
The online Panama chapter is available here.
Or a PDF version is available to download here.
Panama, March 9, 2020. Partners Francisco Arias, Ricardo Arias, and associate Cristina De Roux contributed with Chambers & Partners, providing their professional insights into Panama’s legal securities market.
The online Panama chapter is available here.
Or a PDF version is available to download here.
Morgan & Morgan received top-tier rankings in the international directory IFLR1000, a guide that analyzes the work of lawyers in the financial and corporate transactional area.
In addition, five lawyers of the firm are listed as leading professionals:
- Aristides Anguizola – Rising Star
- Francisco Arias – Highly Regarded
- Carlos Ernesto González Ramírez – Highly Regarded
- Inocencio Galindo – Highly Regarded
Meet them at Here.
In this edition of Chambers & Partners, the securities team of Morgan & Morgan summarized the key aspects and developments in Panama, where the activity in the securities sector has been performed in recent years as an alternative form of financing.
The guide is available here
One of the biggest challenges that micro, small and medium enterprises face when trying to settle in and achieve success as profitable businesses is to obtain capital and sources of financing. Sometimes, the most common sources of financial resources – such as bank loans, private equity and public offerings of securities – are beyond the reach of these companies and, consequently, many innovative ideas that could result in booming business for the national economy and for the creation of jobs are not developed.
Another crowdfunding format is the equity crowdfunding model whereby investors provide capital and receive shares or another capital instrument that gives them the right to receive a percentage of the income generated by the business they are financing. There is also the debt-based crowdfunding model, in which investors lend funds on a temporary basis, waiting for the repayment of their investment in a certain period. In these cases, investors usually require that they be paid an interest on the borrowed capital, but models have arisen in which the participants have not demanded any consideration except the return of the amounts given in loan.
Our securities legislation requires that those securities that are going to be publicly offered in the Republic of Panama be registered first with the Superintendence of the Securities Market (hereinafter the “SMV”). The process of registering securities before the SMV consumes time and resources that micro, small and medium enterprises usually do not have. The current regulations include offers of securities that are exempt from registration with the SMV but they only allow the offer of unregistered securities to a small number of people or institutional investors and, thus, these registration exemptions do not work for crowdfunding initiatives whose purpose is to collect small sums of money from a large number of people. In order for crowdfunding to be possible without having to comply with the registration formalities, a new exemption from the obligation to register securities would have to be adopted.
The second regulatory challenge faced by crowdfunding in the Republic of Panama is that, under the Securities Act and the agreements adopted by the SMV, the operator of the Internet site that serves as a platform to facilitate the collection of financial resources have the obligation to obtain an investment adviser license, broker-dealer firm license or stock exchange license. The management of requesting and obtaining these licenses, as well as their subsequent operation, also requires investment of a lot of time and resources that, given the objective of a crowdfunding site to serve as a mere intermediary between entrepreneurs and investors, may not have to be incurred for crowdfunding purposes.
Article 128 of the Securities Act establishes the following: “Public offer or sales of securities to be made by an issuer or an affiliate or by an offerer in the Republic of Panama shall be registered in the Superintendence, unless they are exempted from such registration in accordance with the provisions of this Decree Law and its regulations. An offer or sale made to persons domiciled in the Republic of Panama shall be deemed to be an offer made in the Republic of Panama, regardless of whether it is made from the Republic of Panama or from abroad, unless the Superintendence determines otherwise.”
Paragraph 2 of article 129 establishes that “there are exempted from registration with the SMV offers of securities made by an issuer or an affiliated thereof, or by an offerer of said issuer or affiliate to no more than twenty-five persons altogether, or any such number of persons which the Superintendence may determine and which, within a period of one year, do not have as a result the sale of such securities to more than 10 persons, or any other number of persons which the Superintendence may determine.”
Article 3 of Agreement 1-2001 establishes that the following legal persons qualify as “institutional investors”: (i) banks, insurance companies, reinsurance companies, investment companies registered with the SMV, investment trusts managed by companies with trust licenses, retirement and pensions funds regulated by Law 10 of April 16, 1993, and broker-dealer firms; (ii) legal persons domiciled in the Republic of Panama, with regular operations managing investments for at least two years before the date the offer and/or sale is, which own a patrimony consisting of no less than One Million Dollars (US$1,000,000.00), according to the last audited financial statements and whose principal officers, or in their absence, the majority of Directors and Officers must have at least two years of experience in regular investment management; and (iii) Sovereign States and public entities that by their nature are authorized to make investments.
Therefore, in relation to the exemption of the obligation to register securities before the SMV, it is proposed that public offers of securities, whether of fixed or variable income (and the resale of such securities in the secondary market) that comply with characteristics similar to the following be considered exempt from registration: (i) the securities that are offered by the issuer through an Internet crowdfunding platform duly notified to the SMV (hereinafter, a “Crowdfunding Site”); (ii) the amount of capital that the issuer wishes to collect (the “Requested Capital”) shall be expressed on the Crowdfunding Site, as well as the amount of securities to be offered, its price and the proportion of total capital represented by each security; (iii) the issuer shall establish a period of time during which potential investors may express their willingness and commitment to purchase the securities (the “Commitment Period”); (iv) the securities shall be issued and the issuer shall receive the funds only when the target is met, that potential investors have expressed, within the Commitment Period, their commitment to purchase securities for an amount at least equivalent to the Requested Capital (the “Minimum Target”); (v) individuals or legal entities with an annual income of less than US$100,000.00 may invest no more than 10% of their income within a period of twelve (12) months; (vi) individuals or legal entities with an annual income of more than US$100,000.00 may invest no more than 15% of their income up to a maximum amount of US$100,000.00 within a period of twelve (12) months; (vii) any issuer that has placed securities on the basis of an exempt crowdfunding offer, by reason of having complied with all the requirements, may carry out additional crowdfunding offers; (viii) an offer of securities under the proposed exemption, if adopted, would not prohibit the issuer from making other offers, sales or transactions exempt from registration as established in Article 129 of the Securities Act (for example, the offers of securities that an issuer carries out under a crowdfunding exemption are excluded from the computation of the investors referred to in numeral 2 of Article 129 on private placements); and (ix) issuers that offer securities under a crowdfunding exception could, in any case, try to obtain financing through other sources of funding, such as bank loans and venture capital.
Notwithstanding the foregoing and with the interest of protecting the investing public, the issuers that offer securities based on a registration exemption such as the above, or similar, must be subject to compliance with the provisions of articles 246 and 248 of the Securities Act in relation to the prohibition of incurring, during the process of offering and placing the exempt securities, in fraudulent or misleading acts, in the making of false statements about a material fact or omitting to disclose a material fact.
In addition to an exemption from the obligation to register securities with the SMV, in order for crowdfunding to work as an accessible measure of financing, it is also required that operators of Crowdfunding Sites are exempt from obtaining an investment adviser license, broker-dealer firm license or stock exchange license. For the purposes of the foregoing, it is proposed that operators of Crowdfunding Sites that meet the following requirements be considered exempt from obtaining the above licenses: (i) notify the SMV of the operation of a Crowdfunding Site within five (5) business days following the launching of the Crowdfunding Site; (ii) not recommend, qualify or otherwise provide investment advisory services in relation to the securities offered through its platform; (iii) obtain the information required by Law 23 of 2015 and its regulations from potential issuers of securities; and (iv) adopt terms and conditions under which (a) the operator of the Crowdfunding Site is prohibited and, if it is a legal entity, its shareholders, directors, officers and employees, to purchase securities offered through the Crowdfunding Site, (b) the issuers of securities undertake to issue the securities in case the Minimum Target is met within the Commitment Period, and (c) the persons who wish to invest through the Crowdfunding Sites recognize that the expressions of willingness to purchase securities during a Commitment Period constitute promises to purchase the securities and pay their price in case the Minimum Target is met but granting those persons who have expressed interest in acquiring the securities the possibility of not having to purchase the securities if they communicate their wish to opt out in the financing within a set period of time before the Commitment Period expires.
The exemptions proposed in this document to encourage crowdfunding in the Republic of Panama are based on similar standards adopted in other jurisdictions. On April 5, 2012, the former president of the United States of America, Barack Obama, signed the so-called “Jumpstart Our Business Startups Act,” also known as the “JOBS Act,” which was a law promulgated with the intention of motivating the financing of small businesses in that country and resulted in the adoption of exemptions similar to those suggested here in the securities regulatory framework of the United States of America. This year, Argentina enacted Law 27,349, which, in its Title II, creates the figure of “crowdfunding systems”.
In other words, certain jurisdictions are adopting new rules so that crowdfunding is a real and accessible source for raising capital and financing for micro, small and medium enterprises. The Republic of Panama cannot be left behind in this aspect and the time is still favorable for us to take the necessary actions and measures in order to adopt rules that can help promote crowdfunding not only to our local entrepreneurs but also to attract those foreigners innovators that do not have this possibility of financing in their respective jurisdictions. Being short in this attempt may even cause our local talent to turn to other countries that have rules that encourage and facilitate crowdfunding in order to obtain funds to develop their ideas and, most likely, end up implementing them in the territory of those same jurisdictions who had the vision of accommodating this figure to help them launch their businesses in the beginning.
Morgan & Morgan and five attorneys of the firm recognized by the IFLR1000 Financial and Corporate guide 2019
Panama, January 4, 2019. Morgan & Morgan received top-tier rankings in the IFLR1000´s 2019 Financial and Corporate guide in the categories Financial and Corporate and Project Development.
In addition, five (5) lawyers of the firm are listed as leading professionals in their areas of practice:
• Francisco Arias
• Carlos Ernesto Gonzalez Ramirez
• Inocencio Galindo
• Ramón Varela
• Aristides Anguizola
The IFLR1000 rankings are the result of a 6-month, in depth research project by IFLR 1000 independent editorial team who consider three main criteria: transactional evidence, peer feedback, and client feedback.
Panama, September 25, 2018. Morgan & Morgan and sixteen attorneys of the firm were recognized in the Chambers Latin America 2019, guide of the best lawyers and law firms across 20 countries of Central America, the Caribbean, South America and Mexico.
The firm has been ranked in the first Bands within the areas of Banking & Finance, Capital Markets, Corporate/M&A, Dispute Resolution, Energy & Natural Resources, Intellectual Property, Offshore, Projects, Real Estate, Shipping and Shipping Litigation.
Likewise, the publication noted as leaders in their areas attorneys Inocencio Galindo, Francisco Arias, Ramon Varela, Roberto Vidal, Simon Tejeira, Jose Carrizo, Luis Vallarino, Ana Carolina Castillo, Allen Candanedo, Maria Eugenia Brenes, Roberto Lewis, Luis Manzanares, Enrique De Alba, Jazmina Rovi, Juan David Morgan Jr. and Francisco Linares.
One of the clients interviewed stated that “Judging by the results that the firm achieves, I can say that their advice is effective and arrives in a timely manner. I would highlight their availability and technical competence”.
About Morgan & Morgan
With over 80 lawyers and 20 practice areas, Morgan & Morgan is a full service Panamanian law firm, regularly assisting local and foreign corporations from different industries, as well as recognized financial institutions, government agencies and individual clients. Of particular note is our continuous advice for clients involved in all stages of the development of important projects related to energy, water supply, construction, oil, mining, public infrastructure, retail, ports, transportation, among others. Learn more at www.morimor.com.
Panama, August 25, 2018. With the topic “Panamanian Fiscal Regulatory Framework in International Securitization”, Mr. Francisco Arias G., partner in charge of the Securities and Capital Markets practice group of Morgan & Morgan, participated as a speaker in the conference Latest Trends in Asset Securitization: Applications to the Panamanian Market. The event was organized by Flex Funds, a firm specializing in vehicles for worldwide investment.
The seminar was held at the Hilton Hotel in Panama City, and was attended by representatives of financial institutions, investment advisors, asset managers, family businesses, among other local and international professionals.
Other topics were discussed in the activity, such as Perspectives and triggering factors in the mergers and acquisitions sector in Central America, the securitization of assets and their applications and the experiences in the securitization of assets in securities firms in Panama.
About Morgan & Morgan
In the sector of capital markets in Panama, Morgan & Morgan focuses on public and private offerings, some with cross border components. The Securities and Capital Markets team of the firm has been involved in numerous transactions involving several billions of dollars. The firm also have assisted many clients in obtaining various licenses from the Superintendence of Securities Markets, including securities brokerage and investment fund administration.
Once again, Latin Lawyer 250 recommended Morgan & Morgan as the largest firm in Panama. “A large headcount and an established presence in the market gives Morgan & Morgan the manpower and experience required to guide some of Panama’s most significant transactions”, states the guide.
This 2018 edition looks at each jurisdiction firm by firm and presents a complete analysis of most recent developments, practices and leading professionals field by field.
Partners Juan David Morgan Jr., Francisco Linares, Enrique De Alba, Jazmina Rovi, Inocencio Galindo, Francisco Arias, Ramon Varela, Roberto Lewis, Raul Castro, Ricardo Aleman, Albalira Montufar, Maria Teresa Mendoza, Mercedes Arauz de Grimaldo, Enrique Jimenez and Jose Carrizo, received mentions as key players.