Circular RUNOR 1 - 1147: Minimum Capital, Computable Equity, Guarantees, and Sanctions for Exchange Houses and Agencies

"2015 - YEAR OF THE BICENTENNIAL OF THE CONGRESS OF THE FREE PEOPLES" COMMUNICATION "A" 5806 17/09/2015 TO FINANCIAL ENTITIES, TO EXCHANGE HOUSES, AGENCIES, OFFICES AND BROKERS, TO NON-FINANCIAL COMPANIES ISSUING CREDIT CARDS, TO CREDIT PORTFOLIO ADMINISTRATORS OF EX-FINANCIAL ENTITIES, TO TRUSTEES OF FINANCIAL TRUSTS INCLUDED IN THE FINANCIAL ENTITIES LAW, TO ELECTRONIC CLEARING HOUSES, TO REPRESENTATIVES OF FOREIGN FINANCIAL ENTITIES NOT AUTHORIZED TO OPERATE IN THE COUNTRY:
Ref.: Circular
RUNOR 1 - 1147
Exchange houses, agencies, offices and brokers. Minimum capital. Computable equity. Guarantees. Proceedings and sanctions in the summary proceedings provided for in Article 41 of Law 21.526. Proceedings for infractions to the Criminal Exchange Regime. Modifications. ____________________________________________________________ We address you to inform you that this Institution adopted the following resolution, which, in its pertinent part, provides:

"1. Replace point 1.3.1. of Chapter XVI of Circular RUNOR - 1 (text according to Communication "A" 3795) with the following:
"1.3.1. Minimum requirements.
1.3.1.1. Exchange houses and agencies must maintain the minimum equity responsibility indicated below:

ENTITY TYPE | CATEGORY | Exchange Houses (in thousands of pesos) | Exchange Agencies (in thousands of pesos) --- | --- | --- | --- I | | 12,000 | 6,000 II | | 7,000 | 3,500 III | | 4,500 | 2,250 IV | | 2,500 | 1,250

1.3.1.2. The categories indicated include entities located in the following jurisdictions:

CATEGORY	TYPE	JURISDICTION	PROVINCE
I		Autonomous City of Buenos Aires
II	A	Greater Buenos Aires	Buenos Aires
II	A	Greater Córdoba	Córdoba
II	A	Greater Mendoza	Mendoza
II	A	Greater Rosario	Santa Fe
II	P	Capital and Iguazú	Misiones
II	P	Paso de los Libres and Santo Tomé	Corrientes II

Where "Type" corresponds to:
A: Agglomeration.
P: Municipality or Department.
For the purpose of determining the composition of urban agglomerations, the definitions adopted for the Permanent Household Survey (EPH) prepared by the National Institute of Statistics and Censuses (INDEC) will be taken into account.
1.3.1.3. Entities that have any branch in a higher category location must maintain the equity responsibility required for that latter category, without prejudice to what is established in point 1.3.2."

2. Provide that what is provided in point 1 of this communication will be enforceable by the close of the semester ending on 12.31.15 inclusive.

3. Replace point 1.3.3. of Chapter XVI of Circular RUNOR - 1 (text according to Communication "A" 3795) with the following:
   "1.3.3. Non-compliance.
   Non-compliance with the minimum capitals fixed in the previous point will result in the suspension for 60 calendar days of the authorization to operate.
   In the event that such deviation is not regularized through the corresponding capital integration during that 60 calendar day period, from the following day the Central Bank of the Argentine Republic will initiate the procedure for the revocation of said authorization, maintaining the suspension of the activity. The Superintendence of Financial and Exchange Entities may extend by 30 calendar days the period provided for in the first paragraph when duly founded reasons so warrant. Once the revocation procedure has been initiated, the regularization of the non-compliance will not be admitted."

4. Replace points 1.3.4.1. and 1.3.4.2. of Chapter XVI of Circular RUNOR - 1 (text according to Communications "A" 4631, 5093 and 5671) with the following:

"1.3.4.1. For the purposes indicated in these regulations, equity responsibility is defined as integrated by the following concepts:
i) Share capital. ii) Equity adjustments. iii) Non-capitalized contributions. iv) Profit reserves. v) Unassigned results. The positive result of the last closed fiscal year will be computed once the auditor's report is available. vi) Deductible concepts. a) Balances in favor resulting from the application of the minimum presumptive income tax -net of provisions for devaluation risk- for amounts exceeding 5% of the computable equity responsibility corresponding to the previous semester. b) Shareholders. c) Non-capitalized contributions that do not have the prior consent of the Central Bank of the Argentine Republic or the Superintendence of Financial and Exchange Entities, as established in points 1.16.1. or 1.16.2., as applicable. d) Real estate whose accounting registration is not backed by the relevant deed of transfer of ownership duly registered in the respective Real Estate Registry, except those acquired through judicial or administrative auction. The deduction will be equivalent to 100% of the value of said assets from their incorporation into equity, until the month prior to the regularization of that situation. The Superintendence of Financial and Exchange Entities may dispose exclusions in this matter, to the extent that they do not undermine the objective of the deduction. e) Upon request made by the Superintendence of Financial and Exchange Entities and with effect from the date indicated in each case, exchange houses and agencies must deduct the amounts of the included assets, when from the elements made available to the acting inspectors it emerges that the accounting registrations made by the entity do not accurately reflect the economic and legal reality of the operations or that actions or tricks have been carried out to distort or disguise the true nature or scope of the operations, without prejudice to the summary proceedings that may correspond. f) In the particular case of exchange houses, balances registered in the asset in correspondent accounts with banks abroad that do not comply with the provisions of point 3.1. of the regulations on "Credit Evaluations" or that do not have an international risk rating included in the "investment grade" category will be computed. This deduction will be made for the highest balance in each entity that is registered during the semester to which the determination of the computable equity responsibility corresponds.

1.3.4.2. For all regulatory purposes related to capital, its integration and increase, contributions may be made:
i) By crediting them to accounts opened in local financial entities. ii) In national public securities -which appear in the volatility list published by the Central Bank of the Argentine Republic- or in their monetary regulation instruments, for which only one species must be chosen. To this effect, the 72-hour spot quotation of the Electronic Open Market will be considered. Regarding said contributions, the origin of the funds must be accredited by providing the information provided for in points 1.16.3.2. and 1.16.3.3., which will be evaluated in accordance with what is established in points 1.16.1. or 1.16.2., as the case may be."

5. Replace points 1.5.1., 1.5.2. and 1.5.3. of Chapter XVI of Circular RUNOR - 1 (text according to Communications "A" 3795, 4631, 5671 and 5740) with the following:

"1.5.1. Exchange houses and agencies must constitute a guarantee not less than 10% of the capital requirement applicable to them, with a minimum of $ 500,000, which must respond to the compliance with the regulations governing their activity. In the case of exchange offices, the guarantee will amount to $ 500,000. When constituting said guarantees, the origin of the funds must be accredited by providing the relevant information, which will be evaluated by the Central Bank of the Argentine Republic.

1.5.2. It must be integrated in national public securities -which appear in the volatility list published by the Central Bank of the Argentine Republic- or in their monetary regulation instruments, for which only one species must be chosen.
To this end, a pledge will be constituted in favor of this Institution with respect to said securities deposited in special accounts opened in the name of the entity and to the order of the Central Bank of the Argentine Republic in the Central Registry and Settlement of Public Liabilities and Financial Trusts (CRyL), according to the procedure enabled for this purpose. The income and/or amortization services of said instruments will also be computed as guarantee to the extent that they are deposited in those special accounts and pledged in favor of this Institution.

1.5.3. Non-compliance with the effectiveness of the guarantee will result in the suspension for 60 calendar days of the authorization to operate.
In the event that such deviation is not regularized through the corresponding integration of the guarantee during that 60 calendar day period, from the following day the Central Bank of the Argentine Republic will initiate the procedure for the revocation of said authorization, maintaining the suspension of the activity. The Superintendence of Financial and Exchange Entities may extend by 30 calendar days the period provided for in the first paragraph when duly founded reasons so warrant. Once the revocation procedure has been initiated, the regularization of the non-compliance will not be admitted."

6. Leave point 1.5.5. of Chapter XVI of Circular RUNOR - 1 (text according to Communication "A" 3795) without effect.

7. Replace the first and second paragraphs of point 1.16.1., point 1.16.2. and item a) of point 1.16.3.2.1. of Chapter XVI of Circular RUNOR - 1 (text according to Communications "A" 4510 and 5006) with the following:

"1.16.1. Directors, administrators, partners, members of supervisory boards, and auditors of entities constituted in the form of a joint-stock company or limited partnership by shares, must inform without delay the Superintendence of Financial and Exchange Entities about any negotiation of shares or capitalization of irrevocable contributions made by shareholders that do not respond proportionally to their shareholdings or capital parts, or any other circumstance capable of producing changes in the respective shareholder groups, and the transfers of shares and the capitalization of irrevocable contributions, which represent, individually or jointly considered over a period of six consecutive months, 5% or more of the capital or votes corresponding to the entity. The same obligation will apply to the managers of limited liability companies and to the sellers and buyers of shares and social quotas. Said information must be concretized within five business banking days from the date of the first of the following acts: signing of the contract or pre-contract or delivery of the deposit or payment on account, which cannot exceed 20% of the price, or the deposit of funds as an irrevocable contribution. Without prejudice to what is provided above, said operations will be subject to the prior authorization of the Central Bank of the Argentine Republic."

"1.16.2. Cases of negotiation of shares or capitalization of irrevocable contributions made by shareholders not included in the previous point must have the prior consent of the Superintendence of Financial and Exchange Entities under the conditions provided in point 1.16.1. In these cases, the exchange house or agency must send to the Superintendence of Financial and Exchange Entities the general and particular information of natural and legal persons, mentioned in points 1.16.3.1., 1.16.3.2, 1.16.3.3. and 1.16.3.4."

"a) AVAILABILITY.

• IN CASH
• IN ENTITIES (with indication of the entity and nature of the deposits).
• IN FOREIGN CURRENCY (type of currency and its equivalent in Argentine pesos at the closing buying exchange rate of the day for banknotes of the Bank of the Argentine Nation)."

8. Replace points 2.6.1. and 2.6.2. of Chapter XVI of Circular RUNOR - 1 (text according to Communication "A" 2744) with the following:

"2.6.1. Exchange brokers, whether natural or legal persons, must constitute a guarantee in favor of the Central Bank of the Argentine Republic of $ 500,000 and $ 1,000,000, respectively, which will respond to the compliance with the regulations governing their exercise. The constitution of the guarantee must be concretized prior to the initiation of activities. A guarantee equivalent to 50% of the amount corresponding for each of the designated agents must also be constituted. When constituting the guarantees, the origin of the funds must be accredited by providing the relevant information, which will be evaluated by this Institution. Non-compliance with the effectiveness of the guarantee will result in the suspension for 60 calendar days of the authorization to operate. In the event that such deviation is not regularized through the corresponding integration of the guarantee during that period, once the 60 calendar day period has been fulfilled, the Central Bank of the Argentine Republic will initiate the procedure for the revocation of said authorization, maintaining the suspension of the activity. The Superintendence of Financial and Exchange Entities may extend by 30 calendar days the period provided for in the fifth paragraph when duly founded reasons so warrant. Once the revocation procedure has been initiated, the regularization of the non-compliance will not be admitted.

2.6.2. The guarantee must be integrated in national public securities -which appear in the volatility list published by the Central Bank of the Argentine Republic- or in their monetary regulation instruments, for which only one species must be chosen.
To this end, a pledge will be constituted in favor of this Institution with respect to said securities deposited in special accounts opened in the name of the exchange broker and to the order of the Central Bank of the Argentine Republic in the Central Registry and Settlement of Public Liabilities and Financial Trusts (CRyL), according to the procedure enabled for this purpose. The income and/or amortization services of said instruments will also be computed as guarantee to the extent that they are deposited in those special accounts and pledged in favor of this Institution."

9. Establish that, when it comes to exchange houses, agencies, offices or brokers authorized as of the date of publication of this communication, the constitution of the guarantees established in points 1.5.1. and 2.6.1. of Chapter XVI of Circular RUNOR - 1 (text according to points 5. and 8. of this communication) will be enforceable from 90 calendar days counted from that date.

10. Provide that, for the purposes of what is provided in points 5. and 8. of this communication, deposits in special custody accounts in US dollars, time deposit certificates or bonds (guarantees) that are in force as of the date of this provision, must be replaced -by exchange houses, agencies, offices or brokers, as applicable- by eligible instruments, within 90 calendar days of the date of publication of this communication or -if applicable- upon their maturity, if this occurs subsequently.

11. Replace point 3.1. of the regulations on "Proceedings and sanctions in the summary proceedings provided for in Article 41 of Law 21.526" with the following:

"3.1. At the request of natural and/or legal persons sanctioned with fines imposed under the Financial Entities Law, the Central Bank of the Argentine Republic may grant payment facilities in the following cases:
3.1.1. When financial entities credibly demonstrate that the fine generates a defect in the integration of the minimum capital requirement. The requests must be accompanied by a plan for the inflow of new capital contributions compatible with the plan granted and the overcoming of minimum capital restrictions. This, without prejudice to the application of point 1.1. of the regulations on "Non-compliance with minimum capitals and technical relations. Applicable criteria".
3.1.2. When natural or legal persons -who are not financial entities nor exchange houses, agencies or offices- sanctioned with a fine under Article 41 of Law 21.526 credibly demonstrate, with the last annual tax return of income tax that is exigible, having income -taxed or not by said tax- that does not exceed a total of $ 700,000 (seven hundred thousand pesos), provided that it is not fines imposed under Article 38 of Law 21.526.
If, due to their income, they do not reach the obligation to file a tax return for said tax for the last expired period, the request must be accompanied by a declaration on the income of the applicant, along with the corresponding documentation, for the last year."

12. Provide that to natural and legal persons not subject to the control of the Central Bank of the Argentine Republic who are sanctioned with a fine for infringement to the Criminal Exchange Regime -except that it concerns fines imposed under Article 1, items a) and b), of Law 19.359- and who credibly demonstrate, with the last annual tax return of income tax that is exigible, having income -taxed or not by said tax- that does not exceed a total of $ 700,000 (seven hundred thousand pesos), the Central Bank of the Argentine Republic may grant them payment facilities under the terms of Section 3. of the regulations on "Proceedings and sanctions in the summary proceedings provided for in Article 41 of Law 21.526".

If, due to their income, they do not reach the obligation to file a tax return for said tax for the last expired period, the request must be accompanied by a declaration on the income of the applicant, along with the corresponding documentation, for the last year.

13. Provide that to requests presented for payment facilities originating from a non-compliance derived from the application of the provisions published through Communication "A" 5690 by entities included in the scope of control of the Central Bank of the Argentine Republic under the terms of Law 18.924, within the framework of what is provided in Section 3. of the regulations on "Proceedings and sanctions in the summary proceedings provided for in Article 41 of Law 21.526", which are pending treatment as of the date of issuance of this communication, these provisions will apply to them."

Likewise, we inform you that we will subsequently send you the sheets that, in replacement of those previously provided, should be incorporated into the regulations on "Proceedings and sanctions in the summary proceedings provided for in Article 41 of Law 21.526" as a consequence of the measure adopted.

We salute you attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Darío C. Stefanelli Juan C. Isi
Principal Manager of Issuance and
Normative Applications
General Sub-manager of Norms