Comunicado No. 2 General Provisions Applicable to Simplified Issuers and Securities Subject to Simplified Registration

Mexico City, January 21, 2025.
Press Release No.: 002

CNBV publishes in the Official Gazette of the Federation the General Provisions Applicable to Simplified Issuers and Securities Subject to Simplified Registration

• The National Banking and Securities Commission (CNBV) publishes today in the Official Gazette of the Federation (DOF) the General Provisions Applicable to Simplified Issuers and Securities Subject to Simplified Registration (Unified Circular for Simplified Issuers, CUES).
• The reforms proposed in the Securities Market Law and the CUES favor access for smaller companies, by creating regulatory conditions that will allow them to participate in the securities market through a faster, simpler, and less costly process.

The National Banking and Securities Commission (CNBV) published today in the Official Gazette of the Federation (DOF) the General Provisions Applicable to Simplified Issuers and Securities Subject to Simplified Registration, which are part of the reform to the Securities Market Law (LMV) published on December 28, 2023, through which the new modality of securities registration known as "simplified" was established.

These provisions were the result of various working groups during the 2024 exercise with the participation of the Secretariat of Finance and Public Credit, Bank of Mexico, the National Commission for the Savings System for Retirement (CONSAR), and industry representatives (Mexican Association of Stock Exchange Institutions, AMIB).

In the session of September 5, 2024, the Governing Board of the CNBV, in accordance with what is established in article 90 bis of the LMV, authorized the project of General Provisions applicable to simplified issuers and securities subject to simplified registration (CUES), for consultation by the various participants in the securities market such as stock exchanges, intermediaries, other authorities, investors, and any interested third party.

The next step corresponds to the stock exchanges, which must adjust their internal regulations and, in the case of brokerage houses, their internal manuals, in order to incorporate the functions, responsibilities, and powers attributed to them in the CUES. Meanwhile, the CNBV will review the secondary peripheral provisions, such as those applicable to brokerage houses, stock exchanges, external auditors, among others, with the objective of strengthening this "simplified" regime of securities registration in the RNV.

It is important to highlight that, with the reforms proposed in the LMV, one of its objectives is to democratize access to financing, and the CUES favors smaller companies by creating regulatory conditions that will allow them to participate in the securities market through a faster, simpler, and less costly process, such as simplified issuances.

Companies that decide to carry out simplified issuances will have access to a new source of resources for their development, which will also be an entry point to new markets. In addition, the market will foster the specialization and professionalization of their teams, which will benefit the business sector as a whole.

With actions such as these, the CNBV fosters and creates regulatory conditions to have a stock market that is increasingly competitive, which incentivizes investors to remain in the national market, achieve reduction in costs (monetary and regulatory) for listing and maintenance.

Below, the main characteristics defined in the Provisions are detailed:

• The minimum requirements and limits that simplified issuers must observe to be subject to this regime, such as the maximum amounts per issuance and accumulated per fiscal year.

• Securities subject to simplified registration in the RNV may only be offered to institutional and qualified investors; therefore, securities market intermediaries may only offer the intermediation service with securities registered under the simplified modality to this type of investor.

• Simplified issuers of shares will be subject to a maximum amount per issuance and accumulated per fiscal year of up to 1,250,000,000 investment units, and must adopt the figure of Investment Promoting Anonymous Societies (SAPI).

• There will be 2 levels of simplified issuers:
  a) Level I, will be those simplified issuers of debt instruments subject to a maximum amount per issuance of up to 75,000,000 UDIS and up to an accumulated amount per fiscal year of up to 900,000,000 UDIS. b) Level II, will be those simplified issuers of debt instruments or asset-backed securities, whose maximum amounts per issuance and accumulated per fiscal year are up to 1,250,000,000 UDIS.

• The values that may be subject to simplified registration, such as: shares, CPOs, securities representative of share capital of foreign societies, debt instruments, asset-backed securities, as well as structured securities (whose characteristics will be determined subsequently).

• Simplified issuers that participate in Level II, as well as those of asset-backed securities, will be required to present, to the placing intermediary, a report on the credit quality of the issuance, issued by a securities rating institution.

• To obtain the simplified registration of securities in the RNV, simplified issuers must obtain income as a result of their main activity, as well as have a minimum age of two years of operation, and in the case of asset-backed securities, it will be the settlor who contributes the assets destined to ensure the fulfillment of the payment of the issuance who must obtain income as a result of their main activity, as well as have a minimum age of two years of operation.

• Simplified issuers, for the purpose of obtaining simplified registration, must also have financial statements audited by an independent external auditor, according to the level of the issuer and the value subject to registration; this information must be prepared with the different accounting frameworks established such as International Financial Reporting Standards; as well as Financial Information Standards recognized and issued by the Mexican Council of Financial Information Standards, A.C. or standards issued by other competent authorities, among others.

• Among the obligations that the placing intermediary will have in the simplified registration process, such as, among others: i) ensure that they comply with the characteristics and requirements established in the LMV, in the provisions, in the internal regulation of the stock exchange where it will be listed, as well as in the internal manuals of the brokerage houses; ii) inform institutional or qualified investors about the risks inherent to the securities in question; iii) retain the issuance file for a period of 5 years subsequent to the date on which the simplified registration is cancelled, and iv) establish in their manuals certain minimum requirements, in order to be verified in each issuance.

• The stock exchange will review the information and documentation that makes up the issuance file and, if applicable, will issue a favorable opinion or abstain from the simplified registration of the securities, in case that the information and documentation presented does not comply with the requirements indicated in the internal regulation of the aforementioned stock exchange; on the other hand, they may indicate in their internal regulations, the requirements and listing maintenance, additional to those established in the LMV and the CUES, which they consider necessary for the protection of the interests of the investing public, such as corporate governance characteristics, minority rights, and the forms to carry out public acquisition offers.

• Given that the role of the Commission will be limited and it will not be responsible for verifying the documentation that makes up the files, as well as that revealed by the issuers to the investing public, it must carry out the simplified registration in the RNV within a period of 2 business days.

• The cancellation of the simplified registration of securities will be requested to the Commission by the stock exchange or by the simplified issuer, with the favorable opinion of the stock exchange. In the case of debt instruments and asset-backed securities, the stock exchange will review that the simplified issuer is up to date with its obligations or that the agreement of the holders' assembly that determines the registry cancellation is presented.

• Simplified issuers must provide annually to the stock exchange and the general public, the annual financial statements or equivalents, audited with a favorable or unmodified opinion by an external auditor depending on the nature of the simplified issuer.

• Stock exchanges must indicate in their internal regulations, the additional information that simplified issuers must deliver periodically, in order for investors to know the financial, economic, accounting, legal, and administrative situation of the simplified issuer; as well as the acts, facts, or events that will be considered relevant events, as well as the criteria that must be followed to determine when an event has such character.

Consult the complete publication of the Provisions in the Official Gazette of the Federation:
https://bit.ly/4hpHPyK

The CNBV reaffirms its high degree of commitment so that the regulatory framework and timely supervision continue to support the healthy development of the securities market in Mexico.