Operations with mutual investment funds: amendments to Circular RUNOR 1-362, LISOL 1-264, OPRAC 1-463

1999 - Year of Export BANCO CENTRAL DE LA REPÚBLICA ARGENTINA __________________________________________________________________ COMMUNICATION "A" 2996 I 27/09/99 __________________________________________________________________ TO FINANCIAL INSTITUTIONS: Ref.: Circular RUNOR 1 - 362. LISOL 1 - 264. OPRAC 1 - 463. Operations with mutual investment funds. Modifications We address you to inform you that this Institution adopted the following resolution: "- Replace point 1. of the resolution disseminated through Communication "A" 2953, with the following: "1. Establish, regarding operations with mutual investment funds, the following provisions: "1.1. As of 1.8.99, financial institutions may not hold units of mutual investment funds, whatever the nature of the assets constituting the fund's estate. Excepted from this limitation are holdings of: a) units corresponding to funds computable as integration of minimum liquidity requirements. b) units of new mutual investment funds for 120 consecutive days counted from the date on which the public offering is launched, with respect to which they act as managers, custodians, placement agents or promoters, to the extent that the holdings - calculated on a monthly average basis - do not exceed the equivalent amount of 2% of the integration of minimum liquidity requirements of the corresponding month or $ 2,000,000, whichever is greater. Institutions may not carry out any transaction that implies providing liquidity to mutual investment funds - whether or not they perform the functions of managers, custodians, placement agents or promoters with respect to them -, such as the purchase or assignment of the assets composing their estate, unless they are national public securities with normal and habitual quotation, in the country or abroad, widely disseminated and easily accessible to public knowledge, in transactions agreed at market prices. The established limitations must be observed on an individual and consolidated basis.

1.2. Effective from 1.10.99, financial institutions that, directly or indirectly, act as managers, custodians, placement agents or promoters of mutual investment funds, must inform investors that the fund's units do not constitute deposits in the intervening financial institution, which is also prohibited from assuming any commitment that implies guaranteeing, at any time, the maintenance of the value of the invested capital, its yield, the redemption value of the units or providing liquidity for that purpose.

This shall be expressly stated in the graphic advertising and documentation (subscription applications and account statements detailing holdings of units) related to the placements made.

For this purpose, in a legible and prominent manner, the following legend shall be used:

"Investments in units of the Fund do not constitute deposits in ................ (name of the intervening financial institution) for the purposes of the Financial Institutions Law nor do they have any of the guarantees that such demand or time deposits may enjoy in accordance with the legislation and regulations applicable to deposits in financial institutions. Likewise, ................. (name of the intervening financial institution) is prohibited by regulations of the Banco Central de la República Argentina from assuming, tacitly or expressly, any commitment regarding the maintenance, at any time, of the value of the invested capital, the yield, the redemption value of the units or the provision of liquidity for that purpose".

Furthermore, said legend must be prominently displayed in all premises of the intervening institutions where units of the fund are promoted and/or sold."

In an annex we send you the updated text of the applicable regulations on the subject of reference.

We greet you very attentively.

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Juan Carlos Isi
Susana Olgiati
Submanager of Regulatory Regime
General Manager a/c Management of Norms for Financial Institutions

ANNEX:
4 sheets.

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| B.C.R.A. |UPDATED TEXT OF THE PROVISIONS|
Annex
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ON OPERATIONS
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WITH MUTUAL INVESTMENT FUNDS
|Com. "A" 2996|
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1. Purchase or assignment of units.

As of 1.8.99, financial institutions may not hold units of mutual investment funds, whatever the nature of the assets constituting the fund's estate.

Excepted from this limitation are holdings of:

a) units corresponding to funds computable as integration of minimum liquidity requirements.

b) units of new mutual investment funds for 120 consecutive days counted from the date on which the public offering is launched, with respect to which they act as managers, custodians, placement agents or promoters, to the extent that the holdings -calculated on a monthly average basis- do not exceed the equivalent amount of 2% of the integration of minimum liquidity requirements of the corresponding month or $ 2,000,000, whichever is greater.

Without prejudice to the limits established above, the holdings of units are computable for the relationships established on a global basis.

2. Transactions with assets composing the estate of the funds.

Entities may not carry out any transaction that involves granting liquidity to mutual investment funds - whether or not they perform the functions of managers, custodians, placement agents or promoters with respect to them -, such as the purchase or assignment of the assets that make up their portfolio, unless they are national public securities with normal and habitual quotation, in the country or abroad, of broad dissemination and easy access to public knowledge, in transactions agreed at market prices.

The restriction does not prevent entities from acting as intermediaries - whether as agents of the Electronic Open Market or through stockbrokers - in transactions with other instruments of the funds. Transactions must be completed on the same day, so that at the daily close the securities involved are not recorded as holdings.

3. Bases for compliance with the restrictions.

The established limitations must be observed on an individual and consolidated basis.

4. Prohibition on assuming commitments to maintain the value of invested capital.

4.1. Definition.

Financial entities that, directly or indirectly, act as managers, custodians, placement agents or promoters of mutual investment funds must inform investors that the fund's units do not constitute deposits in the intervening financial entity, which is also prohibited from assuming any commitment that implies guaranteeing, at any time, the maintenance of the value of invested capital, its yield, the redemption value of the units, or granting liquidity for that purpose.

This measure is not applicable in cases where the resources of a fund are placed in term investments - in accordance with current regulations - that contemplate that possibility or where options with the same effect have been directly sold to the fund, regardless of the intervening entity.

4.2. Advertising.

The impossibility of assuming the aforementioned commitments as well as the fact that they do not constitute deposits shall be expressly stated in the graphic advertising and documentation (subscription applications and account statements detailing holdings of units) related to the placements made.

For this purpose, the following legend shall be used in a legible and prominent manner:

"Investments in units of the Fund do not constitute deposits in ................ (name of the intervening financial entity) for the purposes of the Financial Entities Law nor do they have any of the guarantees that such demand or term deposits may enjoy in accordance with the legislation and regulations applicable to deposits in financial entities. Likewise, ................. (name of the intervening financial entity) is prohibited by regulations of the Central Bank of the Argentine Republic from assuming, tacitly or expressly, any commitment regarding the maintenance, at any time, of the value of invested capital, the yield, the redemption value of the units, or the granting of liquidity for that purpose".

In addition, said legend must be prominently displayed in all premises of the intervening entities where units of the fund are promoted and/or sold."

5. Naming of funds related to entities.

With effect from 1.1.2000, the name of mutual investment funds in respect of which financial entities act, directly or indirectly, as managers, custodians, placement agents or promoters must clearly allow distinguishing that they are independent from each other.

Consequently, as of that date, the use of common words or the same root, abbreviations, acronyms, symbols, etc., that identify them with financial entities shall not be allowed, so other names must be used that leave no doubt to the investing public that the mutual investment funds do not have the patrimonial or financial backing of the intervening financial entity.

For the purposes of the application of article 41 of the Financial Entities Law, financial entities that fail to comply with this provision shall be subject to a daily fine equivalent, at a minimum, to 0.5% and, at a maximum, to 1% of the portfolio of the funds included, recorded as of the last day of the month prior to that in which the non-compliance occurs.

6. Minimum liquidity requirements.

Demand placements in financial entities - whatever the form of the deposit - that, at a minimum, must constitute the portfolio of mutual investment funds, in accordance with the provisions of article 33 of Chapter X - Mutual Investment Funds - of the Rules of the National Securities Commission, shall observe the following minimum liquidity requirements:

Month	Rates in %
August 1999	20
September 1999	40
October 1999	60
November 1999	80
from December 1999	100

The requirements shall apply even in cases where the placements are remunerated at rates that exceed by more than one point the nominal annual interest rate for savings account deposits in the B.C.R.A. survey.

For this purpose, it shall be appropriate to identify the accounts opened for the purpose of complying with the requirement of the National Securities Commission.