Last updated: 05:36 / Tuesday, 18 June 2013
Regulation by the SVS

Chile Modifies the Requirements for Securities Brokers and Asset Managers

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Chile Modifies the Requirements for Securities Brokers and Asset Managers

On Friday, the Chilean Superintendency of Securities and Insurance (SVS) issued Circular No. 2108, repealing circulars Nº 1,862 and Nº 1,894, which until last Friday regulated the third-party portfolio management service offered by securities brokers and fund managers.

The new legislation standardizes and updates the requirements for securities brokers and asset managers who provide portfolio management services to third parties, thereby encouraging competition between them.

It also extends the wide range of financial products they can offer and improves the information they provide to their clients, stressing that the broker or manager shall at all times serve to the best advantage of each client and take the necessary measures to safeguard an adequate combination of performance and security of the client’s investment.

The new circular, which came into effect on Friday, allows investment in all types of financial instruments and contracts, amongst other things, thereby eliminating the restrictions which securities brokers have operated under until now, and eases the guarantee requirements to be constituted by fund managers.

Likewise, it strengthens the reporting requirements to be delivered to clients, primarily in regard to the explanation of the risks, conflicts of interest, fees and expenses to be borne by the client, and specifying what information must be provided to the client, in order that clients may be properly informed about the management of their resources.

It also improves the content of management contracts, easing some requirements for portfolio administration of institutional investors requiring explicit consent from clients for: related party investment, proprietary trading operations, commission rebates, if any; and operations that generate liabilities for clients as in the case of certain transactions with derivative contracts, amongst others.

The SVS has established a period of 12 months from last Friday, for brokers and administrators to bring portfolio management contracts already entered into with their clients, into conformity with the new regulations.

The circular in its entirety may be reviewed in the file attached.

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