CMF regulates management of financial service providers under the Fintech Law, including investment advisors

Felipe Cousiño - Francisca Donoso,  March 4, 2024

Alessandri - On January 12, 2024 the Financial Market Commission (CMF) issued General Applicability Rule No. 502 (NCG), containing the implementing regulations on the registration, authorization and obligations of crowdfunding platforms, alternative transaction systems, financial instrument intermediaries, investment advisors, credit advisors, financial instrument custodians and trades order routers, in accordance with the provisions of Law 21,521 (Fintech service providers and Fintech Law).

These regulations clarified that referring clients or acting as agents to receive client orders for third party intermediaries authorized in Chile or abroad is an activity inherent to investment advisors (and trades order routers) that will not require separate authorization from the CMF.

Moreover, the regulation now includes an important exception to the sole purpose entity requirement for by investment advisors, credit advisors, alternative transaction systems and crowdfunding platforms. Indeed, if the service is being provided to Qualified Investors (as defined in CMF Rule NCG 216) only, then the relevant service providers shall not be required to be sole purpose entities.

Exemption from authorization/license, but not from registration, will also apply to such investment advisors, credit advisors, alternative transaction systems and crowdfunding platforms.

There is a further exemption from having to set up a branch or subsidiary in Chile.

Does the above mean that foreign investment advisors may be required to register with the CMF if they perform direct marketing of their funds? The answer to this question will depend on whether or not they make investment recommendations or assessments. However, even if they are required to register, they would be exempt from applying for authorization (or establishing a branch or subsidiary) if they target Qualified Investors only.

The CMF also clarified in its frequently asked questions (Q&A) document that entities that "provide the service of routing orders abroad are not subject to the Fintech Law, since they would not be providing such service in Chilean territory."

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