On August 16, 2022, the Resolution amending the General Provisions applicable to mutual funds and their service companies (the “CUFI”, and the resolution amending it, the “Amendment”) was published in the Official Federal Gazette, taking effect the day after its publication.

The purpose of the amendment is to (i) reduce the administrative burden of complying with the Mutual Fund Law (Ley de Fondos de Inversión, “ILF“), including exceptions that would allow mutual fund prospectuses to be amended without prior authorization from the Mexican Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, the “CNVB“), (ii) strengthen the corporate governance bodies of mutual fund managers through the creation of investment committees, (iii) strengthen the open architecture, allowing variable income mutual funds and debt to establish fees for the management of their assets or for the distribution of shares of services when they are acquired by UCITS managed by a different UCITS manager and (iv) reduce the legal asymmetry that can have a impact on clients’ assets and on healthy competition in the UCITS market, by integrating the right of investors to the portability of their shares and funds with a mutual fund distributor or an entity that provides distribution (“Distributor of mutual funds“), to another entity of that nature.

I. Exceptions to the authorization of the CNBV to modify prospectuses

Pursuant to the LFI and the CUFI, an authorization from the CNBV is required to modify the prospectuses of FCPs.

By means of the amendment, certain cases have been included in which changes to prospectuses of mutual funds will not require the authorization of the CNBV (for example, changes to the symbol number, the structure of the portfolio of investment, corporate name, capital structure, tax regime, among other data). In such cases, a prospectus markup must be filed with the CNBV no later than five business days before the effective date of the amendments, together with a statement from an authorized signatory of the prospectus indicating that these amendments fall within the scope of the amendments. applicable regulations. exception.

II. Exceptions to Investment Plan Limits

The following events are added in the regulations, according to which the mutual funds mentioned below may exceed or exceed the minimum or maximum limits of their investment scheme during the following periods (in calendar days), without being considered as a default :

  • Recently formed mutual funds: 90 days from the date of the start of operations.
  • UCITS in the process of merger, demerger, dissolution, liquidation or insolvency: 90 days from the date of the CNBV’s authorization to perform the corporate act.
  • When there are no shareholders in the variable portion of the FCP’s share capital due to certain corporate acts: 90 days from the date on which the CNBV was notified of the relevant corporate act.
  • Change in type of FCP or modification of its objectives or its investment policy leading to substantial modifications of its investment regime: 90 days from the date of entry into force of the modifications to the prospectus.

III. Creation of the Investment Committee

The board of directors of the FCP may create an investment committee which will determine the investment strategy in accordance with the investment policies determined by this board of directors and will approve any modification to the investment strategy and to the prospectuses.

This committee must be composed of a director who will assume the functions of chairman, the general manager, the person responsible for overall risk management, the chief investment officer or equivalent and such other officers as the board of directors may appoint to these purposes. If such a commission is created, the mutual fund manager must notify the CNBV within ten working days of its constitution, and file within six months of this notification Annex 19 of the CUFI, including the information of this commission.

IV. Strengthening open architecture and healthy market competition

The Amendment recognizes the right of investors to the portability of their shares and funds from a Mutual Fund Distributor to another similar entity, in accordance with the following:

  • Distributors of Mutual Funds must take action to have their clients terminate the agreements they have entered into with them, at the prior written request of the clients. Agreements should provide mechanisms to make this right effective.
  • Clients may enter into agreements with other mutual fund distributors, with the possibility of further agreeing that the new mutual fund distributor takes all necessary steps to terminate the contract, and request the transfer of funds and of shares to the former distributor of mutual funds, having previously entered into a standard agreement with the mutual fund managers and with the prior express authorization of the client.
  • The old mutual fund distributor must transfer the shares of the mutual fund at the average acquisition price of each of those shares, and the funds must be transferred to the customer’s account at the new mutual fund distributor, and terminate the contract 15 working days before written notice from the new distributor of mutual funds.
  • If the client’s prior authorization is not granted for these purposes, the new mutual fund distributor must deliver the shares and funds to the former mutual fund distributor within ten business days of the date on which the customer has expressed non-compliance (in addition to any applicable damages and penalties that may apply).

Variable income and debt UCITS, whose investment regime allows investment in FCP units, may include costs for the acquisition of FCP units managed by an FCP manager other than the one managing the acquiring FCP.

V. Replacement of Annexes 2 and 3 of the CUFI

The Addendum replaces Appendices 2 (Obligations to draft a prospectus) and 3 (Obligations to draft a key information document for investors in variable income and debt UCITS) of the CUFI.

VI. Transitional provisions

  • The amendment entered into force on August 17, 2022.
  • UCITS have a period of six months from the date of entry into force of the Amendment to file with the CNBV the amendments to the prospectuses and key investor information documents resulting from the Amendment ; i.e. before February 17, 2023.
  • Any update to these documents must be accompanied by a statement from an authorized signing officer of the prospectus stating, under oath, that the relevant changes have been made in accordance with the Amendment.

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