Politically and socially there are no reservations; there is a growing interest in this type of activities.
The applicable licenses for asset and portfolio management are called (i) Portfolio Manager and (ii) Broker Dealer. These licenses are granted by the CBU, and must be obtained in order to develop the activities under the scope of each license.
- The Portfolio Manager is defined as the legal entity that in a professional and customary manner manages third party investments, in an individual and discretionary way.
In order to be registered as Portfolio Manager, the following information should be submitted:
Corporate information (as commercial name, address, taxpayer number, website among others) notarized copy of the by-laws, information regarding the legal representatives, information of its shareholders and senior personnel; information regarding the person or legal entity who has the effective control over the Portfolio Manager, affidavit with signature certified by a notary public stating the legitimate origin of the capital, AML Manual describing the integral system for the prevention of money laundering and financing of terrorism and the appointment of a compliance officer, and a detailed description of the activity to be developed indicating whether the same will be targeted to residents or non-residents, structure of the organization and a description of its information technology structure as well as of the procedures established to perform its portfolio management services, templates of the agreements to be entered with its clients, a description of the services to outsource that are essential for the operation of the company, attaching the model contracts to be signed, days and hours open to public, Good Practices Code, Code of Ethics and the constitution of a guarantee before the CBU (deposit).ii) Broker Dealers: on the other hand, it may be possible to request the registration as a broker dealer. According to local regulations, broker dealers are defined as those entities that in a professional and customary manner carry out intermediation activities between offerors and potential investors of publicly or privately offered securities. Also such entities may have the custody of the assets.
The broker dealers may act within a stock exchange (in which case are Stockbrokers, “corredores de bolsa”) or not (in which case are named “agente de valores”).
In case a company applies before the CBU to obtain the broker dealer license, in addition to the information aforementioned required for Investment Advisors, the entity must submit the following additional information:
- A business plan, which shall include, at least a description of the evaluation carried out to apply for installation in Uruguayan jurisdiction, indicating the reasons considered.
- A description and certain information of the operational development and operational platforms that will be used and a description of the organizational and technological structure.
- A description of the client’s profile to whom the operatives will be oriented.
- Products and services to offer.
- A description of the services to outsource that are essential for the operation of the company, attaching the model contracts to be signed.
Some additional information regarding the shareholders or partners of the broker and the person or legal entity who has the effective control over the broker is also requested.
Please note that there is no registration fee.
We estimate that the total process to complete the registration before the CBU is approximately between six (6) to nine (9) months, though the timing will depend on the complexity of the structure, information and documentation submitted, etc. There is no statutory term.
Finally, some of the main obligations an Portfolio Manager and/or Broker Dealer have are the following:
- To have written agreement with clients;
- To have a Good Practices Code and a Code of Ethics. Additionally, broker dealers should have a Code of Conduct;
- To have a specific procedure for clients to solve any controversy and forms for making claims;
- Provide clients with information about the characteristics and risks of the products for which the client require advice. This information varies depending on whether the securities are public or privately offered securities, issued locally or abroad;
- Provide clients with sufficient and clear information regarding charges and costs to be borne by the client;
- Data safeguard and software procedures (backup systems) and Safeguard procedures of all the documents issued (backup systems);
- Business continuity plan;
- Transcribe into the Board of Directors Book of Minutes, the Central Bank of Uruguay’s resolutions emerging from supervising or inspection acts, as well as the settled fines;
- Communicate certain events, change in the status or information, change in the Superior Personal and submit periodic information, etc. to the CBU within certain specified terms;
- Registry of clients and Registry of the particular trade orders issued by its clients, according to the guidelines given by the CBU. Broker dealers are required to have a third Registry of operations;
- In case of outsourcing of services, it is generally required the prior authorization of the Superintendence of Financial Services.
Additionally, portfolio managers and broker dealers must submit certain periodical information, which includes for example the company’s annual report ; audited and consolidated annual financial report; the company’s individual Financial statements, among others, etc.
FinTechs in this category correspond almost exclusively to bank solutions regarding access to personal account information and transactions executions. Also certain broker dealers offer in some cases these type of services and when the scope of activities is limited to providing investment advice, investment advisors also provide such services.
Please note that if the activity of the service providers in Uruguay constitutes occasional or isolated acts (“acto aislado”), compliance with local requirements of incorporation will not be necessary and licensing requirements most probably should not be triggered.
However, if such activity in Uruguay is carried out on a “regular basis” (which means to be proactively performing activities in Uruguay), it could be considered as doing business in Uruguay and the entity will be required to open a branch or incorporate a subsidiary in Uruguay and it may also need to be registered before, and/or obtain authorizations from, the CBU, as applicable) (hereinafter, referred as to “Doing Business”). The determination of engaging on a “regular basis” is a factual matter to be analyzed under a standard of reasonableness.
Hence, if the activities would be performed cross border, an analysis regarding the above on a case by case basis would need to be performed.