Foreign investment funds characterised as securities and marketed in Chile by means of a public offer are subject to registration in accordance with Chilean securities laws, unless an exemption applies Private offers of foreign investment funds characterised as securities are not caught by Chilean securities laws. The Chilean securities regulator has clarified the conditions an offer must meet in order not to be a public offer Marketing of foreign investment funds not characterised as securities is not regulated in Chile Additional rules must be considered where a local provider helps promote foreign investment funds in Chile I. INTRODUCTION
This article provides a brief guide to marketing foreign investment funds in Chile. It sets out some preliminary considerations regarding the legal nature of the investments typically offered in a fundraising exercise; and addresses the extent to which the marketing of such instruments is regulated by Chilean law. It then discusses the more detailed rules on public and private offerings of foreign investment funds. This article also provides a few highlights about the role performed by local providers that assist in the selling efforts of foreign funds in Chile.
The legal nature of the investment
When it comes to their legal form, investment funds come in many shapes. Funds can be structured as companies, limited partnerships or unit trusts, just to name some of the most popular legal forms funds adopt in common law jurisdictions. In exchange for its capital contribution, the investor gets a share in a company, an interest in a limited partnership or a unit in a unit trust.
From a marketing perspective, ascertaining the legal nature of the investment fund is important. As we shall see later, unlike EU jurisdictions, Chilean law does not have a special regime applicable to the offering of foreign investment funds. Therefore, fund promoters intending to market in Chile must consider general securities laws to establish whether such marketing is regulated. In summary, (i) where a foreign investment fund is characterised as a security1 which is promoted by means of a public offer, it will be subject to Law No. 18,045 (the "Securities Market Act"); and (ii) where a foreign investment fund is characterised as a security, but which is promoted by means of a private offer or where it is not characterised as a security, its marketing will remain unregulated under Chilean law.
The Chilean regime on securities offering
The Securities Market Act defines and regulates public offers of securities. Two conditions must be met for an instrument to fall within the scope of the Securities Market Act:
the instrument must be a security; and the offer of such security must be public. Private offers of securities are excluded from the application of the Securities Market Act.
As the scope of the Securities Market Act is limited to securities, before turning to the public/private offer dichotomy, it is necessary to address the instruments that fall within the "securities" definition.
Definition of "securities" and its impact on foreign investment funds
The Securities Market Act defines securities as 'any transferable instrument, including shares, options for the purchase or sale of shares, bonds, debentures, units (quotas) of mutual funds, saving plans, negotiable instruments and, in general, any investment instruments or credit instruments.' The Chilean securities regulator2 has provided further guidance on the meaning of this term by stating that the instrument must comply with certain characteristics, including being freely transferable.3
According to the foregoing definition, where the investment in a foreign fund takes the form of shares in a company, such shares would typically be characterised as securities under the Securities Market Act.4 Where the investment in a foreign fund takes the form of a partnership interest, however, the position is likely to different. Interests in partnerships often contain restrictions on transferability. As we have seen, for an instrument to be a security it must be freely transferable. The lack of this feature effectively leaves the offer of foreign partnership interests, which contain restrictions on transferability, outside the remit of the Securities Market Act. Therefore, before marketing...