New amendments to the Criminal Code about financial and stock markets activities and unauthorized activities

On December 28, 2011 was published in the Official Gazette the Law No. 26,733, (hereinafter, the “Law”) which amends the Criminal Code replacing Section 77 and adding new Sections.

The Law incorporates the definition of privileged information, which is defined as any information not available to the public, whose disclosure could have significant influence on the stock market.

The Law states that shall be punished by imprisonment of one (1) to four (4) years, a fine equivalent to the amount of the transaction and disqualification, the director, member of the supervisory body, shareholder, shareholder representative, and all who by their function within an issuer company provides or uses privileged information, to which they have access during the fulfillment of their activities, for the negotiation, pricing, purchase, sale or liquidation of securities.

The minimum of the penalty shall be increased to two (2) years of imprisonment and the maximum to six (6) years when the author uses or provides privileged information on a regular basis, or when the use or supply of privileged information would result in obtaining a profit or avoiding a financial loss to the offender or others.

The maximum of the penalty shall be increased to eight (8) years when the supply or use of privileged information causes serious harm to the stock market, or when the crime was committed by a public official, a director member of the supervisory body, an officer or employee of a self-regulatory entity or risk rating companies, or their profession requires qualification or registration. In such cases a penalty of disqualification of eight (8) years will also be imposed.

Additionally, the Law states a penalty of one (1) to four (4) years imprisonment, fine and disqualification to the person who performs transactions or operations which produce a raise, maintain or lower the price of securities or other financial instruments using false news or negotiations, with the purpose to produce the appearance of greater liquidity or trade it at a certain price, or offers securities or financial instruments concealing facts, affirming or hinting false circumstances.

Also, a penalty of imprisonment of two (2) to six (6) years shall be applied to the representative, administrator or auditor of a company required to establish private control bodies, when informing the partners and shareholders false facts that are important in assessing the economic situation of the company, or when the statements and accounting documents consign false or incomplete data.

The Law also provides the employees and officers of financial institutions and of institutions that operate in the stock market shall be punished to one (1) to four (4) years imprisonment if they insert false data when documenting a credit transaction with the intention of obtaining a benefit or cause harm to others; and to one (1) to six (6) years imprisonment if they receive money or other undue financial benefit as a condition for executing financial and stock market activities.

In relation with unauthorized activities, a penalty of one (1) to four (4) years imprisonment, fine and disqualification shall be imposed to the person who executes financial intermediation activities without authorization issued by the correspondent supervisory body, or captures saving of the public in the stock market, or provides intermediation services for the acquisition of securities without authorization of the competent authority.

The Law expressly provides that in the case of legal persons that make public offering of securities, the penalties shall be applied taking care of not damaging shareholders of owners of the respective titles that do not have responsibility in the crime, nor previous creditors to the committing of the crime in the cases the legal person was insolvent.

The Law came into force on January 5, 2012.

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