Publication of the General Provisions applicable to simplified issuers and securities subject to simplified registration

Background

• On April 24, 2023, the members of the Second Finance and Public Credit and Legislative Studies Commission presented to the Honorable Chamber of Senators the initiative with a draft decree to reform, add to and repeal various provisions of the Securities Market Law (“LMV”) and the Investment Funds Law (“LFI”).
• On April 28, 2023, in an ordinary session of the Honorable Chamber of Senators, the corresponding opinion that reforms, adds and repeals various provisions of the LMV and the LFI (the "Opinion") was unanimously approved, which was referred to the Honorable Chamber of Senators.
• On December 28, 2023, the Official Gazette of the Federation (“DOF”) published the Decree amending, adding and repealing various provisions of the Securities Market Law and the Investment Funds Law.
• The aforementioned decree granted the National Banking and Securities Commission (“CNBV”) a period of 365 calendar days to issue the secondary provisions to regulate the reform of the LMV and the LFI.

Publication of secondary provisions

On January 21, 2025, the General Provisions applicable to simplified issuers and securities subject to simplified registration (“Single Circular of Simplified Issuers” and/or “CUES”) were published in the Official Gazette of the Federation. This publication comes a few days after the expiration of the term granted to the CNBV by the decree that reformed the LMV and the LFI of December 28, 2023.

The CUES was developed as a result of working groups of various stock market authorities, such as the Ministry of Finance and Public Credit, the Bank of Mexico, the National Commission of the Retirement Savings System, as well as private sector trade associations, such as the Mexican Association of Stock Market Institutions, AC The draft of the Single Simplified Issuer Circular was approved at the beginning of September 2024 by the Governing Board of the CNBV, which was then submitted to stock market participants. As we announced upon publication of the reform to the LMV and the LFI, there is today a desire for openness on the part of the financial authorities, to allow access to the securities markets in a simpler and faster way, with a lower, but no less important, regulatory burden.

The key points of the secondary regulation contained in the CUES are described below:

Updating of Manuals and Internal Regulations by Brokerage Firms and Stock Exchanges

Among the most important actions to be taken in the secondary regulation of simplified issues, the stock exchanges, the Mexican Stock Exchange and the Institutional Stock Exchange, will be responsible for adjusting their internal regulations in accordance with the CUES. Likewise, the brokerage firms must review their internal manuals in the same terms. This is due to the fact that the Single Circular for Simplified Issuers provides for a host of new powers, functions and responsibilities for said regulated entities, which will now serve as the main channel for simplified issuers.

Eligible Values ​​for Simplified Registration

Securities that may be registered under this regime include the following:

• Actions;
• Ordinary Participation Certificates;
• Representative values ​​of share capital of foreign companies;
• Debt instruments;
• Asset-backed securities; and
• Structured values.

Offer Limited to Qualified Investors

Securities registered in the National Securities Registry under the simplified issuance regime may only be offered by securities market intermediaries to institutional and qualified investors under the terms of the applicable regulations.

Simplified Broadcasting Levels

Two levels of simplified issuers have been defined according to the maximum amounts per issue and accumulated per fiscal year:

• Level I: Includes issuers of debt instruments with a maximum amount of 75 million Investment Units (“UDIS”) per issue and up to 900 million UDIS accumulated per fiscal year.
• Level II: Includes issuers of debt instruments or asset-backed securities, with amounts of up to 1,250 million UDIS both per issue and accumulated per fiscal year.

Requirements and Limits for Simplified Issuers

Simplified broadcasters must comply with:

• Maximum amounts per issue and accumulated per fiscal year of up to 1,250 million UDIS.
• Adoption of the figure of Investment Promotion Corporations, in the case of share issuers.

Credit Quality Opinions

Tier II issuers and those issuing asset-backed securities must submit a credit rating opinion on the issue, issued by a securities rating agency.

Disclosure and Reporting Obligations

• Simplified issuers must annually provide the stock exchange and the general public with financial statements audited by an external auditor, with a favorable or unmodified opinion.
• Stock exchanges may require additional information that allows investors to know the financial, legal and administrative situation of issuers, as well as to identify relevant events.

Stock Market Review and Opinion

• The stock exchanges will review the information submitted for simplified registration and issue their opinion.
• They may include additional requirements in their internal regulations, such as corporate governance characteristics, minority rights and guidelines for takeover bids.

Role of the National Banking and Securities Commission (CNBV)

The CNBV will not verify the documentation submitted by the issuers or the information disclosed to the investing public. It must carry out the simplified registration of the securities in the National Securities Registry within a maximum period of two business days.

Cancellation of Registration

• The registration may be cancelled at the request of the simplified issuer or the stock exchange, always with a favourable opinion from the latter.
• For debt or asset-backed securities, cancellation will require the issuer to comply with its obligations or present the agreement of the holders' meeting that determines the registration cancellation.

Obligations of the Placement Broker

Intermediaries must, among other things:

• Verify that broadcasters comply with applicable legal and regulatory requirements.
• Inform investors about the risks of the securities issued.
• Keep the record of the issue for five years after registration cancellation.
• Establish in your internal manuals minimum requirements applicable to each issue.

General Requirements for Registration

To obtain simplified registration, broadcasters must:

• Have at least two years of operation and generate income derived from its main activity.
• Have financial statements audited by an independent external auditor, prepared under recognized standards such as International Financial Reporting Standards.
• In the case of asset-backed securities, the trustor must provide the assets intended to pay for the issue, and must also meet the requirements regarding seniority and source of income.