Resolution amending the general provisions applicable to issuers of securities and other participants in the securities market

Antecedent

On July 24, 2017 and July 23, 2021, respectively, certain guidelines were published in the Official Gazette of the Federation (“DOF”) that modified the “Resolution modifying the General Provisions applicable to brokerage firms” and the “Resolution modifying the General Provisions applicable to credit institutions”. The issuance of said resolutions adjusted the accounting criteria applicable to brokerage firms in relation to the classification of their investments in securities held to maturity, expanding: (i) the term of sale, or (ii) their classification prior to maturity. In the same sense, the lower risk incurred by credit institutions when granting credit to women was incorporated into the methodology for estimating preventive reserves and into the rating of non-revolving consumer and mortgage loan portfolios, by adjusting the risk parameters of probability of default and severity of loss.

Publication of the Resolution

On January 28, 2025, the Resolution amending the General Provisions applicable to issuers of securities and other participants in the securities market (“Resolution”) was published in the DOF. This publication is part of the efforts of the National Banking and Securities Commission (the “CNBV”) to update the regulatory framework based on international standards and, in turn, promote the development of a more transparent and sustainable securities market.

The Resolution is the result of a technical and regulatory analysis carried out by the CNBV, with the purpose of incorporating sustainability elements into the obligations of securities issuers and aligning the regulatory framework with the International Financial Reporting Standards (“IFRS”) for Disclosure of Sustainability Information (“IFRS-S”) in order to contribute to directing capital flows towards investments that foster economic development, promoting environmental and social sustainability, transparency and long-term strategies in the financial and economic activity of issuers, thus providing the investing public with better tools for decision-making based on measurable and comparable information. The key points of the Resolution are described below:

Obligation to Disclose Information Related to Sustainability

As one of the most relevant changes, the Resolution establishes the obligation for issuers to provide a sustainability report. This must include information on risks and opportunities related to governance, strategy and sustainability metrics that may affect the issuers' cash flows, access to financing or capital costs.

The sustainability report should be aligned with IFRS S1 Standards, General Requirements for Financial Information to be Disclosed Related to Sustainability and IFRS S2, Climate-Related Disclosures, issued by the International Sustainability Standards Board. Foreign issuers may present information based on local standards, provided they include explanations on interoperability with IFRS.

General Disclosure Requirements

Broadcasters must comply with the following periodic disclosure obligations:

• Submit an annual sustainability report, certified by an external auditor, starting in 2027.
• Provide quarterly financial information within 20 business days of the close of the quarter.
• Submit audited annual financial statements by June 30 of the following year.

Validity and Conditions

The Resolution will enter into force on 29 January 2025. From 2026, issuers will be required to submit a sustainability report for the year 2025. This report will not require initial assurance, but in 2027 it will need limited assurance, and from 2028 reasonable assurance by an external auditor will be mandatory. In addition, the registration of securities may be cancelled at the request of the issuer or the stock exchange, always with the favourable opinion of the latter. In the case of securities backed by assets or debt, the issuer must first comply with all its obligations or have the approval of the holders' meeting to proceed with the cancellation.

This Resolution marks an important step forward for the business sector in Mexico, whose observance and structured and gradual implementation will allow them not only to comply with the corresponding provisions, but also to have access to greater financing and, in turn, consolidate their commitment as drivers of sustainability actions in favor of the community.