CMF issues new regulations for financial service providers under the Fintech Law
On Friday, January 12, 2024, the Financial Market Commission ('CMF') issued General Rule No. 502 ('NCG No. 502'), regulating the registration, authorization, and obligations of financial service providers under the Fintech Law. This NCG repeals NCGs 493 and 494.
Following the enactment of Law No. 21.521, known as the Fintech Law, on January 4, 2023, the Financial Market Commission (CMF) has developed regulations for its effective implementation. On January 12, 2024, General Rule No. 502 (NCG No. 502) was published, providing greater clarity to technology-based financial service providers. This rule expands the regulatory focus beyond investment advisory services, including all actors in the financial technology sector, marking a significant advance since the introduction of the Fintech Law.
NCG No. 502 applies to those who professionally provide credit advisory services, custody of financial instruments, order routing, intermediation of financial instruments, investment advisory, crowdfunding platforms, and alternative transaction systems. Among other innovations, it introduces the following:
According to the Fintech Law, technology-based financial service providers, not belonging to other existing categories, must be registered in the CMF's Financial Service Providers Registry. In this regard, NCG No. 502 established specific requirements for registration applications, indicated some exceptions, such as exempting certain service providers from some requirements if their clients are qualified investors, among other novelties.
A fundamental advance was made regarding the necessary authorization to provide services regulated by the Fintech Law. Before NCG No. 502, this matter was only regulated for investment advisory service providers. Now, requirements have been regulated for all technology-based financial service providers, and certain providers serving qualified investors are exempt from the obligation to request such authorization.
For the first time, capital and guarantee requirements have been regulated for those providing financial instrument intermediation and custody services. These rules also apply to order routing services, but only regarding guarantees. The regulatory demand in these matters is determined by the provider's business volume, for which the CMF established three categories based on the number of active clients, average transactions, revenue over the last 12 months, and assets under custody.
It's worth noting that NCG No. 502 also detailed regulations related to information obligations, operational capacity accreditation, activities inherent to the services regulated by the Fintech Law, and requirements in corporate governance and risk management.
NCG No. 502 will come into effect on February 3, 2024. Investment advisory service providers must submit their registration and authorization applications before this deadline. Those already registered must comply with the new regulations and submit the required documentation for registration and authorization before August 3, 2024. Providers of other services regulated by the Fintech Law must submit their applications before February 3, 2025.
Thus, although a year has passed since the publication of the Fintech Law, the implementation process necessary to promote financial competition and inclusion through innovation and technology in financial services will begin to unfold organically with NCG No. 502.