The Mexican Banking and Securities Commission (“CNBV”) publishes the Regulations Applicable to Simplified Issuers and Securities Subject to Simplified Registration

On Monday, January 21, 2025, the Regulations Applicable to Simplified Issuers and Securities Subject to Simplified Registration (the "Regulations") were published following the amendment to the Securities Market Law ("LMV") published in 2023.

Simplified issuers are legal entities and trustees, that request and maintain the simplified registration of securities in the National Securities Registry ("RNV"), in accordance with the Provisions ("Simplified Issuers").

The regime applicable to Simplified Issuers contemplates that:

• Simplified Issuers will undergo a simpler authorization procedure compared to traditional issuers;
• The underwriters and the stock exchange where the securities are listed will be responsible for reviewing documentation and ensuring compliance with periodic obligations, duties that traditionally fell to the CNBV; and
• Securities registered under this regime may only be acquired by investors who, at least, are considered basic qualified investors according to the Provisions ("Qualified Investors")¹, or as institutional investors.

General Characteristics of Simplified Registration

• Simplified Issuers may apply for simplified registration in the RNV of shares, ordinary participation certificates representing shares or securities representing the capital stock of foreign companies, debt instruments, asset-backed securities ("Securitizations") and structured securities (the "Securities").
• The Securities must be placed through a public offering directed exclusively to Qualified Investors and/or institutional investors, with the participation of an underwriter. Exceptions include shares or securities resulting from mergers or spin-offs of Simplified Issuers, which may be placed without a public offering.
• Traditional issuers may not be Simplified Issuers.
• Simplified registration is not applicable to development (CKDs), real estate (CBFIs), indexed (ETFs), energy and infrastructure investment (CBFEs) or investment project trust certificates (CERPIs).
• Simplified Issuers are classified as follows:
  • Level I Simplified Issuers: Debt instruments up to 75,000,000 investment units (approx. MX$627 million) per issuance and 900,000,000 (approx. MX$7,532 million) per fiscal year. (the "Level I Simplified Issuers");
  • Level II Simplified Issuers: Debt instruments or Securitizations up to 1,250,000,000 investment units (approx. MX$ 10,461 million) per issuance and per fiscal year (the "Level II Simplified Issuers"); and
  • Simplified Issuers of Shares: Shares or related securities up to 1,250,000,000 investment units (approx. MX$10,641 million) per issuance and per fiscal year, adopting the modality of sociedades anónimas promotoras de inversión bursátil (SAPIBs)² (the "Simplified Issuers of Shares").
• Financial statements must be audited by an independent external auditor for the last fiscal year compared to the prior fiscal year (Level I Simplified Issuers) or the last two fiscal years compared to the prior year and internal quarterly financial statements (Level II Simplified Issuers and Simplified Issuers of Shares).
• Unlike Level II Simplified Issuers, Level I Simplified Issuers will not be required to have a credit rating for the issuance.

Simplified Registration Process

• implified Issuers must prepare a prospectus in terms of the corresponding annex of the Regulations.
• The underwriter in the simplified registration shall:
  • Ensure compliance with the LMV, Regulations, stock exchange regulations, and the underwriter's manual;
  • Inform investors about inherent risks;
  • Maintain records for five years post-registration cancellation; and
  • Jointly with the Simplified Issuer, request listing and favorable opinion from a stock exchange for application to the CNBV for registration.
• The stock exchange must review the documentation and, if applicable, issue a favorable opinion and request the CNBV, jointly with the Simplified Issuer, the simplified registration of the Securities in the RNV.
• The CNBV will complete the registration within two business days of receiving the application.

Maintenance of Simplified Registration

• Simplified Issuers must provide the stock exchange where they are listed:
  • Annual audited financial statements;
  • Annual report for the immediately preceding fiscal year;
  • Simplified Issuers Level II and Simplified Issuers of Shares must submit quarterly financial statements; and
  • Stock exchanges may set additional periodic information requirements and relevant event criteria.

Transitory Provisions

• The Regulations became effective on January 22, 2025, except for the provisions related to structured securities, which will take effect the day after Annex G is published in the Official Gazette of the Federation.
• Implementation requires Mexican stock exchanges to update regulations and broker dealers to adjust internal manuals accordingly.

_{1 that is, persons who have held, on average, during the last year, investments in securities for at least 1,500,000 investment units or who have obtained in each of the last two years, annual income of at least 500,000 investment units.
2 SAPIBs are subject to simple corporate governance requirements than regular public companies and are not required to maintain a minimum float, minimum number of investor or minimum number of shares placed among investors.}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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