MEXICO Law and Practice Contributed by: Lizette Neme, Andrea López-Malo, Shannon Reilly, Rodolfo Flores and Dunia Salum, Áurea Partners
7.3 Regulatory Distinction Between Funds and Dealers Funds and dealers are entities that are subject to dif - ferent regulatory frameworks, some of the differences include the following. • Funds engaging in HFT and algorithmic trading: the activities are subject to the Investment Funds Law, which focuses on investor protection, transparency and reporting requirements and are supervised by the CNBV. Funds that use algorithmic or HFT strat - egies may need to disclose the risks associated with these techniques in their fund documentation and ensure compliance with broader regulations on market conduct and systemic risk. • Dealers engaged in FT and algorithmic trading: dealers must comply with specific regulations related to their trading activities; this includes anti-manipulation rules, fair pricing practices and liquidity requirements. Dealers are also subject to requirements around capital adequacy, opera - tional risk management, and trade reporting. The CNBV requires financial dealers (such as brokerage firms, market makers, and trading institutions) to be properly licensed and registered to operate in Mexico. 7.4 Regulation of Programmers and Programming Programmers who develop and create trading algo - rithms and other electronic trading tools are not directly regulated in Mexican law, but licensed enti - ties using them would usually have to comply with applicable regulations when hiring them. Please see to 2.8 Outsourcing of Regulated Func- tions .
Risk assessment and underwriting processes are an integral part of the risk management and solvency systems supervised by the CNSF. Although there is no regulation that dictates the underwriting process step- by-step, the regulations require institutions to design, maintain, and review their risk assessment and prod - uct approval processes before commercialisation. Insurtechs in Mexico are not regulated by a specific, separate law for underwriting; they remain subject to the LISF and secondary regulation if they operate directly as insurers or develop products involving risk assumption. 8.2 Treatment of Different Types of Insurance Although all types of insurance, such as life, annuities, property and casualty, must comply with the general legal framework established by the LISF and second - ary regulation, regulators and industry participants treat them differently because risk characteristics and financial obligations vary among them. The LISF classifies and authorises distinct operations and branches, such as (i) life, (ii) accidents and health, and (iii) damage. Each branch has its own nature and risks, requiring different technical bases to calculate premiums, reserves and solvency capital. Regtech providers are not regulated as a separate type of entity under Mexican regulation. There is no law that specifically licenses or supervises regtech firms; they instead fall under the general corporate, data protection, cybersecurity, consumer protection, and industry specific compliance requirements rel - evant to their activities. However, when regtech solutions are used by regu - lated financial institutions, the institutions themselves remain responsible for compliance with requirements imposed by authorities such as the CNBV and the CNSF, including third-party risk management, notifi - cation, or prior authorisation obligations, depending on the nature and criticality of the service. 9. Regtech 9.1 Regulation of Regtech Providers
8. Insurtech 8.1 Underwriting Processes
Insurers are regulated under the Law on Insurance and Surety Institutions (LISF) and secondary regulation issued by the CNSF. The LISF establishes prudential obligations, such as maintaining technical reserves, measuring and managing assumed risks, and guar - anteeing the financial capacity to cover those risks.
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