PUERTO RICO Law and Practice Contributed by: Dianette Rivera-Melendez, Oreste Ramos, Maria Trelles-Hernandez and Rosangela Sanfilippo, Pietrantoni Mendez & Alvarez LLC
5.2 Securities Regulation Securities regulation in Puerto Rico is governed by both federal and Puerto Rican laws. At the state level, Puerto Rico has enacted the PRUSA. Securities are also regulated by a series of federal statutes, which in turn authorise a series of regulations promulgated by the SEC. The main federal statutes are the Securities Act of 1933 and the Securities Exchange Act of 1934. Securities Act of 1933 The Securities Act of 1933 governs the initial issuance and registration of securities, including registration exemptions. It requires that investors receive full and fair disclosures, including financial and other signifi - cant information concerning securities being offered for public sale, and prohibits deceit, misrepresenta - tions and other fraud in the sale of securities. Securities Exchange Act of 1934 The Securities Exchange Act of 1934 governs the purchase and sale of securities, securities brokerage firms, securities exchanges and financial reporting. It created the SEC and gave it broad authority over all aspects of the securities industry, such as the power to register, regulate and oversee brokerage firms, transfer agents, clearing agencies and the securities self-regulatory organisations, like the New York Stock Exchange, the NASDAQ Stock Market and the Finan - cial Industry Regulatory Authority. The PRUSA The PRUSA is modelled on the Model Uniform Secu - rities Act and is administered by OCIF. Among other matters, the PRUSA regulates the offer and sale of securities (unless federal pre-emption applies), and provides the legal framework for the regulation of securities in Puerto Rico. It includes provisions related to registration requirements, anti-fraud measures and the licensing of securities professionals. The PRUSA makes it unlawful for any person to offer or sell any security unless it has been registered, is exempt from registering, or is classified as a federally covered security subject to the Securities Act of 1933. 5.3 Investment Funds As a general matter, private equity funds, venture capital funds and their investment advisers organised under the laws of Puerto Rico and/or authorised to do
debt of the central government of Puerto Rico and most of its municipalities has been restructured pursu - ant to PROMESA’s bankruptcy processes, signalling a potential return by the government of Puerto Rico to the capital markets in the near future. Nevertheless, businesses in Puerto Rico, like those elsewhere in the USA and other regions, have access to a variety of financing options. The availability and attractiveness of these options can vary depending on the size of the business, the industry, creditworthiness and other factors. The primary sources of financing for businesses in Puerto Rico include, without limitation: • traditional bank loans to fund various needs, such as working capital, equipment purchase or expan - sion; • government agencies that offer financing pro - grammes to promote economic development, including through low-interest loans, grants and guarantees to support specific industries or activi - ties; and • private equity and venture capital. Qualified companies can participate in a government programme called the Puerto Rican Industrial, Tour - ism, Education, Medical and Environmental Pollution- Control Facilities Financing Authority (AFICA), which provides financing by issuing industrial revenue bonds for certain projects that promote the economic devel - opment of Puerto Rico. Regulation The US capital markets are regulated by the SEC, which is an independent US government agency empowered to enforce securities laws and to regulate public companies’ disclosure requirements, securities offerings and market activities. It also oversees secu - rity exchanges, brokers, dealers, investment advisers and mutual funds. Puerto Rico’s capital markets are also regulated by OCIF, which is the independent Puerto Rican govern - ment entity responsible for administering the Puerto Rican Uniform Securities Act (PRUSA). OCIF is spe - cifically responsible for enforcing securities laws and for licensing broker-dealers, investment advisers and other market participants.
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