CHILE Law and Practice Contributed by: Felipe Díaz Toro, Victor Riadi and Ignacio Ruiz Rodríguez, EDN Abogados
other norms that, in accordance with the law, are incumbent upon it for the regulation of the finan - cial market. Similarly, the CMF shall be respon - sible for the administrative interpretation of the laws, regulations and other rules governing the persons, entities or activities under its supervi - sion, and may set rules and issue instructions and orders for their application and compliance. Through these regulations, among others that it is authorised to enact, the CMF has established a comprehensive regulatory framework pertain - ing to investment funds. An exception to this rule is in respect of Chilean pension funds, which continue to be regulated separately in terms of both their structure and the investments they are allowed to make, which are set out in various legal bodies, including Decree Law 3500, the Compendium of Pension System Regulations, the Compendium of Central Bank Financial Reg - ulations, the Pension Funds Investment Regime and other regulations issued by the Chilean Pen - sions Supervisor or any governmental authority with regulatory jurisdiction in specific aspects of the applicable legislation (collectively, “Chilean Pension Regulations”). The primary classification established by the LUF regarding investment funds is based on whether the investors’ units are redeemable. If the units are redeemable and this redemption is executed within ten days from the request, the fund will be considered an FFMM. If the units are redeemable but the redemption is carried out between 11 and 179 days from the request, the fund will be considered a redeemable invest - ment fund. Finally, if the redemption occurs in 180 days or more, the fund will be considered a non-redeemable investment fund. This initial classification has significant implications for the fund’s structure, operational burden and fre - quency of regulatory reporting.
In addition, Chilean regulation differentiates between a private investment fund (FIP), which must have a minimum of eight investors and a maximum of 49 (who cannot belong to the same family, as stipulated in the LUF) and a public investment fund (FI), which must have a mini - mum of 50 investors. The primary consequence of this classification pertains to the level of supervision the CMF will exercise over the fund. The primary advantages of structuring invest - ments in alternative assets through an FIP include: • the flexibility of its • Reglamento Interno (“by-laws”); • the low cost of maintaining the structure; • the minimal regulatory compliance required from its fund manager (as defined in 2.1.4 However, due to the maximum limit of 49 inves - tors, it is challenging to diversify participation among a sufficient number of investors unless the fund is targeted at large national or foreign qualified or institutional investors. Attracting such investors can be difficult, as the FIP is not subject to the direct supervision of the CMF. By structuring investments in alternative assets through an FI, the oversight role of the CMF pro - vides greater security to investors due to the reg - ulatory controls imposed upon them. Although the minimum number of investors for this type of fund is 50, this requirement does not apply if an institutional investor (either local or foreign) is among them. The set-up process for this type of investment fund is slower and its maintenance involves higher costs, primarily due to the opera - tional and regulatory requirements. Disclosure Requirements ); and • the speed of its set-up process.
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