CHILE Law and Practice Contributed by: Felipe Díaz Toro, Victor Riadi and Ignacio Ruiz Rodríguez, EDN Abogados
porations whose sole purpose is the manage - ment and administration of third-party funds, for which the Law of Stock Corporations, the LUF and the regulation of the CMF establish com - plex authorisation requirements. This type of corporation is referred to as an AGF (see 2.1.4 Disclosure Requirements ) and is subject to sub - stantial reporting requirements, minimum capital requirements and ongoing personnel accredita - tion monitoring. FIPs may be managed by an AGF but can also be managed by a softly regulated, closely held corporation known as an AFI (see 2.1.4 Disclo- sure Requirements ). 2.2.3 Restrictions on Investors No specific requirements are imposed on fund investors as a direct consequence of their investments in alternative assets or considering the type of investor. An exception to this rule is established in the Chilean Pension Regula - tions, which maintain stringent controls on the percentage of investments permitted to be allo - cated in alternative assets. Recent developments have allowed for an expanded threshold for pension funds investing in alternative assets, as explained in 4.1 Recent Developments and Proposals for Reform . 2.3 Regulatory Environment 2.3.1 Regulatory Regime Chilean regulation does not impose specific investment limitations on alternative funds per se, with the exception of the specific restrictions applicable to pension funds under the Chilean Pension Regulations. However, certain investment prohibitions and limitations apply to all funds, regardless of whether they are FFMMs, FIs or FIPs. Funds are
prohibited from directly investing in real assets, mining properties, water rights, property rights, industrial or intellectual property, and vehicles of any type. Funds are also not permitted to engage directly in: • industrial, commercial, real estate, agricultur - al, mining, exploration, exploitation or extrac - tion activities; • insurance or reinsurance activities; or • any other business that involves the direct development of a commercial, professional, industrial or construction activity by the fund. In general, funds are restricted from undertak - ing any activity directly other than investment. To engage in such activities or hold said assets, investment funds typically invest in special pur - pose vehicles (SPVs), which own the portfolio assets or engage in these activities. This invest - ment in an SPV is materialised through either equity or debt. In addition, pursuant to Article 58 of the LUF, funds must comply with limitations on invest - ments made in equity or debt instruments issued by parties related to their fund manager. Finally, according to NCG No 376 (NCG 376), addition - al restrictions and reporting obligations apply exclusively to FIs when investments are made in offshore jurisdictions. 2.3.2 Requirements for Non-Local Service Providers The original organisational framework estab - lished by the LUF in 2014 vested the fund man - ager with all the responsibilities and operational capabilities necessary for an investment fund to function. Exceptionally, the fund manager must appoint a custodian regulated by the CMF when the asset class in which the fund invests requires such a service. They are also required to appoint
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