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Capital Markets: CMF implements new whistleblower statute in Chile

capital markets , CMF
19 July, 2021

Today, July 19th Chile’s first financial markets whistleblower program has become effective.

 The securities, insurance and banking regulator issued on July 5th the implementing regulations of the recently enacted Law No. 21,314 which introduced Chile’s first whistleblower program relating to financial markets. This new program will allow the regulator to more effectively detect violations committed by the entities under its supervision, while ensuring the confidentiality of the whistleblower and the reward for his or her collaboration.

Nicole Cartier
Alessandri Senior Associate

On April 13th, 2021, Law No. 21,314 which incorporated a series of amendments to different legal bodies governing financial markets was published. Among them, it introduced a Title VII to DL 3,538 (Organizational Law of the Chile’s securities, insurance and banking regulator, Comisión para el Mercado Financiero, “CMF”), which creates a whistleblower program whose implementing regulations were to be issued by the CMF. These are meant to establish the objective parameters to determine the characteristics that the background information provided by those who wish to obtain the whistleblower status must have, as well as the factors to be considered when granting to the whistleblower part of the fine imposed on the reported offender.  Such implementing regulations (NCG 456) were issued on July 5th 2021 and have become effective on July 19th, 2021.

DL 3,538 establishes in Article 82 that the status of whistleblower is granted to those who voluntarily request such status from the CMF and collaborate with the investigations by providing substantial, accurate, truthful, verifiable and unknown information to the CMF for the detection, verification or accreditation of violations of the laws that are within the competence of the CMF, or of the participation of the alleged violator of such violations.  All of the above in the manner established by the CMF through a general applicability rule.

On July 5th, 2021, the CMF issued NCG 456, thus complying with the legal mandate.  By means of this rule, the CMF regulates (i) the way in which the whistleblower may collaborate in the investigations carried out by the CMF; (ii) the admissibility requirements that must be met by the applications submitted to effectively obtain the whistleblower status; and (iii) the parameters to be considered to determine the percentage of the fine that will correspond to the whistleblower in question.

NCG 456 considers the provisions of Article 83 of DL 3,538, which states that the identity of the person making the complaint and the background information that allows identifying the whistleblower will remain confidential and, therefore, will be secret from the date of the application for whistleblower status, whether or not such status is granted.

The analysis of the whistleblower application by the Prosecutor of the Investigation Unit of the CMF may take up to 6 months, including an extension of up to three months.  This period will be counted from the date of filing the application.

In addition to the above, NCG 456 defines the concepts listed in the statute that must characterize the information provided in order to collaborate with the investigations carried out by the CMF and obtain the whistleblower status.  Thus, it defines what must be understood as substantial, precise, truthful, verifiable and unknown, adding that the information provided must refer to violations that may lead to an investigation and subsequent sanction.  In this respect  the information must refer to relevant, serious or important infringements.

Another of the contributions of implementing regulations was to establish the form and parameters to be considered for the purpose of determining what percentage of the relevant fine may be received by the whistleblower.

When imposing the fine, the CMF will define the percentage that the whistleblower shall be entitled to receive as a result of his or her collaboration to provide adequate evidence. Article 84 of DL 3,538 establishes the minimum and maximum limits of the fine to which the collaborator is entitled.  However, NCG 456 supplements it by indicating which factors must be taken into consideration when establishing the final percentage to which the whistleblower shall be entitled:

a) Relevance of the information provided; b) Timeliness; c) Collaboration of the whistleblower; and d) Seriousness of the sanctioned conduct.

In addition, in order to establish an order of precedence in the event that more than one person requests whistleblower status with respect to facts that result in the same sanctioning procedure in order to divide the amount of the percentage of the fine that they should receive, the CMF shall consider the following:

  1. Relevance of the information: proportional to the completeness of the background provided and their capacity to prove the alleged conduct.
  2. Collaboration of the whistleblower: proportional to the collaboration provided.
  3. Timeliness: inversely proportional to the number of days elapsed since each complaint was made and the date of the sanction resolution, i.e. greater proportion to those who reported earlier, to the quantity and quality of the background information provided by each of them.

Read the complete regulation here.

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