Capital markets and structured investments

There are certain restrictions on offering and selling debt securities under Peruvian law if those securities will be offered under a public offering.

A public offering of marketable securities is a public invitation to one or more individuals or legal entities of the general public, or specific segments thereof, to carry out a legal placement, acquisition or disposal of marketable securities.

The Securities Registry is where securities, securities issue program documentation, mutual funds, investment funds and participants in the securities market are registered, with the purpose of making the information thereon publicly available, allowing decision-making by investors and ensuring the market’s transparency. The legal entities entered in this registry and the issuer of registered securities are obliged to submit the information required by law and other regulation and are accountable for the truthfulness of such information.

The publicly offered securities and securities issue programs documentation are required to be entered in the Securities Registry and no previous administrative authorization is required (except for, in the case of financial companies the previous authorization to be obtained from the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS)). The registration of securities that will not be offered publicly is optional.

The holders of debt securities may request the registration of such securities in the Securities Registry in accordance with the provisions of the applicable law and the terms established in the issuance agreement or, as the case may be, the equivalent instrument. If no regulation has been set forth on this regard, the request must be backed up by the holders of such securities that represent the absolute majority of the outstanding amount issued.

The most common types of debt securities issued in Peru are bonds or notes issued on a stand-alone basis or under a program.
A debt security is any right of debt issued on a mass basis that is transferable to third parties.

Many different types of debt securities are offered in Peru. According to the Regulations on the Initial Public Offering of Marketable Securities (Reglamento de Oferta Pública Primaria y de Venta de Valores Mobiliarios) (Resolution Conasev 141-1998-EF/94.10) and SMV supplemented regulations (Normas Comunes para la Determinación del Contenido de los Documentos Informativos) (Resolution Conasev 211-98-EF/94.11), some common forms include:

• securities granted by common companies (commercial paper, issued for debt younger than a year, and corporative bonds, issued for debts older than a year); and
• securities granted exclusively by authorized financial companies:
  • negotiable corporative certificates of deposit (issued for debt younger than a year);
  • corporative bonds (issued for debt older than a year);
  • subordinate bonds (issued for subordinate debt that qualify as effective equity); and
  • leasing bonds (issued for financing the purchase of goods for leasing).

Additionally, the securities listed above must have any of the following characteristics to qualify as typical securities:

• zero coupon securities that pay a fixed amount at its maturity;
• periodical fixed-rate securities, with amounts and maturity determined at its issue;
• securities with automatic adjustment of the principal according to the General Act of the Financial and Insurance Systems and Internal Organization Act of the SBS; and
• variable-rate securities, in which the interest rate cannot be a rate (such as LIBOR, PRIME, or others) plus a fixed differential.

Non-typical securities, which are the ones that are not listed above but have the characteristics of a debt security (which are not common in Peruvian securities), which may have any of the following characteristics, include:

• guaranteed securities, perpetual debt securities (ie debt securities that have no specified redemption date);
• asset-backed securities;
• derivative securities such as securities linked to the value of one or more reference asset including shares, commodities, interest rate, currency rate or index, and credit-linked notes;
• hybrid securities (securities with both debt and equity features);
• equity-linked securities such as convertible bonds (debt securities convertible into the equity of the issuer);
• exchangeable bonds (debt securities convertible into the equity of a third party);
• depositary receipts (a security issued by a depositary conferring its holders beneficial ownership of certain underlying assets held by the depositary); and
• warrants (securities giving its holders the option to purchase the equity of the issuer or a related company).

An offering that exclusively targets institutional investors is considered as a private offer and the regulations established in the Securities Act (Ley del Mercado de Valores) will not be applicable.

In that scenario, securities acquired by an institutional investor cannot be transferred to third parties, unless such third party is another institutional investor or the security is previously entered in the Securities Registry conducted by the Superintendence of Securities Market (SMV).

Nevertheless, institutional investors can decide whether to register before the Securities Registry under a special regime the following issues targeted to institutional investors: (i) the ones registered as such before the SMV; (ii) the ones registered before the U.S. Securities and Exchange Commission – SEC under Rule 144A or Regulation S of the U.S. Securities Act of 1933; (iii) the registered as such before other stock exchanges member of the Latin American Integrated Market (Mercado Integrado Latinoamericano – MILA).   

Unless an exemption applies, it is necessary to prepare, register and publish a prospectus before the Superintendence of Securities Market (SMV) where there is an initial public offering (IPO) of securities, ie the public offering of new securities.

Among other reasons, the prospectus is needed in order to have a security subject to the IPO entered in the Securities Registry. The basic requirements for the preparation of the prospectus are stated in the Regulations on the Initial Public Offering of Marketable Securities (Reglamento de Oferta Pública Primaria y de Venta de Valores Mobiliarios) (Resolution Conasev 141-1998-EF/94.10) and SMV supplemented regulations (Normas Comunes para la Determinación del Contenido de los Documentos Informativos) (Resolution Conasev 211-98-EF/94.1.1).

In addition, there are other special regimes that require lighter requirements.

An offer would not be deemed to have been made to the public if it is made solely to qualified investors or where the minimum denomination per unit is at least PEN499,908.28 in 2019 (equivalent to approximately US$147,770.70). The denomination per unit is annualy adjusted.

The underwriting or acquisition of securities presupposes the acceptance by the underwriter of all terms and conditions of the offering, as they appear in the informative prospectus.

The unique legal stock exchange in Peru is the Lima Stock Exchange (Bolsa de Valores de Lima S.A.), which is a corporation (sociedad anónima) that offers listed securities trading services and provides services, systems and mechanisms for the brokering of publicly offered securities and instruments. The company operates under the supervision of the Superintendence of Securities Market (SMV).

Since 30 May 2011, Lima Stock Exchange (Bolsa de Valores de Lima), Santiago Stock Exchange (Bolsa de Comercio de Santiago), Colombia Stock Exchange (Bolsa de Valores de Colombia) and the Mexican Stock Exchange (Bolsa Mexicana de Valores) (since June 2014) established an alliance namely the Latin American Integrated Market (Mercado Integrado Latinoamericano – MILA) in order to foster the trading activity in those markets by allowing the intervention and operation of investors and intermediaries in any of such stock markets.

Even though there are no official records, there is an active market for private placements. However, private pension funds – which are the principal investors in the Peruvian securities market – generally purchase securities that have information registered at the Superintendence of Securities Market (SMV).

Issuing debt securities

Issuers are required to take responsibility for prospectuses for debt securities. Misleading statements in, or omissions from, any applicable offering document can give rise to administrative, civil and criminal liability under Peruvian law. Peru has various investor protection statutory provisions relevant to liability for inaccurate prospectus. There are also general fraud statutes and liability may also arise under common law through a civil action for deceit, negligent misstatement or misrepresentation.

Investing in debt securities

Debt security terms and conditions typically contain provisions which may permit their modification without the consent of all investors and confer significant discretion on the trustee, which may be exercised without the consent of investors and without regard to the individual interests of particular investors. The conditions also provide for meetings of investors to consider matters affecting the investors' interests. These provisions typically permit defined majorities to bind all investors including investors who did not attend and vote at the relevant meeting and investors who voted against the majority.