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101 on Legal and Compliance for IROs

As part of our role at Miranda IR we focus a lot on best IR practices, but what are the legal and compliance requirements for a Mexican IR firm? This week we provide a simple 101 on legal and compliance for IROs. (Beyond this, it is best to consult a lawyer).


1. Quarterly Reporting Deadlines

We always advise our clients that reporting before the reporting deadline gives a good impression to the market. For Q1, 2 and 3 the quarterly reporting deadline falls at the end of the month after quarter end, usually on a Tuesday, Wednesday or Thursday. For Q4 it usually falls at the end of February. The deadlines are published in advance on the BMV website.


2. Disclosure and Selective Disclosure

Articles 36, 105, 312 and 383 of the Ley del Mercada de Valores (Securities Market Law) explain the laws around disclosure in Mexico.

  • Article 36
    • The members and secretary of the board of directors of public companies must refrain from doing any of the following: Hiding, omitting or causing the concealment or omission of relevant information that must be disclosed to the public, shareholders or security holders, unless this Law allows its deferral.
  • Article 105
    • Issuers must disclose relevant events through the exchange where their securities are listed. Disclosure may only be deferred under the following circumstances: i) they are not acts, facts or consummated events, ii) there is no information in the mass media, iii) there are no unusual movements in the price or trading volume of the securities, which cannot be explained by information available to the public.
  • Article 312
    • The securities central counterparties may disclose information on their risk management procedures, their financial resources and the amount of resources they receive to guarantee compliance with the obligations of their reciprocal debtors and creditors.
  • Article 383
    • Anyone who conceals or omits to reveal relevant information or events, which in terms of this legal system must be disclosed to the public, shareholders or security holders, unless their disclosure has been deferred in the terms of this Law, will be sanctioned with imprisonment of five to ten years. 

In general, we recommend erring on the side of quick disclosure of information that is relevant to the stock price as soon as such information is confirmed and final. We recommend avoiding talking in depth to analysts and investors or hosting events after the end of a quarter and before you report quarterly earnings. And one should try and give roughly the same information, and as much as possible, at the same time, to analysts and investors.


3. Notifications of Changes in Share Price

Based on article 106 of the Ley del Mercada de Valores (Securities Market Law) and article 50 of the General Provisions applicable to issuers of securities and other participants of the stock market, a notification must be sent under the following circumstances: if there is unusual market movement related to the price or trading volume of a security (it can vary, but in general, an unusual movement is considered to be when the traded volume exceeds 1% of the float), or changes in the supply or demand or share price of a security, which are not consistent with its historical behavior and cannot be explained by information available to the public. In this case, issuers must:

  • Inform the CNBV and the stock exchange on which their securities are listed, through a relevant event that explains the causes of the movement for immediate dissemination to the public.
  • Disclose additional information when market opinion of the Commission or the stock market is insufficient, imprecise or confusing, or, to rectify, ratify, deny or expand any event that has been disclosed by third parties to the public, and that due to its interpretation may affect or influence the listing of the issuer’s securities.
  • If the issuers are unaware of the causes referred to above, they must make a statement to that effect. In this case, the issuer must also clarify whether members of the board of directors or relevant executives had anything to do with the movement, or whether the repurchase fund was used.


4. Annual Reports

The deadline to submit the annual report is April 30th of each year, unless an extension is granted (as in 2020 due to the global pandemic). The annual report should be prepared in accordance with the manual available on the CNBV’s website and sent electronically to the CNBV via STIV-2 and to the BMV via EMISNET.

The following information must be included in an annual report: cover page, index, guarantor details, general information, the issuer, financial information, management, capital markets, underlying assets, responsible people and annexes.


5. Press Releases and Relevant Events

Whilst the CNBV does not stipulate a specific time when press releases must be issued, best practice is to publish outside market opening hours. They should be sent electronically to the CNBV via STIV-2 and to the BMV via EMISNET.


6. Shareholder Meetings

There are two types of General Shareholder Meetings: ordinary and extraordinary. Both should be held in the registered offices, otherwise, they could be deemed null and void, except in the case of an act of God or force majeure.

The Ordinary Meeting takes place once a year and should be held within four months of the end of the fiscal year. In this meeting, the main topics that should be discussed are the auditor’s report, the appointment of the Board Secretary or Board Directors and determining the remuneration of directors. An Extraordinary Shareholder Meetings can be held at any time and is held to deal with matters such as an increase of stockholders’ equity, changes in the company’s core business, mergers and the issuance of preferred shares, among other things. For further information on the basic regulations of General Shareholder Meetings, please refer to the Ley General de Sociedades Mercantiles (Mexican General Business Law).

At Miranda-IR, we recommend that: each board members votes independently and separately to the other; accurate and complete information on the Order of the Day is on the website of the company; do not group together issues under “Various Matters”; and provide full information on the board members, such as their work history and membership of other boards.


7. Guidance (annual and quarterly)

Article 364 of the Ley del Mercado de Valores (Securities Market Law) explains the laws around guidance in Mexico as follows:

  • People who have privileged information, in no case may: issue recommendations on any class of securities issued by an issuer or the credit instruments that represent them, when this recommendation, quotation or price may be influenced by said privileged information. This restriction is also applicable to optional securities and financial derivative instruments with these underlying securities.

Apart from this law annual and quarterly guidance are at the full discretion of the company. However, every fact issued must be in accordance with disclosure laws and backed up by previously reported results. In addition, companies should be careful about guidance given to smaller groups and not published publicly – any information which may be considered guidance should be made public and not given only to select groups. 


8. Changes in beneficial ownership.

Shareholders acquiring, in a single act or in multiple acts between 10% and 30% of the capital of a listed company in Mexico must disclose this acquisition to the general public through the BMV. For the purposes of the disclosure requirements, a shareholder can be defined as a single beneficial owner or a group of persons that have agreed to work in concert regarding the company. Additionally, such shareholders must disclose their intention of acquiring or not a significant influence or a controlling interest in the corresponding company. If the acquisition is carried out by a group of related persons or persons acting in concert, the ownership breakdown of each participant must also be disclosed. Any person that controls or has a significant influence in the controlling entity, or in the consortium to which a listed company is party, the counsellors or board members of such consortium, or the companies part of such consortium, that directly or indirectly increases or decreases its participation by 5% in the listed company referred to above, must notify the general public of such increase or decrease through the BMV. Such disclosure must be made on the business day following the increase or decrease. The disclosing party must also disclose its intention of acquiring or not a significant influence or controlling interest in the listed company. The person or group of persons that owns, directly or indirectly, 10% or more of the capital stock of a listed company and the counsellors and board members of such listed company must disclose to the CNBV and, in the cases specified by the CNBV, to the general public through the BMV, the purchase or sale of their shares, in accordance with the general rules that the CNBV will issue in this regard. According to the Credit Institutions Law 6, shareholders acquiring 2% or more of the capital stock of a financial institution are required to notify the CNBV. The notice must be sent within three business days after the acquisition. 


9. Tender Offers

Shareholders who want to acquire more than 30% but less than 50% of the outstanding capital stock of a listed company in Mexico are required to launch a limited tender offer for the intended percentage or for at least 10% of the issuer’s capital, whichever is higher. The offer period must last at least 20 business days. Shareholders who want to acquire more than 50% of the outstanding capital stock of a listed company in Mexico are required, unless an exception is granted, to launch a tender offer for 100% of the outstanding shares of the company. 


Miranda IR is available to help with any investor relations related compliance queries.