Name
Global FinTech Guide
Country _ Name
Uruguay
SectionTitle
Asset and portfolio management
Body
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.

Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.

Introduction

Attitude of the country towards modern asset and portfolio management services

No reservations; there is a growing interest in this type of activities and an increasing number of entities applying for these licenses.

Legal affairs

Obligations and requirements to provide asset and portfolio management, or ancillary services described above

1. Portfolio Managers are defined as the legal entities that in a professional and customary manner manage third party investments, in an individual and discretionary way.

In order to obtain a Portfolio Manager license, the applicant must submit the following information:

    a) Corporate information (as commercial name, address, taxpayer number, website, among others).
    b) Notarized copy of the bylaws or articles of incorporation.
    c) Information regarding the legal representatives.
    d) Information of its shareholders and senior personnel.
    e) Information regarding the person or legal entity who has the effective control over the Portfolio Manager, who must also comply with a series of requirements.
    f) Information regarding all the entities belonging to the economic group of the Portfolio Manager.
    g) Accounting statements regarding the last financial year, prepared in accordance with adequate accounting rules of Uruguay.
    h) Affidavit with signature certified by a notary public stating the legitimate origin of the capital; AML Manual describing the integral system for the prevention of money laundering and financing of terrorism, and appointment of a compliance officer.
    i) Evidence that the personnel have received adequate training according to applicable regulations.
    j)  i) Evidence that the personnel have received adequate training according to applicable regulations.
    k) Templates of the agreements to be entered with its clients.
    l) Description of the services that will be outsourced and are essential for the operation of the company, attaching the model contracts to be signed, and a risk assessment, provided that the outsource is located in, and performs its activity entirely from, Uruguay.
    m) Days and hours open to public.
    n) Code of Good Practices.
    o) Code of Ethics.
    p) Provision of guarantees before the CBU, for the equivalent of approx. USD 60,000, plus a variable amount depending on the size of the portfolio.

2. Broker Dealers are defined as those entities that in a professional and customary manner carry out intermediation activities between offerors and potential investors of publicly or privately offered securities. Also, such entities may have the custody of the assets.

Broker Dealers may act within a stock exchange (in which case are named Stockbrokers, “corredores de bolsa”), or not, in which case are nam
ed Securities Agents, “agente de valores”). 

In case a company applies before the CBU to obtain the Broker Dealer license, in addition to the information listed for Portfolio Managers, the applicant would have to submit:

    a) In case of Stockbrokers, a note from the stock exchange indicating its acceptance as a member thereof.
    b) A Business Plan, which shall include, at least:
    1. Description of the assessment carried out for setting up in Uruguay, with an indication of the grounds considered, accompanied by market and economic and financial feasibility studies, if available.
    2. Detailed description of the operations to be carried out and the operating platforms to be used. It shall be specified whether the platforms are national or foreign, and in the latter case, the following information shall be submitted:
        i) Control body of such platforms,
        ii) Operational and security control procedures in place,
        iii) Template of the contracts to be signed with the owners of such platforms.
    3. Description of the profile of the clients to whom the operations will be oriented, indicating whether they will be: a. residents or non-residents, b. natural persons or legal entities, c. high-net-worth or retail investors.
    4. Declaration of whether the Broker Dealer will be acting for its own account, or on behalf of third parties (e.g., clients), or both.
    5. Products and services to be offered, detailing the financial instruments with which it will operate (domestic, foreign, fixed income, variable or mixed, derivatives, etc.).
    6. Complete identification of the channels of communication and distribution of the services to be offered (points of sale, internet, social networks, others).
    7. Detail of the domestic or foreign counterpart institutions with which the broker-dealer will operate (banking institutions, agents, brokers, custodians, etc.).
    8. Initial capital and cash flow projected for a period of three (3) years with opening basic concepts of income and expenses, together with the criteria used for its preparation.
    c) Templates of the power of attorney to be granted by the clients.
    d) Description of the policies and procedures established for the management of the capital, based on its operations. In this sense, note that Broker Dealers must permanently maintain an equity capital of at least the greater of: (a) the risk-based capital requirement determined according to the nature, complexity and volume of operations, the risk profile or potential risk exposure, and the capacity to absorb losses derived from unforeseen events; (b) the activity-based capital requirement of: (b.1) approx. USD 180,000.00 for Broker Dealers that operate both in their own name and in the name of third parties; or (b.2.) approx. USD 120,000.00 for Broker Dealers that operate exclusively in their own name.

Furthermore, as for the provision of guarantees before the CBU, the amount set for Portfolio Managers increases to the equivalent of approx. USD 240,000, plus a variable amount depending on the size of the portfolio. 

If deemed necessary, the CBU may request additional information to that indicated above.

In approving or denying any of the two licenses, the CBU will take into consideration both legal and merit (opportunity and convenience) grounds. Please note that there is no licensing fee.

The duration of a standard process is approximately between six (6) to nine (9) months, though the timing will depend on the complexity of the structure, information and documentation submitted, etc. There is no statutory term.

Finally, some of the main obligations that Portfoli
o Managers and Broker Dealers have, are the following:

    i) To have written agreements with clients;
    ii) To have a Good Practices Code and a Code of Ethics. Additionally, broker dealers should have a Code of Conduct;
    iii) To have a specific procedure for clients to solve any controversy and forms for making claims;
    iv) Provide clients with information about the characteristics and risks of the products for which the client require advice. This information varies depending on whether the securities are public or privately offered securities, issued locally or abroad;
    v) Provide clients with sufficient and clear information regarding charges and costs to be borne by the client;
    vi) Data safeguard and software procedures (backup systems) and Safeguard procedures of all the documents issued (backup systems);
    vii) Business continuity plan;
    viii) Transcribe into the Board of Directors Book of Minutes, the CBU’s resolutions emerging from supervising or inspection acts, as well as the settled fines;
    ix) Communicate certain events, change in the status or information, change in the Superior Personal and submit periodic information, etc. to the CBU within certain specified terms;
    x) Registry of clients, Registry of advisory and referrals, Registry of the particular trade orders received from its clients, and Registry of instructions made to Broker Dealers, according to the guidelines given by the CBU. Also, Broker Dealers are required to have to additional Registries, one of certificates of legitimacy requested by clients, and the other of securities registered by the broker-dealer in the registering entities.
    xi) In case of outsourcing of services, it is generally required the prior authorization of the Superintendence of Financial Services.

    Additionally, Portfolio Managers and Broker Dealers must submit certain periodical information, which includes, for example, annual consolidated financial statements (in the case of Broker Dealers, the statements must be externally audited).

Additional comments regarding the legal situation for asset and portfolio management services or what FinTechs must be aware of in this business area

Please note that if the activity of the service providers in Uruguay is carried out on a strictly occasional basis (i.e., isolated acts, in Spanish: “acto aislado”), compliance with local requirements of incorporation will not be necessary and licensing requirements most probably should not be triggered.

However, if such activity in Uruguay is carried out on a “regular basis” (which means to be proactively performing activities in Uruguay), it could be considered as doing business in Uruguay and the entity will be required to open a branch or incorporate a subsidiary in Uruguay, and it may also need to obtain a license from the CBU) (hereinafter, referred as to “Doing Business”). The determination of engaging on a “regular basis” is a factual matter to be analysed under a standard of reasonableness.

Hence, if the activities would be performed cross border, an analysis regarding the above on a case-by-case basis would need to be performed.


Economic conditions

Market size for asset and portfolio management services and biggest companies in this business area

FinTechs in this category are mainly bank solutions providing access to personal account information and transactions executions. Also, some Broker Dealers offer these types of services, and when the scope of activities is limited to providing investment advice, Investment Advisors and Portfolio Managers may do so as well.

Currently, there are
a total of 93 Broker Dealers in business, and 55 Portfolio Managers. 

Moreover, according to the CBU’s website , transactions in the primary market (both exchange and OTC) for the month of November 2021 amounted to USD 2,628,260,000,000.00, and in the secondary market USD 537,070,000,000.00. 

Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

According to the latest information published by the CBU , in 2020 there were 63 Portfolio Managers in business, and the assets under management were USD 10,424,159,000.00, split among 6,856 clients. Moreover, the revenues generated from those services amounted to USD 23,444,000.00 directly from clients, and 32,925,000.00 directly from broker-dealers. These figures do not include revenues generated from other services such as referrals, advisory, and channelling of clients’ orders.

 

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