Purpose of the amendment, effective date, and transition period.
On March 26, 2024, the following amendments were passed: (i) to the General Law on Securities and Credit Operations (LGTOC), which established the possibility of issuing, guaranteeing and transferring all types of securities’ certificates through electronic means; and (ii) to General Law on Auxiliary Credit Organizations and Activities (LGOAAC), which modifies the operation of general depository warehouses (AGD), that according to the amendment must document the ownership of goods and merchandise they keep in deposit, exclusively through certificates issued through electronic means; These AGDs are regulated financial institutions that operate with warehouses and facilities in Mexico and/or abroad, whether those facilities are owned or leased (whether the lease is onerous or gratuitous).
These amendments are effective as of March 27, 2024. However, an additional period of 180 days expiring on December 4, 2024, was granted to allow the issuance of the National Banking and Securities Commission’s (CNBV’s) regulatory provisions, required to fully implement the amendments.
Furthermore, the new regulations provided for a transition period that will expire on September 27, 2025, to adjust AGD’s operations to the new rules. During this period, new depository certificates, regardless of being issued in physical or electronic format, must consider the elimination of pledge bonds, and instead include the information referred to in new Article 232 of the LGTOC. The foregoing applies if a collateral is put in place affecting the goods or merchandise subject matter of the depository certificates. Once the transition period is over, AGDs must document all their operations exclusively through depository certificates issued through electronic means.
During the transition period, physical certificates may be replaced by electronic ones, but in any case, they will be valid until their cancellation, pursuant to regulations effective at the time of their last negotiation.
Context.
For more than 20 years, Mexican legislation has recognized data messages including electronic signatures as valid and enforceable. However, the enactment of these new rules provides great certainty not only to the issuance of security’s certificates through electronic means, but also to their circulation and conveyance through a single, uninterrupted, and verifiable chain of endorsements allowing their traceability. The foregoing was already possible from the technical standpoint of view through a decentralized and reliable registry using blockchain technology, but the acknowledgment of the legal system was missing.
With this amendment, security’s certificates, whether nominative or in bearer form, may be issued either through physical or electronic means (whether electronic, optical or through other technology). However, no option is granted regarding depository certificates issued by AGDs, since they must be issued through electronic means as of September 27, 2025.
Credits in general.
The new rules seek to streamline and give certainty to transactions carried out through security certificates issued through electronic means by considering them valid and effective, as far as their issuance is carried out through a system that guarantees the integrity, availability, and traceability of the certificate (the “System”). According to the new rules, relevant acts and operations related to electronic certificates shall be carried out through the System, including not only their issuance, but also third party’s guaranties (“aval”), transfers or conveyance via endorsement or ordinary assignment, as well as their exhibition to exercise the rights set forth in the certificate. Please be aware that once the certificate is endorsed through the System, the new rules consider that it was also delivered, thus simplifying the transfer.
Other advantage of using a System to issue security certificates is that in case of a judicial opposition to the cancellation and payment of the certificate, the judge must verify its existence and circulation through the System in which it was issued, which will contribute to save time and legal expenses otherwise would be required in this kind of processes.
Depository Certificates.
Upon expiration of the transition period described above, all certificates of deposit as well as the collateral affecting deposited goods and merchandize documented therein must be issued and placed through a cryptographic system that, in addition to the requirements applicable to the System, comply with the provisions of NOM-151 regarding the conservation of data messages. Furthermore, the cryptographic system shall ensure the confidentiality, availability, and integrity of information, as well as prevent fraud and cyberattacks (the “Cryptographic Systems”). The National Banking and Securities Commission, as well as the Ministry of Economy shall issue rules and provisions to provide for additional specifications applicable to Cryptographic Systems. Likewise, such systems must secure reliable interconnection with other Cryptographic Systems that use different AGDs.
Please be aware the representative of the AGDs must sign depository certificates using advanced electronic signature provided for in the Commercial Code, whereas other securities’ certificates may be sign using simple or digital electronic signature (such as Docusign’s).
According to the new rules, AGDs will be responsible for guaranteeing access to the Cryptographic System to interested authorities, individuals, and entities, so that they may exercise their rights related to the certificates. Please be aware that Cryptographic Systems shall be the only means available for issuing, transmitting, receiving, delivering, releasing all or part of goods, cancelling the certificate, withholding the goods by court order, or any other act related to depository certificates issued by AGDs; as well as to require payment by the lienholder and carry out the procedure equivalent to the protest for non-payment, replacing the face-to-face protest procedure established by the LGTOC before the amendment. The foregoing will make an important contribution to streamlining and simplifying the procedures for the collection and enforcement of pledged claims, since among other things, it exempts the lienholder from the obligation to give notice of non-payment to all signatories to the certificate.
Depository certificates will also need to be registered in the Single Registry of Certificates and Goods (“RUCAM”), which is maintained by the Ministry of Economy through the https://rucam.gob.mx/ portal, which is publicly accessible, and will have declaratory and informative purposes only. Preventive notices, judicial or administrative decisions and public certifications issued with respect to the goods and merchandise deposited shall also be registered at the RUCAM.
To enforcement pledges placed on goods covered by depository certificates, once the equivalent of the protest for non-payment through the Cryptographic System has been completed, the AGD shall publish a notice of sale of such goods and merchandise at the RUCAM. The sale of deposited goods will take place by auction, either following the procedure provided for in the LGOAAC, or through the procedure agreed upon by the creditor and the debtor (a note must be made on this regard in the Cryptographic System). The sale of goods covered by the certificate may also occur at the end of the deposit period if the holder of the certificate does not remove the goods and merchandise from the warehouse.
Furthermore, it is important that AGDs consider their responsibility as regulated entities to collect and verify the information and documentation related to the identification of their customers and users.
We are looking forward to advice you in connection with the issues set forth herein.
