Venezuela – CM PB – Update 2022

Regulatory Template, Regulatory Summary and Behaviour Template

Material changes

The Manual has been reviewed to ensure that its content remains accurate and in accordance with an evolving interpretation of the legal and regulatory framework. While the legal framework as such has not been significantly amended since the last update, our local experts have suggested to adapt certain approaches on the basis of an evolving interpretation of the regulatory framework.

Activities on-site in Venezuela

In Venezuela a foreign bank will be considered as undertaking financial intermediation in Venezuela when it regularly and habitually performs activities in Venezuela. However, there is no specific statutory or regulatory definition/test of what constitutes doing “regular/habitual business” in Venezuela, nor is there any case law to quantify this criterion.

Since there is no official position from the Venezuelan supervisory authorities on what constitute “regular/habitual basis” a foreign bank may perform certain activities in Venezuela should the Bank conform to the following rules when approaching the targeted prospect/client, in Venezuela to mitigate the risk that the Bank’s activities may be deemed as performed in Venezuela “on a regular basis” (the “Non-Regular Activity Guidelines”):

• The Bank’s representatives only travel to Venezuela from time to time to privately liaise and meet with clients or potential clients privately (e.g. in their home, offices or otherwise privately); i.e. the Bank’s representatives only acts on an occasional and one-to-one basis in Venezuela;
• The Bank has no office, physical presence or permanent establishment in Venezuela;
• No checks or cash are received by the Bank’s representatives in Venezuela;
• Capital market related activities such as brokerage and investment services relate to securities that are offered or listed outside Venezuela;
• Transactions are documented, closed and settled outside Venezuela;
• Non-Venezuelan law and jurisdiction are chosen to govern any transaction documents;
• No public advertisements are made in Venezuela;
• No roadshows, seminars, blast emails or other forms of selling efforts are conducted in Venezuela;
• No promotion or offering of securities listed in Venezuela (e.g., shares of Venezuelan entities). Note, however, that foreign structured products having Venezuelan securities as their underlying or reference asset should not trigger registration with the Venezuelan supervisory authorities.

Based on the above, prospecting activities, negotiation activities, offering of additional services the provision of general advice/investment advice (except with respect to securities listed in the country) and reporting activities undertaken by a foreign bank on-site in Venezuela (both on an active and passive basis) are considered a ‘Grey zone’. It must be stressed that this is an unofficial tolerated practice, and it is not possible to rule out that the Venezuelan regulators will adopt a stricter approach. Each Bank needs, therefore, to determine – based on its risk appetite – whether the Bank will allow its representatives to undertake the abovementioned activities whilst on-site in Venezuela.

Activities via remote means of communication into Venezuela

Activities undertaken via remote means of communication (e.g. e-mail, fax, telephone, video conference) from abroad into Venezuela seem to be considered as being conducted outside of Venezuela (offshore activity) and therefore do not fall under the application of Venezuelan law (narrow concept of territoriality), so long as the person engaging in such activities has not created a permanent establishment and/or a de facto branch in Venezuela or is carrying out “financial intermediation” in the country (i.e. so long as the Bank does not undertake business on a “regular/habitual” basis). Venezuelan law is predicated on the territoriality principle (art. 8, Civil Code), meaning that Venezuelan law does not have a “long arm” that will attract activities that are substantially performed outside Venezuela into the purview of Venezuelan authorities (except for criminal activities that affect persons in Venezuela). There are no formal rules or official position from the Venezuelan supervisory authorities on this regard a cautious approach is recommended; the foreign Bank should conform to the Non-Regular Activity Guidelines.

All in all, it can be said that the new version of the Country Manual presents a much ‘friendlier‘ regulatory environment for foreign banks for the undertaking of activities on-site and via remote means of communication.  Nevertheless, we emphasize that we are still very much recommending a cautious approach when acting in Venezuela, in view that the change of approach is based on unofficial tolerated practices.

Non-material changes

• Several comments have been slightly reworded (without introducing material changes) to reflect the regulatory situation/current interpretation of the regulatory framework more accurately;
• For streamlining purposes, several BT conditions have been reworded without introducing material change.

Implications for business relations with third parties

The answers regarding activities when a foreign bank co-operates with third parties have been modified to follow the logic of the approach that has been described herein above for activities by a foreign bank in Venezuela. Thus, the principle is that a foreign bank may cooperate with finders, business introducers and EAMs, who should act on a one-to-one and occasional basis (unofficial tolerated practice). Third parties should avoid any marketing/promotional activities on behalf of the foreign Bank, should not have powers to bind the Bank (i.e., sign documents on behalf of the Bank) and should act in compliance with the Non-Regular Activity Guidelines.

With respect to the provision of documentation to the EAM (such as documentation on the Bank’s banking and investment services, investment research and financial analysis or recommendation lists), our Country Manual now distinguishes between the provision to the EAM for remittance to the end client on one hand and the provision to the EAM for the EAM’s own professional purposes on the other hand. The answers have been amended accordingly.

Regulatory Summary

This document has now a more user-friendly layout and reflects the changes contained in the RT.

BT Short Comparison

BRP has created a comparison document allowing users to quickly identify the modifications made compared to the previous version of the PB Manual (BT Short Comparison). The BT Short Comparison can be found on BRP’s platform (mybrponline) in the Search tab by entering in the Document Field “CM PB BT SHORT COMP” and “Venezuela” in the Target Country Field.

The BT Short Comparison should be read as follows:

The first column contains a short description of the activity in question. The second column contains the answers of the previous version of the Country Manual (online until the day of the alert). The third column contains the new answers of the most recent version of the Country Manual. Only the modified answers are displayed (in color). If the answers in the new version are unchanged compared to the previous version, they are shaded in grey.

For more information, please contact us: info@brpsa.com

Best regards,