December 29, 2022 - The Board Financial Market Commission (CMF) sanctioned Sonda director Andrés Navarro Haeussler with a fine of UF 6,000 for purchasing shares while in possession of privileged information. Said conduct breaches the duty to refrain stated on the final section of Article 165 of Law No. 18,045 on the Securities Market.
Article 165 states that anyone holding a position, activity, or relationship with an issuer of securities or with the persons indicated in the Law, and who holds inside information must keep it confidential. They may not use it for their own benefit or the benefit of others, nor may they acquire or sell for themselves or third parties, directly or through other persons, the securities about which they hold such information.
Sanctioning Resolution
According to Exempt Resolution No. 8,951, the Board resolved that Andrés Navarro breached the duty to refrain mentioned earlier by acquiring shares of Sonda S.A. through Inversiones Santa Isabel Limitada (a company of which he is a partner and legal representative) on January 28 and March 3, 2022 while possessing inside information. This inside information is an essential reserved fact of Sonda S.A. dated December 17, 2021, which informed about a possible sale of shares held through its subsidiaries SONDA Filiales Chile Limitada and SONDA Mexico.
The transaction involved the eventual divestment of up to 100 percent of Sonda S.A.'s interest, through said subsidiaries, in NOVIS S.A. and Servicios de Aplicación e Ingeniería NOVIS S.A. de C.V. These companies are incorporated under the laws of Chile and Mexico, respectively, and the divestment amounted to 60 percent of total shares issued by each. Had the transaction materialized, it would have resulted in a profit of approximately USD 16 million for Sonda S.A. in its financial statements.
Relevance of the Sanctioned Conduct
The duty to refrain, which bans the purchase of sale of securities while possessing inside information, aims to safeguard the functioning, development, and stability of the market. It also protects investors by preventing transactions carried out under information asymmetries, ensuring the transparency, trust, reliability, and fairness of markets.
Scope of Regulations on Inside Information
In addition to the infringements mentioned earlier, Article 165 of Law No. 18,045 expressly bans the use of inside information to obtain profits or avoid losses through any type of transaction with the securities to which it refers (prohibition of use). Individuals possessing inside information must refrain from communicating it to third parties (duty of non-disclosure) or recommending the acquisition or disposal of securities, ensuring this does not occur through subordinates or trusted third parties.
Article 164 of the Law on the Securities Market defines inside information as:
- Any information referring to one or several issuers of securities, to their business or to one or several securities issued by them, not disclosed to the market and the knowledge of which, by its nature, can influence the price of the securities issued, as well as the reserved information referred to in Article 10.
- Information on acquisition decisions, disposals, and acceptance or rejection of specific offers by an institutional investor in the securities market.
What the Law seeks in banning the use of inside information to obtain benefits or avoid losses, or to acquire or dispose of securities on which such information is held, is to prevent individuals from taking undue advantage of their relationship or position with issuers of securities or certain persons by illegitimately using the information they obtained in a confidential manner.
Additionally, Law No. 21,314 (the Market Agents Act) added an additional section to Article 16 of the Law on the Securities Market. It bans directors, managers, administrators, and main executives of an issuer of publicly offered securities, as well as their spouses, domestic partners, and relatives up to the second degree of consanguinity or affinity from carrying out, directly or indirectly, transactions on securities issued within a 30-day period prior to the disclosure of the issuer's quarterly or annual financial statements.
