Panamanian securities law (Law Decree 1, 1999, and Agreement No. 5-2004, July 23rd, 2004) regulates investment funds. It regulates funds based on number of investors, location of operation, investment types and capitalization. The elements mentioned before will determine 1. registration obligation, 2. supervision obligation.
The framework in question offers two vehicles which allow you to operate without a license, which substantially limits set-up and operation costs. Such funds can be set-up as low-cost purpose funds, which guarantee legal framework for financial transactions and structure of that nature, or purpose equity vehicles, if you stay within the limitations established by law.
It is a company incorporated for the purpose of doing specific investments on behalf of its shareholders, and that does not solicit capital from retail investors or the general public, unless as specifically allowed in the local securities laws, which usually refers to qualified investors.
In Panama, the PIF is enacted by Law 1 of July 8th of 1999 along with regulation 5 of July 23rd of 2004 by the Superintendence of the Securities Market (SSM).
The PIF must have a legal representative in the Republic of Panama, who may be a broker, a brokerage house, an investment advisor, a bank, a firm of public accountants, a lawyer, a law firm or, in any event, people authorized for such purposes by the SSM. The legal representatives will represent the PIF before the SSM and receive administrative and judicial notifications in representation on its behalf.
The fund is limited to 20 investors maximum, investors which should be related to each other by their belonging to a company, association, or group. The shares of this fund can also not be commercialized, distributed, or publicly offered. The article also includes another exception to the rule, which is corporations in which shares were emitted in virtue of a contract between participants, prohibiting the entrance of new shareholders.
Under these two exceptions, the fund will not need to:
PIF-50s are those investment funds that operate in or from the Republic of Panama, whose participation quotas are not offered in the Republic of Panama and whose articles of incorporation, trust instruments or articles of incorporation contain the following provisions:
The PIF must have a legal representative in the Republic of Panama, which may be a broker, a brokerage house, an investment advisor, a bank, a public accounting firm, a lawyer, a law firm or, in any case , persons authorized for such purposes by the SMV. The legal representatives must have the necessary qualifications to represent the PIF before the SMV and receive administrative and judicial notifications on behalf of the PIF.
Before beginning operations in the Republic of Panama, the PIF must notify the SMV, through a lawyer, that it has met the requirements established in Agreement No. 5 of 2004. This notification does not mean that the PIF is considered a person registered with the SMV. Simply, the PIF must deliver to its representative in the Republic of Panama, in order to be available for inspection by the SMV, the following information:
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