He Court of Administrative Litigation (TCA) resolved that the central bank (BCU) awarded a bad authorization to Pilay Uruguay to be a trustee of a financial trust in 2010. The action before the TCA was presented by the company Consorcio del Uruguay that it felt hurt by Pilay’s involvement in the real estate thrift market.
The situation goes back to November 2010 when a resolution of the Superintendence of Financial Services of the BCU enabled Pilay Uruguay to market a product that sought to capture public savings, without having been authorized or registered to do so.
The first conclusion of the TCA is that this resolution was “absolutely null”.
In another passage, the ruling refers to article 26 of Law 17,703 (on trusts). Article 28 of that law says: only financial intermediation entities or investment fund management companies may be trustees in a financial trust.
In this sense, he adds, it is “clear that Pilay Uruguay (Campiglia & Pilay) was not a financial intermediation entity, therefore, to be a trustee of a financial trust, it had to be formalized and registered as an investment fund management company”. Mentioning other regulations, the TCA states that investment fund managers will require, in order to function, authorization from the BCU and for the purpose of granting the aforementioned authorization, the monetary authority will attend legal reasons.
In turn, it states that article 129 of the Compilation of Stock Market Regulations provided that in order to be authorized, investment fund management companies must meet certain requirements. Some mentioned were: having the exclusive purpose of managing investment funds; take the legal form of corporations by nominative, physical or book-entry shares, and include in its name the expression “investment fund managers”.
Leonardo Carreno
Building under construction
On this point, the TCA indicates that the BCU deviated from the provisions of the applicable regulations by having authorized Pilay Uruguay a “provisional and limited operation, as a financial trustee managing investment funds, when it had not complied with the requirements set forth such purposes”.
Referring to the final authorization granted to Pilay Uruguay, he concludes that “the Superintendence of Financial Services has exceeded its faculties or powers that, as it turns out from the legal texts, it is about regulated powers, not discretionary ones”. Thats why he “BCU does not have the power to authorize a company to operate as an investment fund managerwhen it had not complied with the legal demands or requirements”.
With the foregoing, the TCA ordered the annulment of the resolution of the Superintendence of Financial Services of the BCU of November 2010.
What the TCA said about Consorcio
In one part of the ruling, the TCA refers to Consorcio del Uruguay, a company that appeared before the Court to take action against Pilay Uruguay. It states that the Uruguayan Consortium captures resources from the market under a modality other than Campiglia & Pilay.
“But, even with their different legal regimes, they do not carry out their activity in watertight compartments, both operate, at the starting point of such legal differences, in the same financial market, operating in the capital market, seeking to attract private savings” , points out.
He then explains that “under different legal forms both companies, Consorcio and Campiglia & Pilay are engaged in the same business, which is capturing public savings, especially for home purchaseswhether by lottery or bidding between a savers market for that purpose and both the stock market organized around prior savings groups or financial trusts are under the regulation and supervision of the BCU”.
For this reason, it maintains that “Consorcio’s legitimacy is clear insofar as it has a legitimate interest in ensuring that all its competitors comply with the same regulations that regulate that market and demand due behavior in this regard from the central bank supervisory authority.”
