Our partner Antonio Rubilar spoke exclusively with El Mercurio about the questions surrounding the CMF’s actions in the Sartor AGF sanctioning process.
A few weeks ago, the Financial Market Commission (CMF) imposed historic sanctions against former executives and directors of Sartor Administradora General de Fondos (AGF), with fines totaling almost $15 billion. The regulator also accused AGF of violations and sanctioned it by revoking its operating license.
And this week, the 29th Civil Court declared the general fund manager bankrupt. The firm’s defense refutes the accusations and questions the regulator’s decision.
“The sanction is the outcome that the CMF had been announcing through a series of decisions that deviate from the minimum standards of due process. The regulator opted for one of the most drastic measures in the legal system, without the guarantees required by the Constitution and Law 21,000—a bilateral and prior process—which seriously compromises public confidence in the way the authority is exercising its powers, in addition to weakening the soundness of the financial market,” points out Antonio Rubilar, partner at Albagli Zaliasnik Abogados and defender of Sartor AGF.
The sanction imposed at the beginning of the process (revocation of the AGF’s authorization to exist) is, in his opinion, “the legal equivalent of revoking an Environmental Qualification Resolution without a prior process. It is the removal of the license of officials, it is the death sentence for a legal entity, a sentence of dissolution without trial. It is unprecedented in Chile.“ And he accuses: ”Any hint of impartiality in the sanctioning process disappeared.”
That unfair?
“It is unfair and disproportionate, and it is openly illegal in form and substance. This is a completely different case from others seen in the market, because mere formal breaches are being charged, and yet the reaction has been one of the most intense in the history of the CMF.”
What is the reason for this?
“Probably because of criticism, justified or not, of the CMF’s delayed and opportunistic actions in other cases, they sought to compensate themselves by hastily and extremely sanctioning Sartor, a company that had been operating well, with good results, and that was cooperating with the CMF’s supervisory process.”
The president of the CMF, Solange Berstein, who voted in favor of the sanction, issued a prior opinion on the case and did not recuse herself, as they claim.
“The decision not to recuse herself, despite requests and a claim of illegality, raises serious doubts about the objectivity with which this sanctioning procedure was resolved. What guarantees can a citizen have of defending their case with an authority that has already made a decision and expressed it publicly?”
The CMF’s sanction is appealable. What path will they follow?
“The law provides for both an appeal for reconsideration before the CMF itself and a claim of illegality before the courts of justice. These are complementary avenues, and in this case, we have chosen to use all the mechanisms established by law.”
Have you already filed them?
“Last week we filed an appeal for reconsideration with the CMF, and once it is resolved, we will appeal to the Court of Appeals.”
Do you have a chance?
“We hope that in a case with such blatant violations, justice and the law will prevail.”
The Commission referred the case to the Public Prosecutor’s Office, and the charges could constitute a violation of the Economic Crimes Law. Does this complicate any substitution of punishment or alternative outcome?
“The referral of the case to the Public Prosecutor’s Office is, in these cases, a consequence provided for by the regulation itself. However, what may be a crime or an administrative offense are two different things. For example, the CMF only attributes alleged negligence in administration. I am sure that this will be a central point of the criminal defense established by Sartor’s executives and their teams in this area. In any case, given that this is an ongoing investigation, it is not possible to provide further comments.”
You are also the lawyer for former directors Pedro Pablo Larraín, Rodrigo Bustamante, and Michael Clark. Are the defenses the same for all three?
“Each defense has its own merit, but when one reviews each case separately, the lack of technical rigor with which the CMF acted becomes more evident. One example is the case of Rodrigo Bustamante, who was sanctioned for transactions in which he did not participate and at a time when he was not even a director. The CMF’s lack of rigor is scandalous.”
The accusations
The CMF accused Sartor of investing funds in entities related to the management team, of providing false information in its financial statements, and of violations of transparency, internal control, and probity. Are these accusations unfounded?
“The CMF never mentions fraud, but rather alleged negligence. We have maintained that all the investments made were legal and that, until the CMF intervened, Sartor paid in full each of the redemptions requested by its contributors.”
But Sartor’s contributors filed legal actions, including complaints, against the manager and executives.
“The contributors are affected by the situation and it is very legitimate for them to take all legal action. Just as there are contributors who have criticized Sartor, there are others who are disputing, via claims of illegality, the CMF’s decisions, such as the liquidation of funds.”
Did they also provide false information to the market?
“As for the alleged ‘false information,’ the discussion revolves around criteria for recognizing impairment and asset valuation, which are technical accounting issues on which we disagree with the CMF’s approach and which hardly meet the standard for being considered false information, because that implies intent. There was no concealment here. The bottom line is that Sartor operated for years with financial statements audited by reputable firms, subject to oversight by the CMF itself.”
Óscar Ebel, former director of Sartor AGF, cooperated with the CMF’s investigation. How do you explain that?
“All Sartor’s directors and executives cooperated with the investigation, providing all the information in a timely manner, making statements, and participating in countless meetings with the CMF. From a human perspective, it is understandable that any director would have been under significant pressure in the face of the CMF’s improperly intense scrutiny and intervention in the months leading up to the revocation.”
Does this invalidate his accusations? The CMF reduced his fine, recognizing his contribution of information.
“It is a statement made in a context of extremely high pressure from the CMF, and the Commission is interested in promoting the mechanism, so it would be strange not to recognize his cooperation. I see an institutional interest on the part of the CMF.”
Ebel described “transactions involving money invested by contributors to public funds managed by Sartor AGF, which are used by companies linked by ownership or by having a director with a stake in them, with those directors playing a dual role, finding themselves on both sides of the transaction.” Doesn’t that qualify as a conflict of interest?
“Transactions between related parties are not prohibited by law. The conflict of interest lies with the directors, who must abstain when making decisions, and that is regulated, but conflict of interest in the AGF does not exist as a concept in law. It is a criticism that the CMF is making on a whim.”
Was there a “triangulated transaction” that allowed the purchase of Azul Azul to be financed, as Ebel alleges?
“Some of the assertions are bombastic, but they lack technical support. Given that there are ongoing proceedings, we will clarify them in their proper context. From the outset, the term “triangulation” to refer to the purchase of Azul Azul is not appropriate. These are legitimate transactions that have been scrutinized in the past by the regulatory authority itself, without any evidence of wrongdoing in this regard.”
Does Ebel’s role in the investigation weaken Sartor’s defense arguments?
“Even considering the information he provided, there were no violations of financial regulations that would justify sanctions of that magnitude. The final consideration of that evidence will be up to the courts, but we are convinced that there were no violations of the regulations.”
This week, the 29th Civil Court declared Sartor AGF bankrupt. Is this the end, or do you see a way to reverse this process?
“We are concerned about the possibility that situations may become entrenched before the courts rule, so we will analyze and take all available actions to safeguard the effectiveness of those rulings.”
