THE LATEST REFORM TO THE GENERAL LAW OF CREDIT SECURITIES AND OPERATION: A STEP TOWARDS DIGITALIZATION
On March 26, 2024, a decree was published in the Official Gazette of the Federation that reforms, adds, and repeals various provisions of the General Law of Credit Securities and Operations (LGTOC by its initials in Spanish) and the General Law of Organizations and Auxiliary Credit Activities (LGOAAC by its initials in Spanish). This reform represents a significant advance to encourage and provide greater legal security to the celebration of credit operations and negotiability of credit titles through electronic means and other technologies.
Electronic Credit Securities
The LGTOC now expressly allows the issuance and transmission of credit securities in electronic, optical media or through any other technology as long as it is through an “information system” in accordance with the applicable provisions of the Commerce Code. Credit securities that require a person’s signature can be signed in electronic, optical media or other technology as long as that signature is attributable to the signer according to the Commerce Code.
Endorsement and Electronic Transmission
The endorsement of promissory notes and the electronic transmission of other credit securities is expressly allowed. The identity of the people who present the title as the last holder and the continuity of the endorsements “must be verified in the information system in which the respective title was issued”.
Impact of the Reform
In summary, the 2024 reform to the LGTOC marks a milestone in the digitization of the Mexican financial sector by regulating the electronic issuance of deposit certificates and validating the legality of credit securities issued electronically. Although the transmission of promissory notes and other securities through electronic means maintains some challenges in its practical implementation due to the requirement to verify the identity of final holders in the same information system, the reformed text will likely allow better use of technologies that take advantage of the hash function to document traceable electronic operations.
The reform is an important step towards the modernization and digitization of the Mexican financial system, and it is likely to have a significant impact on the way credit operations are carried out in the country. However, as with any major change, it also raises new challenges and questions that will need to be addressed in the future.