A Mexican SOFOM is a complex entity used for many purposes and the most powerful financial entity or structure in Mexico after a full banking license. In fact, a SOFOM is often the most efficient path to a banking license in Mexico.
Mexico is a prime destination for American investors looking to grow their portfolios. Its proximity to the United States, secure banking laws, English speaking professionals, and the strength of the dollar of the country are all factors why American investors are doing business south of the border.
What is Mexican SOFOM?
Sociedad Financiera de Objeto Múltiple is a multiple-purpose financial company under Mexican law whose main objective is granting loans and credit. SOFOM can be a regulated entity (ER) or an unregulated (ENR) one. Mexico also has limited-purpose financial companies known as SOFOL.
You can utilize a SOFOM to perform many activities such as financial leasing, granting loans, financial factoring, issuing credit, etc. The Mexican SOFOM can also be used for crypto exchanges and capital transmission operations.
SOFOMs must register with the National Commission for the Protection and Defense of Financial Services Users (CONDUSEF). A SOFOM is usually governed by article 115 of the Credit Institutions corresponding Law General Law of Credit Auxiliary Organizations and Activities (LGOAAC) and the general provisions issued by CONDUSEF, depending nature of its activities.
The Advantage of a Mexican SOFOM
One of the most powerful entities that you can use for your advantage is called a Sociedad Financiera de Objeto Multiple or SOFOM. There are a number of activities that you can do with a SOFOM such as financing, factoring, making loans, issuing credit, etc. The Mexican SOFOM is also used for cryptocurrency exchanges and money transmission businesses.
Mexico is currently in the beginning of a new era as its President has promised a wave of reforms that will change many laws, one of the many reforms that have gone through is the way SOFOMs operate in the country.
You do not need any special authorization to start operating as a SOFOM. Any person with proper Mexican identification can open a SOFOM. That is to say, the director and person responsible for the SOFOM must be a Mexican person.
The Mexican federal government does not have to be involved at all in the process, so long as you register your financial institution as a non-regulated SOFOM, no license or special permission is required.
Establishing a SOFOM in Mexico works just like opening any other business in the country. Your company must be formed and authorized by a Notario. Do not get confused, a Notario’s role in Mexico is very different from the United States. A notary in Mexico is a very important person, where anyone can be a notary in the US.
Your Notario will create the bylaws of the SOFOM which will feature how the principal purposes of the entity will take place. It is important for you to have a business plan that explains in detail how your financial entity will work under a SOFOM.
As part of one of its functions a SOFOM has the ability to act as a fiduciary in a guaranty trust that is formed to guarantee the credits that it issues, it should also be noted that trusts in Mexico do not work the same way as in the United States.
One activity that cannot be done with a SOFOM receives deposits from clients as those are reserved for banks and financial institutions in the country. A partnership with a bank in Mexico is required.
Establishing SOFOM in Mexico
If you’re looking for a full banking license, check out my article Best Offshore Banking Licenses for 2023
Partnering with a bank as a SOFOM is a great way to operate as a financial entity without an international bank license. The SOFOM structure allows you to hold client funds in your corporate bank account and transact as described above.
There are two types of SOFOMs available, the regulated SOFOM and the unregulated SOFOM. If you will set up a regulated entity, within the bylaws of a the SOFOM you must include the phrase “financial entity with multiple purposes, a regulated entity”.
Meaning that in your bylaws your SOFOM needs to be identified by the abbreviation S.O.F.O.M, E.N.R. Regulated SOFOMs are those that have business activities involving financial holding companies and credit institutions.
Most regulated SOFOMs are owned or controlled by financial institutions and have a number of shareholders. This is because the SOFOM structure is often the most efficient path to an international banking license in Mexico.
Unregulated SOFOMs work a little different than regulated ones. Unregulated SOFOMs are not overseen or are subject to any relevant banking or tax laws in a country such as the CNBV and SHCP.
Capital in unregulated SOFOMs is independent and does not include the participation of third party credit institutions and holding companies. You cannot use the word “bank” in the bylaws of an unregulated SOFOM. Also, an unregulated SOFOM does not have any minimum capital requirements.
If you are establishing your SOFOM as an unregulated entity you must disclose to clients and possible investors that you are not subject to the supervision of Mexican Banking Laws or institutions such as the CNBV.
The only government institutions that have the power to regulate unregulated SOFOMs are the Secretaria de Hacienda y Crédito Público (SHCP), CONDUSEF, and any other applicable anti-terrorism and money laundering laws.
The bottom line is that the Mexican SOFOM is the most powerful structure to start a financial services business, mortgage or payday lender, to raise capital, or to operate a cryptocurrency exchange in Latin America.
Conclusion
The setup process to start an unregulated SOFOM is burdensome and takes 3 to 4 months depending on the time of year. We will be happy to assist you throughout the process, including local representation, banking, and operational support.
So, what makes you wait? Contact us for guidance and support at an affordable rate and our team will reach out to you within 24 hours . Imishore Consultants with the help of their dedicated and experienced team can advise you with a variety of choices and customized ideas for your business. There are various services available that can be availed by you which include offshore company incorporation, corporate bank account opening, nominee director and shareholder services, international bank setup, cryptocurrency exchange, offshore financial licenses service and finTech entities . There are various ancillary services that you can avail of for the growth and expansion of your business.
