Decree-Law 1 of July 8, 1999

INDEX

TITLE I ....................................................................................................................................................1 Article 1: Definitions ...............................................................................................................1

TITLE II...................................................................................................................................................6 Article 2: National Securities Commission...................................................................................6 Article 3: Commissioners.............................................................................................................6 Article 4: Non-ratification ...........................................................................................................6 Article 5: Requirements to be a Commissioner ..............................................................................6 Article 6: Term of appointment of Commissioners ......................................................7 Article 7: Removal....................................................................................................................7 Article 8: Powers of the Commission ......................................................................................7 Article 9: Meetings and decisions of the Commission......................................................................9 Article 10: Agreements, resolutions, and opinions of the Commission................................................9 Article 11: Publication, notification, and entry into force......................................................9 Article 12: Officials and consultants......................................................................................9 Article 13: Code of conduct ...............................................................................................10 Article 14: Delegation of authority........................................................................................10 Article 15: Appeals against Commission decisions .....................................................10 Article 16: Assets and income of the Commission ......................................................................10 Article 17: Registration fees..................................................................................................11 Article 18: Supervision fees............................................................................................12 Article 19: Criteria for determining fees.......................................................13 Article 20: Control by the Comptroller ......................................................................................13 Article 21: Taxes ...............................................................................................................13 Article 22: Intergovernmental relations..........................................................................14

TITLE III ...............................................................................................................................................14 CHAPTER I .............................................................................................................................................14 Article 23: Mandatory license...............................................................................................14 Article 24: Granting of license.......................................................................................14 Article 25: Suspension and revocation of license and other measures ...........................................14 Article 26: Voluntary cancellation of license .......................................................................15

CHAPTER II............................................................................................................................................15 OF SECURITIES FIRMS...................................................................................................................15 Article 27: Permitted activities...........................................................................................15 Article 28: Net capital and liquidity requirements.................................................................15 Article 29: Shareholders of securities firms.............................................................................16 Article 30: Foreign securities firms .................................................................................16 Article 31: Relationship with foreign securities firms ............................................................16 Article 32: Securities firms offering securities abroad..........................................17 Article 33: Books, records, and financial statements ..................................................................17 Article 34: Submission of reports to the Commission ...............................................................17 Article 35: Off-exchange transactions ...................................................................................17 Article 36: Sending information to clients.............................................................................17 Article 37: Investment accounts; handling of client securities and funds.............................17 Article 38: Information retention .........................................................................................18 Article 39: Ethical standards; conflicts of interest ......................................................................18 Article 40: Suitable recommendation......................................................................................18 Article 41: Excessive transactions ........................................................................................18 Article 42: Agreements to share gains or losses; guarantee against losses .........18 Article 43: Prevention of money laundering.............................................................................18 Article 44: Compliance Officer.........................................................................................19

CHAPTER III...........................................................................................................................................19 Article 45: Permitted activities...........................................................................................19 Article 46: Obligations of investment advisors ............................................................19

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CHAPTER IV ..........................................................................................................................................19 OF PRINCIPAL EXECUTIVES, SECURITIES BROKERS, AND ANALYSTS......................................19 Article 47: Mandatory license...............................................................................................19 Article 48: Hiring of employees ...................................................................................19 Article 49: Exams ...............................................................................................................20 Article 50: Inability to hold offices...........................................................................20

TITLE IV ...............................................................................................................................................20 OF SELF-REGULATORY ORGANIZATIONS........................................................................20 Article 51: Mandatory license ......................................................................................20 Article 52: Requirements for granting licenses ........................................................20 Article 53: Voluntary cancellation of license .......................................................................21 Article 54: Standard of internal rules of self-regulatory organizations ...........................21 Article 55: Standard of internal rules of stock exchanges..................................................22 Article 56: Standard of internal rules of clearing houses .............................................22 Article 57: Modification of internal rules of self-regulatory organizations.....................22 Article 58: Admission of members in a self-regulatory organization .................................23 Article 59: Hiring of employees ...................................................................................23 Article 60: Fees, commissions, contributions, and charges........................................................23 Article 61: Oversight and sanctioning of members by self-regulatory organizations 24 Article 62: Disciplinary process.............................................................................................24 Article 63: Summary disciplinary process...............................................................................25 Article 64: Sanctions imposed by the Commission on self-regulatory organizations..............25 Article 65: Sanctions to members............................................................................................26 Article 66: Books, records, and financial statements ..................................................................26 Article 67: Submission of reports to the Commission ...............................................................26 Article 68: Other obligations of self-regulatory organizations....................................26

TITLE V .................................................................................................................................................27 Article 69: Mandatory registration........................................................................................27 Article 70: Registration application........................................................................................27 Article 71: Reports .................................................................................................................27 Article 72: Information disclosure standard ...............................................................28 Article 73: Content of the registration application and reports........................................28 Article 74: Form of the registration application and reports..............................................28 Article 75: Commission's liability for information.................................................28 Article 76: Foreign issuers .............................................................................................28 Article 77: Public communications...........................................................................................29 Article 78: Availability of information ..............................................................................29 Article 79: Sending information to investors...................................................................29 Article 80: Advertising material..............................................................................................29 Article 81: Termination of registration........................................................................................29

TITLE VI ...............................................................................................................................................30 OF THE PUBLIC OFFERING OF SECURITIES .........................................................................................30 Article 82: Public offering ........................................................................................................30 Article 83: Exempt offerings.......................................................................................................30 Article 84: Registration application for public offering...................................................................31 Article 85: Denial of registration application for public offering ..............................................32 Article 86: Content and form of prospectuses.....................................................................32 Article 87: Use of the prospectus in public offerings of securities..................................................32 Article 88: Period prior to registration with the Commission..........................................................33 Article 89: Registration period with the Commission .......................................................................33 Article 90: Post-registration period with the Commission ........................................................33

TITLE VII..............................................................................................................................................34 OF THE REQUEST FOR VOTING POWERS ...................................................................................34 Article 91: Request for voting powers, authorizations, and consents ...........................34 Article 92: Notification to the Commission ....................................................................................34 Article 93: Content and form of requests .....................................................................34

TITLE VIII ............................................................................................................................................35 OF THE PUBLIC OFFER TO PURCHASE SHARES..............................................................35 Article 94: Public offer to purchase shares ..................................................................35 Article 95: Notification of public offer to purchase shares..........................................35 Article 96: Content and form of offer documents ..................................................35 Article 97: Suspension of the offer by the Commission .................................................36 Article 98: Deadline and equal conditions............................................................................36 Article 99: Pro-rata purchase...............................................................................36 Article 100: Revocation of acceptance ...............................................................................36 Article 101: Changes in terms and conditions of the public offer to purchase ..................36 Article 102: Prohibition of buying shares outside the offer ...........................................36 Article 103: Companies with foreign shareholders...............................................................37

TITLE IX ...............................................................................................................................................37 OF INVESTMENT COMPANIES .............................................................................................37 CHAPTER I .............................................................................................................................................37 GENERAL PROVISIONS ...................................................................................................................37 Article 104: Exclusions ..........................................................................................................37 Article 105: Categories of investment companies according to redemption option................37 Article 106: Categories of investment companies according to risk.......................................37 Article 107: Permitted structures........................................................................................38 Article 108: Increase in authorized capital............................................................................38 Article 109: Series and classes of participation units...........................................................38

CHAPTER II............................................................................................................................................38 OF REGISTERED INVESTMENT COMPANIES ...............................................................................38 Article 110: Obligation to register.........................................................................................38 Article 111: Investment companies administered in or from Panama...............................39 Article 112: Registration with the Commission.......................................................................39 Article 113: Investment objectives and policies........................................................................39 Article 114: Subscription of participation units ...............................................................40 Article 115: Redemption of participation units .................................................................40 Article 116: Commissions and charges ........................................................................................41 Article 117: Net value per participation unit.................................................................41 Article 118: Dividend and distribution reports..............................................................42 Article 119: Indebtedness ....................................................................................................42 Article 120: Directors ............................................................................................................42 Article 121: Persons with whom there can be no affiliation...........................................43 Article 122: Custodian.............................................................................................................43 Article 123: Guarantee against theft, robbery, and misappropriation..........................................44 Article 124: External auditors ...............................................................................................44 Article 125: Limitation of liability.............................................................................44 Article 126: Voting...............................................................................................................44 Article 127: Contract with an investment administrator ...................................................45 Article 128: Accounting, books, and records ...........................................................................45 Article 129: Other administrative and operational requirements.................................................45 Article 130: Reports ...............................................................................................................45 Article 131: Advertising............................................................................................................46 Article 132: Foreign investment companies....................................................................46 Article 133: Registered investment companies that only offer their participation units abroad 46

CHAPTER III...........................................................................................................................................47 OF PRIVATE INVESTMENT COMPANIES .....................................................................................47 Article 134: Definition ............................................................................................................47 Article 135: Appointment of representative..........................................................................48 Article 136: Notification to the Commission ..................................................................................48 Article 137: Oversight........................................................................................................49

CHAPTER IV ..........................................................................................................................................49 OF INVESTMENT ADMINISTRATORS............................................................................................49 Article 138: Mandatory license ..............................................................................49 Article 139: Granting of license.....................................................................................49 Article 140: Outsourcing of services...............................................................................50 Article 141: Foreign investment administrators...........................................................50 Article 142: Obligations of investment administrators..............................................50 Article 143: Reports ...............................................................................................................50 Article 144: Suspension, revocation, and cancellation of the license ..........................................50 Article 145: Provisions applicable to investment administrators...................................50

TITLE X .................................................................................................................................................51 OF CREDIT ON THE EXCHANGE, OPTIONS, AND DERIVATIVE INSTRUMENTS...............................51 Article 146: Credit in general ...............................................................................................51 Article 147: Indebtedness of securities firms...................................................................51 Article 148: Securities lending...........................................................................................51 Article 149: Repurchase of securities ...........................................................................................51 Article 150: Options, forward contracts, and other derivative instruments .............................51

TITLE XI ...............................................................................................................................................52 OF THE CUSTODY, CLEARING, AND SETTLEMENT OF SECURITIES....................................52 CHAPTER I .............................................................................................................................................52 GENERAL PROVISIONS ...................................................................................................................52 Article 151: Objectives..............................................................................................................52 Article 152: Interpretation ......................................................................................................52 Article 153-A ........................................................77 Article 153: Physical titles, book entries, and indirect holding.................................52 Article 154: Plurality of holders.......................................................................................5