Banking Board of Ecuador

RESOLUTION No. JB-2015-3393

THE BANKING BOARD

CONSIDERING:

That the second paragraph of the Third Transitory Provision of the Organic Code of Monetary and Financial Affairs determines that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was hearing on the date this Code entered into force, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

That attached to Memorandum No. INSP-DA2-2013-173, dated April 8, 2013, the Directorate of the Private Insurance System Audit contains the report of the special audit on Mayva Cía. Ltda. Agencia Asesora Productora de Seguros, the pertinent part of which states textually as follows:

"e) Main observations:

(...)

"They incur in Article 24.11 of the Codification of Resolutions of the Superintendence of Banks and Insurance, Book II, Title XI, Chapter II, Paragraph IV - of rights, obligations, and prohibitions, states: ..."Use in their stationery names or terms that are not authorized by the Superintendence of Banks and Insurance", using the commercial name Megabrokers Ecuador, Inc. which is not authorized by the control body, therefore it must immediately cease to use the name Megabrokers Ecuador, Inc. and be sanctioned according to Article 52 of Section V, Chapter II, Title IX, of Book II of the Codification of Resolutions of the Superintendence of Banks and Insurance.

(...)

f) Opinion of Team Leader:

(...)

"In general, Mayva Cía. Ltda. Agencia Asesora Productora de Seguros uses this name, authorized by the Superintendence of Banks and Insurance, for all legal and tax formalities duly proven in the audit process, but uses the name Megabrokers Ecuador, Inc. as a commercial name".

(...)

ADMINISTRATION OF THE INSURANCE PRODUCER ADVISORY AGENCY MAYVA CÍA. LTDA.

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(...)

"Mayva Cía. Ltda. Agencia Asesora Productora de Seguros displays the framed originals of the credential and authorization certificates in the entrance hall in front of the reception, visible to the public in compliance with Article 97 of the aforementioned codification.

MEGABROKERS ECUADOR, INC.- However, from what is stated in the point of operation permits, at the entrance door to the company, visible to the public, they display the logo of Megabrokers Ecuador, Inc. (Annex No. 21), and not that of Mayva Cía. Ltda. Agencia Asesora Productora de Seguros, the company authorized to operate by the Superintendence of Banks and Insurance; likewise, the general manager's business cards bear this logo; payments to GF Systems for domain activation + Hosting 2 GB megabrokersecuador.com, meaning that all sellers, officials, and employees have their email address as Megabrokers.com, (Annex No. 22)..."

(...)

GENERAL CONCLUSION:

"Sanction them for the use of the commercial name Megabrokers Ecuador, Inc. and suggest to the administration a more corporate than family management style as it is currently managed."

(...);

That through Resolution No. SBS-INSP-2014-006, dated January 6, 2014, the National Intendancy of the Private Insurance System revoked the authorization granted to Mayva Cía. Ltda. Agencia Asesora Productora de Seguros on June 9, 2005; and, consequently, withdrew Credential No. 00928 and the authorization certificates by branch;

That through communication received at the Superintendence of Banks on January 23, 2014, Mr. Mauricio Malo Pozo, General Manager and Legal Representative of Mayva Cía. Ltda. Agencia Asesora Productora de Seguros, with the professional sponsorship of Dr. Rodrigo Borja Calisto, filed an appeal against Resolution No. SBS-INSP-2014-006, dated January 6, 2014, before the Banking Board, based on Article 70 of the General Insurance Law;

That through Resolution No. SBS-INSP-2014-029, dated February 10, 2014, the National Intendancy of the Private Insurance System granted the appeal filed and ordered the transfer of the respective file;

That through Official Letter No. JB-2014-328, dated February 12, 2014, addressed to Mr. Mauricio Malo Pozo, General Manager and Legal Representative of Mayva Cía. Ltda. Agencia Asesora Productora de Seguros, the Secretary of the Banking Board sent certified copies of Resolution No. SBS-INSP-2014-029, dated

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February 10, 2014;

That numeral 24.11 of Article 24, of Book II, Title XI, Chapter I, Paragraph IV, of the Codification of Resolutions of the Superintendence of Banks and Insurance, provides as follows:

"ARTICLE 24.- Insurance producer advisors are prohibited from:

(...)

24.11 Using in their stationery names or terms that are not authorized by the Superintendence of Banks and Insurance;

(...)

That from the review of the file, it has been verified that the denomination Megabrokers has been used by the company since September 2012, without authorization from the Superintendence of Banks; and only on May 28, 2013, did they request authorization from the control body for the use of the commercial name Megabrokers Ecuador Cía. Ltda. Agencia Asesora Productora de Seguros, despite the fact that said denomination was on the entrance door to the company, visible to the public, in place of Mayva Cía. Ltda. Agencia Asesora Productora de Seguros; on the general manager's business cards; and on the stationery used by the company, a situation that was proven by the audit commission;

That the argument of Mayva Cía. Ltda. Agencia Asesora Productora de Seguros regarding that they requested authorization on May 28, 2013, before the audit report presented on the 31st of the same month and year, and that they only used the name Megabrokers Ecuador without the expression INC, is not valid, since the non-compliance with the use of the denomination occurred since 2012;

That Article 37 of the General Insurance Law, whose text states:

"Art. 37.- (...)

When in a controlled entity, its directors, administrators, or officials violate the laws or regulations governing their operation, or in cases where they infringe statutory provisions or norms and instructions issued by the Superintendence of Banks and Insurance, and especially when they fail to comply with the provisions of this Law; when they refuse to receive visits from auditors or officials duly accredited by the Superintendence of Banks and Insurance or refuse to supply documents or data necessary for the practice of the audit; when they do not timely present balance sheets, accounts, and other documents related to their business, or do not present special reports requested of them; when they report deficiencies in reserves, investments, and solvency margin; if they do not pay the contribution for the maintenance of the Superintendence

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of Banks and Insurance within the period that has been set, when they make investments without adhering to legal norms; the Superintendence of Banks and Insurance, depending on the gravity of the infringement, will impose one of the following sanctions:

a) To the controlled entity:

1. Reprimand.

2. Fine.

3. Suspension of authorization certificates or withdrawal of credentials, as appropriate; and,

b) To the directors and administrators of the entity in the private insurance system:

1. Reprimand.

2. Fine.

3. Removal.

In any case and without prejudice to what is established in this article, the Superintendent of Banks and Insurance will adopt measures aimed at restoring compliance with the violated norm. The fines imposed on directors and administrators will be paid with their own resources.

If a director, administrator, official, or employee, or even the external auditor of a controlled entity, is designated or exercises their functions in contravention of what is provided in Article 17 of this Law, they will be removed from their functions by resolution issued by the Superintendent of Banks and Insurance, if the nominating body has not done so beforehand, or if they have not resigned."

That literal 54.3 of Article 54 of the General Insurance Law, which provides as follows:

"ARTICLE 54.- The Superintendent of Banks and Insurance may additionally revoke the credential and order the withdrawal thereof from insurance producer advisors, reinsurance intermediaries, and insurance experts, natural and legal persons, when they incur in one of the following causes:

(...)

54.3 If they fail to comply with the obligations or incur in one of the prohibitions imposed by the General Insurance Law, its general regulation, by this chapter, the provisions of the Superintendence of Banks and Insurance, and the Companies Law as a supplementary norm;

(...);

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That although it is true that the Superintendence of Banks, under the support of the transcribed provisions, had the authority to apply the relevant sanction to Mayva Cía. Ltda. Agencia Asesora Productora de Seguros for the use of a denomination different from that approved by the control body, disseminating misleading information that could affect public interest, which must be protected by the control body, since they used a denomination backed by a company based in Panama, which has not been previously approved for use, it must also be considered the duty to maintain proportionality between the infringement and the sanction, as analyzed below in light of constitutional norms;

That the sanction imposed on MAYVA Cía. Ltda. Agencia Asesora Productora de Seguros, through Resolution No. SBS-INSP-2014-006, dated January 6, 2014, by which the National Intendancy of the Private Insurance System revoked the authorization granted on June 9, 2005; and, consequently, withdrew Credential No. 00928 and the authorization certificates by branch, constitutes the maximum sanction provided in Art. 54 of the General Insurance Law for cases of non-compliance with the provisions of the control body; while according to Art. 37 of the General Insurance Law, depending on the gravity of the infringement, the Superintendence of Banks and Insurance must impose on the controlled entity one of the sanctions provided for in said norm, namely: 1) Reprimand; 2) Fine; 3) Suspension of the Authorization Certificates; thus authorizing a proportional application of sanctions to infringements, in concordance with the constitutional principle of proportionality;

That Articles 6; 33; and numbers 5 and 6 of Article 76 of the Constitution of the Republic establish:

"Art. 6.- All Ecuadorian women and men are citizens and will enjoy the rights established in the Constitution.

Art. 33.- Work is a right and a social duty, and an economic right, source of personal fulfillment and base of the economy. The State will guarantee to working people full respect for their dignity, a decent life, fair remuneration and compensation, and the performance of healthy and freely chosen or accepted work.

Art. 76.- In any process in which rights and obligations of any order are determined, the right to due process will be ensured, which will include the following basic guarantees:

5. In case of conflict between two laws of the same matter that contemplate different sanctions for the same fact, the less rigorous one will be applied, even if its promulgation is subsequent to the infringement. In case of doubt about a norm containing sanctions, it will be applied in the sense most favorable to the infringing person.

6. The law will establish the due proportionality between the infractions and the

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criminal, administrative, or other nature sanctions."

IN exercise of its legal powers,

RESOLVES:

SINGLE ARTICLE.- PARTIALLY ACCEPT the claim contained in the appeal filed by the General Manager of MAYVA Cía. Ltda. Agencia Asesora Productora de Seguros; and, consequently, DECLARE WITHOUT EFFECT the sanction of revocation of the authorization granted on June 9, 2005, and the withdrawal of Credential No. 00928 and the authorization certificates by branch; and, in its place, ORDER THE SUSPENSION, for sixteen (16) months, of the operations of said insurance producer advisory agency, from the date of notification of the aforementioned resolution, that is, from January 16, 2014.

NOTIFY.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on April 30, two thousand fifteen.

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Econ. Rodrigo Landeta Parra GENERAL INTENDENT, S. PRESIDENT OF THE BANKING BOARD, E

I CERTIFY.- Quito, Metropolitan District, on April 30, two thousand fifteen.

Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD