Draft Risk Based Capital and Liquidity Requirements Bye-Laws 2024

REPUBLIC OF TRINIDAD AND TOBAGO THE SECURITIES ACT, CHAP. 83:02 BYE-LAWS MADE BY THE MINISTER UNDER SECTION 148 OF THE SECURITIES ACT AND SUBJECT TO NEGATIVE RESOLUTION OF PARLIAMENT THE RISK –BASED CAPITAL AND LIQUIDITY REQUIREMENTS BYE-LAWS, 2024 PART 1- PRELIMINARY 1 Citation 2 Interpretation 3 Purpose 4 Application 5 Relationship to Act; Bye-laws 6 Definitions 7 Part II- LIQUIDITY REQUIREMENTS Liquidity Requirement 8 Liquid Assets 9 Part III- QUALIFYING CAPITAL Qualifying Capital 10 Tier 1 Capital 11 Common Equity Tier 1 Capital 12 Deductions from Common Equity Tier 1 Capital 13 Tier 2 Capital 14 Subordinated term debt 15 Part IV- CAPITAL REQUIREMENTS Capital Requirement 16 Minimum Capital Requirement 17 Risk-Based Capital Requirement 18 Market Risk Requirement 19 Market Risk Requirement for certain Broker-Dealers 20 General Interest Rate Risk Requirement 21 Specific Interest Rate Risk Requirement 22 Foreign Currency Risk Requirement 23 Equity Risk Requirement

24 Operational Risk Requirement 25 Capital Requirement for the Risk to Client Money 26 Capital Requirement for the Risk to Client Assets Under Management 27 Capital Requirement for the Risk to Client Assets in Safekeeping 28 Credit Risk Requirement 29 Fixed NAV CISs 30 Client Loans and Contingent Liabilities 31 Underwriting Risk Requirement 32 Part V- SUPERVISORY REVIEW AND EVALUATION PROCESS Supervisory review and evaluation process 33 Part VI-OBLIGATION OF REGISTRANTS AND SELF REGULATORY ORGANISATIONS Responsibility 34 Quarterly Reports 35 Additional Reporting Requirements 36 Provision of Information 37 Risk Management 38 Stress Testing 39 Part VII- EXEMPTIONS Exemptions for Dual Registrants 40 Part VIII- MISCELLANEOUS Imposition of Penalty 41 Other Supervisory Actions 42 Transitional Provisions

PART I PRELIMINARY Citation 1. These Bye-Laws may be cited as the Risk-Based Capital and Liquidity Requirements Bye-Laws, 2024. Interpretation 2. In these Bye-Laws: the “Act” means the Securities Act, Chapter 83:02 of the Laws of the Republic of Trinidad and Tobago. Purpose 3. The purpose of these Bye-Laws is to assist the Commission in the discharge of its functions under Section 6(j) and Section 6(l) of the Act by: a. ensuring that SROs and registrants registered under Section 51(1) of the Act maintain adequate levels of capital and liquid assets to assist in absorbing some of the costs related to potential losses and risks associated with their business activities; and b. mitigating the impact of the failure of such SROs and registrants registered under Section 51(1) of the Act on clients, other market participants, the securities industry, and the financial system. Application 4. These Bye-Laws apply to all registrants registered under Section 51(1) of the Act and self-regulatory organisations registered under Part III of the Act. Relationship to Act; Bye-Laws 5. The requirements set out in these Bye-Laws apply in addition to any other requirements contained in the Act, any other Bye-Laws or any other Guidelines, made thereunder. Definitions 6. 1. For the purposes of these Bye-Laws- “capital requirement” means the amount of capital that a registrant registered under Section 51(1) of the Act or self￾regulatory organisation is required to hold based on the methodologies prescribed under part IV of these Bye-Laws; “Central Bank” means the Central Bank of Trinidad and Tobago established under the Central Bank Act, Chapter 79:02 of the Laws of the Republic of Trinidad and Tobago; “CIS” means a collective investment scheme as defined in the Act; “contingent liabilities” means possible obligations whose existence will be confirmed by uncertain future events that are not wholly within the control of the entity, in accordance with international financial reporting standards; “credit rating” means an opinion or assessment from a particular credit rating agency regarding the creditworthiness of an entity, a

credit commitment, a debt-like security or an issuer of such obligations. “credit rating agency” means an external credit rating agency that is deemed to be eligible for the determination of capital requirements by the Central Bank; “credit risk” means the potential that a counterparty will fail to meet its obligations in accordance with agreed terms; “equity risk” means the risk of losses arising from changes in the value of that equity investment; “exceptional costs” means unanticipated material expenses which arise from an entity’s ordinary business activities; “extraordinary costs” means expenses that arise from activities that are outside the ordinary operations of an entity, and therefore are not expected to reoccur on a regular basis; “fixed NAV CIS Guarantee” means the redemption price guarantee provided by the CIS manager regardless of the current net asset value of the CIS; “fixed net asset value” or “Fixed NAV” means the value of a CIS unit is constant for both subscription and redemption; “floating net asset value” or “Floating NAV” means the value of a CIS unit fluctuates based on the performance of the pool of the underlying securities; “foreign currency position” means the sum of foreign currency assets less foreign currency liabilities; “foreign currency risk” means the risk that the financial performance or position of a registrant registered under Section 51(1) of the Act or self-regulatory organisation will be affected by fluctuations in the exchange rates between currencies; “general interest rate risk” means the sensitivity of interest rate bearing instruments to changes in market yields; “haircut” means the percentage discount deducted from the market value of a security; “liquid assets” means the liquid assets as set out in Bye-Law 8 of these Bye-Laws; “market risk” means the risk of losses in on- and off-balance sheet positions due to adverse movements in market prices,

including interest rates, exchange rates, commodity and equity values; “modified duration” means the percentage change in the price of an interest rate bearing instrument given a percentage change in interest rates; “net long foreign currency position” means the foreign currency assets of an entity exceeds its foreign currency liabilities; “net short foreign currency position” means the foreign currency liabilities of an entity exceeds its foreign currency assets; “operational expenses” means the expenses shown in the last audited financial statements excluding exceptional and extraordinary costs, tax costs and non-cash expenses such as depreciation and amortisation; “operational risk” means the risk of loss resulting from inadequate or failed internal processes, systems or people, or external events; “qualifying capital” means the amount of capital as determined under Part III of these Bye-Laws and reflected in the financial statements of an SRO and registrant registered under Section 51(1) of the Act; “repurchase agreement” or “Repo” means a financial agreement in which a dealer of securities transfers ownership of securities to another person, or creates a beneficial interest (whether whole or fractional) in securities in favour of another person, with or without provisions allowing for – a. The substitution of the underlying securities by the dealer; and/or b. The entitlement of the dealer to the coupon rate on the underlying securities; in which the parties agree that at an agreed future date the securities will be repurchased by the dealer on the terms and conditions specified in the agreement; “risk-based capital” means the amount of capital as determined under Part IV of these Bye-Laws; “SRO” refers to ‘self-regulatory organisation’ and has the same meaning as defined in the Act; “specific interest rate risk” means the risk of adverse movements in the price of an individual security arising from factors related to the individual issuer, most specifically changes in the perception of the issuer’s ability to pay interest and principal, as represented by the credit rating;

“statutory reserve fund” means the mandatory amounts that a registrant registered under Section 51(1) of the Act or self￾regulatory organisation may be required to hold as per legislative requirements; and “subordinated debt” means the subordinated debt as set out in Bye-Law 14 of these Bye-Laws. PART II LIQUIDITY REQUIREMENTS Liquidity Requirement 7. 1. A registrant registered under Section 51(1) of the Act that engages in the sale of repurchase agreements must have additional liquid assets equivalent to a minimum of fifteen (15) percent of its current repurchase agreement liabilities, that mature within three months. 2. A registrant registered under Section 51(1) of the Act and a SRO must have, at all times, liquid assets equivalent to a minimum of six (6) months’ operational expenses, to be calculated using the most recent audited financial statements. 3. A registrant registered under Section 51(1) of the Act and a SRO shall also have, at all times such additional liquid assets as they deem necessary to ensure they can continue to meet their obligations as they fall due, including in stress scenarios referred to under Bye-Law 38. Liquid Assets 8. 1. Liquid assets shall comprise￾a. cash or cash equivalents held in a financial institution as defined in the Act; b. treasury bonds, notes and bills issued by the Government of the Republic of Trinidad and Tobago; c. bonds, debentures, notes or other evidence of indebtedness of other domestic issuers registered with the Commission or listed and traded on the Trinidad and Tobago Stock Exchange Limited or any other securities exchange registered under the Act, with a remaining maturity of up to one (1) year; d. units of regulated floating NAV domestic CISs, up to a ceiling of five (5) percent of the amount in issuance; e. equities listed and traded on the Trinidad and Tobago Stock Exchange Limited or any other securities exchange registered under the Act, up to a ceiling of five (5) percent of the amount in issuance; f. sovereign bonds issued by the Organisation for Economic Co-operation and Development countries and listed and traded on regulated markets in these countries;

g. corporate bonds, equities and units of regulated CISs listed and traded on regulated markets in the Organisation for Economic Co-operation and Development countries; and h. other assets in such form as the Commission may by Order approve following periodical reviews. 2. For an asset to be considered liquid, the asset must￾a. be free and clear of any encumbrance; b. not require any external approval for liquidation; and c. not have any restrictions on transfer. 3. In the case of a CIS, subject to the provisions of paragraph 2, an asset shall be considered liquid if the units of the CIS are redeemable within thirty (30) days of receipt of a request for 4. redemption. PART III QUALIFYING CAPITAL Qualifying Capital 9. 1. Qualifying capital shall be the sum of Tier 1 and Tier 2 capital, as calculated in accordance with this Part, and subject to the prescribed deductions. 2. The allowed Tier 2 capital cannot be higher than the Tier 1 capital Tier 1 Capital 10. For the purposes of these Bye-Laws, Tier 1 capital shall comprise the sum of￾a. common equity Tier 1 capital; and b. fully paid perpetual non-cumulative preference share capital and share capital premium. Common Equity Tier 1 Capital 11. For the purposes of these Bye-Laws, Common equity Tier 1 capital shall comprise the sum of￾a. fully paid issued ordinary share capital and share premium; b. statutory reserve fund; c. capital reserves, excluding asset revaluation reserves; d. general reserves, excluding those for losses on assets; and e. retained earnings as stated in the last audited financial statements of the entity. Deductions from Common Equity Tier 1 Capital 12. Common equity Tier 1 capital shall be reduced by the following: a. unappropriated losses (if applicable) for the current financial year and as stated in the financial statements of the entity; b. goodwill; and c. other intangible assets. Tier 2 Capital 13. 1. For the purposes of these Bye-Laws, Tier 2 capital shall comprise the sum of-

a. fully paid perpetual cumulative preference share capital and share capital premium; b. limited life redeemable preference shares with an original term to maturity of at least five (5) years; c. hybrid capital instruments such as bonds convertible to equity at the option of the entity; d. subordinated term debt. 2. The value of instruments listed in Tier 2 capital only qualify for Tier 2 capital treatment to a maximum of 100 percent of the amount of Tier 1 capital. Subordinated term debt 14. 1. In these Bye-Laws, “Subordinated term debt” shall￾a. be subordinated to all other creditors; b. have an original maturity of at least five (5) years; c. not be redeemable at the discretion of any party without the prior approval of the Commission; and d. include terms that enable the Commission to require that payments of interest and principal be deferred where it considers it to be in the interest of investors. 2. The value of the subordinated term debt shall be tapered by twenty (20) percent for every year less than five (5) years to maturity. PART IV CAPITAL REQUIREMENTS Capital Requirement 15. 1. A registrant registered under Section 51(1) of the Act or SRO must maintain the capital requirement in liquid assets as defined in Bye-Law 8. 2. A registrant registered under Section 51(1) of the Act must maintain qualifying capital that is the higher of￾a. the minimum capital requirement for its registered business activity as outlined in this Part; b. the risk-based capital requirement as outlined in this Part; or c. such additional amount as is necessary to enable for prudent management of the risks arising from its business activity. 3. The amount referred to in paragraph 2(c) must include: a. an amount higher than the minimum capital requirement or risk-based capital requirements that the registrant registered under Section 51(1) of the Act deems necessary to ensure it can continue to meet its obligations as they fall due, including in stress scenarios; and b. Any capital add-on specified by the Commission in accordance with Bye-Law 32.

4. Notwithstanding paragraph 1, a person seeking to be registered under Section 51(1) of the Act must have the minimum capital requirement, at the time of application for registration, for its registerable business activity.
5. A SRO must maintain qualifying capital equivalent to at least six (6) months’ operational expenses. Minimum Capital Requirement
6. 1. The minimum capital requirement shall be as follows: a. In the case of a broker-dealer – i. that only conducts the business of effecting transactions in securities for the account of others, a minimum capital requirement of two (2) million dollars; ii. that conducts the business of effecting transactions in securities for the account of others or buying and selling securities for his own account and who holds himself out as willing to buy and sell securities at prices specified by him, a minimum capital requirement of five (5) million dollars; iii. that conducts the business of effecting transactions in securities for the account of others and his own account and the activities of an underwriter, a minimum capital requirement of six (6) million dollars; b. A registrant registered under Section 51(1) of the Act that conducts the sole business of a CIS Manager must have a minimum capital requirement of two (2) million dollars. c. A registrant registered under Section 51(1) of the Act that conducts the sole business of a portfolio manager and i. performs non-discretionary portfolio management activities must have a minimum capital requirement of seventy-five (75) thousand dollars; or ii. performs discretionary portfolio management activities only or both discretionary and non￾discretionary portfolio management activities, the minimum capital requirement shall be one hundred and twenty-five (125) thousand dollars. d. In the case of an underwriter, a minimum capital requirement of five (5) million dollars. e. In the case of an investment adviser, a minimum capital requirement of fifty (50) thousand dollars.
7. The capital levels set forth in paragraph 1 are the prescribed levels of capitalisation for the purpose of Section 57(1)(f) of the Act. Risk-Based Capital Requirement
8. The risk-based capital requirement for a registrant registered under Section 51(1) of the Act shall comprise the sum of￾a. Market risk requirement; b. Operational risk requirement; and c. Credit risk requirement.

Market Risk Requirement 18. The market risk requirement for a registrant registered under Section 51(1) of the Act shall be the sum of the￾a. general interest rate risk requirement; b. specific interest rate risk requirement; c. foreign currency risk requirement; and d. equity risk requirement. Market Risk Requirement for certain Broker￾Dealers 19. Where a broker-dealer sells Repos, the underlying assets of all Repos must be included in the market risk requirement. General Interest Rate Risk Requirement 20. 1. For the purposes of these Bye-Laws, the Standardized Trinidad and Tobago Treasury Yield Curve as published by the Central Bank shall be used in determining the general interest rate risk requirement. 2. The Commission shall be responsible for publishing the maturity bands, modified duration conversion factors and assumed changes in yield by posting this information on the website of the Commission and in such other manner as the Commission may determine. 3. The capital required against general interest rate risk shall be the product of the following: a. the total market value of all debt and interest rate bearing securities in an entity’s proprietary book and Repo book (where applicable); b. the weighted average maturity of all debt and interest rate bearing securities in an entity’s proprietary and Repo books (where applicable); c. the modified duration conversion factor; and d. the assumed change in yields. Specific Interest Rate Risk Requirement 21. 1. The specific interest rate risk requirement shall be calculated by multiplying the current market value of debt securities in an entity’s proprietary book and Repo book (where applicable) by their respective weights as follows: Category Credit Rating Interest Rate Risk Charge Government of the Republic of Trinidad and Tobago TT Securities Not Applicable 0.0% Government of the Republic of Trinidad and Tobago Eurobonds Not Applicable 1.6% Other Domestic Bonds AAA to AA- 0.0% A+ to BBB- 1.6% BB+ to B- 8.0% Below B- 12.0% Unrated 8.0% Foreign Government and Non-Government Securities AAA to AA- 0.0% A+ to BBB- 1.6% BB+ to B- 8.0%

Below B- 12.0% Unrated 8.0% 2. The Government of the Republic of Trinidad and Tobago TT Securities category shall include treasury bills, notes and bonds issued by the Government of the Republic of Trinidad and Tobago. 3. The category labelled as “Other Domestic Bonds” include debt securities issued by state agencies and other institutions domiciled and registered with the Government of the Republic of Trinidad and Tobago. 4. In this part- “Unrated” means a security that is not rated by a credit rating agency. 5. In the instance where a security is rated by more than one credit rating agency and there is a difference in the credit rating by each credit rating agency, the interest rate risk charge in respect of the lowest credit rating shall apply. Foreign Currency Risk Requirement 22. 1. Capital requirements for foreign currency risk shall be calculated for all assets and liabilities denominated in foreign currencies. 2. The total foreign currency exposure shall be measured as the higher of the net long foreign currency positions or the net short foreign currency positions. 3. The capital charge for a net long foreign currency position shall be two (2) percent. 4. The capital charge for a net short foreign currency position shall be five (5) percent. 5. The capital required against foreign currency risk shall be the product of the following: a. the net foreign currency exposure; and b. the capital requirement for foreign currency risk. Equity Risk Requirement 23. 1. Equity risk capital requirement shall apply to￾a. ordinary shares; b. convertible preference shares; c. convertible bonds that trade like equities; d. units of a collective investment scheme; e. exchange-traded funds; and f. any other financial instruments that exhibit equity-like characteristics and trade like equities. 2. The capital charge for equity risk shall be eight (8) percent. 3. The capital required against equity risk shall be the product of the following: a. the total market value of all equity and equity-like securities in a entity’s proprietary and Repo books, (where applicable); and b. the capital requirement for equity risk. Operational Risk Requirement 24. 1. The operational risk requirement for a registrant registered under Section 51(1) of the Act shall be the sum of the capital requirements for￾a. Risk to client money;

b. Risk to client assets under management; and c. Risk to client assets in safekeeping. 2. The operational risk requirement shall apply to – a. a registrant registered under Section 51(1) of the Act that administers client accounts; and b. a registrant registered under Section 51(1) of the Act that has direct control over clients’ assets. Capital requirement for the Risk to Client Money 25. 1. The capital charge for risk to client money shall be zero point four (0.40) percent . 2. The capital required against risk to client money shall be the product of the following: a. the capital requirement for risk to client money; and b. client money. 3. For the purposes of these Bye-Laws, “client money” shall be the value in Trinidad and Tobago Dollars of money held or controlled by a registrant registered under Section 51(1) of the Act on behalf of clients and any other third parties. It includes: a. client money held in cash; and b. client money held in cash within segregated and omnibus accounts. 4. Client money shall include all amounts in Trinidad and Tobago Dollars and in foreign currency. 5. All foreign currency cash and bank balances shall be converted to Trinidad and Tobago Dollars using the effective exchange rate as at the end of the relevant reporting period. Capital requirement for the Risk to Client Assets Under Management 26. 1. The capital charge for risk to client assets under management shall be zero point zero two (0.02) percent. 2. The capital required against risk to client assets under management shall be the product of the following: a. the capital requirement for risk to client assets under management; and b. client assets under management. 3. For the purposes of these Bye-Laws, “client assets under management” shall be the value in Trinidad and Tobago Dollars of all investment assets in client accounts including discretionary, advisory and execution-only investment accounts. 4. Client assets under management include accounts for CISs, pension funds, and portfolios of corporate and individual clients, but not cash. 5. All investments in foreign currency shall be converted at the exchange rate effective as at the date of the calculation. 6. Repo assets are exempted from the capital requirement against risk to client assets under management. Capital requirement for the Risk to Client Assets in Safekeeping 27. 1. The capital charge for risk to client assets in safekeeping shall be zero point zero two (0.02) per cent. 2. The capital required against risk to client assets in safekeeping shall be the product of the following:

a. the capital requirement for risk to client assets in safekeeping; and b. client assets in safekeeping. 3. For the purposes of these Bye-Laws, “client assets in safekeeping” shall mean the value in Trinidad and Tobago Dollars of all investment assets held in the custody of or in safekeeping by a registrant registered under Section 51(1) of the Act. 4. Client assets in safekeeping include￾a. all investments held in the custody or safekeeping by the registrant registered under Section 51(1) of the Act. b. investments held by another party that acts on instructions from the registrant registered under Section 51(1) of the Act, rather than from the investor. c. all Repo assets and investment assets held in the Central Depository or a similar custodian on behalf of clients. d. all amounts referred to in parts a to c converted to Trinidad and Tobago Dollars at the exchange rate effective as at the date of the calculation. Credit Risk Requirement 28. The credit risk requirement shall be the sum of the capital requirements for￾a. Fixed NAV CISs; b. client loans; and c. contingent liabilities. Fixed NAV CISs 29. 1. The capital requirement for Fixed NAV CISs shall be calculated using the market risk requirement formula in accordance with Bye-Law 18. 2. The capital in respect of each Fixed NAV CIS shall be held separately as a reserve by a registrant registered under Section 51(1) of the Act, and all capital so held shall be applied solely for the purposes of the Fixed NAV CIS in respect of which it is held. 3. The Commission may require that the Fixed NAV CIS capital requirement referred to in sub-paragraphs (1) and (2) be: a. held only in such instruments; and b. subject to such valuation haircuts as it may specify from time-to-time. 4. In requirement under sub-paragraph (3), the Commission may: a. require the relevant assets to be held in a more restricted list of instruments than that indicated in Bye-Law 8; b. apply different requirements to different fund managers depending on the liquidity profile of the underlying Fixed NAV CISs or such other

risk-based factors as the Commission may specify. Client Loans and Contingent Liabilities 30. 1. The capital charge for client loans and contingent liabilities shall be ten (10) percent of the total credit risk weighted exposure. 2. A registrant registered under Section 51(1) of the Act shall apply the following credit risk weights to client loans and contingent liabilities to determine the total credit risk weighted exposure: Client Loans and Contingent Liabilities Credit Risk Weights Cash Collateral 0.0% Other Collateral 20.0% Uncollateralised 100.0% Contingent Liabilities 100.0% Underwriting Risk Requirement 31. A registrant registered under Section 51(1) of the Act that conducts security underwriting activities shall maintain, at all times, excess capital equivalent to five (5) percent of the value of the underwritten security, subject to a minimum of five (5) million dollars. Where the underwriter proposes to underwrite more than one transaction, it must demonstrate that it has net assets of five (5) percent of the total value of those transactions. The issuer of participation certificates or derivative securities must demonstrate to the satisfaction of the Commission that it owns or has the capacity to acquire at least eight (8) percent of the underlying security. PART V SUPERVISORY REVIEW AND EVALUATION PROCESS Supervisory review and evaluation process 32. 1. A registrant registered under Section 51(1) of the Act or SRO may be required to report on the method, content and results of their assessment used to determine their need to hold, additional liquid assets in accordance with Bye-Law 7(3) or capital in accordance with Bye-Law 15(2)(c). 2. The Commission may, by means of a compliance direction under Section 90 of the Act, require a registrant registered under Section 51(1) of the Act and a SRO to hold a risk￾based capital add-on in addition to any other capital required to be held under Bye-Law15(1). 3. The Commission may require the additional risk-based capital add-on referred to in paragraph 2 where: a. It has reviewed the registrant registered under Section 51(1) of the Act or SRO’s assessment of its capital needs made in accordance with paragraphs (1) and Bye-Law 15(2)(c) and

considers the scope, methodology or result of the registrant’s or SRO’s assessment insufficient; or b. It has identified risks through other means which indicate that a capital add-on is appropriate for that registrant registered under Section 51(1) of the Act or SRO. 4. The capital add-on referred to in paragraphs (2) and (3) may take the form of any or all of the following: a. An extra amount of capital which the registrant registered under Section 51(1) of the Act or SRO is required to hold; b. A requirement for a registrant registered under Section 51(1) of the Act or SRO to hold a specified amount or proportion of its capital in a more restrictive list of instruments than that indicated in Bye-Law 8. The Notice required to be issued prior to the issuance of a Compliance Directions is issued under section 90(3) of the Act must include a statement of the risk(s) in relation to which it has determined a capital add-on is appropriate. PART VI OBLIGATION OF REGISTRANTS AND SELF-REGULATORY ORGANISATIONS Responsibility 33. The Board of Directors or Chief Executive Officer or any other individual who performs functions similar to those normally performed by an individual occupying any such office, or an officer duly appointed by the Board of Directors of a SRO or a registrant registered under Section 51(1) of the Act, must ensure that the entity holds and maintains qualifying capital and liquid assets that complies with these Bye-Laws. Quarterly Reports 34. A SRO and a registrant registered under Section 51(1) of the Act shall file within thirty (30) days following the end of each quarterly period within the calendar year: a. its liquidity requirements as determined in accordance with Part II of these Bye-Laws; b. qualifying capital, calculated in accordance with Part III of these Bye-Laws; and c. its capital requirements as determined in accordance with Part IV of these Bye-Laws, in such form as the Commission may determine. Additional Reporting Requirements 35. 1. SROs and registrants registered under Section 51(1) of the Act must monitor their capital and liquidity on a monthly basis.

2. Where the qualifying capital of a SRO or registrant registered under Section 51(1) of the Act falls below one hundred and twenty-five (125) per cent of the total capital requirement the SRO or registrant registered under Section 51 (1) of the Act must notify the Commission within thirty (30) days after such change occurred in such form as the Commission may determine. Provision of Information
3. A SRO and a registrant registered under Section 51(1) of the Act shall submit or make available to the Commission upon written request, any statement, document, book, record and other information as may be required for the purposes of ensuring conformity and compliance with these Bye-Laws. Risk Management 37. 1. A SRO or a registrant registered under Section 51(1) of the Act must develop and implement policies, procedures and internal controls to mitigate the risks inherent in its business activities.
4. The risk management framework for a SRO and a registrant registered under Section 51(1) of the Act must incorporate￾a. The responsibilities of the Board of Directors, which should include: i. Ensuring that the SRO or registrant registered under Section 51(1) has sufficient capital and liquid assets for their business operations; ii. Ensuring the SRO or registrant registered under Section 51(1) complies with their obligations under these Bye-Laws; and iii. Ensuring that the SRO or registrant registered under Section 51(1) has an acceptable and feasible contingency plan to obtain additional capital and liquid assets should the need arise. b. The processes for monitoring and managing: i. Risks to the capital of the SRO or registrant registered under Section 51(1); ii. Liquidity risks; and iii. Concentration of large exposures on and off the balance sheet, including all exposures to connected parties, whether issuers or counterparties, that are greater than twenty-five (25) per cent of qualifying capital. c. Risk reporting processes which should cover, at a minimum, concentration, liquidity and capital risks. d. The process for considering capital adequacy and liquidity requirements within the strategic planning and budgeting processes. e. The process for considering the capital needs of a SRO or registrant registered under Section 51(1) over the foreseeable future when approving interim or final dividends or similar distributions.
5. The risk management framework referred to in paragraph 2 must be documented in the form of written policies and

procedures and approved by the board of directors or similar position. Stress Testing 38. 1. A SRO or registrant registered under Section 51(1) of the Act must conduct stress testing to assess whether its capital and liquid assets are adequate given the risks inherent in its business activities. 2. Stress tests should, at a minimum, be conducted at least annually. 3. The stress tests should, at a minimum: a. be based on severe but plausible stress scenarios that assist with the assessment of the capital and liquidity needs of the registrant registered under Section 51(1) of the Act; b. consider multiple scenarios; and c. take into consideration the key business risks of the SRO or registrant registered under Section 51(1) of the Act. 4. A SRO or registrant registered under Section 51(1) of the Act must develop a written stress testing framework which must be approved by the Board of Directors or similar position. 5. The stress testing framework and stress testing report must be reviewed periodically by the Board of Directors and senior management of the registrant registered under Section 51(1) of the Act. PART VII EXEMPTIONS Exemptions for Dual Registrants 39. 1. A registrant registered under Section 51(1) of the Act which is also licensed by the Central Bank under the Financial Institutions Act Chapter 79:09 of the Laws of the Republic of Trinidad and Tobago may make an application to the Commission to be exempted from the provisions of these Bye-Laws. 2. The Commission may on such application, grant an exemption from any or all of the requirements of these Bye￾Laws. 3. In determining whether to grant such exemption, the Commission shall have regard to the following factors: a. the nature of business activities of the registrant registered under Section 51(1) of the Act; b. the risks associated with the business activities of the registrant registered under Section 51(1) of the Act; c. the nature of the off-balance sheet assets which includes client money and assets under management; and d. any other factors which the Commission may deem relevant.

4. An exemption application must be made in writing to the Commission within sixty (60) days from the coming into force of these Bye-Laws or upon a registrant registering with the Commission.
5. In granting an exemption pursuant to paragraph 2, the Commission may attach such conditions as it deems appropriate.
6. The Commission may grant an extension of time for the period specified in paragraph 4 provided that the existing registrant registered or newly registered registrant under Section 51(1) of the Act, makes an application in writing setting out the reasons for the extension within thirty (30) days from the coming into force of these Bye-Laws. PART VIII MICELLANEOUS Imposition of Penalty 40. Where a SRO or a registrant registered under Section 51(1) of the Act fails to comply with the requirements of these Bye-Laws, the Commission may impose penalties and/ or administrative fines in accordance with the Act. Other Supervisory Actions
7. 1. If the Commission considers it necessary in the performance of its supervisory function under these Bye-Laws, it may require a SRO or a registrant registered under Section 51(1) of the Act to submit an action plan within such time and verified in such manner as it may specify.
8. For the purposes of these Bye-Laws, where the Commission determines that there is reasonable cause for concern, the Commission may appoint an independent auditor, at the expense of the respective SRO or registrant registered under Section 51(1) of the Act, to examine the business operations of such SRO or registrant. Transitional Provisions
9. 1. Where at the date of the coming into force of these Bye￾Laws, a SRO or a registrant registered under Section 51(1) of the Act does not meet the liquidity and capital requirements stipulated in Parts II and IV it shall a. have a transition period of one (1) year from the coming into force of these Bye-Laws within which to meet the capital and liquidity requirements; and b. within three (3) months of the coming into force of these Bye-Laws, submit a board-approved capital plan to the Commission which details how it intends to meet the capital and liquidity requirements within the period referred to in paragraph 1(a).
10. Notwithstanding paragraph 1, a SRO or registrant registered under Section 51(1) of the Act shall maintain, at least the relevant minimum capital requirements stipulated in Bye-

Law 16 during the transitional period referred to in paragraph 1(a). 3. During the transitional period referred to in paragraph 1(a), a SRO and a registrant registered under Section 51(1) of the Act shall file within thirty (30) days following the end of each quarterly period within the calendar year: a. its liquidity requirements as determined in accordance with Part II of these Bye-Laws; b. qualifying capital, calculated in accordance with Part III of these Bye-Laws; and c. its capital requirements as determined in accordance with Part IV of these Bye-Laws, in such form as the Commission may determine. 4. The capital requirement for the Managers of Fixed NAV CISs will be introduced over three (3) years, with the requirement being imposed as follows: Date Percentage of Capital Requirement Coming into force of these Bye-Laws 25% 12 months after effective date of Bye-Laws 50% 24 months after effective date of Bye-Laws 75% 36 months after effective date of Bye-Laws 100% 5. Where a SRO or a registrant registered under Section 51(1) of the Act is unable to comply with the transition period referred to in paragraph 1(a) as a result of external unforeseeable circumstances beyond reasonable control including but not limited to the occurrence of any natural disaster, industrial unrest, public disorder, epidemic or the like, the Commission may extend the transition period by up to one (1) year as it considers necessary.