Technical Standards for the Processing and Recording of Buy and Sell Securities Orders by Brokerage Houses

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

THE NORMS COMMITTEE OF THE CENTRAL BANK OF RESERVE OF EL SALVADOR, CONSIDERING:
I. That Article 65 letter a) of the Securities Market Law establishes that brokerage houses are obligated to keep records of buy and sell orders received by any means.
II. That Article 47 of the Regulations of the Securities Market Law regulates that the minimum content of the order records that brokerage houses receive from their clients, as well as the manner of keeping them, will be determined by the Superintendency, which by virtue of the validity of the Financial System Supervision and Regulation Law now corresponds to the Central Bank of Reserve through the Norms Committee.
III. That Article 7 letter f) of the Financial System Supervision and Regulation Law establishes that the supervision of brokerage houses corresponds to the Financial System Superintendency.
IV. That Article 35 letter g) of the Financial System Supervision and Regulation Law establishes that members of the financial system are obliged to have an efficient functioning of registration, treatment, storage, transmission, production, security, and control systems for information flows.
V. That Article 15 first paragraph of the Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction establishes that obligated subjects, to achieve identifying their clients and users, including the controller, recipient, or final beneficiary, managing associated risks and obtaining appropriate information on commercial relationships entered into or their continuity, must take reasonable measures to carry out due diligence procedures. (3)

THEREFORE,

by virtue of the normative powers conferred upon it by Article 99 of the Financial System Supervision and Regulation Law, AGREES to issue the following:

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

Objective
Art. 1.- These Standards aim to regulate the operations of brokerage houses, observing best operational practices in the records and controls necessary for the receipt, execution, allocation, and settlement of the transactions they perform, which allow providing transparency, fairness, ordering, and competitiveness to the Salvadoran securities market. (2)

Subjects
Art. 2.- The subjects obligated to comply with these Standards are brokerage houses, authorized by the Financial System Superintendency to perform securities intermediation in accordance with the Securities Market Law.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Agent(s): Brokerage agents, understood as the representative of a brokerage house authorized to perform operations on behalf of the house in a Stock Exchange; b) Order Allocation: Action of assigning executed orders to the clients who issued them; c) Exchange(s): Stock Exchanges constituted in El Salvador and registered in the Financial System Superintendency; d) House(s): Brokerage houses, authorized and registered in the Financial System Superintendency; e) Order Execution: Compliance by brokerage houses with a buy or sell securities order issued by a client; f) Orders: Instructions issued by clients to brokerage houses so that, on their behalf, they execute operations in the securities market in accordance with the authorization obtained by the Houses according to the Securities Market Law; g) Order Receipt: Action of a House receiving orders issued by clients; h) Order Record: Record of Buy and Sell Orders, which Houses must keep, as expressed in letter a) of Article 65 of the Securities Market Law; i) Computer System: Computer system used by the House, through which all orders imparted by their clients will be entered for their control and record, to be subsequently executed; and

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv j) Superintendency: Financial System Superintendency.

CHAPTER II
RECEIPT OF BUY AND SELL ORDERS

Art. 4.- The House must have a computer system that automatically assigns a consecutive number and enters and records orders received from clients in chronological order immediately. This system must be authorized by the Superintendency and must meet the characteristics established in Article 16 of these Standards.

Buy and Sell Order Form
Art. 5.- The instructions received by the House for the purchase or sale of securities from its clients according to agreed means must be entered immediately into the buy and sell order form designed within the computer system. This form must contain at minimum the following information:
a) Consecutive number of orders: Number assigned consecutively and automatically by the system according to the chronological reception of each of the clients' orders; b) Client Name: Identification of the natural or legal person on whose behalf the buy and sell securities order will be made; c) Currency Type: Identification of the currency type; d) Date and time of the order: Specification of the date and time when the buy and sell securities order is received by the client; e) Client Code: Code assigned according to the internal controls of the House; f) Number of account in the central deposit and custody of securities: Client's securities account involved in the operation; (2) g) Amount: Specification of the total amount the client wishes to trade; h) Method of order receipt: Indication of the method of order receipt, which can be by telephone, electronically, or in writing; i) Order Type: Specification if the order issued is to buy or sell securities; j) Order Validity: Deadline for the validity of the order, after which the issued order will have the status of expired; (2) k) Instrument: Detail of the instrument to be traded, considering the necessary characteristics to identify it so that the House can execute the issued order, such as Title Type or Instrument, Term, Issuer, Interest Rate, Payment Periodicity. In the case of repurchase agreements (repos), the client must designate to the House at least the types of securities in which they wish to invest or with which they intend to raise funds, whether public or private; as well as the term of the repo operation; (2) l) Market Type: Identification of the market in which the client wants the order to be executed;

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv m) Price or yield: Specification of the prices or yields at which the client wishes to trade the securities, including for the tranches they wish to negotiate with different prices, yields, or price or yield policies. In any case, they may indicate the maximum and minimum price or yield at which the client is willing to accept the operation, depending on whether the operation is a purchase or sale; n) Quantity of securities to trade: Indication of the total quantity of securities desired to be traded when applicable, according to the nature of the securities, along with the detail of limits in quantities the client wishes to negotiate with different prices or price policies; o) Person responsible for receiving the order: Identification of the person receiving the order, indicating the agent's number or name of the employee authorized by the House to receive it, including their respective signatures; (2) p) Agreed Commission: Specification of the percentage commission to be charged to the client in the execution of the order. This commission may vary only if it is for the benefit of the client, which must be detailed in the observations field; (2) q) Method of executing the order: Specification of the particularities indicated by the client that the House must consider when executing the order; (2) r) Observations: Detail of special situations that arise in the execution, cancellation, or expiration of the trading order, including special settlement conditions; and (2) s) Client Signature: Name and signature of the client or the person authorized by them to sign orders on their behalf when required, in accordance with what is established in these Standards. The buy and sell order form will be prepared by the House and must contain at minimum the information established in this article. (2)

Minimum Information at Order Receipt
Art. 6.- The House must complete the buy or sell order form with the necessary information allowing it to execute the operation at the moment it receives the client's instruction.
The minimum information at the moment of receiving the instruction will be the client's name, amount, instrument denomination, price or yield ranges for the operation, type of market in which it will trade, and the number of the account in the central deposit and custody of securities when available.

Modifications and Corrections of Orders
Art. 7.- Orders that have been modified totally or partially by client instruction must be documented in a new form, to which the corresponding consecutive number, date, and time in the computer system will be assigned. (2) Corrections will proceed when the House must remedy errors incurred in the process of receiving, operating, and allocating orders, and will be carried out considering what is established in Articles 54 and following of the Regulations of the Securities Market Law. In any case, the correction made by the House implies leaving the original content of the order intact, detailing said corrections in the observations field of the order.

Cancellation of Orders
Art. 8.- Houses may only accept cancellations of instructions issued by their clients when the orders have not yet been executed, for which they must have the corresponding supporting documentation, observing what is established in the third paragraph letter e) of Article 21 of these Standards. (2)

Form Signature
Art. 9.- The order forms that are executed must contain complete information and be signed by both the client or person authorized by them, and by the agent or person authorized by the House, within a maximum period of three business days after the day the negotiation takes place, in accordance with the House's internal procedure. (2) The House must ensure that the person signing, in case the orders are not signed by the Client, has the corresponding powers. In any case, the authorization of the person designated by the client to sign the orders must comply with the provisions defined in the intermediation contracts signed by the client with the House. Art. 10.- The House must not sign orders on behalf of the client at any time, except when dealing with own operations or individual portfolio administration, provided it is authorized to provide this service, for which it must clearly identify such situation. (2)

Communication Means for Order Receipt
Art. 11.- In case the House establishes and agrees with the client for the sending of orders, the use of means other than the written note signed by the client, either by telephone, verbal, mail, or electronic system, these must have supporting documentation of the client's acceptance of the medium they will use to issue their orders, which must meet the following conditions: (2) a) That they guarantee the timeliness, integrity, confidentiality, consistency, and security of the transmitted information; b) That they allow controlling the chronological reception of orders; c) That they send the client automatic notification of the order receipt by the House, when applicable by the nature of the mechanism used; d) That they guarantee the capture of the information required in the buy and sell order forms according to what is established in Article 5 of these Standards; and e) That they allow establishing mechanisms for validating the client's acceptance of the order. In any case, the House is responsible for verifying the authenticity and documenting the orders it receives according to any medium agreed upon between the client and itself, establishing mechanisms for validating the client's acceptance of the order. Art. 12.- The client's signature referred to in Article 9 of these Standards will not be required when the House uses order receipt by telephone, email, or other electronic means and has control mechanisms allowing it to support and safeguard all those instructions that have been issued by clients, for which it must comply with the following conditions: (2) a) Comply with what is established in Article 11 of these Standards; b) Obtain from the client the duly accepted acceptance, in which they clearly specify that their orders will be issued via telephone, email, or other electronic medium, therefore, they do not require autograph signature by their person or by the person authorized to issue their orders; (2) c) Obtain prior authorization from the client or the person authorized to issue orders on their behalf to perform voice recordings for the case of order receipt by telephone; d) Incorporate into the internal control procedures referred to in Article 21 of these Standards, controls and mechanisms related to:
i. The reliable identification of the client;
ii. The conservation, backup, and safeguarding of all those instructions that have been issued by their clients by telephone, email, or other electronic medium, without editing and in integral form for the term established in Article 28 of these Standards; (2)
iii. The easy location and identification at any time of the instructions of the orders for which there are voice recordings and of the records in electronic media when dealing with emails;
iv. The designation of the person responsible for the custody of the backups of client instructions made telephonically, by email, or other electronic medium; (2)
e) Incorporate into the contracts that Houses subscribe with their Clients, in accordance with what is established in the "Technical Standards on the Registration of Clients and Intermediation Contracts Used in the Securities Market by Brokerage Houses" (NDMC-23), approved by the Central Bank through its Norms Committee, a Clause related to the forms in which the client can realize their instructions or buy and sell securities orders to the House; which can be by means other than the written note signed by the client, either via telephone,

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv email, or other electronic medium agreed upon by the parties; (2) f) Repealed; and (2) g) Obtain authorization from the Superintendency regarding compliance with the conditions required in this article.

Delivery of Receipt to Client
Art. 13.- Order forms will be issued in original and copy, and the copy must be delivered to the client when the order has been executed and signed.

CHAPTER III
RECORDING OF BUY AND SELL ORDERS

Recording
Art. 14.- The Order Record must be implemented by the House, through a computer system that allows control of the receipt, recording, execution, and allocation of its clients' orders. This Record, as well as its modifications, must have prior authorization from the Superintendency, and must be legalized by a public accountant as established in Article 65 of the Securities Market Law and Article 17 of the Law Regulating the Practice of Accounting, respectively. (2) Additionally, this Record must adapt and comply at all times with what is disposed in the Regulations of the Securities Market Law and must be available in the House's facilities.

Content of the Buy and Sell Order Record
Art. 15.- The Order Record must contain, at minimum:
a) The fields necessary to note the orders received, according to what is established in Article 5 of these Standards; (2) b) The status of the orders, when they have not been executed, the conditions under which the client requested them must be specified; the order statuses to be considered will be valid, executed, expired, cancelled, or annulled; (2) c) Level of order execution, establishing if the order was executed partially or totally; d) Negotiated amount of the order, as well as the commission assigned to each operation; and e) Number assigned to the executed operation, the day it was closed or registered in the exchange's recording system to which Houses have access.

Characteristics of the Computer System
Art. 16.- The computer system used for the Record must meet the following minimum characteristics:
a) Information security controls, that guarantee availability, integrity,

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND RECORDING OF BUY AND SELL SECURITIES ORDERS BY BROKERAGE HOUSES Approval: 09/01/2014 Validity: 03/02/2014

Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

Tel. (503) 2281-8000 www.bcr.gob.sv confidentiality and security of information and the system, including the use of unique and individual user access codes; b) That the system automatically assigns a consecutive number and the exact time in chronological order, according to the receipt of each of the clients' orders, considering that such information must be unalterable; c) That it controls the status of the orders and registers the date and time of execution or modification of the order, as well as the corresponding stock exchange operation number for the order; (2) d) That it includes an audit log, which allows identifying the registered orders and all their modifications; e) That it allows printing on legalized sheets according to what is established in Article 65 of the Securities Market Law and Article 17 of the Law Regulating the Practice of Accounting; (2) f) That the data of the date and time of entry, execution, or modifications in the order record must be consistent with the central server time and local time; g) That it has backup and recovery mechanisms for information in case of fortuitous events or force majeure, as well as contingency plans that ensure the capacity and continuity of the systems; and h) That it allows the printing of reports and export of information regarding the Order Register to files in Excel spreadsheet and PDF formats. In the system, information that is not necessary for the broker to execute orders may be left pending, and which does not correspond to the minimum information established in Article 6 of these Standards, nevertheless, this must be completed once the trading session has ended, in which the order was executed. (2)

Art. 17.- The computer system used for the registration of buy and sell orders must have its applications and processes duly documented, including records of changes in them, maintenance policies, licenses, and authorizations if required, mechanisms that guarantee the availability, integrity, and confidentiality of the information they collect, store, transmit, and process from their clients, based on what is established in the "Technical Standards for Information Security Management" (NRP-23) and the "Technical Standards for Business Continuity Management System" (NRP-24), approved by the Central Bank through its Standards Committee. (2)

CHAPTER IV
EXECUTION AND ASSIGNMENT OF ORDERS
Entry of orders for trading

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

Art. 18.- The Firm, at the moment it enters the order into the electronic trading systems of the corresponding stock exchange, will incorporate the value account number assigned to the client by the central depository and custody of securities, for the Electronic Register of Securities Accounts.

Receipt for the client
Art. 19.- The Firm must deliver to clients the settlement sheet of the operations carried out and record this fact in its records.

Assignment of orders
Art. 20.- The assignment of orders will be made according to what is provided in Articles 48 to 51 of the Regulations of the Securities Market Law.

CHAPTER V
INTERNAL CONTROL

Internal control
Art. 21.- The Firm must define internal control procedures for the receipt, registration, execution, modification, cancellation of orders, and settlement of executed operations.
The procedures must consider the definition of participants, functions, and responsibilities inherent to the Order Register.
In addition, the Firm must have a manual containing policies and guidelines for the receipt, registration, and execution of orders, as well as for the assignment of operations. Such manual must be authorized by its Board of Directors and include at least the following:
a) Process of receipt, registration, execution, and assignment of orders; b) Internal control measures that must be implemented to safeguard order forms, which must be archived chronologically; c) The information that client orders must contain depending on the type of order in question, as well as the procedures for their modification or cancellation; d) The schedule for receiving orders, the deadline for their execution, and their validity period; (2) e) The process of cancellation of unexecuted orders can be carried out from the same day it was instructed until the last business day of its validity, according to the period established by the client, observing for this purpose, the schedule established by the Firm and the means agreed with the client, which the Firm has made available; (2) f) Mechanisms that ensure the integrity of client orders, avoiding their alteration, as well as guaranteeing their correct execution and assignment;

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv g) The definition of persons authorized by the Firms to act on their behalf to receive, execute, and sign orders issued by clients; h) The description of mechanisms and procedures applied by the Firm to attend to client complaints, specifying the means of receipt of the same and a reasonable response time to their clients, for which it must have internal controls on attended inquiries and responses provided; i) Protection measures for the integrity of the computer systems used in the registration of buy and sell orders; j) Mechanisms that allow it to unequivocally verify the identity of the person issuing a trading order, corroborating the necessary documents and relevant legal powers; and k) Mechanisms to control the period or validity established by the client for the execution of the order.

Art. 22.- The Board of Directors of the Firm and its administrators will be responsible for having the necessary information that allows them to evaluate the functioning and efficiency of the internal control system, and examine the compliance with internal procedures and policies in the operations carried out, their documentation, and registration.

Due diligence in operations
Art. 23.- The Firms must act with responsibility, care, and diligence, faithfully executing their clients' instructions, or under the best conditions for their benefit. (2)

Art. 24.- Within the procedures defined by the Firm, the necessary actions to prevent behaviors such as the following must be considered:
a) Anteceding operations of clients, their agents, related companies, the financial conglomerates of which the Firm is a part, or the Firm itself when they precede those of other clients; b) Privileging a client or the Firm over others, when the orders received have the same characteristics and conditions to execute the order; c) Improper use of the securities entrusted to them by clients or of the information provided by them; d) Possible conflicts of interest due to personal or other relationships between clients and Firm personnel; e) That employees accept compensation, goods, gifts, or donations whose amount could affect the objectivity of the operations they perform on behalf of third parties; f) Altering the integrity of records and documentation related to operations carried out by clients; and

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv g) Fragmenting orders issued by clients with the object of artificially manipulating the prices of securities.
In any case, the policies required by the Law of Supervision and Regulation of the Financial System, in its Article 35, regarding ethical conduct standards, management of conflicts of interest, use of insider information, prevention of behaviors that could imply manipulation or abuse of the market, must include provisions applicable to the Firm's personnel involved in the activities referred to in these Standards, which promotes fair treatment for clients, in addition to considering what is established in the "Technical Standards of Conduct of Entities of the Stock Markets" (NDMC-15), approved by the Central Bank through its Standards Committee. (2) Likewise, the policies and mechanisms for risk management, required for Firms, must include provisions that allow for adequate management of the risks assumed in their intermediation labor.

Art. 25.- The Firm is obliged, in the exercise of its functions, to inform the Superintendence within two business days following, when it has indications that make it presumable that clients incur in the following behaviors:
a) Effecting or inducing transactions to fix or artificially vary the prices of any security in the market; b) Distorting the correct functioning of the stock exchange trading system, through the orders or instructions sent from the Client to a Firm; (2) c) Intervening in operations with conflict of interest; and d) Improper use of insider information.

Information for the client
Art. 26.- The Firm must establish contractually or in its procedures, the form of communication to the client regarding custody services for their securities, especially the inventory of their securities, as well as the detail of commissions or charges carried out for the provision of said custody service. (2)

Responsibility of its Board of Directors
Art. 27.- The procedures and manuals referred to in Articles 21, 24, and 35 of these Standards, as well as their modifications, must be approved by the Board of Directors of the Firm and sent to the Superintendence, within a maximum of ten business days after their approval.

Time of information retention
Art. 28.- The orders received and their respective records, as well as the documentation and controls generated from these provisions, must be preserved according to the period established in the Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction. (2) (3)

CHAPTER VI
OBLIGATIONS WITH CLIENTS AND CLIENT KNOWLEDGE

Transparency and confidentiality of information Art. 29.- The Firm must behave with diligence and carry out all operations, whether on its own behalf or on behalf of third parties, with transparency, in the interest of its clients, maintaining in strict reserve the identity of the person on whose account it contracts. (2) Art. 30.- The Firm must inform its clients so that they make consistent and reasoned decisions about their investments, regarding the characteristics of the securities available in the market, informing them of their price, yield, guarantees, and risk categories. All information directed to clients, whether advertising or not, must be clear and not misleading. Art. 31.- The Firm will provide its clients with information regarding the characteristics of the financial instruments in which they express interest in investing, which must include as a minimum, the information defined by the issuer in its issuance prospectus. In addition, at the client's request, it must provide them with information regarding market quotations of the financial instrument, as well as the detail of commissions that would apply in case of carrying out operations with them. The disclosure of this information must be carried out prior to the trading order with the securities.

Client knowledge
Art. 32.- The Firm must ensure that it has sufficient information about its clients, especially regarding:
a) The identification of the client; b) Objective and investment preference of the client; c) Client's knowledge and experience, regarding the specific type of service contracted; d) Behavior towards risk; and e) Financial situation and capacity of the client, including identification of the origin of funds. In client knowledge, the Firm must perform due diligence on its clients according to what is established in the laws, instructions, and regulations in force related to the prevention, detection, and control of money laundering, terrorism financing, and financing of the proliferation of weapons of mass destruction. (2) (3)

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

Client risk profile
Art. 33.- Based on the information provided by the client, interviews conducted, and a systematic procedure applied by the Firm for client knowledge, a client profile must be determined regarding preferences in the securities they wish to invest in, taking into consideration the risk the client wishes to assume in them, as well as the knowledge they may have about the securities market, education level, occupation or professional activity, investment volume, and habitual nature of carrying out operations, leaving a record in the form that the Firm must carry out for each of its clients, which must be signed by them. (2) It will be the responsibility of the Firm to ensure that the investments offered to its clients, and the investment orders, are adequate for them, based on their profile, the risk they wish to assume, experience, and knowledge. (2)

Art. 34.- In the case that the Firm has clients considered as institutional investors, it will not be necessary what is required in Article 33 of these Standards, regarding determining a category according to their risk profile. Nevertheless, it must comply with what is established in the regulation for the prevention, detection, and control of money laundering, terrorism financing, and financing of the proliferation of weapons of mass destruction. (2) (3) Institutional investors are understood to be entities such as banks, financial conglomerates, and member companies thereof according to the Banking Law, pension funds, securitization funds, insurance and reinsurance companies, Firms acting on their own behalf, private administrators of authorized collective funds, the Development Bank of El Salvador, and the Central Reserve Bank of El Salvador.

Art. 35.- For the determination of the client profile, the Firm must have policies and procedures which must be approved by its Board of Directors, which must contain at least the following:
a) Include within client profiles, at minimum, the categories of: Conservative, moderate, and aggressive; b) Investment policies for each category of client profile that the entity defines; c) Policy for updating the profile of active clients, which cannot be less than three years; d) Training policy for personnel responsible for the elaboration and application of client profiles; and e) Form or questionnaire to establish the client profile. (2) The policies and procedures must be reviewed at least every three years in order to adapt them to the characteristics of the market.

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

The client risk profile categories are defined as follows: (2) a) Conservative or risk-averse (Income-oriented): Is that which has low tolerance for risk and seeks an investment in which the risk of loss of capital contributed is minimal. (2) b) Moderate: Is that which has moderate tolerance for risk and seeks to maintain the stability of its investment, willing to accept more modest returns for it. Seeks a balance between profitability and risk. (2) c) Aggressive or speculative: Is that which has knowledge of the market where it is investing, handles fundamental and technical analysis tools, assumes the risks of its investments, seeks to maximize profitability, and invests basically in variable income and high-risk fixed income securities regardless of extreme market volatility and potential losses. (2) Art. 36.- The client profile form will be part of each client's file, and must contain the information referred to in Articles 32 and 33 of these Standards, as well as the documentation that served as the basis in the evaluation and determination of the client's profile, specifying in said form, its date of elaboration, as well as, the date of its update and the client's acceptance; for which the Firm must carry out a questionnaire that allows determining their level of knowledge in the securities market, preference in the investments traded in the market, investment horizon, and the risk they wish to assume. (1) (2) For clients who are legal entities, the client profile will correspond to that of the society, being the responsibility of the Firm to elaborate it according to its policies and mechanisms for risk management approved by its Board of Directors, a questionnaire to determine the knowledge of its clients in the securities market, in accordance with what is established in Articles 32 and 33 of these Standards. (1) (2) Likewise, in case the client does not provide the information indicated in this article or the provided information is insufficient, the Firm will warn the client that it is not in conditions to determine if the investment order is adequate for them. In any case, the Firm must have documentation supporting the compliance with these provisions.

Exception to the application of investment policies Art. 37.- The Firm, at the client's request, may execute an investment order that is not in accordance with their profile and the investment policy defined for them, provided that the client signs a document authorizing said operation, which will be required every time this type of order is issued.

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

This document will be signed prior to carrying out the operations of its clients, which must be known to the General Manager of the Firm and will be part of the client's file and include at least: (2) a) That they accept that the securities in which they are going to invest do not correspond to the investment policy according to their investor profile; b) That they understand and accept the characteristics and risks of the securities in which they will invest; c) That they do not accept the Firm's recommendation not to invest in said securities; and d) A warning by the Firm to the client of the main risks and characteristics of the securities in which they wish to invest, and that these titles are not in accordance with the risk profile determined in their analysis (The determined client category by the Firm must be specified). In the case that the client expressly requests that their profile not be carried out or determined, the Firm must obtain a document signed by their client, in which prior to carrying out operations they indicate: (1) a) That they requested that the profile not be applied; (1) b) That they understand and accept the characteristics and risks of the securities in which they will invest, therefore, they do not require the advice or recommendations of the Firm or its officials to invest in that product; or (1) (2) c) Repealed; (1) (2) d) Repealed; (1) (2) e) That the operations correspond to the sale of securities and are not investments. (2) Repealed. (2) When a client habitually carries out investments that are not in function of their profile, the Firm may carry out a new evaluation to determine the client's profile according to the profile update policy of clients referred to in Article 35 of these Standards, leaving a record of the analysis carried out. In any case, the Firms must inform the Superintendence within the third business day following the signing of the document referred to in this article, the names of the clients and detail of the investments carried out.

CHAPTER VII
OTHER PROVISIONS AND VALIDITY
Sanctions
Art. 38.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESS AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES OF STOCKBROKERAGE FIRMS Approval: 09/01/2014 Validity: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

Transitory Provisions

Art. 39.- From the effective date of these Standards, Brokerage Houses shall have four months to adapt the minimum content required for the form and the Order Register; and to obtain approval from their Board of Directors of the procedures and manuals detailed in Chapters V and VI of these Standards. (1)

Art. 39-A.- Brokerage Houses must implement the computer system for the registration of buy and sell orders, in accordance with Chapter III of these Standards, within a maximum period of eighteen months from the effective date of these Standards. This period consists of the following stages: (1)

a) Three months for the submission to the Superintendence of the implementation plan for the system, approved by the Board of Directors of the respective Brokerage House, which must include: the persons responsible for implementing, executing, and verifying said plan, specific dates on which activities will be carried out, as well as the details thereof; (1)

b) Nine months for the design and development of the computer system by the Brokerage Houses and submission of the request for its approval to the Superintendence, including the documentation required in Article 17 of these Standards; (1)

c) Four months for the review and testing of the system by the Superintendence; incorporating modifications to it, if required; and (1)

d) Two months for the final authorization by the Superintendence. (1)

Art. 39-B.- Obligated subjects shall have six months after the entry into force of these Standards to create the client profile for all clients who require carrying out stock market operations. (1)

Unforeseen Aspects

Art. 40.- Unforeseen aspects in regulatory matters within these Standards shall be resolved by the Standards Committee of the Central Reserve Bank of El Salvador.

Repeal

Art. 41.- These Standards repeal Resolution RS.CB.22/2002 Registration of Buy and Sell Orders for Securities, approved on September 23, 2002, by the Superintendent of the Securities Superintendence, whose Organic Law was repealed by Legislative Decree number 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Gazette number 23 Volume 390 dated February 2, 2011.

Effectiveness

Art. 42.- These Standards shall enter into force as of February 3, two thousand fourteen.

MODIFICATIONS:

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES BY BROKERAGE HOUSES Approval: 09/01/2014 Effectiveness: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv

(1) Modifications approved by the Standards Committee of the Central Reserve Bank of El Salvador, in Session No. CN-05/2014 dated March 27, two thousand fourteen, with effect from April 10, two thousand fourteen.
(2) Modifications to Articles 1, 5, 7, 8, 9, 10, 11, 12, 14, 15, 16, 17, 21, 23, 24, 25, 26, 28, 29, 32, 33, 34, 35, 36, 37 and repeal of Annexes No. 1 and No. 2, approved by the Central Bank through its Standards Committee, in Session CN-03/2024, of February 29, two thousand twenty-four, with effect from March 15, two thousand twenty-four. (3) Modifications in Consideration V and in Articles 28, 32 and 34, approved by the Central Bank through its Standards Committee, in Session No. CN-04/2026, of May 25, two thousand twenty-six, with effect from June 9, two thousand twenty-six.

CNBCR-01/2014
NDMC-01
TECHNICAL STANDARDS FOR THE PROCESSING AND REGISTRATION OF BUY AND SELL ORDERS FOR SECURITIES BY BROKERAGE HOUSES Approval: 09/01/2014 Effectiveness: 03/02/2014

Tel. (503) 2281-8000 www.bcr.gob.sv