Resolution No. JPRF-F-2023-062: Reforming Articles 19, 29, and 30 of Chapter XL on General Assemblies and Board Elections for Savings and Credit Cooperatives

Resolution No. JPRF-F-2023-062 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal certainty is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities; That, Article 226 of the Fundamental Norm states that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law, and shall have the duty to coordinate actions to fulfill their purposes and make effective the enjoyment and exercise of rights recognized in the Constitution; That, Article 303 of the aforementioned Magna Carta prescribes that monetary, credit, exchange, and financial policies are a privative competence of the Executive Branch; That, Article 309 of the Fundamental Norm determines that the national financial system is composed of the public, private, and popular and solidary sectors, which intermediates public resources; each of these sectors shall have specific and differentiated autonomous control norms and entities, which shall be responsible for preserving their security, stability, transparency, and solidity; That, the article numbered after Article 6 of the Organic Code of Monetary and Financial Law, Book I, establishes that regulatory bodies "shall seek to adopt as a reference framework the international technical standards related to the scope of their competence for the issuance of regulations and for the exercise of their functions, strictly adhering to the normative hierarchy established in the Constitution of the Republic of Ecuador." That, Article 13 ibid, reformed by the Organic Reforming Law to the Organic Code of Monetary and Financial Law for the Defense of Dollarization, published in the Official Register Supplement No. 443 of May 3, 2021, created the Financial Policy and Regulation Board, part of the Executive Branch, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That, Article 14 ibidem, which refers to the scope of the Financial Policy and Regulation Board, determines that this collegiate body is responsible for formulating policies and regulations in financial matters, as well as issuing regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care services systems; That, Article 14.1 of the Organic Code of Monetary and Financial Law, Book I, in numbers 1 and 9, states that it is the responsibility of the Financial Policy and Regulation Board to regulate the creation, constitution, organization, activities, operation, and liquidation of financial entities; as well as to issue the non-prudential regulatory framework for all financial entities; That, the antepenultimate paragraph of Article 14.1 of the Organic Code of Monetary and Financial Law, Book I, confers upon the Superintendent of the Popular and Solidary Economy the faculty to propose regulatory proposals to this regulatory body within the scope of its competencies;

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That, Article 163 ibidem prescribes that the Popular and Solidary Financial Sector includes, among others, Savings and Credit Cooperatives and Mutual Associations for Savings and Credit for Housing; That, General Provision Twenty-Ninth of the Organic Code of Monetary and Financial Law, Book I, provides that in existing legislation mentioning the "Monetary and Financial Policy and Regulation Board," it shall be replaced by "Financial Policy and Regulation Board"; That, Transitory Provision Fifty-Fourth ibidem, provides that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions shall remain in force until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies; That, through Office No. SEPS-SEP-2022-00013-O of April 27, 2022, the General Secretariat of the Superintendent of the Popular and Solidary Economy, attached Office No. SEPS-SGD-2022-12634-OF signed on the same date by the Superintendent of the Popular and Solidary Economy, which contains the reports and the draft reform of "articles 19, 29, and 30 of Chapter XL 'Regulation of General Assemblies or General Meetings and Elections of Representatives and Vocal Members of the Boards of Administration and Surveillance of Savings and Credit Cooperatives and Mutual Associations for Savings and Credit for Housing'," of Title II "National Financial System," of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions"; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0020-M of March 10, 2023, sent to the President of the Board the Technical Legal Report No. JPRF-CTCJ-2023-003 of March 8, 2023, which concludes: a) Technical Coordination: Based on the review and evaluation of the proposal and the technical arguments exposed, sent by the control body through Office No. SEPS-SEP-2022-00013-O of April 27, 2022, to which Office No. SEPS-SGD-2022-12634-OF and the corresponding technical report are attached, it is concluded that it is appropriate to carry out the reform of articles 19, 29, and 30 of Chapter XXXIX "Regulation of General Assemblies or General Meetings and Elections of Representatives and Vocal Members of the Boards of Administration and Surveillance of Savings and Credit Cooperatives and Mutual Associations for Savings and Credit for Housing," of Title II "National Financial System," of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the adjustments made to the proposal for reform of article 19 mentioned above, considering additionally that the adjusted reform proposal would provide greater clarity to the election processes of the boards, would give congruence to the norm with respect to other normative bodies that regulate these aspects, and would allow the articulation of the secondary norm with the control norm, evidencing that together they would contribute to the fulfillment of best practices in corporate governance and internal control. b) Legal Coordination: The Financial Policy and Regulation Board, as responsible for the formulation of policy and regulation of financial entities, has legal competence to regulate the creation, constitution, organization, activities, operation, and liquidation of Savings and Credit Cooperatives and Mutual Associations for Savings and Credit for Housing; to issue the regulatory framework to which the entities of the popular and solidary economy must adhere, a framework that must be coherent, not give rise to regulatory arbitrage, adopting international best practices; in accordance with what is provided in numbers 1 and 9 of Article 14.1 of the Organic Code of Monetary and Financial Law, Book I;

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That, the Financial Policy and Regulation Board, in ordinary session convened by technological means on March 10, 2023 and carried out via video conference on March 14, 2023, reviewed Memorandum No. JPRF-ST-2023-0020-M of March 10, 2023, issued by the Technical Secretariat of the Board; as well as the aforementioned report from the Technical Coordination of Financial Sector Policy and Regulation and the Legal Coordination of Financial Policy and Regulation, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in ordinary session convened by technological means on March 10, 2023 and carried out via video conference on March 14, 2023, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES: SINGLE ARTICLE.- Substitute the text of articles 19, 29, and 30 of Chapter XXXIX "Regulation of General Assemblies or General Meetings and Elections of Representatives and Vocal Members of the Boards of Administration and Surveillance of Savings and Credit Cooperatives and Mutual Associations for Savings and Credit for Housing," Title II "National Financial System," of Book I "Monetary and Financial System," of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Art. 19.- Challenge of resolutions adopted in assemblies or general meetings.- If the conflict regarding the resolutions adopted in general assemblies or meetings has not been resolved through the special commission provided for in the General Regulation of the Organic Law of the Popular and Solidary Economy, which must be stated in its bylaws; or through alternative dispute resolution methods, members may file the challenge with the Superintendent of the Popular and Solidary Economy, within a term of five days, counted from the date of signing the minutes of impossibility of agreement, granted in a mediation center. The challenge to the resolution must be filed by members or representatives registered with the Superintendent who attended the session of the governing body. The Superintendent may annul the resolutions of the general assembly or general meeting when, having been challenged within the prescribed term; and, after the corresponding administrative procedure has been processed, any of the following circumstances are verified:

1. The assembly or general meeting was held without the legal or regulatory quorum;
2. The resolutions were adopted without complying with the procedures established in the bylaws or in this Chapter;
3. The resolutions are incompatible with the corporate purpose of the entity;
4. The matter discussed was not expressly stated in the agenda established in the call, unless its modification is verified; and,
5. The non-observance of the provisions of this Chapter, as applicable."

"Art. 29.- Election of board vocal members.- The vocal members of the boards of administration and surveillance shall be elected by the general assembly or general meeting, with the vote of the majority of its attending members. The voting shall be secret and personal."

"Art. 30.- Debate Director.- To guarantee the development of assemblies or meetings for the election of vocal members of the boards, the governing body shall obligatorily designate, among the attending members or representatives, a debate director, who at the time of his designation, must not be a vocal member of any board. In the event that the elected debate director is nominated to participate or is participating in the election of vocal members, the assembly or general meeting must elect a new debate director."

GENERAL PROVISION.- The Superintendent of the Popular and Solidary Economy shall issue the corresponding control regulations to operationalize the challenge process referred to in this resolution. FINAL PROVISION.- This Resolution shall enter into force as of the present date, without prejudice to its publication in the Official Register. Publish this Resolution on the website of the Financial Policy and Regulation Board, within a maximum term of two days from its issuance. COMMUNICATE.- Given in the Metropolitan District of Quito, on March 14, 2023. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The aforementioned Resolution was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on March 14, 2023.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala