Agreement 8-2023 Establishing Rules for Simplified Procedure Investment Accounts in Securities Houses

REPUBLIC OF PANAMA
SUPERINTENDENCY OF THE SECURITIES MARKET
Agreement No. 8-2023
(December 13, 2023)
"By which the rules for simplified procedure investment accounts in Securities Houses are established."

THE BOARD OF DIRECTORS

In exercise of its legal powers and

CONSIDERING

That Law 67 of September 1, 2011, reformed Decree-Law 1 of July 8, 1999, and created the Superintendency of the Securities Market as an autonomous state entity, with legal personality, its own assets, and administrative, budgetary, and financial independence.

That the Board of Directors, in accordance with Articles 5, 6, 10 (numeral 1), 19, and 20 of the Single Text of the Securities Market Law (hereinafter: Single Text), acts as the Highest Consultative, Regulatory, and Policy-Setting Body of the Superintendency and has among its attributes the power to adopt, reform, and revoke Agreements that develop the provisions of the Securities Market Law.

That the Superintendency, by virtue of Article 3 of the Single Text, has the general objective of regulating, supervising, and auditing the activities of the securities market developed in the Republic of Panama or from it, promoting legal certainty for all market participants and guaranteeing transparency, with special protection of investors' rights.

That the Superintendency, through Agreement 2-2011 of April 1, 2011, adopted the rules applicable to the activities and functioning of Securities Houses.

That, in this order of ideas, Article 323 of the Single Text establishes that when the Superintendency contemplates reforming an agreement, it must consider to determine if the action is necessary and appropriate: (a) the public interest, (b) the protection of investors, and (c) whether the action promotes efficiency, market competition, and capital formation.

That Article 1 of Law 23 of April 27, 2015, establishes that mechanisms for client and ultimate beneficiary identification, as well as the verification of information and documentation, will depend on the risk profile of obligated financial subjects, considering the types of clients, products, and services offered, the distribution or marketing channels used, and the geographic location of their facilities, clients, and ultimate beneficiaries.

That Agreement 6-2015 of August 19, 2015, establishes that Securities Houses must apply enhanced or reinforced due diligence measures or simplified due diligence measures, established in Law 23 of April 27, 2015, and Executive Decree 363 of August 13, 2015, for natural and legal persons, in accordance with the client's risk classification.

That in working sessions of the Superintendency, the need to adopt provisions that allow simplifying the account opening procedures for certain low-risk clients has been highlighted, in order to promote financial inclusion and access to the securities market.

That, taking into account that the provisions contemplated in this Agreement facilitate the relationships of securities houses by simplifying access for low-risk clients after verifying the established legal requirements, and also allowing access through electronic means, it corresponds to apply what is established in Article 326 of the Single Text, regarding actions that grant an exemption or eliminate a restriction, so that the provisions contained in Title XV, regarding the "Administrative Procedure for the Adoption of Agreements," will not be applicable to this Agreement.

That, by virtue of the foregoing, the Board of Directors of the Superintendency of the Securities Market, in exercise of its legal powers,

AGREES

ARTICLE ONE: ADOPT the rules applicable for simplified procedure investment accounts in securities houses.

Article 1. Scope of application. The provisions of this Agreement shall be applicable to entities with a securities house license.

Article 2. Simplified procedure investment account. For the purpose of applying the provisions contained in this Agreement, a simplified procedure account shall be understood as an investment account that meets the following requirements:

1. It may only be opened by natural persons.
2. It may only be opened in the individual account modality.
3. Only one simplified procedure account may be opened per natural person in the Republic of Panama. Therefore, the securities house must verify compliance with this limitation on the part of the client and may only open one investment account per natural person.
4. The natural person must maintain a profile with a low risk classification.
5. Its opening balance and assets under administration may not, under any circumstances, exceed the sum of two hundred fifty thousand United States dollars (US$250,000.00), throughout the entire relationship of the simplified procedure investment account.

Paragraph 1. Securities houses must ensure they have sufficient controls to allow compliance with the amount established in numeral 5 of this article. To this end, they must implement the necessary mechanisms to prevent the established limits from being exceeded.

Article 3. Parameters for client identification. For the opening of simplified procedure accounts, licensed Securities Houses are not obligated to comply with the due diligence requirements established in Article 7 of the Single Text of Agreement No. 6-2015 of August 19, 2015.

Instead, securities houses must maintain records of the information and documentation of the due diligence applied for the identification and verification of the identity of the natural person, which must contain the following:

1. Full name.
2. In the case of nationals, a copy of the personal identity card, and in the case of permanent or temporary resident foreigners, a copy of the passport and the document issued by the competent entities that accredits their legal residence in the Republic of Panama, as applicable. The documents provided must be valid.
3. Personal or work address.
4. Profession or occupation.
5. The information and/or documentation that allows verifying the source of resources or assets and the origin of the funds of the natural person.
6. Sworn declaration by the natural person, stating to the securities house that they do not maintain another simplified procedure investment account in the Republic of Panama.

Article 4. Internal controls. Securities houses, when applying the simplified procedure investment account modality, must have procedures that allow them to monitor, evaluate, and control the risks assumed, in order to prevent abuse of this account modality, guarantee its operability within the established conditions, and take additional measures that are appropriate to keep the product within the levels typical of a low-risk account in terms of prevention of money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction.

In the event that the securities house has knowledge that the natural person (client) maintains an investment account in another securities house in the Republic of Panama, thereby failing to comply with what is established in Article 2 of this Agreement, the securities house must proceed with the closure of the investment account, applying the corresponding procedure for the return of financial assets to the natural person (client).

The update of the due diligence of these clients must be carried out attending to the frequency determined in Article 25 of Agreement No. 6-2015 of August 19, 2015.

In the event that the risk profile of the natural person (client) undergoes any change, the securities house must update the information, documentation, and risk profile.

Article 5. Linking the simplified procedure account with electronic means. Securities Houses may link simplified procedure accounts with various channels or electronic means, such as mobile telephony, internet, among others, in which case they must form the respective client identification register as provided in this Agreement. Any linking to a simplified procedure account carried out through electronic means must have a two-factor authentication method (2FA).

Likewise, they must establish and document mechanisms to identify said client and define procedures to prevent the improper use of said electronic means or channels, all in accordance with applicable regulations in matters of prevention of money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction.

All records of the information and documentation of these clients may be kept updated electronically, which must be compiled chronologically by client, in such a way as to allow expedited location, evaluation, and review. Such systems must be auditable and have the necessary records and backups, which must be maintained during the client's active life and for five (5) years, counted from the end of the commercial relationship.

Securities houses will take the necessary measures so that the information and documentation are available in a timely and immediate manner, upon request of the Superintendency of the Securities Market.

Article 6. Prohibitions. The use of the simplified procedure account is subject to the following prohibitions:

1. A person may not maintain more than one simplified procedure account in the Republic of Panama.
2. The client may not exceed the limits indicated in Article 2 of this Agreement.
3. The investment account may not be subject to the figure of leverage, and
4. Transfers to third parties are not allowed.

Article 7. Sanctions. In the event of non-compliance with the provisions contained in this Agreement, the Superintendency of the Securities Market, once the sanctioning procedure has been completed, will apply the sanctions established in the Single Text of the Securities Market Law.

SECOND ARTICLE: Validity. This Agreement shall enter into force from the day of its promulgation in the Official Gazette of the Republic of Panama.

PUBLISH AND COMPLY

Adriana
President of the Board of Directors

Vásquez Briones
Secretary of the Board of Directors