Agreement No. 1-2024 Modifying Article 27 of Agreement No. 1-2016 Regarding the Forced Liquidation of Institutions Registered with the Securities Market Superintendence

REPUBLIC OF PANAMA
BOARD OF DIRECTORS
SECURITIES MARKET SUPERINTENDENCE

Agreement No. 1-2024
(From March 26, 2024)

"By which Article 27 of Agreement No. 1-2016 of January 13, 2016, By which the provisions contained in Chapter V of Title XIV, regarding the Forced Liquidation of Institutions Registered before the Securities Market Superintendence, are developed, is modified."

The Board of Directors of the Securities Market Superintendence, 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 Securities Market Superintendence (hereinafter: the Superintendence), as an autonomous entity of the State, with legal personality, 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 Body of consultation, regulation, and setting of the general policies of the Superintendence and has among its attributes to adopt, reform, and revoke Agreements that develop the provisions of the Securities Market Law.

That the Superintendence, by virtue of Article 3 of the Single Text, has as its general objective the regulation, supervision, and oversight of securities market activities 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 Article 29 of Law 23 of April 27, 2015, which adopts measures to prevent money laundering, terrorism financing, and financing of the proliferation of weapons of mass destruction, provides among other things that, similarly, they shall safeguard information, customer and ultimate beneficial owner due diligence documentation, as well as records of transactions carried out, for a minimum period of five years, counted from the termination of the professional relationship, which make possible the knowledge of this and the reconstruction of its operations.

That Article 93 of the Commercial Code provides among other things that every merchant is obliged to conserve their indispensable accounting records, for the entire time their management lasts and up to five (5) years after closing their business.

That Article 302 of the Single Text of the Securities Market Law establishes that if the Superintendence deems it necessary to force the liquidation of a registered institution that is subject to intervention or reorganization, it will issue a reasoned resolution ordering its administrative liquidation, for which it must post a copy of the resolution ordering the forced liquidation in a public and visible place of its main establishment and in said resolution the hour when the liquidation order will enter into force will be indicated.

That, for institutions registered by the Superintendence, contrary to entities governed by Law 32 of 1927, first their liquidation is ordered, whether voluntary or forced, and once the liquidation of their assets is completed in accordance with the provisions established by the Securities Market Law, their dissolution proceeds.

As a consequence of the foregoing, registered institutions, once the forced liquidation order enters into force, immediately cease to be a going concern, as all their commercial business activities protected under their license completely cease, and the liquidation procedure begins.

That Article 313 of the Single Text of the Securities Market Law establishes that from the date on which the resolution by which the forced liquidation is decreed becomes final, all contracts in which the registered institution is a party will be rescinded by operation of law, which similarly generates, among other things, the termination of the professional relationship of the registered institution

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with its investors (clients) and gives way to the liquidation procedure in the hands of the liquidator appointed by the Securities Market Superintendence.

That, in this order of ideas, Article 323 of the Single Text establishes that when the Superintendence 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) if the action promotes efficiency, market competition, and capital formation.

That this Superintendence has identified the need to modify Article 27 of Agreement No. 1-2016 of January 13, 2016, which establishes the procedure for the custody, storage, and preservation of documentation of a registered institution subject to administrative forced liquidation, with the purpose of updating and improving the management of these documents during, and once the administrative forced liquidation process is finalized, among other things, taking as a starting point the moment when the registered institution formally ceases its commercial activities, ceases to be a going concern, and the professional relationship with its clients ends, that is, once the resolution by which the forced liquidation of a registered institution is decreed becomes final and the liquidator begins their functions to manage the appearance of both investors (clients) or other creditors in the liquidation to present their claims, as well as the notification to the debtors of the registered institution to appear to cancel their obligations. Similarly, provisions are being added for the custody and preservation of the registered institution's documentation in case of litigation.

That taking into account that the actions contemplated in this agreement update and improve the management of the documentation of a registered institution once its administrative forced liquidation is ordered, it corresponds to apply what is established in Article 326 of the Single Text, regarding actions that grant an exemption or eliminate any restriction, so 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 Securities Market Superintendence, in exercise of its legal powers,

AGREES:

ARTICLE FIRST: MODIFY Article 27 of Agreement No. 1-2016 of January 13, 2016, which will read as follows:

Article 27. (Custody, storage, and preservation of documentation).

1. Custody, preservation, and final disposal (destruction) of documentation.

The physical custody of the documentation of the registered institution must be maintained for a period of five (5) years counted from the date on which the resolution by which the forced liquidation is decreed becomes final.

Once the liquidation is finalized, if the documentation preservation period established in the previous paragraph has not ended, the Liquidator must remit for the remaining time of physical custody, all files and other original documentation of the registered institution subject to administrative forced liquidation, including all documentation related to the liquidation process, to an entity or storage company that guarantees the conditions of security, confidentiality, and proper preservation of the custodied documentation.

The Liquidator must include in the contract or in some other document signed with the storage company, instructions establishing that the Securities Market Superintendence constitutes itself as the custodian of the delivered documentation and in this sense will maintain unique and exclusive access to all documentation of the registered institution (liquidated), which must be immediate and unlimited, during the entire period that its physical custody is maintained, when the Superintendence so requires for its consultation, reproduction, or obtaining of the documentation.

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Similarly, the Liquidator must manage the contracting of a company for the destruction and final disposal of stored documents, once the period established for its physical custody ends, guaranteeing during its management the confidentiality of the information maintained there. Similarly, this service must be assumed and paid in full by the registered institution in liquidation.

In the case where the period of physical custody of the documentation has been fulfilled without the administrative forced liquidation process having ended, the Liquidator must maintain the physical custody of all documentation of the registered institution until the moment the liquidation process concludes, and at that moment, its final disposal (destruction) will proceed.

The Securities Market Superintendence may maintain the physical custody of the documentation of the liquidated registered institution beyond the period established in the first paragraph of this numeral, provided that for exceptional reasons it is required to conserve the documentation for an additional period of time, in which case the Superintendence must cover the cost of conservation, custody, and final disposal or may manage the custody of the documentation in its facilities.

2. Custody and preservation of documentation in case of litigation

In the case that there is any type of litigation, whatever its nature, in which the registered institution in administrative forced liquidation is a party, it will correspond to the appointed Liquidator, once the liquidation process ends, to deliver to the Securities Market Superintendence all files of the liquidated registered institution linked to these processes.

The Securities Market Superintendence will maintain custody of the documentation, while the litigations in which the registered institution is a party have not ended, and, once finalized, the Superintendence will proceed with the destruction of the documentation, once the preservation term established in numeral 1 of this article is fulfilled.

The Securities Market Superintendence will develop in its internal manuals what concerns the process of transfer, custody, and final disposal of documentation relative to the litigations in which the registered institution is a party, in accordance with what is established in this numeral.

3. Cost of preservation

The cost of preservation and custody of the documentation must be assumed and paid in full by the registered institution in liquidation.

Once the administrative forced liquidation process begins, the appointed liquidator must allocate and reserve the necessary funds to cover the costs of preservation and destruction of the documentation of the registered institution in accordance with what is established in this article.

In the case where the appointed liquidator evidences, once the administrative forced liquidation process begins, that the registered institution is not in financial conditions to assume the cost of these services, the Securities Market Superintendence must cover the cost of preservation, custody, and final disposal or may manage the custody of the documentation in its facilities.

4. Report of documentation by the liquidator

The Liquidator must deliver to the Securities Market Superintendence a report with the detail of the documentation that will be delivered in custody to the storage company or entity or, in its defect, to the Securities Market Superintendence, in accordance with what is established in this article, with the proper identification through an index of the content of the

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Once the Superintendence receives to satisfaction the report with the detail of the documentation provided in the previous paragraph, it will indicate to the Liquidator that they may deliver in custody to the storage company or entity the documentation of the registered institution in liquidation. A copy of this contract, as well as the contract that manages the final disposal of the documentation, with the respective records of the payment of these services, must be delivered to the Securities Market Superintendence within a period not greater than five (5) business days, counted from the delivery in custody of the documentation of the registered institution.

ARTICLE SECOND: This Agreement will begin to govern from its promulgation in the Official Gazette of the Republic of Panama.

PUBLISH AND COMPLY,

[Signature]
Adriana Carles
President of the Board of Directors

[Signature]
Luis E. Vásquez Brown
Secretary of the Board of Directors

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