Region

Jurisdiction

Regulator

2023-12-14 | NDMC-30

Technical Standards for the Authorization and Establishment of Obligations of the Representatives of the Holders of Securities of a Securitization Fund

The Central Reserve Bank of El Salvador issued Technical Standards CNBCR-11/2023 to regulate the authorization and obligations of representatives for holders of securities in securitization funds. The document establishes specific capital, governance, and procedural requirements for non-bank entities seeking authorization, while defining conduct and operational duties for all representatives, including banks and brokerage houses. It mandates strict conflict of interest management, internal controls, and reporting obligations to ensure the protection of security holders' interests.

El Salvador

Superintendencia del Sistema Financiero

CNBCR-11/2023 NDMC-30 TECHNICAL STANDARDS FOR THE AUTHORIZATION AND ESTABLISHMENT OF THE OBLIGATIONS OF THE REPRESENTATIVES OF THE HOLDERS OF SECURITIES OF A SECURITIZATION FUND Approval: 12/14/2023 Validity: 01/02/2024 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 10

THE COMMITTEE OF STANDARDS OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That Article 3 of the Asset Securitization Law establishes that the Superintendence is the competent administrative authority for the execution and application of said Law, with responsibility for monitoring compliance with its provisions, the supervision of Securitizers, their operations, and the entities participating in the securitization process.

II. That Article 80 of the Asset Securitization Law establishes that each Securitization Fund shall have a Representative of Security Holders who shall sign the Securitization Contract with the Securitizer and shall be responsible for monitoring that the Securitization Fund is properly integrated as established in this Law, in the Securitization Contract, and in what is established in the first General Meeting of Security Holders. Likewise, the obligations of the Representative of Security Holders are established.

III. That Article 83, first paragraph, of the Asset Securitization Law states that in addition to banks and brokerage houses, other legal entities authorized by the Superintendence of the Financial System may serve as Representatives of Security Holders.

IV. That Article 5, letter a), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Superintendence of the Financial System to authorize, suspend, or cancel the public offering of securities and the operation of persons or transactions carried out in the stock market, in accordance with applicable provisions.

V. That Article 7, letter u), of the Law on Supervision and Regulation of the Financial System establishes that other transactions specified by laws are subject to the provisions of the Law on Supervision and Regulation of the Financial System and therefore to the supervision of the Superintendence of the Financial System.

VI. That Article 99, letter e), of the Law on Supervision and Regulation of the Financial System regulates that it is the responsibility of the Committee of Standards of the Central Reserve Bank of El Salvador to establish technical criteria to determine acts and operations considered contrary to stock market practices or sound market practices.

VII. That in accordance with Article 101, fourth paragraph, of the Law on Supervision and Regulation of the Financial System, the powers to approve, modify, and repeal technical standards that must be complied with by the members of the financial system and other supervised entities are transferred to the Central Reserve Bank of El Salvador.

THEREFORE,

by virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System,

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE AUTHORIZATION AND ESTABLISHMENT OF THE OBLIGATIONS OF THE REPRESENTATIVES OF THE HOLDERS OF SECURITIES OF A SECURITIZATION FUND

CHAPTER I OBJECTIVE, SUBJECTS, AND TERMS

Objective Art. 1.- These Standards aim to develop the minimum requirements that banks and Brokerage Houses must attend to when acting as Representatives of the Security Holders of a Securitization Fund in particular; likewise, to establish the requirements and procedures to be followed by other legal entities to be authorized by the Superintendence of the Financial System as Representatives of Security Holders and the particular requirements they must fulfill to act as Representatives of Security Holders of a specific Securitization Fund.

Subjects Art. 2.- The subjects obligated to comply with the provisions established in these Standards are: a) Banks acting as Representatives of the Security Holders of a Securitization Fund; b) Brokerage Houses acting as Representatives of the Security Holders of a Securitization Fund; and c) Other legal entities interested in being authorized by the Superintendence of the Financial System to act as Representatives of the Security Holders of a Securitization Fund.

Terms Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) Central Bank: Central Reserve Bank of El Salvador; b) Brokerage House: Brokerage Houses, authorized and registered with the Superintendence of the Financial System; c) Fund(s): Securitization Funds; d) Securitization Law: Asset Securitization Law; e) Originator: Person owning assets susceptible to securitization in accordance with the Asset Securitization Law; f) Registry: Public Stock Registry; g) Representative of Security Holders: Legal entity responsible for representing the owners of the securities of each Fund as established in the Law; h) Superintendence: Superintendence of the Financial System; and i) Securitizer: Securitization Company registered with the Superintendence of the Financial System.

CHAPTER II AUTHORIZATION REQUIREMENTS TO ACT AS REPRESENTATIVE OF THE SECURITY HOLDERS, WHEN NOT A BANK OR BROKERAGE HOUSE

Nature and Share Capital Art. 4.- Any legal entity seeking authorization from the Superintendence to act as Representative of Security Holders must be constituted as a Joint Stock Company, and must have at least the share capital required for Brokerage Houses established in Article 56 of the Securities Market Law, which must be fully subscribed and paid and will be subject to variation in accordance with Article 98 of said Law.

Regarding the Application and Its Content Art. 5.- Legal entities seeking authorization to act as Representatives of Security Holders must apply to the Superintendence and for this purpose must present the following: a) Application signed by its Legal Representative, relating and attaching a notarially certified copy of the documents legitimizing its representation. In the case that the application is not presented to the Superintendence by the applicant, the signature on the application must be authenticated by a notary;

b) List of its shareholders, partners, or associates as applicable, which must contain, at least, the full name, age, nationality, profession or occupation, domicile, expression of the type and number of personal identity document, Tax Identification Number, if any, percentage or amount of shareholding participation of each shareholder, and Taxpayer Registry Number, the latter only in the case that they are registered as such in the corresponding registry. The list must be signed by the applicant; c) The amount of subscribed and paid share capital of the society seeking authorization as Representative of Security Holders; d) Corporate name and trade name; e) Full name, age, nationality, profession or occupation, domicile, and expression of the type and number of personal identity document, of each of its directors, managers, and administrators; and f) Address, telephone, and email, as well as the persons commissioned to receive notifications or any other documentation.

Documents to be Attached to the Application Art. 6.- The following documentation must be attached to the aforementioned application: a) Legible notarially certified copy of the public deed of incorporation, its bylaws, and the corresponding modifications of both, if applicable, duly registered or deposited, as applicable, in the Commerce Registry. The purpose stated in the social pact must be compatible with the function of Representative of Security Holders; b) Legible and certified copy of the Unique Identity Document, legible copy of the Tax Identification Number (NIT) which shall be in accordance with what is established by the Tax Administration, and legible and certified copy of the Taxpayer Registry Number, if registered as such in the respective registry, of the directors, managers, and administrators, including, in addition, their curriculum vitae; c) At least two bank references or two credit references issued by institutions that are audited or supervised by the office exercising State vigilance, when the references are issued abroad; d) When any of the certificates related in the previous letter have been issued abroad, applicants must also attach the documents by which it is proven that the person or entity that issued said certificate is legally authorized to operate in the corresponding country; e) In the case that one or more shareholders are legal entities and have a participation, either directly or through an intermediary, of more than fifty percent in the share capital, the following documents must also be attached, insofar as applicable: i. Notarially certified copy of their current Social Pact and the latest credential of the election of their administration body; and ii. Certification of the list of shareholders who own twenty-five percent or more of their share capital. Such certification must be signed by whoever has legal representation of the applicant and must be authenticated by a notary. f) Legible notarially certified copy of the agreement appointing the External Auditor, who must be registered in the Special Registry of External Auditors kept by the Superintendence; g) Legible, notarially certified copy of the minute point pursuant to which the appointment of the General Manager or Executive Director was made, duly registered in the Commerce Registry; h) Legible copy of the Tax Identification Number (NIT) which shall be in accordance with what is established by the Tax Administration and notarially certified photocopy of the Taxpayer Registry Number of the applicant; i) Organizational chart, indicating the names of administrators, managers, and directors, with expression of their positions and support units; j) Appointment of personnel designated to exercise the functions of Representative of Security Holders, indicating their experience in financial matters, including the sworn declaration of the designees, in which they declare not to have conflicts of interest with the Fund, with the Originator, or with the respective Securitizer; and k) Description of internal control procedures that allow adequate separation or division of activities for the development of the tasks corresponding to the Representative of Security Holders. The documentation indicated in this article must be presented for each of the securitization processes in which it is intended to act as Representative of Security Holders.

Requirements to be Director, Manager, or Administrator Art. 7.- The administration of the applicant society must be under the board of directors regime, and its members and administrators must meet the following requirements: a) Be Salvadoran domiciled in the country, and in the case of foreigners, prove their physical and permanent residence in the country; b) Be over twenty-five years of age; and c) Be of recognized honorability and financial and administrative competence.

These requirements must be fulfilled while the society is authorized as Representative of Security Holders.

Ineligibility to be Director, Administrator, or Manager Art. 8.- Legal entities that are ineligible to be Representatives of Security Holders are those indicated in Article 84 of the Securitization Law. For the purposes of proving the above, the applicant society must present to the Superintendence a Sworn Declaration stating that they are not included within the aforementioned ineligibilities, a circumstance that must be accredited with respect to each of the Securitization processes in which they intend to act as Representative of Security Holders issued against the same.

Procedure for Application for Authorization of Representative of Security Holders Art. 9.- Upon receipt of the authorization application to act as Representative of Security Holders in accordance with Articles 5 and 6 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Securitization Law and these Standards, having a period not exceeding fifteen business days for its review. If the application is not accompanied by complete and properly formatted information as detailed in Articles 5 and 6 of these Standards, the Superintendence, due to the lack of necessary requirements, may request said persons to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested persons when there are reasons justifying it. The Superintendence in the same notice will indicate to the legal entities interested in acting as Representative of Security Holders that if they do not complete the information within the aforementioned period, it will proceed without further formality to archive the application, reserving their right to present a new application. If after the analysis of the documentation presented in accordance with Articles 5 and 6 of these Standards, the Superintendence has observations or when the documentation or information presented does not result sufficient to establish the facts or information intended to be accredited, the Superintendence will notify said persons to remedy the deficiencies communicated or present additional documentation or information requested.

Legal entities interested in acting as Representative of Security Holders will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the additional information required by the Superintendence. The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires.

Extension Period Art. 10.- Legal entities interested in acting as Representatives of Security Holders may present to the Superintendence an application for extension of the period indicated in the fifth paragraph of Article 9 of these Standards, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the pertinent proof. The extension period may not exceed ten business days and will start from the business day following the expiration date of the original period.

Suspension of the Period Art. 11.- The fifteen business day period indicated in the first paragraph of Article 9 of these Standards will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendence are remedied.

Once the complete and properly formatted documentation is presented, the Superintendence will proceed to respond whether the application is authorized or denied, which it will notify within a maximum period of three business days from the date the resolution is issued.

CHAPTER III BANKS AND BROKERAGE HOUSES ACTING AS REPRESENTATIVE OF THE SECURITY HOLDERS

Art. 12.- For a bank or a Brokerage House to act as Representative of Security Holders, they must be constituted in accordance with the laws of the Republic and be domiciled in El Salvador. Art. 13.- The bank or Brokerage House must inform that it will act as Representative of Security Holders, demonstrating that it is not within the ineligibilities indicated in Article 8 of these Standards. The ineligibilities will apply for each of the Securitization processes in which it intends to act as Representative of Security Holders. Art. 14.- The bank or Brokerage House must appoint the personnel designated to exercise the functions of Representative of Security Holders, including the Sworn Declaration of the designees, in which they declare not to have conflicts of interest with the Fund, with the Originator, or with the respective Securitizer. Art. 15.- The bank or Brokerage House must maintain internal control procedures that allow adequate separation or division of activities for the development of the tasks corresponding to the Representative of Security Holders.

CHAPTER IV OBLIGATIONS OF THE REPRESENTATIVE OF THE SECURITY HOLDERS

Art. 16.- Any person acting as Representative of Security Holders must attend to at least the following obligations: a) Exercise all actions or rights corresponding to the group of Security Holders to claim the payment of rights granted in the acquired securities, as well as those required for the performance of the functions referred to the representation of Security Holders and execute the necessary conservatory acts; b) Convene and preside over the General Meeting of Security Holders and execute its decisions; c) Periodically and timely obtain from the administrators of the Securitizer, data regarding its financial situation and that of the Fund, and any others considered necessary for the exercise of its functions; d) Grant, on behalf of the group of Security Holders, the documents or contracts that must be celebrated; e) Issue certification of the integration of the Fund; f) Give approval in the substitution of assets, according to what is agreed in the Securitization Contract; g) Others established legally and normatively, as well as those defined in the respective Securitization Contract.

Conduct Obligations of the Representative of Security Holders Art. 17.- Any person acting as Representative of Security Holders must adopt, in the exercise of its functions, at least the following conduct norms:

a) Refrain from carrying out operations in which there is a conflict of interest that actually or potentially opposes the interest of the Security Holders; b) Keep confidentiality regarding information of a confidential nature that comes to know in the development of its function as Representative of Security Holders, insofar as it is not indispensable for the protection of the interests of its represented parties; c) Refrain from giving any preferential treatment to a holder or group of holders; d) Refrain from any conduct or circumstance that, in accordance with applicable legislation, attacks the adequate exercise of its functions as Representative of Security Holders.

Presentation of Information Art. 18.- Any photocopy presented to the Superintendence in compliance with what is provided in this regulation must be certified by a Salvadoran notary. Likewise, signatures that appear in all types of documentation, when applicable, must be legalized by a Salvadoran notary. In the cases of photocopies corresponding to the Tax Identification Number (NIT) which shall be in accordance with what is established by the Tax Administration, notarially certification will not be required. Notwithstanding the above, if the documentation presented originates from abroad, both the photocopies and the signatures appearing in them may be authenticated...