Resolution R-CNMV-2025-10-MV: Regulation for the Authorization, Operation, Selection and Supervision of External Auditors

SOO! Superintendencia del Mercado de Valores de la República Dominicana

CERTIFICATION

The undersigned, Mr. Ervin Novas Bello, Manager of the Central Bank of the Dominican Republic (hereinafter "Central Bank"), representing the Governor of the Central Bank, ex officio member and President of the National Securities Market Council (hereinafter "Council"); and Mrs. Fabel María Sandoval Ventura, Secretary of the Council,

CERTIFY that the text below constitutes a faithful and complete copy transcribed in accordance with the original of the Third Resolution, R-CNMV-2025-10-MV, adopted by the Council in the meeting held on the first (1st) day of April of the year two thousand twenty-five (2025), which is kept in the archives of this Secretariat, namely:

"THIRD RESOLUTION OF THE NATIONAL SECURITIES MARKET COUNCIL DATED APRIL FIRST (1ST) OF TWO THOUSAND TWENTY-FIVE (2025). R-CNMV-2025-10-MV

REFERENCE: Approval of the Regulation for the Authorization, Operation, Selection and Supervision of External Auditors.

WHEREAS:

That on March twenty (20) of the year two thousand twenty-five (2025), the Superintendent of the Securities Market (hereinafter "Superintendent") submitted to the knowledge and consideration of the National Securities Market Council (hereinafter "Council"), the draft Regulation for the Authorization, Operation, Selection and Supervision of External Auditors (hereinafter "Draft Regulation").

That the Council, in compliance with the powers conferred upon it by Law No. 249-17 of the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00 of May eight (8) of the year two thousand (2000), promulgated on December nineteen (19) of two thousand seventeen (2017), and its modification (hereinafter "Law No. 249-17"), and in view of what is provided by the Internal Regulation of the Council, adopted by this collegiate body through the First Resolution, R-CNMV-2018-06-MV, dated November twenty-nine (29) of two thousand eighteen (2018) (hereinafter "Internal Regulation of the Council"); duly convened, with the corresponding supporting documentation, deems it appropriate to state the following:

CONSIDERING:

1. That from the combined reading of articles 6 and 7 of Law No. 249-17, it is derived that the Superintendence of the Securities Market (hereinafter "Superintendence") constitutes an autonomous and decentralized organism of the State, with administrative, financial, and technical autonomy, whose object is to promote an orderly, efficient, and transparent securities market, protect investors, ensure compliance with the aforementioned law, and mitigate systemic risk.

2. That article 10 of the aforementioned legal statute provides that the Superintendence is composed of a collegiate body, the Council, and an executive official, the Superintendent; who is in charge of the direction, control, and representation of the institution.

3. That the aforementioned law, in the main part of its article 13, establishes that the Council is the superior body of the Superintendence, with functions essentially of a normative, supervisory, and control nature.

4. That, in addition to the foregoing, article 13, in its numeral 4, recognizes the Council's authority to periodically review the regulatory framework of the securities market, adapting it to market trends and realities, and to propose, on its own initiative or upon proposal of the Superintendent, the modifications that are necessary.

5. That in accordance with article 17, numeral 14, of Law No. 249-17, the Superintendent is invested with the authority to "[i]ssue the resolutions, circulars, and instructions required for the development of this law and its regulations."

6. That, likewise, article 25 of Law No. 249-17 reiterates that "[t]he Council is the competent body to establish the regulations relating to the activities of the securities market indicated in this law."

7. That paragraph I of said article adds that "[i]n the exercise of regulatory power, the Council and the Superintendence will observe the principles of legality and the rules of public consultation, participation, and transparency contained in the Constitution of the Republic and the laws in force."

8. That, on this particular matter, article 37 of the Internal Regulation of the Council establishes that "[t]he preparation of drafts and their posting for prior public consultation is the responsibility of the Superintendent of the Securities Market."

9. That it is worth highlighting that article 2 of the aforementioned Law No. 249-17 reveals that the provisions contained in said legal statute apply to all natural and legal persons who carry out activities, operations, and transactions in the securities market of the Dominican Republic, with public offer securities that are offered or traded within the national territory.

10. That in accordance with article 3, numeral 33, of Law No. 249-17, a participant of the securities market "[i]s the natural or legal person, registered in the Securities Market Registry and regulated by the Superintendence of the Securities Market."

11. That, in this regard, article 36 of the aforementioned law establishes that "[t]he Superintendence will have a Registry available to the public, which may be electronic, and in it will be registered the natural and legal persons who participate in the securities market, as well as public information regarding the securities registered in the Registry and the participants of the securities market regulated by this law."

12. That Title XI of Law Number 249-17, specifically articles 188 to 195, refer to auditing services and auditors in the securities market.

13. That, thus, article 188 of the aforementioned legislative piece prescribes that accredited persons wishing to offer external auditing services to participants of the securities market must register in the Registry, for which they will present an application for authorization and registration to the Superintendence.

14. That the paragraph of the cited article adds that external auditors must use in the audits they perform on participants of the securities market, principles and auditing standards generally accepted, as established by regulation.

15. That, for its part, article 190 of Law No. 249-17 orders that external auditors must be independent of the audited entities in the exercise of their function, abstaining from acting when their independence, in relation to the review and verification of financial statements or other accounting documents, could be compromised.

16. That, further on, paragraph II of the indicated article adds that auditing and ethics principles applicable to external auditors, as well as rules relating to the principle of independence to be observed, will be established by regulation.

17. That through communication received in the Council's Secretariat on March twenty (20) of the year two thousand twenty-five (2025), the Superintendent submitted to the knowledge and final approval of this collegiate body the draft Regulation, together with a justificatory file.

18. That in said missive it is informed that the object of the draft Regulation is to establish the principles, criteria, and requirements that will govern the authorization and registration in the Registry, as well as the operation, hiring, and provision of services of external auditors who perform audits on participants of the securities market and autonomous patrimony, as well as the supervision that the Superintendence will carry out in accordance with what is provided in article 188 of Law No. 249-17.

19. That the indicated communication states that, in compliance with the applicable current legal framework, the draft Regulation was submitted to public consultation from August twenty-six (26) to October twenty-nine (29) of the year two thousand twenty-four (2024), inclusive; receiving comments from various actors in the private sector.

20. That, likewise, from the documents accompanying the Superintendent's communication, it is highlighted that, as a result of the aforementioned consultative process, comments were received from: the Dominican Association of Investment Fund Management Companies, Inc. (ADOSAFT), the Association of Multiple Banks of the Dominican Republic (ABA), the Cibao Savings and Loan Association (ACAP), the Dominican Association of Investment Fund Management Companies (ADOSAFI), the Stock Exchange Association (APB), the BI-ID Financial Center, Citinversiones de Títulos y Valores, Stock Exchange; KPMG, Institute of Public Accountants of the Dominican Republic (ICPARD), PriceWaterHouseCoopers, and Deloitte.

21. That it is highlighted that the technical body involved in the analysis of the observations and comments presented by the market includes officials and collaborators from the Directions of Regulation and Innovation, Public Offering, Participants, Risk Analysis and Economic Studies; and the Department for the Prevention of Crimes in the Securities Market.

22. That from the pieces composing the file, a matrix is highlighted that collects the observations and comments presented, duly analyzed and responded to by the Superintendence's technical team; subsequently, as part of the administrative procedure and in attention to the principles of transparency and participation, a working table with interested sectors -in virtual mode- was held on January twenty-four (24) and thirty (30) of the year two thousand twenty-five (2025).

23. That, likewise, in the documents presented to the Council, there is a list of relevant data in which it is explained that the draft Regulation contemplated the following improvements from the consultation process, namely: • The wording of the paragraph of article 8 (Authorization Process) is modified. • Article 9 (Documentation required for authorization) is modified. • A paragraph is added to article 12 regarding the update of information on the obligation of External Auditors to notify the Superintendence of updates within a period of twenty (20) days. • Numeral 2 of article 26 (Selection Process) of requirements that the auditor must meet for consideration is eliminated. • The wording of the article on integrity is modified. • Numerals 4, 5, and 8 of article 66 (Information on important matters) of the project regarding the information that auditors must reveal to the superintendence were eliminated. • It is established that the disclosure of relevant matters by the External Auditor to the Superintendence will not constitute a breach of their duty of confidentiality related to their fees in compliance. • The minimum content of the contract is added to establish the process for the substitution of team members; • Regulatory compliance Consultancy is added as a complementary service. • The situations in which the Superintendence requests the substitution of the external auditor are modified. • The deadline to notify the SIMV of the hiring of an external auditor is extended to twenty-five (25) days. • The deadline to remit documents supporting the change of control is extended to thirty (30) days."

24. That, in parallel, as explained verbally by the Superintendence's technical team, in accordance with best practices in the matter, the wording regarding the rotation period for external auditors was raised to five (5) years.

25. That with the promulgation and entry into force of Law No. 249-17, it becomes necessary to create a regulation that unifies in a single document and adapts to international standards the rules concerning the participation of external auditors in the Dominican securities market, with the purpose of guaranteeing independent and high-quality practices, adhering to ethics and contributing to increasing confidence in the market.

26. That, in view of everything stated above, weighing the reports and documentation submitted by the technical area of the Superintendence, this collegiate body is of the opinion that the draft Regulation can be favorably accepted.

SEEN:

a. The Constitution of the Dominican Republic, voted and proclaimed by the National Assembly on October twenty-seven (27) of the year two thousand twenty-four (2024), published on October thirty-one (31) of the year two thousand twenty-four (2024).

b. Law No. 249-17 of the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00 of May eight (8) of the year two thousand (2000), promulgated on December nineteen (19) of two thousand seventeen (2017).

c. Law No. 107-13, on the Rights of Persons in their Relations with the Administration and of Administrative Procedure, dated August six (6) of the year two thousand thirteen (2013).

d. Law No. 200-04, General Law on Free Access to Public Information, dated July twenty-eight (28) of the year two thousand four (2004).

e. The Regulation of the General Law on Free Access to Public Information, approved through Decree No. 130-05, dated February twenty-five (25) of the year two thousand five (2005).

f. The Internal Regulation of the National Securities Market Council, dictated through the First Resolution, R-CNMV-2018-06-MV, dated November twenty-nine (29) of the year two thousand eighteen (2018).

g. The Regulation of the General Law on Free Access to Public Information, approved through Decree No. 130-05, dated February twenty-five (25) of the year two thousand five (2005).

h. The communication received in the Council's Secretariat on March twenty (20) of the year two thousand twenty-five (2025), signed by the Superintendent, and attached documentation.

i. The other documents that make up the file.

THEREFORE:

After having studied and deliberated on the matter, the Council, in the exercise of the powers conferred upon it by Law No. 249-17, by unanimous vote of its members, attending to the motives exposed,

RESOLVES:

FIRST: APPROVE the definitive version of the draft Regulation for the Authorization, Operation, Selection and Supervision of External Auditors; according to the document presented by the Direction of Regulation and Innovation, through the Superintendent, whose content is copied textually below:

"REGULATION FOR THE AUTHORIZATION, OPERATION, SELECTION AND SUPERVISION OF EXTERNAL AUDITORS

TITLE I GENERAL PROVISIONS

CHAPTER I Object, Scope and Definitions

Article 1. Object. To establish the principles, criteria, and requirements that will govern the authorization and registration in the Securities Market Registry (hereinafter, the "Registry"), as well as the operation, selection, hiring, and provision of services of External Auditors who perform Audits on Participants of the Securities Market and Autonomous Patrimony, as well as the supervision that the Superintendence of the Securities Market (hereinafter, the "Superintendence") will carry out over them, in accordance with what is provided in article 188 of Law No. 249-17 of the Securities Market of the Dominican Republic of December nineteen (19) of two thousand seventeen (2017), which repeals and substitutes Law No. 19-00 of May eight (8) of two thousand (2000) (hereinafter, "Law No. 249-17").

Article 2. Scope. The present Regulation shall apply to accredited persons who are registered or seek registration in the Registry for the purpose of offering external auditing services to Participants of the Securities Market and Autonomous Patrimony regulated, as well as to Participants of the Securities Market in the scope of their relationship with External Auditors.

Paragraph. The operation, selection, hiring, and provision of services of External Auditors who perform Audits on issuers of securities whose sectoral legislation provides otherwise, shall be governed by said regulations. However, in the absence of special regulation on this matter, the provisions of this Regulation must be applied."

Article 3. Definitions. In addition to the definitions established in article 3 of Law No. 249-17 and its complementary regulations, for the purposes of this Regulation, the following terms are defined:

1. Auditor: Is the natural person who performs the external audit, usually the partner of the audit work or other members of the work team.

2. External Auditors: Are the professional commercial societies accredited before the Institute of Public Accountants of the Dominican Republic (hereinafter, the "ICPARD") and enabled by the Superintendence to perform audits, examine the financial records and commercial transactions of Participants of the Securities Market and Autonomous Patrimony registered in the Registry, as well as to offer the complementary services provided by the current regulations.

3. Financial Statement Audit: Is the set of procedures to make it possible for the Auditor to express an opinion on whether the financial statements are prepared in accordance with what is established in the International Financial Reporting Standards (IFRS) or by what is provided in the sectoral regulation governing Participants of the Securities Market and Autonomous Patrimony, as applicable.

4. Quality Control: Is the process by which External Auditors verify compliance with the policies and procedures adopted to provide reasonable assurance that the Audit is carried out in accordance with International Standards on Auditing (ISA) and the provisions established in their internal regulations.

5. Audit Evidence: Is the information obtained by the Auditor to reach the conclusions on which the Audit opinion is based and will include the information contained in the accounting records that underpin the financial statements, Working Papers or Audit Documentation, and confirmatory information from other sources.

6. Relative Importance or Materiality: Is the magnitude or nature of an error or omission in financial information that, individually or in aggregate, and in light of the surrounding circumstances, makes it probable that the reasonable judgment of a person who relies on the information would have been influenced or their decision affected, as a consequence of the error or omission.

7. Audit Report: Is the opinion of the External Auditor on the financial statements, expressed based on the audit evidence obtained.

8. International Standard on Quality Management (ISQM): Is the standard that refers to the responsibilities of External Auditors to design, implement, and operate a quality management system for Audits or reviews of financial statements and other related services.

9. International Standards on Auditing (ISA): Are the basic and essential principles and procedures along with related guidelines that the External Auditor must apply in Audits of financial statements.

10. International Financial Reporting Standards (IFRS): Are international technical accounting standards issued by the International Accounting Standards Board (IASB).

11. Working Papers or Audit Documentation: Is the record of the procedures applied, the relevant evidence obtained, and the conclusions reached by the External Auditor in the execution of audit assignments or other complementary services contracted. Working Papers or Audit Documentation are prepared or obtained by the Auditor through the execution of procedures performed and may be presented in the form of data stored in physical, electronic, or other media.

12. Audit Planning: Is the development of a general strategy and a detailed approach for the nature, timing, and extent of the audit, as well as the available resources for the same, in order to reduce Audit Risk to an acceptable level.

13. Quality Review: Is the internal process of External Auditors designed to objectively evaluate the significant judgments made by the work team and the conclusions reached in the working papers or audit documentation that support the audit opinion."