Resolution JPRF-V-2024-097: Regulation of Authorization, Issuance, Public Offering, Registration, and Maintenance of Exchange-Traded Fund Participation Quotas

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-V-2024-097 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 stipulates 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; having the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of rights recognized in the Constitution; That, Article 227 of the Magna Carta establishes that public administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation; That, Article 13 of the Organic Monetary and Financial Code, Book I, reformed from the promulgation of the Organic Reformatory Law to the Organic Monetary and Financial Code for the Defense of Dollarization, created the Financial Policy and Regulation Board, part of the Executive Function, 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, Book I, in its numbers 1 and 2, determines that, within the scope of the Financial Policy and Regulation Board, it corresponds to formulate securities policy; as well as, issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the securities system; establishing that, for the fulfillment of these functions, the referred Board will issue norms in matters within its competence, without being able to alter legal provisions; being able to issue regulations by segments, economic activities, and other criteria; That, the Organic Monetary and Financial Code, Book I, in its Article 14.1, prescribes that, for the performance of its functions, the Financial Policy and Regulation Board must fulfill certain duties and exercise certain faculties; among which are those indicated in its numbers 1, 9, 16, and 27, which are: to regulate the creation, constitution, organization, activities, operation, and liquidation of securities entities; to issue the non-prudential regulatory framework for all securities entities, which will include, among others, norms on accounting, transparency and information disclosure, market integrity, and consumer protection; to regulate the constitution, operation, and liquidation of funds and fiduciary businesses related to the securities market; and, to exercise the other functions, duties, and faculties assigned to it by the cited Code and the law; That, the Financial Policy and Regulation Board currently has the attributions of: establishing the general policy of the securities market and regulating its functioning; promoting the development of the securities market, through the establishment of policies and mechanisms for promotion and training on the same; promoting the opening of capital and financing through the securities market, as well as the use of new instruments that can be traded in this market; issuing the necessary resolutions for the application of the Securities Market Law; regulating the public offering of securities, establishing the minimum requirements that

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | securities offered publicly must have; as well as the procedure for the information that must be disseminated to the public to adequately reveal the financial situation of the issuers; and, regulate the registrations in the Public Registry of the Securities Market and its maintenance; determined in numbers 1, 2, 3, 4, 10, and 14 of Article 9 of the Organic Monetary and Financial Code, Book II (Securities Market Law); That, in accordance with what is prescribed in Article 75 of the Organic Monetary and Financial Code, Book II (Securities Market Law), an investment fund is the common patrimony, integrated by contributions from various investors, natural or legal persons, and legally recognized employee associations, for investment in the securities, assets, and other assets that said Law allows, the management of which corresponding to a fund and trust administrator company; That, Article 76 determines the classes in which investment funds are classified, referring to literal c) that, exchange-traded funds are those that cannot invest in projects, but exclusively in securities admitted to stock exchange quotation, and that can replicate the same composition of a stock index; disposing that, the Financial Policy and Regulation Board, will establish the norms for the constitution of exchange-traded funds and the negotiation and registration of their quotas, which constitute negotiable securities in the securities market; That, the Fiftieth Fourth Transitory Provision of the Organic Monetary and Financial Code, Book I, prescribes: “Transitory Regime of Resolutions of the Codification of the Monetary and Financial Policy and Regulation Board. The resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board and the norms issued by the control bodies will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within the scope of their competencies.”; That, through Resolution No. JPRF-A-2022-022 of March 16, 2022, the Financial Policy and Regulation Board issued its Operating Regulations, complying with what is prescribed in number 20 of Article 14.1 of the Organic Monetary and Financial Code, Book I; That, number 7 of Article 7 of the Operating Regulations of the Financial Policy and Regulation Board, states that the members of this Board have the right to present proposals for policy and regulation within the scope of competence of the Board; That, through Memorandum No. JPRF-JPRF-2023-0069-M of August 04, 2023, Mgs. Catalina Pazos Chimbo, Member of the Financial Policy and Regulation Board, presented before the Technical Secretariat of the Board a proposal for regulation regarding investment exchange-traded funds, in application of the right established in the aforementioned number 7 of Article 7 of the Operating Regulations of the referred Board; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0016-M of February 10, 2024, sends to the President of the Board the Technical Report No. JPRF-CTVS-2024-001 of February 09, 2024, issued by the Technical Coordination of Policy and Regulation of the Securities and Insurance System; as well as the Legal Report No. JPRF-CJF-2024-005 of February 09, 2024, issued by the Legal Coordination of Policy and Financial Norms of this Board;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on February 14, 2024 and carried out through video conference on February 16, 2024, learned of the Memorandum No. JPRF-ST-2024-0016-M of February 10, 2024, issued by the Technical Secretariat of the Board; as well as the aforementioned Technical Report No. JPRF-CTVS-2024-001 and Legal Report No. JPRF-CJF-2024-005, in addition to the draft resolution corresponding; That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on February 14, 2024 and carried out through video conference on February 16, 2024, learned of and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE FIRST.- Incorporate as Chapter XI of Title II “Public Offering”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following: “CHAPTER XI: PUBLIC OFFERING OF QUOTAS OF INVESTMENT EXCHANGE-TRADED FUNDS SECTION I: AUTHORIZATION AND REGISTRATION OF THE ISSUANCE IN THE PUBLIC REGISTRY OF THE SECURITIES MARKET Art. 1.- Definition of participation quotas of exchange-traded funds.- The quotas of exchange-traded funds will be securities that will be issued and placed through public offering and will be registered in the Public Registry of the Securities Market and in the registry of one of the stock exchanges of the country. The participation quotas of exchange-traded funds are equity securities. Active management of an exchange-traded fund will be understood as when the fund administrator seeks to exceed the performance of a specific benchmark through active management decisions, such as asset selection and investment strategies. Passive management of an exchange-traded fund will be understood as when the fund administrator seeks to replicate the performance of a specific national stock index without making active decisions, simply maintaining a portfolio that reflects the composition of the underlying index. Art. 2.- Registration of quotas.- The registration of the quotas of an exchange-traded fund in one of the stock exchanges of the country must remain valid, until the liquidation of the exchange-traded fund, in order to ensure investors an adequate and permanent secondary market. Art. 3.- Transfer of quotas.- The transfer of the participation quotas of the exchange-traded funds will be carried out under the terms provided in the Law and the self-regulation norms of the stock exchanges of the country. The Compensation, Liquidation, and Custody of these securities will be carried out in the authorized centralized compensation and liquidation depositories.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Art. 4.- Registration and authorization of exchange-traded fund quotas.- The Superintendence of Companies, Securities, and Insurance will register in the Public Registry of the Securities Market and authorize the public offering of the quotas of an exchange-traded fund, at the moment it approves the internal regulations and the public offering prospectus, in accordance with the requirements established in Article 12 of the Organic Monetary and Financial Code, Book II. SECTION II: ISSUANCE AND PUBLIC OFFERING Art. 5.- Issuance.- The issuance of the participation quotas of the fund may be divided into classes and may be placed in tranches, using any of the negotiation mechanisms authorized by the Financial Policy and Regulation Board. Art. 6.- Primary negotiation of exchange-traded fund quotas.- The placement of the quotas will be made through authorized intermediaries, in the stock exchanges of the country. Art. 7.- Content of the public offering prospectus.- For the authorization of the issuance of quotas of exchange-traded funds, the public offering prospectus must contain at least the following:

1. Cover: 1.1. Title: “PUBLIC OFFERING PROSPECTUS OF EXCHANGE-TRADED FUND”, duly highlighted. 1.2. Name of the fund. 1.3. Duration term. 1.4. Amount of the issuance. 1.5. The risk rating granted to the issuance. 1.6. Name of the fund administrator that manages the exchange-traded fund. 1.7. Terms and conditions for the subscription of quotas. 1.8. Number and date of the resolution authorizing the functioning of the fund and trust administrator company and number of registration in the Public Registry of the Securities Market. 1.9. Number and date of the resolution issued by the Superintendence of Companies, Securities, and Insurance that authorizes the functioning of the fund, approves the public offering, and orders the registration of the respective issuance in the Public Registry of the Securities Market. 1.10. Exclusion of liability clause, as provided in article 15 of the Securities Market Law.
2. Summary of information about the fund: 2.1. Objective of the fund and general characteristics. 2.2. The determination of the financial and legal conditions that enable the investment of the fund's resources in securities admitted to stock exchange quotation. 2.3. Investment policy of the fund's resources. 2.4. Investment characteristics and limits. 2.5. Determination of the amount of the patrimony of the exchange-traded fund, number of quotas in which it is divided, classes, and nominal value of each of the quotas. 2.6. Norms for the valuation of the quotas. 2.7. Information and periodicity of the information that must be provided to investors. 2.8. Indication that the information for investors will be published on the website of the Superintendence of Companies, Securities, and Insurance and on the website of the trustee.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 2.9. Corporate name, domicile of the custodian of dematerialized securities, and, if applicable, financial group to which the custodian of the physical securities in which the fund will invest belongs. 2.10. Copy of the internal regulations. 2.11. Extract of the risk rating study. 2.12. Determine the type of management of the fund, which may be active or passive. 2.13. Detailed information on the national stock index that the fund replicates and to which the investment policy is associated, in case of passive management. 2.14. Determine the model for the distribution of its benefits. 2.15. In case of passive management, the investment policy must contain the tolerable degree of deviation, as well as, the index tracking model. 3. General information of the fund and trust administrator: 3.1. Name, home address, telephone number, and email address. 3.2. Date of constitution and duration term of the society. 3.3. Organization of the society. 3.4. Human resources and technical and administrative infrastructure for the management of funds. 3.5. Identification and experience of managerial staff. 3.6. Authorization of functioning and registration in the Public Registry of the Securities Market. 3.7. Share capital and shareholding composition. 3.8. Economic-financial information, financial statements of the last fiscal year, along with the notes and external auditor's opinion and a vertical analysis. 3.9. Indication that the obligations assumed by the fund and trust administrator are of means and not of result. Art. 8.- Of the issuance of new participation quotas.- In the case of new issuances of participation quotas of existing exchange-traded funds, investors must acquire said quotas in primary public offering processes at their last valid value. SECTION III: MAINTENANCE OF REGISTRATION IN THE PUBLIC REGISTRY OF THE SECURITIES MARKET AND REMITTANCE OF CONTINUOUS INFORMATION Art. 9.- Maintenance of quota registration.- Fund and trust administrators, to maintain the registration in the Public Registry of the Securities Market of the quotas of the exchange-traded funds they manage, must present and disseminate, in addition to the information required to maintain the registration of investment funds, the following: Monthly until the 15th day of the immediate following month:

1. Amount placed in the month.
2. The total value of the quotas in circulation.
3. Consolidated information of the buyers of the quotas and the amount acquired, classified by groups, considering: a. Natural persons; b. National financial system; c. Investment funds; and, d. Others determined by the control body. Once the public offering period has ended, a detailed report on the situation of the fund must be sent semi-annually, until the 30th day of the month following the close of the respective semester.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | SECTION IV: OF THE SURVEILLANCE COMMITTEE Art.10.- Composition.- The Surveillance Committee will be composed of an odd number of representatives of the fund contributors, who will be elected in an ordinary assembly and will serve for one year in their positions, being eligible for re-election, as determined in the internal regulations. Once the operation of a fund has begun, the administrator will proceed to designate a provisional Surveillance Committee, which will last in its functions until the first ordinary assembly of contributors, which must meet to resolve on the integration of the definitive Surveillance Committee, within a period of six (6) months. Art.11.- Attributions.- The attributions of the Surveillance Committee will be: a) To verify that the administrator complies with what is established in the internal regulations of the fund and its investment policy; b) To verify that the information provided to contributors regarding the management of the fund is sufficient and timely; c) To report immediately to the control body and to the general assembly of contributors, when they detect the non-compliance with the norms governing the fund and its administrator, being able to request, for that purpose, the convocation to an extraordinary assembly of contributors; and, d) The other attributions that the assembly of contributors determines for the committee. GENERAL PROVISIONS FIRST.- The manuals of processes and procedures of the corresponding market participants must be updated in virtue of what is determined in this norm. SECOND.- In case of doubts regarding the operational control related to the provisions of this Norm, it will correspond to the Superintendence of Companies, Securities, and Insurance to resolve them. On the other hand, in case of doubts regarding the technical content of the Norm, it will correspond to the Financial Policy and Regulation Board to resolve them.” TRANSITORY PROVISION UNIQUE.- The stock exchanges will dictate the self-regulation norms corresponding for the application of this norm within a period of three (3) months. ARTICLE SECOND.- Substitute the text of the third paragraph of Article 5 “Validity of the authorization for public offering” of Chapter I “Common Provisions to the Public Offering of Securities”, Title II “Public Offering”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following: “The period referred to in the first paragraph of this article will be applicable to those securities subject to public offering, whose specific issuance has been authorized by the Superintendence of Banks or by the Superintendence of Companies, Securities, and Insurance, such as shares, bonds, quotas of collective investment funds, quotas of investment exchange-traded funds, and securities resulting from securitization processes, among others.”

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | ARTICLE THIRD.- Substitute the text of the first paragraph of Article 1 “Denomination” of Section I “Constitution and Authorization of Investment Funds”, Chapter II “Investment Funds”, Title XII “Institutional Investors” of Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following: “Art. 1.- Denomination.- Investment funds must include in their denomination the expression “Managed Investment Fund”, “Collective Investment Fund” or “Exchange-Traded Investment Fund”, as the case may be. When a fund makes specific investments, according to article 76 and with the last paragraph of Art. 87 of the Securities Market Law, it must add the respective identification linked to its specific investment. These expressions are exclusive to funds registered in the Public Registry of the Securities Market, so no other instrument, figure, or institution provided for in the Securities Market Law may use the expression “Fund”, or “Investment Fund” in its denomination, with the exception of fund and trust administrators, when it comes to the administration of investment funds.” ARTICLE FOURTH.- Substitute the text of the first paragraph of Article 3 “Constitutive Deed” of Section I “Constitution and Authorization of Investment Funds”, Chapter II “Investment Funds”, Title XII “Institutional Investors” of Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following: “Art. 3.- Constitutive Deed.- To constitute an investment fund, whether managed, collective, or exchange-traded, it will be required that the public deed of constitution, in addition to the requirements provided in article 29 of the Notarial Law, contain the following:” ARTICLE FIFTH.- Eliminate number 8 and its content, from Article 3 “Constitutive Deed” of Section I “Constitution and Authorization of Investment Funds”, Chapter II “Investment Funds”, Title XII “Institutional Investors” of Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions. ARTICLE SIXTH.- At the end of Article 4 “Content of the internal regulations” of Section I “Constitution and Authorization of Investment Funds”, Chapter II “Investment Funds”, Title XII “Institutional Investors” of Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, incorporate the following text: “5. Additional information for exchange-traded funds: a. Determination of the amount of the patrimony and the number of quotas in which it is divided; b. Determination of the type of management of the fund, which may be active or passive; c. Information on the national stock index that the fund replicates, in case of passive management; d. Information on the