Regulation of Investment Management Companies and Investment Funds

Page 1 of 96 This document was prepared by the Superintendence of the Securities Market with the purpose of facilitating the consultation of the current and unified provisions of the Regulation of Investment Management Companies and Investment Funds approved by the First Resolution of the National Securities Market Council, R-CNMV-2019-28-MV, dated five (5) November two thousand nineteen (2019) and the Second Resolution of the National Securities Market Council, R-CNMV-2021-16-MV, dated sixteen (16) July two thousand twenty-one (2021); which are published at https://simv.gob.do/resoluciones/.

REGULATION OF INVESTMENT MANAGEMENT COMPANIES AND INVESTMENT FUNDS

TITLE I GENERAL PROVISIONS

Article 1. Objective. This Regulation aims to establish the principles, criteria, and requirements that will govern the authorization, registration, operation, and exclusion of investment fund management companies, their conduct on behalf and in representation of the funds they manage, and the requirements for the authorization, registration, operation, establishment of the management risk guarantee, merger, and liquidation of the different investment funds.

Article 2. Scope. The regulation established in this Regulation is subject to the anonymous societies that wish to operate as investment fund managers and the investment funds managed by them, as well as anyone who participates in the structuring, promotion, placement, distribution of participation shares of said funds and in their operation.

Article 3. Definitions. In addition to the definitions established in Article 3 of Law No. 249-17 of the Securities Market of the Dominican Republic, promulgated on nineteen (19) December two thousand seventeen (2017) (hereinafter, the "Law"), for the purposes of this Regulation, the terms will have the following definitions:

1. Investment Fund Manager. Executive of the management company, authorized by it to carry out investment activities within the framework of current legislation.

2. Investment fund management. Financial service provided by management companies, consisting of the professional and diversified investment of third-party resources, called contributors, in securities and other assets authorized by the Law and this Regulation.

3. Benchmark or performance comparative indicator. Indicator selected from verifiable sources as a reference to evaluate the efficiency in the management of an investment fund portfolio (hereinafter, "Investment Portfolio"). These indicators must be related to the investment policy of the respective investment fund and be detailed in its internal regulations.

4. Subscription or Redemption Certificate of participation shares. Non-tradable receipt or voucher that certifies the subscription or Redemption of participation shares as appropriate, made by a contributor of an open investment fund.

5. Placement. Act by which securities subject to a public offer already authorized and registered for acquisition or subscription in the primary market are made available to the public.

6. Commissions. Percentage or fixed amount received by the management company or the investment fund in accordance with what is provided in this Regulation and the internal regulations.

7. Administration commission. Percentage or fixed amount charged by the management company against the investment fund, for its administration work and the financial services it provides to investment funds.

8. Success or performance commission. Remuneration of the management company based on the financial service provided, applied as a percentage on the surplus in case the effective performance rate of the investment fund exceeds the Benchmark or comparative performance indicator established, under the terms and periodicity determined in its internal regulations.

9. Early redemption commission. Percentage charged by the management company in favor of the investment fund on a certain Redemption of participation shares of an open investment fund, in case said redemption is requested and carried out before the minimum holding period determined in the internal regulations.

10. Purchase of participation shares. Operation by which participation shares of a closed investment fund are acquired through monetary contributions, in the primary or secondary market, through a securities intermediary, as well as the acquisition of participation shares of an open investment fund quoted in the secondary market.

11. Master subscription agreement for participation shares. Adhesion contract that governs the relationships between the management company and the contributors of the open investment funds managed and that contains all the general contracting terms to which the Subscription Form for participation shares for each fund will be attached.

12. Participation share. Each of the aliquot parts, of equal value and characteristics, into which the equity of an open investment fund or a closed investment fund is divided, which expresses the contributions made by a contributor and which grants the latter rights over its equity.

13. Identity document. This Regulation recognizes as valid and acceptable documents, the identity and electoral card in the case of Dominican citizens, the identity card or work or residence permit in the case of resident foreigners, or the valid passport in the case of non-resident foreigners.

14. Duration. It is the weighted average of the maturity of the fixed-income instruments that make up the Investment Portfolio of the fund, determined through the weighted average of the different maturities of the cash flows associated with a fixed-income instrument, weighted by the present value of each of the flows in relation to the sum of the present values of all flows.

15. Issuance date. Date on which the securities of an issuance begin to generate obligations and their economic content rights.

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16. Quoted open investment funds. Open investment fund whose portfolio is constituted by instruments, of variable or fixed income, in proportions such that they allow replicating a certain stock index or other verifiable reference indicator, whose issued participation shares are negotiable and tradable in a stock exchange approved by the Superintendence.

17. Summarized information brochure. Document with the most relevant information about the characteristics of investment funds, provided to potential investors and contributors of the funds.

18. Subscription form for participation shares. Document signed by the contributor through any verifiable means in which their acceptance of the conditions established in the internal regulations and the Summarized information brochure will be recorded, as well as any other documentation related to the open investment fund.

19. Liquidity. It includes cash, demand bank deposits, and cash equivalents, the latter being short-term investments of high Liquidity and easily convertible into determined amounts of cash, being subject to a insignificant risk of changes in their value, in accordance with what is established in the International Financial Reporting Standards (IFRS).

20. Investment portfolio. Set of securities, goods, and other assets permitted by the Law and this Regulation, acquired with the resources of the investment funds.

21. Investment promoter. The natural or legal person hired by the management company to carry out the promotion activities of open investment funds.

22. Internal regulations of the investment fund. Internal norm elaborated by the management company to establish the characteristics and administration rules of each investment fund.

23. Redemption of participation shares. Operation by which the contributor makes liquid their participation shares of an open investment fund, through the redemption of shares executed by the management company.

24. Subscription of participation shares. Operation by which participation shares of an open investment fund are acquired, through monetary contributions through bank accounts opened in the name of each fund.

25. Tranches. Each of the successive acts or stages through which participation shares of a closed investment fund are issued in an issuance.

26. Creation Unit. Minimum quantity of participation shares of the quoted open investment fund expressed as the monetary equivalent of a selection of instruments, determined and disclosed by the management company, which allow making contributions or redemptions under the terms established by the internal regulations. The minimum quantity of participation shares determined for the purpose of receiving contributions may differ from that determined to liquidate redemptions, in attention to the prevailing market conditions for the best interest of the contributors.

27. Sale of participation shares. Operation by which the contributor makes liquid their participation shares of a closed investment fund or a quoted open investment fund in the secondary market through a securities intermediary.

TITLE II INVESTMENT MANAGEMENT COMPANIES

CHAPTER I Legal nature, authorization of registration and operation

Article 4. Legal Nature. In accordance with what is established by Article 118 of the Law, the entity that wishes to operate as an investment fund management company must be constituted as a single-purpose and exclusive anonymous society.

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Article 5. Name and activity. Once authorized by the Superintendence of the Securities Market (hereinafter, the "Superintendence"), the corporate name of the management company will include obligatorily the mention of the expression "Investment Fund Management Company". This name is exclusive of the authorized and registered management companies in the Securities Market Register (hereinafter, the "Register"), therefore, no natural or legal person who is not registered in the Register may use it, nor any other name, initials, or similar abbreviations that could induce error, mistake, or confusion to the public.

Article 6. Process of Authorization of operation and Registration in the Register. The application processed before the Superintendence to register in the Register by legal persons wishing to act as investment fund management companies, will be developed in two (2) phases:

1. First phase, verification and compliance with registration requirements and absence of disqualifications.

2. Second phase, evaluation of operational capacity, prior inspection, and authorization of operation.

Paragraph. The phases will be developed in accordance with what is established in Article 8 (Deadlines for evaluation and authorization) and Article 13 (Deadlines for adaptation of the second phase) of this Regulation.

Article 7. Formalities of the presentation of the application. The application for registration in the Register of a management company must be made through the form available on the Superintendence's website and the documentation required in this Regulation must be presented in one original copy and with a backup in the electronic media available to the Superintendence.

Paragraph I. Prior to the delivery of the application, the applicant must make the corresponding payments for the deposit of documents according to the Tariff Regulation for regulation and for the services of the Superintendence of the Securities Market (hereinafter, the "Tariff Regulation") approved by the National Securities Market Council, and attach the proof of payment made through the channels enabled by the Superintendence.

Paragraph II. Documents originating abroad must be duly legalized by the competent authorities of the country of origin and by the consular authorities of the Dominican Republic located therein. In case there is no Dominican consular office in the country of origin, the procedure will be carried out before the concurrent Dominican consular representation. If the country of origin of the documents has signed the Hague Convention, it will be sufficient for the documents to be apostilled.

Paragraph III. All documents and information drafted in another language must be translated into Spanish by a judicial interpreter, before being sent to the Superintendence. In case of inconsistency or error, the Superintendence will only admit the validity of the document in Spanish.

Article 8. Deadlines for evaluation and authorization. The Superintendence must resolve the application for authorization of a public offer within a period of twenty-five (25) business days, counted from the next business day after the formal and complete receipt of the authorization application for registration in the Register.

Paragraph I. The Superintendence will have a period of three (3) business days, counted from the next business day after the date of formal deposit of the authorization application, to verify that it is complete, in accordance with the requirements established in this Regulation and other applicable regulations.

Paragraph II. In the event that the application and the accompanying documentation are incomplete, the Superintendence will request the missing documents, and the applicant must respond to the requests within a period of fifteen (15) business days, counted from the next business day after the receipt of the communication sent by the Superintendence. If the applicant does not send the requested documentation or request within the established deadline, the Superintendence will automatically dismiss it, without the need to notify the applicant. If the applicant corrects the observations and requests made by the Superintendence within the established deadline, the process developed in Paragraph IV of this article will be carried out, starting the Superintendence's deadline to resolve the application on the next business day after the complete receipt of the requests.

Paragraph III. The deadline with which the applicant has to complete the information established in the previous paragraph may be extended by the Superintendence, provided that there are causes duly justified in writing by the applicant; however, the additional deadline can never be greater than thirty (30) business days, understanding that it applies to exceptional cases.

Paragraph IV. If the authorization application and the accompanying documentation are complete, the following procedure will be followed:

1. The Superintendence must resolve the application within a period of twenty-five (25) business days, counted from the next business day after the expiration of the three (3) business days indicated in this article.

2. The period of twenty-five (25) business days may be exceptionally extended by the Superintendence based on the complexity of the application or other circumstances that must be adequately motivated. Such extension cannot exceed twenty-five (25) business days.

3. In case the applicant does not respond within the granted deadline or responds incompletely and incorrectly, the application will be dismissed.

Paragraph V. If during the evaluation of the application the Superintendence determines that there are elements that could induce errors or interpretations contrary to current regulations, it may, through a duly motivated act, reject the application or request corrections of non-compliance, errors, or disqualifications detected.

Paragraph VI. The Superintendence may request any additional information to that indicated in this Regulation, for the purpose of clarifying aspects of the application.

Article 9. Basic legal documentation required from companies (first phase). [Modified by Article 1 of the Second Resolution of the National Securities Market Council, R-CNMV-2021-16-MV, dated sixteen (16) July two thousand twenty-one (2021)]. Without prejudice to what is stipulated in Article 120 of the Law, the company, represented by the legal representatives or general or special attorneys constituted for such purposes, must present a list of the documents that support it, as well as detail the following information:

1. Simple copy of the trade name issued by the National Office of Industrial Property (ONAPI).

2. Copy of the corporate bylaws certified by the Commercial Registry under the charge of the corresponding Chamber of Commerce and Production, in which it is verified: a) That the social capital corresponds to the minimum fixed by the Law; b) That the corporate object corresponds to that determined by the Law; c) That the social exercise begins on the first (1) of January and ends on the thirty-one (31) of December of each year.

3. Copy of the current and updated Commercial Registry certificate.

4. Certification from the General Directorate of Internal Taxes that it is registered in the National Registry of Taxpayers, and, if applicable, that it is up to date with its taxes.

5. List of shareholders of the company who possess directly or indirectly ten percent (10%) or more of share control with indication of their respective participations in percentages, amounts, and votes. In case the shares belong to another company, the list of its shareholders must be added, duly certified, sealed, and registered in the Commercial Registry under the charge of the corresponding Chamber of Commerce and Production or its equivalent in the jurisdiction of origin. This list must comply with the following specifications: a) In the case of natural persons, include: name, profession, occupation, domicile, nationality, and Identity document; and, b) In case the shareholders are legal persons, include: name and corporate object, domicile, of the shareholders (general data and share participation) and number of National Registry of Taxpayers (RNC) or its equivalent in the jurisdiction of origin.

6. Composition of the board of directors and management, including copy and number of the Identity document, profession or occupation, nationality, and domicile, as well as the position or post they occupy in other entities or guilds, if applicable.

7. Copy of the minutes of the assembly containing the designation of the current board of directors, certified by the secretary and president of the entity and registered in the Commercial Registry of the corresponding Chamber of Commerce and Production.

8. Sworn declaration, individual or joint, in the form of notarial copy or act under private signature legalized by a Public Notary, of the members of the board of directors, general manager, fund manager, or principal executive declaring that they are not disqualified in accordance with what is provided by Article 219 of the Law.

9. List of shareholders where a list of societies or entities with whom the applicant maintains linkages or relationships (name of the societies that are part of the economic or financial group, shareholders, and members of the board of directors) is recorded, if applicable. This list must be duly signed by the president and secretary of the applicant entity and sealed with its seal; and registered in the Commercial Registry of the corresponding Chamber of Commerce and Production.

10. Original of the minutes of the board of directors where power is granted to the legal representatives of the company duly registered in the corresponding Chamber of Commerce and Production, if it is a matter of persons different from the members of the board of directors who have in charge the ordinary representation of the company.

Paragraph. The Superintendence may request any additional information to that indicated in this article, for the purpose of clarifying aspects of the application.

Article 10. Authorization of the first phase. Once the compliance with the requirements established in the previous article is verified, the approving resolution will be sent, with the start of operations conditioned to the compliance with the second phase of the registration process.

Article 11. Documentation required to evaluate the operational capacity of management companies. The documentation required to support the application to complete the registration and start operations, corresponding to the second phase of registration, is the following:

1. Business Plan, according to the minimum content established in Article 12 (Minimum Content of the Business Plan) of this Regulation.

2. Organization and Functions Manual, which must reflect the organization and administration scheme, indicating in detail the functions, obligations, prohibitions, and responsibilities of each position within the management company, as well as indicating in all positions that, in case of vacation, resignation, or substitution of a person, which person within the company will perform that function during their absence, taking into consideration that the functions exercised by said personnel do not present disqualification or conflict of interest between both positions, which must be in accordance with the Internal Conduct Standards and the provisions issued by the Superintendence through technical or operational norm.

3. Draft of the general functioning regulations of the investment committees of the management company, which must contemplate that the minutes of the investment committee meetings must be signed by the present members and will be kept in a book elaborated for such purposes or in any other means that allows the Law, susceptible of subsequent verification and guaranteeing its authenticity. This book must be located at the corporate domicile of the management company and be at the disposal of the Superintendence at all times, when it requires it.

4. Internal Conduct Standards Manual of the management company, which must contemplate, by way of example and not limitatively, specific rules that prevent the improper flow of privileged information; handling of conflict of interest; information mechanisms on securities market operations carried out by the company's employees; internal sanction regime; among others.

5. Policies, Procedures, and Internal Control Manual that describe the main procedures to be carried out and the internal control mechanisms, which must...