Circular 05-24 — Instruction for the Constitution, Registration, and Enforcement of Guarantees on Participation Quotas of Open or Mutual Investment Funds with Financial Intermediation Entities — SIMV — DO

Superintendence of the Securities Market of the Dominican Republic

CIRCULAR
No. 05/24
To Investment Fund Administrator Societies.
Subject: Instruction for the constitution, registration, and enforcement of guarantees on participation quotas of open or mutual investment funds with financial intermediation entities.

Seen:

Constitution of the Dominican Republic, proclaimed on October twenty-seven (27), two thousand twenty-four (2024).

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

Law No. 167-21, on Regulatory Improvement and Simplification of Procedures, dated August twelve (12), two thousand twenty-one (2021).

Law No. 45-20, on Movable Guarantees, dated February twenty-one (21), two thousand twenty (2020) and its modifications through Law No. 170-21, which suspends the application of Law No. 45-20 that modifies Article 21 and reincorporates articles temporarily and permanently, dated August seventeen (17), two thousand twenty-one (2021).

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

Law No. 183-02, which approves the Monetary and Financial Law, dated November twenty-one (21), two thousand two (2002).

Decree No. 18-23, which establishes the Regulation of Law No. 45-20, on the Electronic System of Movable Guarantees, dated January twenty-six (26), two thousand twenty-three (2023).

Regulation of Administrator Societies and Investment Funds, issued by the National Securities Market Council through First Resolution, R-CNMV-2019-28-MV, dated November five (5), two thousand nineteen (2019) and its modifications.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

WHEREAS:

I. Circular CSB-REG-202400011 of the Superintendence of Banks, which brings into force the fourth version of the "Instruction on Formalization, Registration and Control of Guarantees" dated July twenty-six (26), two thousand twenty-four (2024).

Considering:

That, paragraph 13 of Article 35 of the Regulation of Administrator Societies and Investment Funds establishes that administrator societies, within the framework of investment fund administration, in addition to what is established in Law No. 249-17, must comply with the obligations determined by the Superintendence of the Securities Market through technical or operational norms.
That, paragraph 19 of Article 60 of the Regulation of Administrator Societies and Investment Funds establishes that, the internal regulations of open or mutual investment funds must contain any additional information that contributes to a greater understanding of the characteristics of the investment fund, as well as the administration and operation activities determined by the administrator society or the Superintendence of the Securities Market through technical or operational norms.
That, paragraph 4 of Article 90 of the Regulation of Administrator Societies and Investment Funds establishes that the administrator society may suspend redemption operations and the consideration of new subscription requests for participation quotas of open investment funds before "Any other circumstance determined by the Superintendence through technical or operational norm (...)".
That, Article 100, Paragraph II, of the Regulation of Administrator Societies and Investment Funds establishes that, in the case of open investment funds, the administrator society must keep a register of contributors in which the name of the holder, identity documents, address, number of participation quotas owned, as well as the date on which the quotas were subscribed in their name, will be recorded. Contributors must be inscribed in this register according to their method of entry.
That, Article 17, paragraph 14), of Law No. 249-17, empowers the Superintendent of the Securities Market to "issue the resolutions, circulars and instructions required for the development of this law and its regulations".
That the Superintendence of the Securities Market, in its capacity as the regulatory body of the Securities Market and in accordance with Article 7 of Law No. 249-17, shall have as its objective to promote an orderly, efficient and transparent securities market, protect investors, ensure compliance with the law and mitigate systemic risk, through the regulation and supervision of natural and legal persons operating in the securities market.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

That the Superintendent of the Securities Market is the highest executive authority of the Superintendence of the Securities Market, having under his charge the direction, control and representation thereof.
That it corresponds to the Superintendence of the Securities Market the development of the technical or operational norms derived from Law No. 249-17, the applicable regulations and necessary norms for the development of the market in accordance with Article 25 of the aforementioned Law.
That Law No. 45-20, on Movable Guarantees, established the legal framework of the movable guarantee regime, the Electronic System of Movable Guarantees, the execution processes related to such guarantees, as well as a unitary legal regime for the constitution, effectiveness, publicity, registration, priority, execution and everything related to them.
That Law No. 170-21 suspended the application of Law No. 45-20, and provided for its entry into force as of January twenty (20), two thousand twenty-three (2023).
That, likewise, on January twenty-six (26), two thousand twenty-three (2023), Decree No. 18-23 was issued through which the Regulation of Law No. 45-20 of the Electronic System of Movable Guarantees is established.
That, Article 2 of Law No. 45-20, provides an exception in its scope of application for securities and financial instruments regulated in Law No. 249-17, only when special regulation or regulation is issued for the constitution of guarantee and execution thereof.
That the participation quotas of closed investment funds and quoted open investment funds shall be represented by book entry, as provided by Article 47 of Law No. 249-17.
That the status of contributor to an open investment fund is acquired through the subscription of participation quotas, which takes place at the moment the investment fund receives the contribution by virtue of the signing of the quota subscription form and the person acquires ownership thereof and by the other forms of acquiring ownership established by Law No. 249-17, a situation that must be recorded in the register of contributors maintained by the administrator society for each fund it administers.
That, for a contributor to subscribe or redeem participation quotas of an open investment fund, they must do so directly with the investment fund administrator society that manages it, except in the case of quoted open investment funds where the subscription and trading of quotas is carried out on the stock exchanges.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

That, the accounting record of book-entry securities is the responsibility of the centralized securities depositories and, in the case of participation quotas of open investment funds, the accounting record is the responsibility of the investment fund administrator societies that manage them. Therefore, the internal regulations of both entities must establish the necessary processes for the constitution, registration and enforcement of guarantees applicable to book-entry securities and the participation quotas of open or mutual investment funds administered, respectively, which will be subject to prior approval by the Superintendence of the Securities Market.
That the books, records and files of the administrator society and of the investment funds it administers shall be kept through automated data processing systems.
That it is necessary to define a homogeneous scheme that contemplates the minimum conditions for the registration, constitution and enforcement of guarantees on the participation quotas of open or mutual investment funds in order to promote investment in this type of financial instruments, granting greater incentives to contributors so that these quotas can be granted as guarantee for other financial operations.
That, with the entry into force of Circular CSB-REG-202400011 which brings into force the fourth version of the "Instruction on Formalization, Registration and Control of Guarantees", the Superintendence of Banks enables the participation quotas of open or mutual investment funds to be considered as admissible guarantees for financial intermediation entities. Therefore, it is necessary to establish the applicable process for contributors and administrator societies of open or mutual investment funds.
That, for its part, Law No. 167-21, on Regulatory Improvement and Simplification of Procedures, has the objective of defining and articulating public policies directed towards regulatory improvement and the simplification of administrative procedures.
That, in compliance with the applicable legal framework, the Superintendence of the Securities Market submitted the draft instruction for public consultation from December fourteen (14), two thousand twenty-three (2023) to February twenty (20), two thousand twenty-four (2024), inclusive.
That as a result of said consultative process, comments were received from: (i) Dominican Association of Investment Fund Administrator Societies, Inc. (ADOSAFI); (ii) Central Securities Depository, CEVALDOM; (iii) BHD Financial Center, S.A.; and (iv) Cibao Savings and Loans Association.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

That, likewise, on November twelve (12), two thousand twenty-four (2024), the Superintendence of the Securities Market held a virtual working table with interested sectors.
That, as a result of the weighing of the comments received during the public consultation process, the Superintendence of the Securities Market has made the following modifications:

It is established that the register of contributors must record any encumbrance on the participation quotas.
It is specified in the title of the circular that it is directed to financial intermediation entities.
The name of the guarantee contract is updated so that it is called special movable guarantee constitution contract or act.

Therefore:

The Superintendent of the Securities Market, in the exercise of the powers granted by Article 17, paragraph 14, of Law No. 249-17, orders the following:

I. Authorize the instruction for the registration, constitution and enforcement of guarantees on the participation quotas of open or mutual investment funds with financial intermediation entities, which is attached to this circular.

II. Inform investment fund administrator societies that, for the registration, constitution and enforcement of guarantees on the participation quotas of open or mutual investment funds, they must establish in their manual of policies, procedures and control, the necessary processes, which are subject to prior approval by the Superintendence of the Securities Market and must comply with the minimum provisions established in the annex of this circular.

III. Inform the general public that the participation quotas of closed investment funds and quoted open investment funds, unequivocally, are subject to the regime of registration, constitution and enforcement of guarantees established for book-entry securities in a centralized securities depository, as established by Article 47 of Law No. 249-17.

IV. Inform investment fund administrator societies that investment promoters, within their activities to make known and inform about the operation and qualities of open or mutual investment funds, must communicate to the potential contributor about the right they have to grant their participation quotas in open investment funds as guarantee, as well as the process to follow for such purposes, in accordance with what is established in their manual of policies, procedures and internal control.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

V. Inform investment fund administrator societies that the provisions of this Circular will enter into force within thirty (30) business days counted from its publication.

VI. Instruct the Directorate of Regulation and Innovation of the Superintendence of the Securities Market to publish the Circular on the institution's website.

In Santo Domingo, National District, capital of the Dominican Republic, on the seventeen (17) day of the month of December, two thousand twenty-four (2024).

Ernesto Bournigal Read
Superintendent

EB / Signature
Directorate of Regulation and Innovation

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

ANNEX
INSTRUCTION FOR THE CONSTITUTION, REGISTRATION AND ENFORCEMENT OF GUARANTEES OF THE PARTICIPATION QUOTAS OF OPEN OR MUTUAL INVESTMENT FUNDS WITH FINANCIAL INTERMEDIATION ENTITIES

General Provisions:

1.1. For the case of open or mutual investment funds, the investment fund administrator society must keep a register of contributors in which the name of the holder, identity document, address, number of participation quotas owned, as well as the date on which the quotas were subscribed in their name and, if applicable, the encumbrances constituted on the quotas of said funds, will be recorded. Contributors must be inscribed in this register according to their method of entry, in accordance with what is provided in the Regulation of Administrator Societies and Investment Funds.

1.2. The register of contributors shall be governed by the principle of priority, by virtue of which the act that is registered first in the property book shall have priority over those that access subsequently, the investment fund administrator society being required to register the corresponding operations according to the order of presentation.

1.3. The constitution of limited real rights or any other class of encumbrances on the participation quotas of open or mutual investment funds must be registered in the register book in the name of the contributor. The constitution of the guarantee shall be enforceable against third parties from the moment that the corresponding registration has been made in the register of the investment fund administrator society. The registration publicly establishes a real right of guarantee, granting the priorities and rights over the ownership of the encumbered asset in case of default by the contributor.

1.4. The participation quotas of open or mutual investment funds may be subject to movable guarantee. The special movable guarantee constitution contract or act must be in writing, in accordance with the requirements established for financial intermediation entities by the Superintendence of Banks and identify: (i) the parties, (ii) the investment fund administrator society that administers the public offering securities subject to guarantee, (iii) the number of participation quotas of open or mutual investment funds to be affected; (iv) the name of the investment fund and Securities Market Registration number, (v) the quota value in effect at the time of signing the contract; (vi) conditions and process for the enforcement of the guarantee, as provided in paragraph 1.6 of this instruction, and the conditions for its release.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

Superintendence of the Securities Market of the Dominican Republic

1.5. The guarantee shall be perfected, have a certain date and be enforceable against third parties from the moment the investment fund administrator society carries out the corresponding registration, in accordance with what was agreed between the contributor and the financial intermediation entity as creditor.

1.6. The enforcement of the guarantee on the participation quotas of open or mutual investment funds shall be carried out directly by the investment fund administrator society, as the entity responsible for keeping the register of contributors of each open or mutual investment fund administered, by virtue of what is provided in the contract signed between the parties.

Process for constitution, registration and enforcement of guarantees for their admissibility:

2.1. Prior Verification. The contributor interested in granting as guarantee participation quotas of their property in an open or mutual investment fund must request from the administrator society the issuance of a quota certification for guarantee purposes directed to their financial intermediation entity (creditor of the guarantee), which, at a minimum, must contain:

a. The general information of the contributor or contributors; b. The number of participation quotas owned by the contributor or contributors;
c. The participation quota value corresponding to the day the certification is issued;
d. The total value represented by the participation quotas on the date of issuance of the certification; e. The charges, encumbrances or any affectation weighing on the participation quotas, as recorded in their records on the date of issuance of the certification; f. The name, Securities Market Registration number and National Taxpayer Registry (RNC) of the open or mutual investment fund and of the investment fund administrator society issuing the certification; g. The summary of the rules applicable to the pact of permanence in the open or mutual investment fund and the early redemption commission, as well as the conditions for scheduled redemption and significant redemption, if applicable, and their reference to the internal regulations; h. The warning about the variable nature of the value of the participation quotas of the open or mutual investment fund;
i. The warning that the certification reflects the information on the number of participation quotas as of the cut-off date of its issuance;
j. The date of issuance of the certification; and, k. The warning that the information may vary on the date of issuance of the certification.

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Av. Nicolás Penson No. 60, Gascue, Santo Domingo, Dominican Republic Telephone: 800.221.4433 - Web: www.sivmgob.do | info@sinivgob.do RNC: 1-01-51572-5

2.1.1. The request for certification shall serve as evidence and proof of the interest of the contributor(s) that, in the future, a guarantee be established in favor of the recipient of the certification.

In the request made by the contributor(s), in the case of individual accounts or joint ownership, their will, express acceptance, and authorization must be clearly indicated to comply with the conditions established in this instruction, so that the investment fund management company establishes a guarantee in favor of the financial intermediation entity as reflected in the contract or constitutive act of special movable property guarantee of the open investment fund or mutual.

The certification may be issued in physical form or in any type of digital format, as defined by the investment fund management company in its internal processes. The issuance of the certification does not generate a registry block, therefore, the contributor retains the faculty to redeem their participation quotas and they may be affected by liens, encumbrances, or other measures.

The certification may be subject to validation and confirmation by the financial intermediation entity before the investment fund management company.

2.2. Contract or Constitutive Act of Special Movable Property Guarantee on Participation Quotas of Open Investment Funds or Mutuals. The contract signed by the contributor of the open investment fund or mutual and the financial intermediation entity regarding the guarantee must take the form of an act under private signature. In all cases, it must clearly provide for the granting in guarantee by the fund contributor, in favor of the party requiring the guarantee, of a specific number of participation quotas and the respective value that said quotas represent on the date of signing the contract, the currency in which the open investment fund or mutual operates.

2.2.1. The contract must indicate the name, the registration number in the Securities Market Registry, and the National Taxpayer Registry (RNC) of the corresponding investment fund. Likewise, it must be drafted legibly and establish the term or conditions under which this guarantee is granted and remains valid, as well as the procedure and requirements for its execution and cancellation.

2.2.2. The financial intermediation entity acting as creditor, through communication means mutually agreed upon with the investment fund management company, must request the latter to register the guarantee, sending a copy of the contract or constitutive act of special movable property guarantee signed by the contributor, in which the value desired to be guaranteed on that date through the number of participation quotas equivalent thereto is recorded.

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Av. César Nicolás Penson No. 600, Gascue, Santo Domingo, Dominican Republic Telephone: (809) 321-1433 - http://www.superc.gob.do | RNC: 130-1573-5

2.2.3. Registration requests shall be deemed received exclusively until twelve noon (12:00 p.m.) on a business day of the investment fund management company. Receipt of the request at any other time shall be deemed received on the next business day of the investment fund management company.

2.2.4. In the event that the contributor has sufficient participation quotas to cover the amount of the guarantee and these are available, the investment fund management company shall affect the participation quotas up to the amount of the guarantee stipulated in the contract. These quotas shall remain unavailable while affected and cannot be redeemed until the guarantee is cancelled.

2.2.5. Partial guarantee registrations are not admissible. Therefore, if the contributor does not possess sufficient participation quotas, free of lien, encumbrance, or measure, to cover the amount required by the financial intermediation entity for the establishment of the guarantee, the investment fund management company shall not proceed with its registration, informing the contributor and the financial intermediation entity through agreed means within a period not exceeding one (1) business day after receiving the request.

2.3. Term for Registration of the Guarantee. The investment fund management company must register the guarantee within a period not exceeding one (1) business day after receiving the request correctly and completely. Once the registration is performed, the investment fund management company must communicate this to the financial intermediation entity in whose favor the guarantee is established, through reliable agreed means, indicating the number of affected participation quotas, the respective amount on the date, in the currency in which the fund operates, and the date of establishment and registration of the guarantee.

2.3.1. The investment fund management company, at the request of the contributor or the financial intermediation entity, may issue certifications regarding the status of the guarantee or enable channels for verification by the parties.

2.4. Execution of the Guarantee for Non-Compliance. In the event of contractual non-compliance by the contributor giving rise to the execution of the guarantee as established in the contract or constitutive act of special movable property guarantee, the financial intermediation entity shall notify the investment fund management company requesting the execution of the guarantee.

2.5. Redemption of Participation Quotas. Once the procedure indicated in the previous numeral is exhausted and in accordance with what is established in the internal regulations of the fund in question, within the following business day after the execution request of the guarantee is received, the investment fund management company shall proceed to redeem the corresponding participation quotas up to the reported value, which in no case may exceed the value of the guarantee. If there is a remainder, it shall release said quotas and the respective value for their availability in favor of the contributor. The delivery of money to the financial intermediation entity as creditor shall be carried out via bank transfer to an account of the creditor or by check in their name.

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Av. César Nicolás Penson No. 600, Gascue, Santo Domingo, Dominican Republic Telephone: (809) 321-1433 - http://www.superc.gob.do | RNC: 130-1573-5

2.5.1. The investment fund management company, as a third-party facilitator of the guarantee transaction, acts in good faith and is not the judge of the execution of the guarantee. Therefore, the responsibility of the investment fund management company is limited exclusively to carrying out the execution of the guarantee under the conditions requested by the financial intermediation entity, which assumes responsibility before the contributor for any error in the reported balance owed for the execution of the guarantee or any error in the report of non-compliance with any of the conditions originating the execution, or any other claim that may arise from the contributor.

2.6. Cancellation of the Guarantee. In the event of total compliance by the debtor contributor of their payment obligation towards the financial intermediation entity, or in the event of agreement between the parties, the lifting and cancellation of the guarantee on the affected participation quotas may be requested. Such request may be presented by the creditor financial intermediation entity or by the contributor who, in the latter case, must provide a balance letter issued by the creditor financial intermediation entity, which must be confirmed by the investment fund management company.

2.6.1. The investment fund management company must execute the respective process and leave at the free disposal of the contributor the participation quotas that were used as guarantee, within a maximum period of one (1) business day after receipt of the request for lifting and cancellation of the guarantee, provided that it complies with the formal and documentary requirements established in this instruction.

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Av. César Nicolás Penson No. 600, Gascue, Santo Domingo, Dominican Republic Telephone: (809) 321-1433 - http://www.superc.gob.do | RNC: 130-1573-5

Lineage: In force