Circular 1/2001 — Repos Agreed by Investment Companies

(This provision was repealed by Circular 1/2003 published on August 6, 2003)

CIRCULAR 1/2001

Mexico, D.F., March 19, 2001.

TO COMMON INVESTMENT COMPANIES AND THOSE IN DEBT INSTRUMENTS

SUBJECT: REPO OPERATIONS.

The Bank of Mexico, based on articles 14, fraction VII of the Investment Companies Law and 26 of its Law, and taking into consideration the convenience of: a) allowing common investment companies to enter into repo operations on government securities and bank titles, and b) providing greater flexibility to investment companies in debt instruments and common ones in the aforementioned repo operations,

has resolved to issue the following:

RULES

FIRST.- Investment companies may enter into repo operations with brokerage firms and credit institutions, on government securities and bank titles.

By government securities and bank titles, it shall be understood only those that are susceptible to being repoed by credit institutions and brokerage firms, in accordance with the provisions issued by this Bank of Mexico.

Investment companies may in no way carry out repo operations on titles or securities other than or under conditions different from those expressly mentioned in these rules.

SECOND.- In repo operations on the titles and securities referred to in the previous rule, the aforementioned investment companies must act solely on their own account and as repo providers.

THIRD.- The term, price, premium, form, and other characteristics of the repo operations entered into by investment companies must invariably comply with the general provisions issued by the Bank of Mexico for credit institutions and brokerage firms, as applicable.

FOURTH.- Investment companies must refrain from entering into repo operations with brokerage firms and credit institutions that, directly or indirectly, hold control of the majority of the shares representing the fixed social capital of the respective investment companies.

FIFTH.- Investment companies must refrain from carrying out repo operations in which the agreed price or premium significantly deviates from those prevailing in the market at the time of contracting; as well as, in general, carrying out operations under conditions and terms contrary to the general policies of the investment companies and to sound market practices and usages.

SIXTH.- Investment companies must provide the Bank of Mexico with information regarding the repo operations they carry out, in the form and terms required by the latter.

SEVENTH.- Investment companies that fail to comply with the provisions contained in these rules will be sanctioned by the National Banking and Securities Commission in accordance with the Investment Companies Law.

TRANSITORY PROVISIONS

FIRST.- This Circular shall enter into force on March 19, 2001.

SECOND.- From the date of entry into force of this Circular, our Circular 1/92 of November 13, 1992, is hereby repealed.

Sincerely,

BANK OF MEXICO