CONASEV Resolution No. 050-2011

Lima, June 30, 2011

HAVING REVIEWED:

File No. 2009004773 and Memorandum No. 416-2011-EF/94.04.1 dated April 4, 2011 from the Legal Advisory Office;

CONSIDERING:

That, through Resolution of the CONASEV Administrative Tribunal No. 039-2010-EF/94.01.3 (hereinafter, The Resolution) it was resolved: (i) To declare that Southern Perú Copper Corporation – Branch of Peru (hereinafter, SOUTHERN) has committed a minor infraction typified in Annex I, numeral 3.1 of the Sanctions Regulation, approved by CONASEV Resolution No. 055-2001-EF/94.10 (hereinafter, The Sanctions Regulation) for violating article 3 of CONASEV Resolution No. 103-99-EF/94.10, which approves the Financial Information Regulation, by failing to timely submit the individual audited financial statements corresponding to the 2007 fiscal year; and (ii) To sanction SOUTHERN with a fine of 1.82 tax units equivalent to S/. 6,279.00 (Six Thousand Two Hundred Seventy-Nine and 00/100 New Soles);

That, through a document dated April 20, 2010, SOUTHERN filed an appeal against The Resolution, requesting that the CONASEV Board of Directors declare it null and void based on the following factual and legal grounds summarized below:

Non-compliance with charge attribution rules under the General Administrative Procedure Law and violation of the right to defense and the principle of due process:

• CONASEV informed SOUTHERN via Letter No. 983-2009-EF/94.06.3 that it had not submitted within the established deadline the individual audited financial statements corresponding to the 2007 fiscal year in accordance with article 3 of CONASEV Resolution No. 103-99-EF/94.10, which approves the Financial Information Regulation. However, the instructor body's report developed absolutely new factual and legal arguments that were not included as part of the factual and legal reasons for the charge attribution, thereby violating the rules contained in articles 234 and 235 of the General Administrative Procedure Law, Law No. 27444 (hereinafter, the LPAG).

• Had CONASEV attributed to SOUTHERN what was ultimately sanctioned, the submission of financial information not meeting technical specifications, the company would have had the possibility to provide evidence and documents as corresponds to its constitutional right to defense.

• The actions of both the instructor body and the CONASEV Administrative Tribunal (hereinafter, The Tribunal) contravene due process rules contained in article 139 of the Political Constitution of Peru (hereinafter, The Constitution), in article IV numeral 1.2 of the Preliminary Title of the LPAG, and in article 230 numeral 2 of the same legal body.

• The technical specifications, approved by General Management Resolution No. 44-2007-EF/94.11, were not published in the Official Gazette El Peruano, which is a requirement for them to be mandatory, as reiterated by the Constitutional Court through the rulings in File Nos. 2050-2002-AA and 06402-2007-PA/TC; therefore, The Resolution violates what is stated in article 109 of The Constitution.

The imposed sanction is based on the analogical application of norms that have been repealed:

• The Tribunal intends to apply by analogy the last paragraph of article 43 of the Regulation of the Public Registry of the Securities Market, approved by CONASEV Resolution No. 79-97-EF/94.10 (hereinafter, the RPMV Regulation) when such norm was repealed by article 3 of CONASEV Resolution No. 8-2003-EF/94.10, which approves the MVNET System Regulation.

• Regarding this, article 1 of the MVNET System Regulation states that this norm applies to natural and legal persons within the supervision and control scope of CONASEV, all of whom must obligatorily use the Peruvian Securities Market Network (MVNET) to submit to CONASEV the information and documentation required by the regulations. Nevertheless, article 43 of the RPMV Regulation established that companies were obligated to present their financial information in physical and magnetic media. In this sense, it is clear that what is provided in the aforementioned article 43 of the RPMV Regulation opposes article 1 of the MVNET System Regulation which establishes the obligation of the MVNET system.

• It is intended to give a new content to the repealed article 43, establishing that financial statements are considered validly presented when submitted through electronic media, following the corresponding technical specifications.

• Extensive or analogical interpretation is proscribed to support the imposition of sanctions, in accordance with article 139 numeral 9 of The Constitution, article IV of the Preliminary Title of the Civil Code, and article 230 numeral 4 of the LPAG.

The sanction is sought based on a typification that is incorrect and does not adjust to the facts subject to sanction:

• It was not appropriate to attribute Annex I numeral 3.1 of the Sanctions Regulation, when there is an express and specific typification that requires no interpretation, Annex I numeral 3.6 of the Sanctions Regulation, which sanctions the submission of documentation or information not meeting the established technical specifications.

The Administrative Tribunal has confused its role:

• The Tribunal seems to assume the role of defender of the charges formulated by the instructor bodies. In this sense, the resolution lacks a public purpose, a validity requirement contained in article 3 numeral 3 of the LPAG.

The Impugned Resolution Must Be Declared Null:

• It considers that the impugned resolution violates The Constitution and the laws, and therefore must be declared null in accordance with article 10 numerals 1 and 2 of the LPAG.

The norms and control systems established by CONASEV do not contemplate the unique situation of SOUTHERN, which constitutes a branch of a foreign company:

• SOUTHERN is not a joint-stock company governed by the General Companies Law, Law No. 26887, but rather the Peruvian branch of a foreign company and, therefore, lacks corporate bodies; nevertheless, CONASEV demands compliance with obligations that are not applicable to this type of branch. Furthermore, it imposes the obligation to comply with an information disclosure system that has not been designed for branches of foreign companies.

Regarding the application of sanctioning criteria:

• The Resolution contains a misapplication of the sanctioning criteria approved by the CONASEV Board of Directors, as the harm and market repercussion of the alleged infraction were not verified. In this sense, it rejects that such harm and repercussion had been generated, since the information arrived and was known by the market in a timely manner, so no negative repercussion or harm could have been generated;

That, the appeal filed meets the requirements established in articles 113, 207, 209, and 211 of the LPAG[1], given that it was filed within the 15-day deadline from notification of the administrative act, is well-founded, and was authorized by a lawyer;

That, in accordance with articles 28 and 29 of the Securities Market Law, Legislative Decree No. 861 (hereinafter, the LMV), issuers with securities registered in the Public Registry of the Securities Market (The RPMV) must present material events and their financial information and annual reports;

That, article 3 of CONASEV Resolution No. 103-99-EF/94.10 establishes that such issuers must present to this National Commission and to the Lima Stock Exchange S.A. their annual individual audited financial information and annual report on the day following approval by the corresponding body, with the deadline for presentation being the fifteenth (15) of April each year. Likewise, in accordance with articles 6 and 7 of CONASEV Resolution No. 103-99-EF/94.10, issuers of securities registered in The RPMV are obligated to prepare and present to CONASEV the individual interim financial statements on the day following their approval, with the presentation deadline for the first three quarters being 30 calendar days following the closing date and 45 calendar days for those corresponding to the fourth quarter;

That, in accordance with article 1 of the MVNET System Regulation, all natural and legal persons within the supervision and control scope of CONASEV must obligatorily use the MVNET to submit to the supervisor all information and documentation to which they are obligated. Likewise, through General Management Resolution No. 044-2007-EF/94.11, the Technical Specifications of the Registration and Supervision Information System – SIRyS were approved, which allow compliance with the obligation to present financial information contained in the aforementioned norms;

That, through CONASEV Resolution No. 102-2010-EF/94.01.1, all regulations on the submission of financial information were consolidated, establishing that issuing companies with securities registered in The RPMV and other legal persons under the competence of CONASEV must prepare and present their financial information, in accordance with applicable norms, observing the following:

“Article 4.-

a) Their financial information, whether annual individual audited, annual consolidated audited, interim individual and/or interim consolidated, as well as their annual report and management report, must be submitted to CONASEV obligatorily through the Peruvian Securities Market Network (MVNet) and in accordance with the technical specifications established in General Management Resolutions No. 044-2007-EF/94.11 and No. 058-2005-EF/94.11, or in subsequent norms that modify or replace them.

By exception, the corresponding files with the information to which they are obligated may be presented directly at the CONASEV Document Processing Office, provided that any of the three exempting contingencies established in article 22-A of the MVNET System Regulation, approved by CONASEV Resolution No. 008-2003-EF/94.10, and its modifications, are configured. The existence of any of the exempting contingencies will be verified by CONASEV prior or subsequent to the presentation of such information. Likewise, for the presentation of the information, what is provided in article 13 of said Regulation must be observed.

b) The financial information submitted must meet the following conditions jointly: (i) Presented in a complete manner; ii) Within the established deadlines; iii) Observing the technical specifications approved by CONASEV; and, (iv) Communicating the approval by the respective corporate body.”

That, through article 5 of CONASEV Resolution No. 102-2010-EF/94.01.1, all provisions issued by this National Commission opposed to the aforementioned norm were repealed;

That, it is derived from article 4 quoted above that the financial information must be presented observing certain conditions that are clearly distinguishable from each other and sanctionable independently, which would allow, for example, that the information is presented timely and completely but without observing the technical specifications;

That, therefore, under the new regulatory framework, article 43 of the RPMV Regulation, which established that financial information was only considered validly presented when submitted through the MVNET and in accordance with technical specifications, must be considered repealed, as it opposes article 4 of CONASEV Resolution No. 102-2010-EF/94.01.1;

That, in the present case, SOUTHERN presented on April 15, 2008 (the last day established by the regulations) its 2007 annual audited financial information; however, as it had not complied with submitting it in accordance with the technical specifications, CONASEV did not consider it validly presented, thus requiring the respective regularization. The regulated party presented the financial information in accordance with the technical specifications on April 23, 2008; however, by that date, the deadline for timely presentation had expired, considering such presentation as late;

That, this non-compliance was typified in Annex I, numeral 3.1, of the Sanctions Regulation, which states literally as follows:

“3.1.- Not to supply, or not to do so timely, or to present in an incomplete form or without the requirements established by the regulations, to CONASEV, to the Stock Exchange, to the commodities exchange, to the entity in charge of the centralized trading mechanism, or to any other entity or subject of the securities or commodities market, the individual or consolidated audited financial information, the individual or consolidated interim financial statements, management report, additional audit report, material events, annual reports, and in general any other documentation or information to which they are obligated by the regulations or by request of CONASEV.” (Emphasis added)

That, in the present case, the substantive norm that allowed the qualification of the aforementioned infraction as a failure to file has been repealed, so it is necessary to evaluate the application of the principle of non-retroactivity. It should be noted that, unlike Criminal Law, in administrative law there is indirect typification of the administrative offense, which implies that the three elements that typify an infraction (the mandate or prohibition, the norm that warns that certain non-compliance constitutes a sanctionable infraction, and the applicable sanction) generally do not appear in the same norm, but are dispersed in different norms[2];

That, article 230 numeral 5 of the LPAG regulates the principle of non-retroactivity as follows:

“Article 230.- Principles of Administrative Sanctioning Power The sanctioning power of all entities is additionally governed by the following special principles:
(...)
5. Non-retroactivity.- Sanctioning provisions in force at the time the regulated party incurs the conduct to be sanctioned are applicable, except when subsequent ones are more favorable.
(...)”.

That, by the principle of non-retroactivity, sanctioning bodies must apply the norms on typification and sanction in force at the time the facts occurred, except when a subsequently issued norm is more favorable to the regulated party, in which case that legal framework approved after the occurrence of the facts will be applied retroactively, for the benefit of the regulated party;

That, in the case under evaluation, having repealed article 43 of the RPMV Regulation, the submission of financial statements within the established deadlines but not meeting technical specifications is not considered a failure to file, but a submission not meeting technical specifications, conduct sanctioned by another infraction type, which is clearly more favorable to the regulated party, so it is not appropriate to confirm the sanction imposed on SOUTHERN, lacking object to perform the analysis regarding the arguments raised by said regulated party in its appeal;

And

In accordance with what is provided in article 11, subsection t) of the Unified Text of the Organic Law of CONASEV, approved by Legislative Decree No. 26126, as well as what was agreed by the CONASEV Board of Directors met in its session of June 13, 2011;

IT IS RESOLVED:

Article 1°.- To leave without effect, by application of article 230 of the General Administrative Procedure Law, Law No. 27444, the sanction imposed on Southern Perú Copper Corporation – Branch of Peru through the Resolution of the CONASEV Administrative Tribunal No. 039-2010-EF/94.01.3.

Article 2°.- To declare the administrative remedy exhausted.

Article 3°.- To transcribe this resolution to Southern Perú Copper Corporation – Branch of Peru and to the Lima Stock Exchange S.A.

Article 4°.- To order the dissemination of this resolution on the CONASEV Portal.

Register, communicate, and archive

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Michel Canta Terreros
President

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[1] Article 113.- Requirements of writings
Every writing presented before any entity must contain the following:

1. Full names, address, and National Identity Document number or foreigner's ID card of the regulated party, and if applicable, the quality of representative and of the person represented.
2. The concrete expression of what is requested, the factual grounds supporting it, and, when possible, the legal grounds.
3. Place, date, signature or fingerprint, in case of not knowing how to sign or being impeded.
4. The indication of the body, entity, or authority to which it is addressed, understood as such, as far as possible, the authority of the grade closest to the user, according to hierarchy, with competence to hear and resolve it.
5. The address of the place where notifications of the procedure are desired to be received, when different from the real address exposed by virtue of numeral 1. This address designation takes effect from its indication and is presumed subsistent, unless its change is expressly communicated.
6. The list of documents and attachments accompanying it, indicated in the TUPA.
7. The identification of the file of the matter, in the case of already initiated procedures.

Article 207.- Administrative remedies
(...)

207.2 The term for filing appeals is fifteen (15) peremptory days, and they must be resolved within a period of thirty (30) days.

Article 209.- Appeal
The appeal shall be filed when the challenge is based on a different interpretation of the produced evidence or when it concerns matters of pure law, and must be directed to the same authority that issued the act being challenged so that it elevates the proceedings to the hierarchical superior.

Article 211.- Requirements of the appeal
The appeal writing must indicate the act from which the appeal is made and fulfill the other requirements provided in Article 113 of this Law. It must be authorized by a lawyer.