JPRF-V-2024-0133 — Derogation of provisions related to the inability to back vehicle credit with commercial trust agreements

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-V-2024-0133 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal security is based on respect for the Constitution and on the existence of prior, clear, public legal norms applied by competent authorities; That, Article 84 of the Supreme Norm provides that any body with normative power shall have the obligation to adapt, formally and materially, laws and other legal norms to the rights provided for in the Constitution; stipulating that, in no case, the reform of laws or other legal norms nor acts of public power shall violate the rights recognized by the Constitution; That, number 6 of Article 132 of the aforementioned Constitution grants public regulatory bodies the authority to issue norms of a general nature in matters within their competence, without being able to alter or innovate legal provisions; That, Article 226 of the Magna Carta provides that State institutions, their bodies, 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 the necessary actions for the effective fulfillment of the rights recognized in the Constitution; That, Article 308 ibidem determines that financial activities are a public order service, and may be exercised, with prior authorization from the State, in accordance with the law; That, Article 424 supra mandates that the Constitution is the supreme norm and prevails over any other in the legal system, providing that norms and acts of public power must maintain conformity with constitutional provisions; in case of non-compliance, they shall lack legal efficacy; That, Article 425 of the Constitution of the Republic of Ecuador prescribes the following hierarchical order for the application of legal norms: “The Constitution; international treaties and conventions; organic laws; ordinary laws; regional norms and district ordinances; decrees and regulations; ordinances; agreements and resolutions; and other acts and decisions of the public powers. (…)”; That, Article 13 of the Organic Monetary and Financial Code, Book I, 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, Articles 14, numbers 1 and 2, of the aforementioned Code, regarding the scope of competence of the Financial Policy and Regulation Board, determine that it corresponds, among other functions, to formulate securities policy and issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the securities system. Likewise, its penultimate paragraph establishes that, for the fulfillment of its functions, it must issue norms in matters within its competence, without being able to alter legal provisions; That, numbers 1, 16, and 27 of Article 14.1 ibidem prescribe that the Financial Policy and Regulation Board corresponds, among other faculties, to regulate the creation, constitution, organization, activities, operation, and liquidation of financial and securities entities; regulate the constitution, operation, and liquidation of funds and fiduciary businesses related to the securities market; as well as to exercise the other functions, duties, and faculties assigned to it by the Organic Monetary and Financial Code and the law;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, Article 25.1, number 1, ibidem prescribes, among the functions of the Technical Secretariat of this Board, the elaboration of technical and legal reports that support the regulation proposals to be issued by the Financial Policy and Regulation Board; That, General Provision Twenty-Ninth of the Organic Monetary and Financial Code, Book I, prescribes: “In the current legislation where reference is made to the ‘Monetary and Financial Policy and Regulation Board’, replace it with ‘Financial Policy and Regulation Board’.”; That, Transitory Provision Fiftieth-Fourth of the aforementioned Code determines the transitional regime for resolutions of the Codification of the Monetary and Financial Policy and Regulation Board, establishing that: “(…) 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 control bodies shall remain in force until the Monetary and Financial Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”; That, the Securities Market Law, contained in Book II of the Organic Monetary and Financial Code, when referring to the object and scope of said Law, determines in its Article 1 that its objective is to promote an organized, integrated, efficient, and transparent securities market, in which securities intermediation is competitive, orderly, equitable, and continuous, as a result of true, complete, and timely information; whose scope covers the securities market in its stock and over-the-counter segments, stock exchanges, trade associations, securities houses, fund administrators and trusts, rating agencies, issuers, external auditors, and other participants who act in any way in the securities market; That, Article 9 of the Organic Monetary and Financial Code, Book II (Securities Market Law), enumerates the attributions that currently correspond to the Financial Policy and Regulation Board in the context of this Law, among which are those indicated in numbers 1, 6, and 19, which are, respectively: (i) establish the general policy of the securities market and regulate its functioning; (ii) regulate the creation and functioning of fund and trust administrators, as well as the services they provide; and, (iii) authorize the related activities of fund and trust administrators that are necessary for the adequate development of the securities market; That, Article 109 of the Securities Market Law, regarding the commercial trust contract, prescribes that by the commercial trust contract, one or more persons called settlors or trustors transfer, temporarily and irrevocably, the ownership of movable or immovable corporeal or incorporeal goods, which exist or are expected to exist, to an autonomous estate, endowed with legal personality, so that the fund and trust administrator society, which is its trustee and in such capacity its legal representative, fulfills the specific purposes instituted in the constitution contract, either in favor of the settlor itself or a third party called beneficiary; That, Article 110 ibidem establishes that the commercial trust contract must be granted through a public deed, and that the transfer of ownership by title of trust shall be carried out in accordance with the general provisions provided for in the laws, attending to the nature of the goods;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, Article 115 of the Securities Market Law states that natural or legal persons, private, public, or mixed, national or foreign, or entities endowed with legal personality, may act as settlors of commercial trusts, who will transfer the ownership of the goods by title of commercial trust; That, by Resolution No. 340-2017-V of March 6, 2017, the then Monetary and Financial Policy and Regulation Board issued the “Norms on the Constitution of Commercial Trusts in Guarantee on Vehicles”, contained in Chapter II of Title XIII “Commercial Trust and Fiduciary Encumbrance”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities and Insurance Resolutions, through which it established the prohibition of constitution of commercial trusts in guarantee on light vehicles by natural or legal persons, public or private, national or foreign, and further determined that in no case shall institutions of the financial system constitute commercial trusts in guarantee on all types of vehicles, without distinction of tonnage or purpose, whether for public or private transport of persons or goods; in consonance with what was prescribed at that date in the article numbered following Article 120 of the Securities Market Law, which legislated these prohibitions; That, the Organic Law for Economic Development and Fiscal Sustainability after the COVID-19 Pandemic, published in the Third Supplement of Official Register No. 587 of November 29, 2021, in its Article 195, reformed the article numbered following Article 120 of the Organic Monetary and Financial Code, Book II (Securities Market Law), which details credit operations in which institutions of the financial system may only accept the quality of beneficiaries in commercial trusts in guarantee, incorporating as number 8 credit operations or of any other type destined for the financing of vehicles. Additionally, it repealed the third paragraph of the aforementioned article, which established the following: “In no case shall natural or legal persons, public or private, national or foreign, including naturally institutions of the financial system, be able to constitute commercial trusts in guarantee on vehicles.”; That, the article numbered following Article 120 of the current Securities Market Law establishes that institutions of the financial system may only accept the quality of beneficiaries in commercial trusts in guarantee that back the credit operations determined in said article, indicating among them those contained in number 8, which are credit operations or of any other type destined for the financing of vehicles; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0111-M of December 18, 2024, submits to the President of the Board the Technical Report No. JPRF-CTIFSP-2024-0022 of December 13, 2024, issued by the Technical Coordination of Financial Inclusion and Prepaid Health Policy, and the Legal Report No. JPRF-CJF-2024-058 of December 13, 2024 issued by the Coordination of Financial Policy and Norms of this Board, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2024 and carried out through video conference on December 23, 2024, reviewed the Memorandum No. JPRF-ST-2024-0111-M of December 18, 2024, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-CTIFSP-2024-0022 and Legal Report No. JPRF-CJF-2024-058, in addition to the corresponding draft resolution;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2024 and carried out through video conference on December 23, 2024, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES: SINGLE ARTICLE.- Chapter II “Norms on the Constitution of Commercial Trusts in Guarantee on Vehicles”, of Title XIII “Commercial Trust and Fiduciary Encumbrance”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities and Insurance Resolutions is repealed. GENERAL PROVISIONS FIRST.- The Superintendency of Companies, Securities and Insurance shall communicate to the respective controlled entities the content of this Resolution. SECOND.- In case of doubt regarding the content or scope of the provisions of this Resolution, it shall be for the Superintendency of Companies, Securities and Insurance to resolve them. FINAL PROVISION.- This Resolution shall enter into force from this date, without prejudice to its publication in the Official Register, and shall be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance. NOTIFY.- Given in the Metropolitan District of Quito, on December 23, 2024. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The preceding Resolution was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on December 23, 2024.- I CERTIFY. TECHNICAL SECRETARY, Mgs. Luis Alfredo Olivares Murillo