Decree-Law 1 of July 8, 1999

INDEX

TITLE I ....................................................................................................................................................1
Article 1: Definitions ...............................................................................................................1

TITLE II...................................................................................................................................................6
Article 2: National Securities Commission...................................................................................6
Article 3: Commissioners.............................................................................................................6
Article 4: Non-ratification ...........................................................................................................6
Article 5: Requirements to be a Commissioner ..............................................................................6
Article 6: Term of appointment of Commissioners ......................................................7
Article 7: Removal....................................................................................................................7
Article 8: Powers of the Commission ......................................................................................7
Article 9: Meetings and decisions of the Commission......................................................................9
Article 10: Agreements, resolutions, and opinions of the Commission................................................9
Article 11: Publication, notification, and entry into force......................................................9
Article 12: Officials and consultants......................................................................................9
Article 13: Code of conduct ...............................................................................................10
Article 14: Delegation of authority........................................................................................10
Article 15: Appeals against Commission decisions .....................................................10
Article 16: Assets and income of the Commission ......................................................................10
Article 17: Registration fees..................................................................................................11
Article 18: Supervision fees............................................................................................12
Article 19: Criteria for determining fees.......................................................13
Article 20: Control by the Comptroller ......................................................................................13
Article 21: Taxes ...............................................................................................................13
Article 22: Intergovernmental relations..........................................................................14

TITLE III ...............................................................................................................................................14
CHAPTER I .............................................................................................................................................14
Article 23: Mandatory license...............................................................................................14
Article 24: Granting of license.......................................................................................14
Article 25: Suspension and revocation of license and other measures ...........................................14
Article 26: Voluntary cancellation of license .......................................................................15

CHAPTER II............................................................................................................................................15
OF SECURITIES FIRMS...................................................................................................................15
Article 27: Permitted activities...........................................................................................15
Article 28: Net capital and liquidity requirements.................................................................15
Article 29: Shareholders of securities firms.............................................................................16
Article 30: Foreign securities firms .................................................................................16
Article 31: Relationship with foreign securities firms ............................................................16
Article 32: Securities firms offering securities abroad..........................................17
Article 33: Books, records, and financial statements ..................................................................17
Article 34: Submission of reports to the Commission ...............................................................17
Article 35: Off-exchange transactions ...................................................................................17
Article 36: Sending information to clients.............................................................................17
Article 37: Investment accounts; handling of client securities and funds.............................17
Article 38: Information retention .........................................................................................18
Article 39: Ethical standards; conflicts of interest ......................................................................18
Article 40: Suitable recommendation......................................................................................18
Article 41: Excessive transactions ........................................................................................18
Article 42: Agreements to share gains or losses; guarantee against losses .........18
Article 43: Prevention of money laundering.............................................................................18
Article 44: Compliance Officer.........................................................................................19

CHAPTER III...........................................................................................................................................19
Article 45: Permitted activities...........................................................................................19
Article 46: Obligations of investment advisors ............................................................19

2

CHAPTER IV ..........................................................................................................................................19
OF PRINCIPAL EXECUTIVES, SECURITIES BROKERS, AND ANALYSTS......................................19
Article 47: Mandatory license...............................................................................................19
Article 48: Hiring of employees ...................................................................................19
Article 49: Exams ...............................................................................................................20
Article 50: Inability to hold offices...........................................................................20

TITLE IV ...............................................................................................................................................20
OF SELF-REGULATORY ORGANIZATIONS........................................................................20
Article 51: Mandatory license ......................................................................................20
Article 52: Requirements for granting licenses ........................................................20
Article 53: Voluntary cancellation of license .......................................................................21
Article 54: Standard of internal rules of self-regulatory organizations ...........................21
Article 55: Standard of internal rules of stock exchanges..................................................22
Article 56: Standard of internal rules of clearing houses .............................................22
Article 57: Modification of internal rules of self-regulatory organizations.....................22
Article 58: Admission of members in a self-regulatory organization .................................23
Article 59: Hiring of employees ...................................................................................23
Article 60: Fees, commissions, contributions, and charges........................................................23
Article 61: Oversight and sanctioning of members by self-regulatory organizations
24
Article 62: Disciplinary process.............................................................................................24
Article 63: Summary disciplinary process...............................................................................25
Article 64: Sanctions imposed by the Commission on self-regulatory organizations..............25
Article 65: Sanctions to members............................................................................................26
Article 66: Books, records, and financial statements ..................................................................26
Article 67: Submission of reports to the Commission ...............................................................26
Article 68: Other obligations of self-regulatory organizations....................................26

TITLE V .................................................................................................................................................27
Article 69: Mandatory registration........................................................................................27
Article 70: Registration application........................................................................................27
Article 71: Reports .................................................................................................................27
Article 72: Information disclosure standard ...............................................................28
Article 73: Content of the registration application and reports........................................28
Article 74: Form of the registration application and reports..............................................28
Article 75: Commission's liability for information.................................................28
Article 76: Foreign issuers .............................................................................................28
Article 77: Public communications...........................................................................................29
Article 78: Availability of information ..............................................................................29
Article 79: Sending information to investors...................................................................29
Article 80: Advertising material..............................................................................................29
Article 81: Termination of registration........................................................................................29

TITLE VI ...............................................................................................................................................30
OF THE PUBLIC OFFERING OF SECURITIES .........................................................................................30
Article 82: Public offering ........................................................................................................30
Article 83: Exempt offerings.......................................................................................................30
Article 84: Registration application for public offering...................................................................31
Article 85: Denial of registration application for public offering ..............................................32
Article 86: Content and form of prospectuses.....................................................................32
Article 87: Use of the prospectus in public offerings of securities..................................................32
Article 88: Period prior to registration with the Commission..........................................................33
Article 89: Registration period with the Commission .......................................................................33
Article 90: Post-registration period with the Commission ........................................................33

TITLE VII..............................................................................................................................................34
OF THE REQUEST FOR VOTING POWERS ...................................................................................34
Article 91: Request for voting powers, authorizations, and consents ...........................34
Article 92: Notification to the Commission ....................................................................................34
Article 93: Content and form of requests .....................................................................34

TITLE VIII ............................................................................................................................................35
OF THE PUBLIC OFFER TO PURCHASE SHARES..............................................................35
Article 94: Public offer to purchase shares ..................................................................35
Article 95: Notification of public offer to purchase shares..........................................35
Article 96: Content and form of offer documents ..................................................35
Article 97: Suspension of the offer by the Commission .................................................36
Article 98: Deadline and equal conditions............................................................................36
Article 99: Pro-rata purchase...............................................................................36
Article 100: Revocation of acceptance ...............................................................................36
Article 101: Changes in terms and conditions of the public offer to purchase ..................36
Article 102: Prohibition of buying shares outside the offer ...........................................36
Article 103: Companies with foreign shareholders...............................................................37

TITLE IX ...............................................................................................................................................37
OF INVESTMENT COMPANIES .............................................................................................37
CHAPTER I .............................................................................................................................................37
GENERAL PROVISIONS ...................................................................................................................37
Article 104: Exclusions ..........................................................................................................37
Article 105: Categories of investment companies according to redemption option................37
Article 106: Categories of investment companies according to risk.......................................37
Article 107: Permitted structures........................................................................................38
Article 108: Increase in authorized capital............................................................................38
Article 109: Series and classes of participation units...........................................................38

CHAPTER II............................................................................................................................................38
OF REGISTERED INVESTMENT COMPANIES ...............................................................................38
Article 110: Obligation to register.........................................................................................38
Article 111: Investment companies administered in or from Panama...............................39
Article 112: Registration with the Commission.......................................................................39
Article 113: Investment objectives and policies........................................................................39
Article 114: Subscription of participation units ...............................................................40
Article 115: Redemption of participation units .................................................................40
Article 116: Commissions and charges ........................................................................................41
Article 117: Net value per participation unit.................................................................41
Article 118: Dividend and distribution reports..............................................................42
Article 119: Indebtedness ....................................................................................................42
Article 120: Directors ............................................................................................................42
Article 121: Persons with whom there can be no affiliation...........................................43
Article 122: Custodian.............................................................................................................43
Article 123: Guarantee against theft, robbery, and misappropriation..........................................44
Article 124: External auditors ...............................................................................................44
Article 125: Limitation of liability.............................................................................44
Article 126: Voting...............................................................................................................44
Article 127: Contract with an investment administrator ...................................................45
Article 128: Accounting, books, and records ...........................................................................45
Article 129: Other administrative and operational requirements.................................................45
Article 130: Reports ...............................................................................................................45
Article 131: Advertising............................................................................................................46
Article 132: Foreign investment companies....................................................................46
Article 133: Registered investment companies that only offer their participation units abroad 46

CHAPTER III...........................................................................................................................................47
OF PRIVATE INVESTMENT COMPANIES .....................................................................................47
Article 134: Definition ............................................................................................................47
Article 135: Appointment of representative..........................................................................48
Article 136: Notification to the Commission ..................................................................................48
Article 137: Oversight........................................................................................................49

CHAPTER IV ..........................................................................................................................................49
OF INVESTMENT ADMINISTRATORS............................................................................................49
Article 138: Mandatory license ..............................................................................49
Article 139: Granting of license.....................................................................................49
Article 140: Outsourcing of services...............................................................................50
Article 141: Foreign investment administrators...........................................................50
Article 142: Obligations of investment administrators..............................................50
Article 143: Reports ...............................................................................................................50
Article 144: Suspension, revocation, and cancellation of the license ..........................................50
Article 145: Provisions applicable to investment administrators...................................50

TITLE X .................................................................................................................................................51
OF CREDIT ON THE EXCHANGE, OPTIONS, AND DERIVATIVE INSTRUMENTS...............................51
Article 146: Credit in general ...............................................................................................51
Article 147: Indebtedness of securities firms...................................................................51
Article 148: Securities lending...........................................................................................51
Article 149: Repurchase of securities ...........................................................................................51
Article 150: Options, forward contracts, and other derivative instruments .............................51

TITLE XI ...............................................................................................................................................52
OF THE CUSTODY, CLEARING, AND SETTLEMENT OF SECURITIES....................................52
CHAPTER I .............................................................................................................................................52
GENERAL PROVISIONS ...................................................................................................................52
Article 151: Objectives..............................................................................................................52
Article 152: Interpretation ......................................................................................................52
Article 153-A ........................................................77
Article 153: Physical titles, book entries, and indirect holding.................................52
Article 154: Plurality of holders.......................................................................................5