Decree No. 664-12 Approving the Implementation Regulation of the Securities Market Law No. 189-11

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_________________________________________________________________________ Dec. No. 664-12 Approving the Implementation Regulation of the Securities Market Law, No. 189-11. Repeals Regulation No. 729-04. Official Gazette No. 10702 of December 12, 2012.
DANILO MEDINA
President of the Dominican Republic
NUMBER: 664-12
CONSIDERING: That in its capacity as an ordinary member of the International Organization of Securities Commissions (IOSCO), the Dominican Republic must adapt its regulation to the principles of said Organization, based on investor protection and the reduction of systemic risk, and in turn, guarantee that markets are fair, transparent, and efficient. CONSIDERING: That in its capacity as a member of the Organization for Economic Co-operation and Development (OECD), regarding Corporate Governance Principles, the regulation of the Dominican Republic must be based on achieving financial stability for countries and contributing to their healthy economic expansion. CONSIDERING: That the Dominican Republic has adopted the International Financial Reporting Standards (IFRS), which establish international standards for accounting and financial information. CONSIDERING: That Law No. 189-11 adds figures to the Securities Market and establishes new provisions that make it necessary to modify the current Regulation to guarantee regulation under the precepts indicated in said legislation and in turn allow the adequate development of the figures that allow the development of the Dominican mortgage market. CONSIDERING: That the figures of separate and autonomous assets must be ordered and adequate in their different forms and applications, in order to be able to develop effectively in the Dominican market. CONSIDERING: That in accordance with the new corporate provisions and good corporate governance practices, introduced under the General Law of Commercial Companies and Individual Limited Liability Enterprises No. 479-08 and its modifications, it is imperative to adapt the Implementation Regulation of the Securities Market Law, in order that it be in accordance with them and that market participants possess transparent and sustainable corporate governance.

_________________________________________________________________________ CONSIDERING: That in the Dominican Republic, the Securities Market has developed substantially, making it necessary that the figures evolve in accordance with international best practices in the matter, and in turn allow a healthy development of the Dominican Securities Market. CONSIDERING: That it is the function of the Securities Superintendence to disseminate all possible information as a goal for achieving market transparency by providing suitable surveillance and supervision tools for the market. CONSIDERING: That Regulation No. 729-04 is not in accordance with the provisions that tend to procure the protection of investors regarding the degree of information they must possess about the securities being traded and their issuers. Likewise, it shows insufficient regarding the scope and effects of public offering securities issuances and their placement and trading mechanisms. CONSIDERING: That international best practices regarding the regulation of the Securities Market require that rules be flexible and dynamic, so that they adapt to the constant needs of seeking alternative financing mechanisms and, in turn, to the diversification of investment and savings. CONSIDERING: That after a detailed process of market evaluation and the existing regulatory legal framework, the Securities Superintendence, having exhausted a deep study of all the figures contained therein, has determined that it is necessary to modify the current Regulation, in order that it guarantees adequate levels of transparency and efficiency, elements indispensable for the dynamization of the local Securities Market. CONSIDERING: That the Securities Superintendence served as a scenario for the exchange of observations and suggestions from market participants regarding the needs for essential regulations for its development and strengthening. SEEN: The Objectives and Principles for the Regulation of Securities Markets of the International Organization of Securities Commissions (IOSCO). SEEN: The Corporate Governance Principles of the Organization for Economic Co-operation and Development (OECD). SEEN: The International Financial Reporting Standards (IFRS). SEEN: The Constitution of the Dominican Republic, of January 26, 2010. SEEN: The Civil Code of the Dominican Republic. SEEN: The Commercial Code of the Dominican Republic.

_________________________________________________________________________ SEEN: The Law regulating the Securities Market in the Dominican Republic, No. 19-00, of May 8, 2000.
SEEN: The Monetary and Financial Law, No. 183-02, of November 21, 2002.
SEEN: Law No. 72-02, of June 7, 2002, on Money Laundering from Illicit Traffic in Drugs and Controlled Substances.
SEEN: The General Law of Commercial Companies and Individual Limited Liability Enterprises, No. 479-08, of December 11, 2008, modified by Law 31-11, of February 8, 2011.
SEEN: Law No. 189-11, for the Development of the Mortgage Market and Trusts in the Dominican Republic, of July 16, 2011.
SEEN: The Implementation Regulation of the Securities Market Law, No. 729-04, of August 3, 2004.
In exercise of the attributions conferred upon me by Article 128 of the Constitution of the Republic, I dictate the following:
IMPLEMENTATION REGULATION OF THE SECURITIES MARKET LAW TITLE I OF GENERAL PROVISIONS
CHAPTER I
GENERAL PROVISIONS
Article 1.- Object. The fundamental object of this Regulation is to establish the system that determines the organization and functioning of the Dominican Securities Market, in accordance with what is established in the Law regulating the Securities Market in the Dominican Republic, No. 19-00, of May 8, 2000 (hereinafter Law).
Paragraph. This Regulation establishes the provisions of a general nature that will guide the actions of the Securities Superintendence (hereinafter Superintendence) in the fulfillment of its responsibilities, regarding the object of trading of the Dominican Securities Market; the authorization and treatment of the public offering of securities and their issuers; the functioning of the primary and secondary securities markets; the organization, opening, and functioning of participants in the Securities Market and the supervision and oversight regime of them and of securities issuers; the

_________________________________________________________________________ sanctions system; the concepts for services provided to issuers and other market participants; as well as all aspects necessary to guarantee an adequate functioning of the Securities Market and an effective application of the Law.
Article 2.- Supplementary Framework. This Regulation will be supplementary to the Law, commercial legislation, and will have precedence over commercial and stock exchange usages.
Paragraph. The Superintendence is the competent body to interpret, for administrative purposes, the precepts of this Regulation and to provide whatever is required for its application.
Article 3.- Scope of Application. The following are subject to the regulation established in this Regulation:

1. Securities susceptible to being traded in the Dominican Securities Market, namely, all public offering securities, both in national and foreign currency, that are issued, traded, or commercialized in the national territory, by national or foreign issuers;
2. The Dominican primary securities market and all actors participating in this market;
3. The Dominican secondary securities market and all actors participating in this market;
4. Securities intermediaries:
   i. Securities agents.
   ii. Stock exchange seats.
5. Securities issuers;
6. Centralized securities depositories;
7. Securitization companies;
8. Investment fund management companies;
9. Trust entities that carry out public offerings of securities;
10. Stock exchanges;
11. Product exchanges;
12. Other participants in the Securities Market.

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Article 4.- Territorial Scope. The precepts of this Regulation, except for the exceptions contemplated in the current legal framework, apply to all securities offered or traded in the national Securities Market and to all participants intervening in the issuance and trading of these securities.
Article 5.- Language. The documentation submitted to the Superintendence, in accordance with what is established in the Law, this Regulation, and the general nature norms established by said institution, must be in the official language of the Dominican Republic, Spanish.
Paragraph. All documents and information drafted in another language must be translated into Spanish before being submitted to the Superintendence. These translations must be carried out by a judicial interpreter designated for this purpose by the interested party. In the event that such documents have a meaning that does not correspond with that of the original text and induces confusion or error, such action will constitute a serious offense by the acting judicial interpreter, who by this fact will commit his civil responsibility, without prejudice to the pertinent legal actions that may be promoted against all those persons who are found responsible for said facts.
CHAPTER II
OF DEFINITIONS
Article 6.- Definitions: For the purposes of this Regulation, the following definitions are established:
a) Underlying asset: In the scope of securitization, it is that composed of goods or assets generating determinable cash flows, with common characteristics, irrevocably transferred by the originator to the securitization company for the constitution of a separate asset.

_________________________________________________________________________ b) Underlying asset administrator of securitization: It is the securitization company or the legal entity delegated by said securitization company that is in charge of fulfilling the functions of conservation, custody, and administration of the goods or assets that make up the underlying asset of the separate asset, including the collection of cash flows derived from them. c) Placement agent: It is the securities agent or stock exchange seat that acts between the issuer and the investor with the object of carrying out the subscription of a securities issuance in the primary market. d) Payment agent for securitized securities: It is the entity in charge of paying investors of securitized securities. e) Investment fund contributor or Contributor: It is the investor of an investment fund and owner of the representative quotas of his contributions to it.

_________________________________________________________________________ f) Bonds: Are debt securities issued by public or private legal entities for a term greater than one (1) year. g) Certificate of quotas or subscription of quotas: Name of the physical document delivered to the investor upon subscribing to quotas of a mutual or open fund. h) Class: Is the set of similar rights and obligations and the same form of transfer, conferred to capital-representative securities of the same nature and proceeding from the same issuer. i) Securitization companies: Are anonymous societies, authorized by the Superintendence and registered in the Registry of the Securities and Products Market, whose exclusive object is the development of securitization processes from the acquisition of assets. In development of their object, securitization companies are empowered to acquire goods or assets within securitization processes, structure and administer securitization processes integrally, constitute separate assets, represent them, and issue and place securitized securities against them. j) Goods or assets sales contract or "sales contract": Is the contract signed between the originator or originators and the securitization company, through which the latter purchases from the former the goods and/or assets that will make up the underlying asset, thus initiating the securitization process. This contract will be an annex to the master issuance contract of the securitized securities program. k) Master issuance contract of the securitized securities program: In accordance with what is established in Law No. 189-11, it is the contract signed between the securitization company and the representative of securitized security holders, through which the creation of the separate asset is perfected, which remains legally and accountingly constituted on the date said subscription takes place. In this master issuance contract of the securitized securities program and its annexes, the particular conditions of the securitization process are established, according to the terms defined by the Superintendence through a general nature norm including, among other aspects, the granting of certification by the securitization company established in Law No. 189-11, the designation and acceptance of the representative of security holders, the conditions of the issuance, the rights and obligations of investors, the securitization company, the representative of security holders, and other participants in the securitization process. l) Participation quota: Is each of the aliquot parts, of equal value and characteristics, into which the asset of an investment fund is divided and which expresses the contributions of the contributors. m) Securitization ownership right: Is the ownership exercised in legal and accounting terms by the securitization company over the underlying asset, including all principal and accessory rights derived from it, in its capacity as administrator

_________________________________________________________________________ both of the separate asset formed by the underlying asset and of the securitization process originating it. The ownership right implies that the securitization company exercises the quality of holder of the underlying asset with the sole purpose that securities be issued against the separate asset through a securitization process. n) Fiduciary ownership: Is the right granted to the trustee to exercise full powers of administration and disposal over the goods or rights entrusted in accordance with the instructions and limitations established in Law No. 189-11 and in the constitutive act that gave rise to the trust. o) Securities issuance: Is the set of negotiable securities proceeding from the same issuer and forming part of the same financial operation, responding to a unit of purpose, attributing to their holders certain rights and obligations. p) Issuer of securitized securities: Is the securitization company that carries out issuances of securitized securities against the separate asset backing the respective issuance. The securitization company will not be liable for the results obtained from the securitization processes as indicated in this regulation. q) Investment grade: Refers to those ratings granted by a risk rating company, registered in the Registry of the Securities and Products Market, about issuers and their securities that due to their solvency status and historical payment relationship, are considered to have good credit quality and adequate or sufficient payment capacity, and are therefore recommended for investment under normal conditions. r) Risk group: According to Law No. 183-02, it is the set of two or more individual or legal persons linked or tied by reasons of ownership, administration, kinship, or control. s) Derivative instruments: Are financial instruments whose value derives from the price of some other title or underlying asset (interest rates, indices, currencies, among others) and in function of which the risks of an investment portfolio are managed. t) Institutional investors: Are financial intermediation entities, insurance and reinsurance companies, pension fund management companies, investment fund management companies, securities agents, stock exchange seats, trust societies registered in the Banking Superintendence or the Superintendence, securitization companies, as well as any legal entity that receives resources from third parties, mainly for investment purposes through the Securities Market. u) Product manual: is the written document of a private and confidential nature where it is compiled: (A) the foundation, determinants, integral conceptualization, legal basis, accounting treatment, and risk analysis of the product; and (B) the

_________________________________________________________________________ definition, description, instrumentation, and establishment of policies and standards inherent to the processes and activities required to constitute and institute a product. v) Public Acquisition Offer (PAO): Is that offer made by one or more natural or legal persons to the shareholders of a company whose shares are registered in the stock exchange, with the purpose of acquiring, directly or indirectly, in a single act or successive acts, a determined quantity of its shares, to reach a significant participation in said company, or increase the already reached. w) Public Sale Offer (PSO): Is that offer made by one or more natural or legal persons, with the object of transferring to the general public or to certain segments thereof, capital-representative securities previously issued or acquired. The public sale offer (PSO) takes place in the secondary market. x) Originator: Is one or more natural or legal persons, public or private, national or foreign, owners of goods or assets that transfer said goods or assets in an irrevocable manner to a securitization company for the development of a securitization process. y) Commercial paper: Are debt securities issued by private legal entities for a term not greater than one (1) year. z) Influential participation: For the purposes of this Regulation, it is considered to have an influential participation any natural person, legal person, or risk group that possesses, controls, or receives directly or indirectly ten percent (10%) or more of the ownership or of the results of the commercial exercise of the parties to which it is linked. aa) Autonomous asset: Is the asset of exclusive purpose, independent and separate, both legally and accountingly, from the asset of the legal entity that administers it and from any other asset that is under its administration, as well as from the asset of who constitutes it and from any other person who might have interest in the operation for which it was created. The transfer of goods to the asset is of an irrevocable character and they are unseizable. Additionally to what is established in this definition, each autonomous asset will consist of a denomination and own characteristics, in addition to particular qualities according to its application in the scope of investment funds, securitization, or public offering trusts. bb) Trusted asset: Is the autonomous asset formed by the goods and/or rights of a movable or immovable, corporeal or incorporeal nature, that the settlor has transmitted to the trustee for the constitution of a trust, as well as its fruits and accessories. The goods and/or rights transmitted by the settlor, the fruits they generate, and the goods incorporated during the validity of the trust, constitute the assets of the trust. When public offering securities are issued against the asset of the trust, it will have, from the moment of its constitution, an irrevocable character.

_________________________________________________________________________ cc) Separate asset: Is that autonomous, unseizable, and irrevocable asset whose constitution is perfected with the signing of the master issuance contract of the securitized securities program, so that against it, through a securitization company, said securities are issued. The transfer of goods to the asset is of an irrevocable character and they are unseizable. dd) Program of securitized securities issuances: Is the public offering of securities that consists of one or more successive issuances of securitized securities carried out against the same separate asset, formed by underlying assets transferred by one or more originators through a sales contract, within a determined period of time. ee) Asset range: Is the range in which an entity is located in a bracket of asset and risk guarantee, which indicates the level of capitalization and asset guarantees required to carry out a specific set of activities and operations that imply a determined level of risk. ff) Representative of securities in securitization processes or "representative of securitized security holders": Is the legal entity designated by the securitization company and that by virtue of what is established in the master issuance contract of the securitized securities program, acts on behalf of the holders of securities issued within a securitization process. It is in charge of supervising, in the name and on behalf of investors, the securitization process, in accordance with what is established in current regulations. Its designation and acceptance are recorded in the master issuance contract that it signs jointly with the securitization company, in compliance with Law No. 189-11, the Law, and this Regulation. gg) Securitization: Is the process of asset mobilization that consists of the grouping or packaging of goods or assets generating cash flows, through the creation of a separate asset administered by a securitization company, from which securitized securities are issued whose exclusive source of payment is the cash flow derived from such goods or assets, linked to the securitization process as an underlying asset. hh) Trust securities: Are securities issued against the asset of a trust previously constituted for that purpose. Said securities grant to the investors who acquire them a right or aliquot part, which is represented through fiduciary participations. Trust securities do not have a fixed yield, but qu