Banking Board of Ecuador

RESOLUTION No. JB-2015-3315

THE BANKING BOARD

CONSIDERING:

THAT through letters Nos. INSS-DASS3-2014-0171, INSS-DASS3-2014-0258, and INSS-DASS3-2014-0372, dated February 21, March 28, and May 2, 2014, respectively, the National Social Security Intendancy instructed the Administrator and Legal Representative of the Closed Complementary Pension Fund Association ASOPREP-FCPC to address the repeated complaints filed by several former participants of said Fund, represented by Mr. Vicente Aníbal Acosta Charro, by applying the third paragraph of Article 19 of Resolution No. SBS-2013-504 of July 7, 2013, given that the claiming former participants withdrew from PETROAMAZONAS EP, the employer entity, without meeting the retirement requirements;

THAT in response to the non-compliance with the instructions issued by this regulatory body through the aforementioned letters, the economist Mayra Alejandra Flores, Acting National Social Security Intendancy, through letter No. INSS-DASS3-2014-0508 of May 30, 2014, instructed the Administrator and Legal Representative of ASOPREP-FCPC as follows:

"(...) comply with what is provided in letter No. INSS-DASS3-2014-0171 of February 21, 2014; for which, it must additionally observe what is established in the Fourth Transitional Provision of Resolution No. SBS-2013-504, to which this Office referred through letter No. INSS-DASS3-2014-0222 of March 12, 2014.

You are hereby warned for the last time regarding the imposition of sanctions for the repeated non-compliance with provisions issued by this Regulatory Body; it is pertinent to cite what is provided in Article 53, second paragraph, and Article 54 of the repeatedly cited Resolution No. SBS-2013-504 (...)

Finally, within a term of five (5) days counted from the receipt of this letter, you must submit a documented report on the compliance with what is established in this letter."

THAT through a communication dated June 11, 2014, received at the Superintendence of Banks and Insurance on the 13th of the same month and year, the economist María del Carmen Quevedo Tobar, Administrator and Legal Representative of the Closed Complementary Pension Fund Association ASOPREP-FCPC, filed an administrative review appeal before the Banking Board against the administrative act contained in letter No. INSS-DASS3-2014-0508 of May 30, 2014, based on Articles 66, numeral 23, and 76, numeral 7, letter l), of the Constitution of the Republic of Ecuador, and on Article 28 of the State Modernization Law;

THAT in response to the communication of July 9, 2014, with which the appellant rejected the non-acceptance for processing of the administrative review appeal filed, allegedly due to being untimely, notified by letter No. JB-2014-1634 of June 26, 2014, the Secretary of the Banking Board, through letter No. JB-2014-1824 of July 14, 2014, accepted the administrative review appeal for processing, as it has not been possible to verify that the appealed letter was duly notified in the offices of ASOPREP-FCPC, and communicated to the appellant that they may present additional documentation within a term of fifteen days from being notified with that letter;

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THAT from the written administrative review appeal filed, which contains extensive and repetitive assertions of fact and law, the following arguments can be fundamentally extracted: violation of the principle of non-retroactivity of the law; repeated order from the regulatory body to pay twice to the former participants of the Fund; lack of response to letter No. 0432-FP-2014 of April 2, 2014, with which a request for extension or prudent deadline was made to comply with several obligations of the Administration of ASOPREP-FCPC, among them, attending to the claims of the former participants; and, notification of contradictory criteria by the regulatory body;

THAT this challenge is resolved in accordance with the First Transitional Provision of the Organic Monetary and Financial Code, published in the Second Supplement of the Official Register No. 332 of September 12, 2014, whose text states that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, and norms issued by regulatory bodies, will maintain their validity in all that does not oppose what is established in the Organic Monetary and Financial Code, until the Monetary and Financial Policy and Regulation Board resolves what corresponds, according to the case; and with the second paragraph of the Third Transitional Provision, which states that the Banking Board will continue to act until resolving all claims, appeals, and other administrative procedures it was hearing as of the date of entry into force of the same, within a term of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT through Resolution No. SBS-2013-504 of July 9, 2013, the Superintendence of Banks and Insurance issued the "Norms for the Constitution, Registration, Organization, Operation, and Liquidation of Closed Complementary Pension Funds," whose Articles 19, 53, and 54; and Transitional Provisions Second and Fourth, applicable to the present administrative review appeal, provide:

"ARTICLE 19.- The liquidation of the individual account of a pension fund occurs when a participant meets the requirements established in its statutes to qualify for retirement.

In the case where the participant withdraws from the fund but continues their labor relationship with the same employer, pension funds must provide in their statutes the maximum number of participants that can withdraw each year, the minimum time and/or amount of stay and accumulation, considering the effects on liquidity requirements. The return of personal contributions and their respective returns shall be gradual and may not exceed 50% of the amount registered as personal contributions and returns. The remainder of personal contributions plus employer contributions shall remain in a differentiated account, in which returns will accumulate until the date on which the retired condition is met, according to the fund's statutes.

In the case of termination of employment, without having met the requirements contemplated in their statutes to access retirement, the funds shall deliver to the participant the personal contributions and their respective returns. The employer contributions shall be delivered to the participant affected by a discount that may not exceed 50% of the employer contributions, registered in their favor, at the moment the labor relationship ends. (emphasis added)"

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The remaining balance of employer contributions to be collected by the fund shall be registered in a differentiated account, in which returns will accumulate until the date on which the retired condition is met, according to the fund's statutes."

"ARTICLE 53.- The Superintendent of Banks and Insurance may declare the supervening disqualification of the members of the board of directors, members of the risk committee, investment committee, benefits committee, audit committee, and legal representatives of closed complementary pension funds, who are found to be subject to legal or regulatory impediments or disqualifications, without prejudice to civil and criminal liabilities that may arise.

Similarly, it may order the removal if the officials cited in the previous paragraph have committed infractions of the law and other applicable provisions, or have been imposed repeated fines, or have shown manifest reluctance to comply with provisions issued by the Superintendence of Banks and Insurance, or have altered or distorted their financial statements, or hindered supervision, or carried out operations that foster or involve illicit acts, or have executed any serious act that makes one fear for the stability of the complementary funds.

If within a term of three (3) days from the removal, the competent body is not convened to designate the removed officials, the Superintendence of Banks and Insurance will proceed to convene it."

"ARTICLE 54.- The members of the board of directors, and the members of the risk committee, investment committee, benefits committee, audit committee, as well as the legal representatives who do not comply with the provisions of this chapter, shall be sanctioned, without prejudice to administrative, civil, or criminal liabilities that may arise."

TRANSITIONAL PROVISIONS:

"SECOND.- Closed complementary pension funds registered in the Superintendence of Banks and Insurance will present a schedule for compliance with the statutory reform to which they are obligated by provision of this chapter, within thirty days after the publication of this resolution in the Official Register.

Closed complementary pension funds registered in the Superintendence of Banks and Insurance must have their statutes approved by May 31, 2014."

"FOURTH.- Those pension funds that, as of the date of issuance of this norm, were administering resources whose purpose is to grant employer pensions established in the Labor Code, must return them to the employer entity.

For this effect, within a term not exceeding ninety (90) days counted from the publication in the Official Register of this norm, the fund must determine the amount to be returned to the employer, for which it will coordinate with the employer entity."

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Once the amount to be returned is determined, the fund will present to the Superintendence of Banks and Insurance the schedule for the return of values, which shall not exceed one hundred and eighty (180) days, from the date on which it was determined.

In the case that during this period any of the affiliates meet the conditions for the right established in the Labor Code, the fund must deliver to the employer the value received in administration plus their respective returns, so that the employer entity complies with what is established in said Code.

The contributions made by the participant to the closed complementary pension fund, plus their respective return, will not be considered in the amount to be returned to the employer;

THAT the appellant's argument that in this matter the principle of non-retroactivity of the law has been violated is inadmissible, since the National Social Security Intendancy through letter No. INSS-DASS3-2014-0171 of February 21, 2014, clearly disposed: "Resolution No. SBS-2013-504 of July 7, 2013 (sic) governs from its publication in the Official Register; that is, from August 7, 2013; therefore, closed complementary pension funds must comply with what is stipulated in said norm, and in the case at hand, which refers to termination of employment, without having met the requirements contemplated in their statutes to access retirement, the application of the third paragraph of Article 19 of the same corresponds, without it being an indispensable requirement for this effect to complete the electoral process and the statutory reform you mention in your letter";

THAT it has not been disposed, as the appellant states, to "pay twice and repeatedly" to the former participants of the Fund, given that through letter No. INSS-DASS3-2014-0508 of May 30, 2014, what the Acting National Social Security Intendancy disposed was: "(...) observe complementarily what is established in the Fourth Transitional Provision of Resolution No. SBS-2013-504 (...) and submit a documented report on the compliance with what is established in this letter.";

THAT the National Social Security Intendancy, in technical report No. INSS-2014-1335 of September 19, 2014, states: "(...) if the personal contributions plus the returns of the individual accounts of the claimants were liquidated, according to the regulations in force at the date of their separation from the Fund, Economist María del Carmen Quevedo should have informed us with the pertinent documentation of each case, since these are people who did not yet meet the statutory requirements to access retirement, although they ended their labor relationship (...), and additionally, inform us about the compliance with the Fourth Transitional Provision of Resolution No. SBS-2013-504. Which, up to the present date, has not been done, ratifying once again their total reluctance to comply with resolutions emanating from the regulatory body and particularly the express provisions issued by this office.";

THAT regarding the appellant's argument that letter No. 0432-FP-2014 of April 2, 2014, was not answered, with which a request for extension or prudent deadline was made to comply with several obligations of the Administration of ASOPREP-FCPC, among them, attending to the claims of the former participants, it is worth clarifying that in the second paragraph of the appealed letter, the Acting National Social Security Intendancy clearly manifested the following:

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"Additionally, on this occasion, in compliance with the summary inserted by the Superintendent of Banks and Insurance in his letter No. 0432-FP-2014 of April 2, 2014, (...) I give response to said communication; as well as to letter No. 0790-FP-2014 of May 8, 2014, received on the 12th of the same month and year (...)";

THAT as part of the "ANALYSIS" of letter No. INSS-DASS3-2014-0508 of May 30, 2014, the appellant was also told: "(...) you have been delaying both the responses to the letters sent and the effective compliance with what is established, pretending to subordinate it to the completion of an electoral process extremely delayed even before the issuance of the invoked norm, to the subsequent qualification of new members of the Board of Administration, to the statutory reform that would take place and to its approval by the Superintendence of Banks and Insurance; in short, a permanent attitude of non-compliance with the provisions emanating from this Office regarding the matter that constitutes the subject of the present letter is evident." For the reasons stated, the argument is inadmissible;

THAT regarding the alleged notification of contradictory criteria by the regulatory body, referred to by the appellant mentioning several letters sent by the National Social Security Intendancy to different Complementary Pension Funds, with which various consultations formulated by them were attended to, it must be indicated, as affirmed by engineer Herbozo in the technical report, that some of the cited letters correspond to the first semester of the year 2013 and even to the year 2012. "Consultations that were satisfied in application of the regulations in force at the date, that is, prior to the current Resolution No. SBS-2013-504 of July 9, 2013, published in the Official Register No. 53 of August 7, 2013.";

THAT regarding the documentation provided within the present administrative review appeal by the former participants of ASOPREP-FCPC, the National Social Security Intendancy, through the technical report contained in memorandum No. INSS-2014-1335 of September 19, 2014, informs that prior to the communication of August 7, 2014, in which the former participants request the President of the Banking Board to confirm the appealed administrative act, this Office addressed them with letter No. INSS-DASS3-2014-0670 of July 8, 2014, in which it was explained why the pension entity was instructed to give "(...) compliance to what is provided in letter No. INSS-DASS3-2014-0171 of February 21, 2014; for which it must observe complementarily what is established in the Fourth Transitional Provision of Resolution No. SBS-2013-504, to which this Office referred through letter No. INSS-DASS3-2014-0222 of March 12, 2014.";

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2014-1045 of December 19, 2014, recommended to the Banking Board to reject the claim contained in the appeal filed by the Administrator and Legal Representative of the Closed Complementary Pension Fund Association ASOPREP-FCPC; and,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the administrative review appeal filed by the economist María del Carmen Quevedo Tobar, Administrator and

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Legal Representative of the Closed Complementary Pension Fund Association ASOPREP-FCPC, as of that date; and, consequently, CONFIRM the administrative act contained in letter No. INSS-DASS3-2014-0508 of May 30, 2014, through which the Acting National Social Security Intendancy warned, for the last time, the Administrator and Legal Representative of the Closed Complementary Pension Fund Association ASOPREP-FCPC, of applying the sanctions contemplated in Articles 53 and 54 of Resolution No. SBS-2013-504 of July 9, 2013.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on March 25, 2015.

Signature

Econ. Rodrigo Laredeta Parra ACTING GENERAL INTENDANT PRESIDENT OF THE BANKING BOARD SESSION (E)

I CERTIFY.- Quito, Metropolitan District, on March 25, 2015.

Signature

Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD