Law No. 29781 on Strengthening the Supervision of the Securities Market

El Peruano
Lima, Thursday, July 28, 2011
LEGAL NORMS
447525

LEGISLATIVE POWER

CONGRESS OF THE REPUBLIC

LAW No. 29781

THE PRESIDENT OF THE REPUBLIC

WHEREAS:

THE PERMANENT COMMISSION OF THE CONGRESS OF THE REPUBLIC; Has enacted the following Law:

LAW ON STRENGTHENING THE SUPERVISION OF THE SECURITIES MARKET

Article 1. Change of name
The name National Supervisory Commission of Companies and Securities (Conasev) is replaced by the Superintendency of Securities Market (SMV).
All references to Conasev contained in Legislative Decree 21907, On Collective Fund Management Companies Controlled by CNSEV; in Legislative Decree 26126, Consolidated Single Text of the Organic Law of the National Supervisory Commission of Companies and Securities; in Legislative Decree 861, Securities Market Law; and its Management Companies; in Law 26361, Product Exchange Law; and in other legal or regulatory norms, must be understood as referring to the Superintendency of Securities Market (SMV). Likewise, all references in the aforementioned norms to the Board of Directors of Conasev must be understood as referring to the Superintendent of the Securities Market. The Board of Directors of the SMV maintains only the attributions referred to in Article 5 of the Consolidated Single Text of the Organic Law of the National Supervisory Commission of Companies and Securities, approved by Legislative Decree 26126.

Article 2. Amendments to the Consolidated Single Text of the Organic Law of the National Supervisory Commission of Companies and Securities, approved by Legislative Decree 26126

Articles 1, 2, 3, 4, 5, 6, 8, 9 and 10, paragraphs a) and e) the penultimate paragraph of Article 18 of the Consolidated Single Text of the Organic Law of the National Supervisory Commission of Companies and Securities, approved by Legislative Decree 26126, are replaced by the following texts:

"Article 1. Definition, purpose and functions of the Superintendency of Securities Market (SMV) The Superintendency of Securities Market (SMV) is a specialized technical body attached to the Ministry of Economy and Finance whose purpose is to ensure the protection of investors, the efficiency and transparency of the markets under its supervision, the correct price formation and the dissemination of all necessary information for such purposes, through regulation, supervision and promotion. It has internal public law legal personality and enjoys functional, administrative, economic, technical and budgetary autonomy, constituting a budgetary entity. Its operation is governed by the provisions contained in this Law and its organizational and functions regulation. The functions of the Superintendency of Securities Market (SMV) are the following:

a. To issue legal norms that regulate matters of the securities market, product market and collective funds system. b. To supervise compliance with the legislation of the securities market, product market and collective funds systems by natural and legal persons participating in said markets.
Natural or legal persons subject to the supervision of the Superintendency of Banking, Insurance and Private Pension Fund Administrators (SBS) are also subject to the Superintendency of Securities Market (SMV) in aspects that involve participation

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in the securities market under the supervision of the latter.
c. To investigate and study the securities market, the product market and the collective funds system.

Likewise, it is the responsibility of the Superintendency of Securities Market (SMV) to supervise compliance with international auditing standards by auditing firms authorized by a public accountants' association of Peru and contracted by natural or legal persons subject to the supervision of the SMV in compliance with the norms under its competence, for which it may issue general provisions consistent with the aforementioned international auditing standards and require any information or documentation to verify such compliance.- The Superintendency of Securities Market (SMV) has its legal domicile in the city of Lima and may establish offices anywhere else in the Republic for the better fulfillment of its purposes. The establishment of such decentralized offices does not alter the determination of its actual domicile in the city of Lima for the purposes of its summons in judicial proceedings.

Article 2. Appointment and removal of the Superintendent of the Securities Market
The highest executive authority and head of the budgetary entity is the Superintendent of the Securities Market, who presides over the institution's Board of Directors and exercises the official representation of the Superintendency of Securities Market (SMV). The Superintendent is appointed by the Executive Power by supreme resolution endorsed by the Minister of Economy and Finance. They hold the position for a period of six years, not renewable for the immediate period. They will continue in office until their successor is appointed. The exercise of the position is remunerated and on an exclusive dedication basis, with the exception of teaching. To be appointed Superintendent of the Securities Market, one must be a Peruvian citizen, enjoy full exercise of civil rights, have recognized solvency and moral suitability, as well as possess extensive competence in economics, finance and the securities market. If for any reason they do not complete the period for which they were appointed, their replacement will be appointed within sixty days after their cessation, who will hold the position until the end of their predecessor's term. The removal of the Superintendent of the Securities Market is carried out by the Executive Power by supreme resolution endorsed by the Minister of Economy and Finance, in the following cases:

1. When, in the exercise of their functions, they have incurred in a duly proven and substantiated serious offense, determined by the Minister of Economy and Finance.
2. When a firm order of definitive detention is issued against them.

The following constitute serious offenses of the Superintendent of the Securities Market:

a. Failure to adopt the necessary measures to sanction, as appropriate, those who, without the corresponding authorization, carry out exclusive activities of persons authorized by the Superintendency of Securities Market (SMV). b. Incurring in the impediments established in paragraphs a) to n) of Article 6 and the prohibitions established in Article 8.
c. Failure to sanction natural or legal persons who infringe the norms under the competence of the Superintendency of Securities Market (SMV) when it has duly proven information that reliably demonstrates the committed infringement.

Article 3. Attributions of the Superintendent of the Securities Market

The attributions or faculties of the Superintendent of the Securities Market are the following:

1. To grant the respective organization and operation authorizations to legal entities subject to its supervision.
2. To authorize the operation of centralized negotiation mechanisms.
3. To maintain the Public Registry of the Securities Market and others necessary for the fulfillment of its functions.
4. To exercise consolidated supervision of the legal entities to which it grants operating authorization and the companies controlled by said authorized person. This provision does not apply to companies whose consolidated supervision corresponds to the Superintendency of Banking, Insurance and Private Pension Fund Administrators, in accordance with Law 26702, General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance, and other complementary norms.
5. To require authorized legal entities information about private offers they make or those they make on behalf of the assets under their administration.
6. To summon and interrogate any person who may contribute to the success of investigations carried out by the Superintendency of Securities Market (SMV) or another foreign securities market supervisory body with whom it has signed an inter-institutional collaboration agreement. Any person who, without justification, fails to appear for the summons or refuses to answer or provide the required information, incurs in the automatic imposition of a coercive fine of up to five tax units (UIT). Said fine must be paid within five business days of notification, after which coercive collection will be generated. If the obligated party persists in non-compliance, a new coercive fine will be imposed, successively and unlimitedly doubling the amount of the last coercive fine imposed until they appear or respond to the interrogation, as the case may be, and without prejudice to reporting them to the Public Ministry for the initiation of the corresponding criminal proceedings. The coercive fines imposed, not being sanctioning in nature, do not prevent the Superintendency of Securities Market (SMV) from imposing a sanction at the end of the procedure, if applicable.
   The Superintendency of Securities Market (SMV) may use technical and legal means to generate a complete and reliable record of statements, and may record statements or declarations for this purpose.
7. To order inspections and inspections with prior notification, or without it.
   For the exercise of the inspection power referred to in the preceding paragraph, the Superintendency of Securities Market (SMV) may examine, by the means it deems necessary, books, accounts, files, documents, correspondence and, in general, any other information that is necessary for the fulfillment of its functions. For this purpose, the company and its representative have the obligation to provide the personnel in charge of inspections with all the facilities required for the fulfillment of their task. The refusal, resistance or non-compliance of the obligated parties, provided it is duly accredited, gives rise to the imposition of any of the sanctions set forth in Legislative Decree 861, Securities Market Law. It may also require all background information it deems necessary to inform itself about their financial situation, resources, administration or management, the actions of their representatives, the degree of security and prudence with which investments are made and, in general, any other matter that, in its opinion, should be clarified. Testimony from third parties may also be received

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and they may be asked to exhibit books and documents, a diligence that will be carried out within the limits established by Article 47 of the Commercial Code.
8. To administratively intervene premises where exclusive activities of persons authorized by the Superintendency of Securities Market (SMV) are presumed to be carried out without said authorization, and to proceed with the closure of their offices. For this purpose, the attributions referred to in numeral 7 will be available.
9. To impose sanctions on those who contravene the norms under its competence.
The Superintendency of Securities Market (SMV) may issue precautionary or corrective measures ex officio or at the request of a party, as well as refrain from initiating a sanctioning procedure in case of minor infringements if, at the time of detecting the infringement, it has been reversed or remedied, provided that the conditions of admissibility established in the corresponding regulation are met and said fact is communicated to the administered party, or if the corrective measures issued by the Superintendency of Securities Market (SMV) in application of Article 358 of Legislative Decree 861, Securities Market Law, have been complied with. The Superintendency of Securities Market (SMV) may impose sanctions in a single instance through the Administrative Tribunal or body determined in the organizational and functions regulation. Preliminary inquiries prior to the initiation of the sanctioning procedure are confidential.
10. To require legal entities to which it grants operating authorization, a level of operational capital based on the risks assumed in accordance with the general provisions it approves. The Superintendency of Securities Market (SMV) regulates the capital levels that make up the operational capital of said companies, as well as the requirements that the referred concepts must meet.
11. To require legal entities to which it grants operating authorization amounts greater than the guarantees required in Legislative Decree 861, Securities Market Law; Legislative Decree 862, Investment Funds and their Management Companies Law; Law 26361, Product Exchange Law; and Legislative Decree 21907, On Collective Fund Management Companies Controlled by CNSEV; based on the operations and risks they assume, or the substitution of these when circumstances exist that jeopardize their validity, effectiveness or execution, the Superintendency of Securities Market (SMV) being empowered to execute them when the causes for execution are verified or if the substitution of the same does not occur after the granted term has expired. Said guarantees are unseizable. By means of general norms, the SMV regulates the cases where greater amounts of guarantees are exigible and the concepts that can integrate them.
12. To authorize the transfer of ownership of shares issued by legal entities to which it grants operating authorization, as well as the acquisition of shares due to capital increases that involve the entry of a new shareholder or any act of encumbrance, trust, management agreements or other legal act regarding said securities that grants a third party, directly or indirectly, the capacity to manage or exercise voting rights in the authorized company in accordance with the general norms approved by the Superintendency of Securities Market (SMV). The SMV, by means of general norms, will regulate this article, being able to establish minimum share percentages from which the aforementioned authorization must be requested, as well as the cases in which said authorization is not justified.
13. To impose coercive fines in accordance with the provisions of Law 27444, General Administrative Procedure Law. The coercive fine will be fixed in each case. At the time of its imposition, the term available to the sanctioned party to comply with the act whose execution is required will be established. Once said term has expired, without the required act having been executed, a new fine will be imposed for an amount five percent greater than the previous fine.
14. To automatically suspend the operating authorization granted to legal entities under its supervision and control, without the need to initiate a sanctioning administrative procedure, in the following cases: i) When they cease to observe any of the necessary requirements for their operation; ii) when the operational capital of their shareholders incurs an impediment or ceases to comply with the requirements established by the regulations; iii) When there is non-compliance with the precautionary or corrective measures ordered by the Superintendency of Securities Market (SMV); and iv) When there is non-observance of what is indicated in numerals 10 and 11. This decision is unappealable in the administrative sphere. In case the non-compliance that originates said suspension persists, the SMV may revoke the operating authorization without the need to initiate a sanctioning administrative procedure.
15. To enter into agreements, memoranda of understanding and contracts that are necessary with foreign securities market supervisory bodies and for the institutional purposes of the Superintendency of Securities Market (SMV).
16. To share information regarding its supervised entities with the Central Reserve Bank of Peru for the exclusive use of said entity, within the framework of its respective competence and provided there is a reciprocal collaboration and information exchange agreement. Said information will be protected by the duty of identity reservation contemplated in Legislative Decree 861, Securities Market Law.
17. To share information regarding its supervised entities with other foreign supervisory bodies with whom the Superintendency of Securities Market (SMV) has signed reciprocal collaboration agreements or memoranda of understanding. Said information may include that protected by the duty of reservation and also the testimonial declarations that may have been taken in the exercise of the SMV's functions.
18. To hire, suspend, remove or dismiss the personnel of the Superintendency of Securities Market (SMV), as well as to fix their remunerations, within the framework of current legal provisions.
19. To designate, among the deputy superintendents, the official who must substitute them due to absence or impediment.
20. To program, formulate and propose to the Board of Directors, for its approval, the annual budget of the Superintendency of Securities Market (SMV), as well as to execute it within the framework of current budgetary regulations.
21. To approve, by resolution of the Superintendent of the Securities Market, the table of personnel allocation (CAP), the Single Text of Administrative Procedures (TUPA) and other internal norms of the institution, based on the guidelines that regulate the current norms on the matter.
22. To propose the organizational and functions regulation to the corresponding instances and in accordance with the guidelines that regulate the current norms on the matter.
23. To require from public departments and state entities the reports it deems necessary, as well as to contract the services of experts and technicians.
24. To administer and collect contributions for the maintenance of the Superintendency of Securities Market (SMV), as well as its interests and late payment charges.

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25. To approve operational policies, programs and the General Supervision and Inspection Plan.
26. To exercise coercive enforcement attributions over natural or legal persons subject to supervision, in accordance with Law 26979, Coercive Enforcement Procedure Law.
27. To exercise other faculties and attributions that may be delegated by the Board of Directors.
28. To delegate any of the aforementioned attributions to the officials or bodies it deems convenient.

Article 4. Appointment and removal of the Board of Directors of the Superintendency of Securities Market (SMV)
The Board of Directors is the body of the Superintendency of Securities Market (SMV) responsible for approving institutional policies and objectives, as well as the regulations applicable to the markets under the SMV's competence. It is composed of the Superintendent of the Securities Market, who presides over it, and four directors appointed by the Executive Power by supreme resolution endorsed by the Minister of Economy and Finance; one at the proposal of the Ministry of Economy and Finance, one at the proposal of the Central Reserve Bank of Peru and one at the proposal of the Superintendency of Banking, Insurance and Private Pension Fund Administrators (SBS). In addition, an independent director is a member of the SMV Board of Directors, who must not have conflicts of interest or be professionally linked to matters under the SMV's competence. The SMV will issue the regulatory provisions for the appointment of the independent director. The members of the Board of Directors do not represent the interests of the entity from which they come nor any particular interest. To be appointed director, one must be a Peruvian citizen, enjoy full exercise of civil rights, have recognized solvency and moral suitability, as well as possess extensive competence in economics, finance and the securities market. The directors hold the position for a period of six years, not renewable for the immediate period, and will receive a per diem. The director who concludes their period may continue in office until their successor is appointed. If for any reason they do not complete the period for which they were appointed, their replacement will be appointed within sixty days after their cessation, who will hold the position until the end of their predecessor's term. The removal of a member of the Board of Directors is carried out by the Executive Power by supreme resolution endorsed by the Minister of Economy and Finance in the following cases:

1. When in the exercise of their functions they have incurred in a serious offense, duly proven and substantiated, determined by the Minister of Economy and Finance.
2. When a firm order of definitive detention is issued against them.

Incurring in the impediments and prohibitions established in Articles 6 and 8 constitutes a serious offense for the director.
The quorum for the sessions of the Board of Directors of the Superintendency of Securities Market (SMV) is three members. Agreements are adopted by an absolute majority of those present.

Article 5. Attributions of the Board of Directors of the Superintendency of Securities Market (SMV)
The attributions of the Board of Directors of the Superintendency of Securities Market (SMV) are the following:

a) To approve institutional policies and objectives. b) To approve the regulations of the securities market, product market and collective funds system, as well as those to which natural and legal persons subject to the supervision of the Superintendency of Securities Market (SMV) must adhere. Likewise, to interpret, administratively, adhering to the provisions of common law and general principles of law, the scope of the legal norms that govern natural and legal persons under its supervision. c) To issue norms for the preparation and presentation of individual and consolidated financial statements that govern natural and legal persons under its supervision, ensuring that they reasonably reflect the financial situation, operating results and cash flows of the companies and entities included within its scope of supervision, in accordance with international financial reporting standards (IFRS), as well as to control their compliance. This norm does not apply to entities participating in the securities market and that are under the competence of the Superintendency of Banking, Insurance and Private Pension Fund Administrators (SBS). d) To typify the infringing conduct of those participating in the securities market, product market, collective funds systems and other matters under its competence, observing the provisions of Articles 343, 349, 350 and 351 of Legislative Decree 861, Securities Market Law. e) To propose, through the Ministry of Economy and Finance, draft laws on matters within its institutional competence. f) To establish the rights and contributions for the maintenance of the Superintendency of Securities Market (SMV), in accordance with the provisions of Article 18, as well as to determine the form, place and term for the fulfillment of said obligations. g) To approve the annual budget of the Superintendency of Securities Market (SMV), in accordance with Article 18, as well as the modifications, as well as to control said budget. h) To approve the final statements

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