Agreement No. 6-2023 of July 5, 2023 Modifying Articles 14, 17, 37, 38, and 39 of Agreement No. 5-2004 and Article 2 of Agreement No. 2-2010

REPUBLIC OF PANAMA
BOARD OF DIRECTORS
SECURITIES MARKET SUPERINTENDENCE

Agreement No. 6-2023
(Of July 5, 2023)

"Modifying Articles 14, 17, 37, 38, and 39 of Agreement No. 5-2004 of July 23, 2004, and Item 4 of Article 2 of Agreement No. 2-2010 of April 16, 2010"

The Board of Directors
of the Securities Market Superintendence,
in exercise of its legal powers, and

CONSIDERING:

That Law 67 of September 1, 2011, reformed Decree-Law 1 of July 8, 1999, and created the Securities Market Superintendence (hereinafter: the Superintendence), as an autonomous state entity, with legal personality, own assets, and administrative, budgetary, and financial independence.

That the Superintendence, by virtue of Article 3 of the Single Text of the Securities Market Law (hereinafter Single Text), has the general objective of regulating, supervising, and auditing the activities of the securities market developed in the Republic of Panama or from it, promoting legal certainty for all market participants and guaranteeing transparency, with special protection of investors' rights.

That the Board of Directors of the Superintendence, in accordance with Articles 6 and 10 (Item 1) of the Single Text, acts as the Highest Consultative Body for regulation and setting of the Superintendence's general policies, and among its attributes are the following:

*"Article 10. Attributes. The attributes of the Board of Directors are:

1. To adopt, reform, and revoke agreements that develop the provisions of the Securities Market Law.
   ..."*

That regarding the modification to Agreement No. 5-2004 of July 23, 2004, we have:

That Article 164 of the Single Text, regarding the calculation of the net value per share of investment societies registered with the Superintendence, establishes the following (we highlight the emphasized part):

"Article 164. Net value per share....
...
In order to calculate the net value per share, the assets and liabilities of registered investment societies shall be valued based on rules issued to that effect by the Superintendence, through agreement, with the objective of establishing homogeneity in the market and protecting the interests of the investing public. Within what is practical and reasonable, assets shall be evaluated at market value."

That Agreement No. 5-2004 of July 23, 2004, which regulates the registration, operation, and activities of investment societies, establishes in its Articles 14, 17, 37, 38, and 39, the duty to contract the services of a price-providing entity for the determination of asset prices, which allow valuing the investment portfolio and calculating the net value per share.

That Agreement No. 1-2014 of May 28, 2014, creates the category of venture capital investment society and, in its Article 14, establishes for these the valuation of assets as follows:

"Article 14 (Valuation of Assets)

*The valuation of the Permitted Investments of the Venture Capital Investment Society shall be carried out according to their effective value, in accordance with criteria of maximum prudence and applying valuation methods generally admitted in practice and in conformity with the International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles in the United States of America (US GAAPs) authorized by the Superintendence or any other norms authorized by the Superintendence. The valuation of the Permitted Investments shall be carried out, at least, one (1) time per year; and its support shall be preserved for a period no less than four (4) years from the realization of the valuation and be available to the Superintendence.

If necessary, for the valuation of the Permitted Investments and the Incidental Investments, the Venture Capital Investment Society may use the services of Price-Providing Entities duly registered with the Superintendence."*

That Agreement No. 2-2014 of August 6, 2014, creates the category of real estate investment society and, in its Article 10, establishes for these the valuation of assets as follows:

"Article 10 (Valuation of Assets)

*In order to calculate the net value per share, the valuation of the assets and liabilities of the Real Estate Investment Society shall be carried out in conformity with the following rules:

1. The Permitted Investments shall be valued according to appraisals prepared by duly authorized appraisal companies. These appraisals shall be carried out, at least, one (1) time per year, as well as on the occasion of acquisition and/or sale of the asset; and its support shall be preserved for a period no less than four (4) years from the realization of the valuation and be available to the Superintendence.
2. The Incidental Investments shall be valued in conformity with the provisions established in Article 37 of Agreement 5-2004 of July 23, 2004.

In the absence of a market price, the Real Estate Investment Society may use the services of Price-Providing Entities duly registered with the Superintendence."*

That the Superintendence, based on the legal attribute fixed in Article 164 of the Single Text, has seen the importance of adapting Articles 14, 17, 37, 38, and 39 of Agreement No. 5-2004 of July 23, 2004, relating to the calculation of the net value of participation shares and the valuation of assets and liabilities of registered investment societies, in such a way that this valuation is consonant with the asset measurement methodology established in the International Financial Reporting Standards (IFRS).

That regarding the modification to Agreement No. 2-2010 of April 16, 2010, we have:

That the Superintendence, through Agreement No. 2-2010 of April 16, 2010, adopted the procedure for the presentation of registration requests for securities and termination of registration before this Administrative Authority.

That through Agreement No. 3-2017 of April 5, 2017, a modification was made to the second paragraph of Item 4 of Article 2 of Agreement No. 2-2010 of April 16, 2010, incorporating within the documentary requirements that must be provided in securities registration requests that are subject to public offering, that in the case of investment societies, it will be necessary only the information of the effective owners and final beneficiaries of the participation shares with political or control rights.

That the Superintendence has seen the importance of modifying the wording of the requirement established in the second paragraph of Item 4 of Article 2 of Agreement No. 2-2010 of April 16, 2010, with the objective of clarifying its scope, in the sense that the issuer, which maintains within its shareholding composition investment societies, provides the information of the effective owners and final beneficiaries of the participation shares with political or control rights.

That it should be noted that Article 323 of the Single Text establishes that when the Superintendence contemplates adopting an Agreement, it must consider to determine if the action is necessary and appropriate: (a) the public interest, (b) the protection of investors, and (c) if the action promotes efficiency, market competition, and capital formation.

That taking into account that the provisions contemplated in this Agreement are limited to clarifying the scope of the valuation rules of investment societies and eliminating restrictions for the registration of self-administered investment societies, as well as clarifying the scope of the norm described in the second paragraph of Item 4 of Article 2 of Agreement No. 2-2010, it corresponds to apply what is established in Article 326 of the Single Text, regarding actions that grant an exemption or eliminate any restriction, so that the provisions contained in Title XV, regarding the "Administrative Procedure for the Adoption of Agreements," will not be applicable to this agreement.

That, by virtue of the foregoing, the Board of Directors of the Securities Market Superintendence, in exercise of its legal powers,

RESOLVES:

ARTICLE FIRST: MODIFY Article 14 of Agreement No. 5-2004 of July 23, 2004, which will remain as follows:

Article 14. Requirements for the registration of self-administered investment societies.

In the case of investment societies that will assume their own administration, they must comply with the following requirements:

1. Have a Board of Directors or its equivalent formed by no less than three (3) members. All of them persons of recognized business or professional honorability. At least one-third of the members of the Board of Directors must also have adequate knowledge and experience in matters related to the securities market or the financial sector in general. Such honorability, knowledge, and experience will also be required in the other main executives of the entity, as well as, in their case, in the natural persons who represent the legal persons in the Boards of Directors or their equivalents.

   It will be understood that they have commercial and professional honorability those who have maintained a personal trajectory of respect for commercial laws or others that regulate economic activity and business life, as well as good commercial and financial practices.

   In any case, it will be understood that such honorability is lacking who is subject to any of the following causes of incapacity to hold positions:
   a. That in the last ten (10) years they have been convicted in the Republic of Panama, or in a foreign jurisdiction, for crimes against property, for crimes against public faith, for crimes related to money laundering, for crimes against the inviolability of secrecy, for the preparation of false financial statements or that they have been convicted for any other crime that carries a prison sentence of one (1) or more years. b. Those in the last five (5) years whose authorization or license necessary to serve as a member of a self-regulated organization, securities house, investment advisor, investment manager, main executive, securities broker, or analyst, had been revoked in the Republic of Panama, or in a foreign jurisdiction.
   c. Those who have been declared bankrupt, without having been rehabilitated.

   It will be understood that they possess adequate knowledge and experience to exercise their functions those who have performed, for a period of no less than two (2) years, functions of similar responsibility in other public or private entities.

2. Have good administrative and accounting organization and adequate technical and human means for the management and administration of the investment society in accordance with its prospectus and its constitutive norm.

3. Internal code of conduct, in accordance with the applicable provisions of Agreement No. 5-2003 of June 25, 2003 of the Securities Market Superintendence, in which, expressly, the regime of personal operations of dignitaries, directors, main executives, employees, and agents is provided for, as well as control mechanisms that include, in particular, a regime of personal operations of its directors, dignitaries, executives, and employees of the entity and, in their case, the regime of related operations.

4. Designate the person who will exercise the role of compliance officer, who will be responsible for ensuring that the self-administered investment society, its directors, dignitaries, and employees comply with their obligations according to Decree-Law No. 1 of 1999 and its regulations. This person may be any member of the organization and must hold the Main Executive License issued by the Securities Market Superintendence.

For self-administered investment societies constituted as a trust, the trustee must comply with the conditions indicated in the preceding paragraphs.

Self-administered investment societies must have, at least, one (1) official or employee who has obtained the Main Executive License of Investment Manager, who will be responsible for executing the investment policies of the investment society.

ARTICLE SECOND: MODIFY Article 17 of Agreement No. 5-2004 of July 23, 2004, which will remain as follows:

Article 17. Information Prospectus

The prospectus is an instrument for disseminating information about the characteristics, investment policies, and risks of the investment society and the investment manager.

The Information Prospectus must contain all information that allows investors to form a judgment about the investment. The information reflected in it must be true, clear, precise, sufficient, and verifiable; it must not contain subjective assessments or omissions that distort reality.

It must be presented to the Securities Market Superintendence in Spanish. However, the society may publish it in another language, but it must leave a record that the version held by the Securities Market Superintendence, in Spanish, is the official document of the prospectus that prevails over the other versions.

The Information Prospectus must reflect, in addition to what the Securities Market Law provides, this Agreement and what is established in Agreement 2-2010 insofar as applicable to it, the following:

a) Name of the investment society. b) Categories in which the investment society is integrated. c) Investment objectives and policies, selection and distribution criteria of investments, and inherent risks that directly and indirectly affect investments, credit risks, country risks, and the mechanisms required to modify investment objectives and policies. d) Detail of the investment society's debt policies and the risks associated with said policies and said debt levels. e) Subscription and, if applicable, redemption mechanism of participation shares, method of calculating the net value per share. In the case of subscription, it must be indicated if there is a minimum investment amount. In the case of redemption, the applicable rules must be indicated taking into account the nature of the investment society. Likewise, if the society distributes benefits, the applicable procedures must be indicated. f) Administration commissions, marketing commissions for shares, and others that are fixed. g) Dividend and distribution policy, h) Designation and identification of the investment manager. i) In the case that the legal person investment society will carry out its own administration, description of the administration bodies, structure, and organizational chart of the entity. In such a case, one of its officials must have a Main Executive License of Investment Manager. j) Designation and complete information about the person who will act as custodian of the securities of the investment society's portfolio. k) The method with which its investments will be valued, which must be in accordance with the provisions established in Chapter Four of this Agreement. In case it is contemplated to use the services of price-providing entities duly registered with the Securities Market Superintendence, the name and registration number of said entity must be reported.

l) Rules applicable to the removal and substitution of the investment manager or the Custodian, m) Description of control systems in the case of investment in derivative instruments, n) Minimum capital or equity to be maintained by the investment society. o) Any other information that the Securities Market Superintendence considers relevant for the protection of the investing public.

ARTICLE THIRD: MODIFY Article 37 of Agreement No. 5-2004 of July 23, 2004, which will remain as follows:

Article 37. Net value per share and valuation of assets

In order to calculate the net value per share, the valuation of the assets and liabilities of registered investment societies shall be carried out applying valuation methodologies generally admitted in practice and in conformity with the International Financial Reporting Standards (IFRS) and must observe the following rules:

1. In cases of the non-existence of a liquid market that allows periodically valuing positions, self-administered investment societies or investment managers must apply the International Financial Reporting Standards (IFRS) to fix the price of these securities or may use the services of price-providing entities duly registered with the Securities Market Superintendence.

   The service agreement entered into between the registered investment society and the price-providing entity must be communicated to the Securities Market Superintendence, formally and in writing, in which the scope and content of that delegation is stated, prior to its application.

2. The net value per share will be the quotient resulting from dividing the net value of the assets of the registered investment society by the number of participation shares issued and in circulation. The net value of the assets of the registered investment society will be the difference resulting from subtracting its liabilities from its assets.

3. Registered investment societies may temporarily suspend the calculation of the net value of their participation shares in the following cases:
   a. During periods when a stock exchange is closed in which a significant number of securities in which the assets of the investment society are invested are quoted, or in the periods when the negotiation of said securities is suspended in said exchange. b. During periods where an emergency exists that results in it not being reasonably practical to adequately and fairly determine the net value per share.
   c. In cases where the right of redemption of the investment is suspended.

4. Registered investment societies will report to the Securities Market Superintendence and the investing public, through press, electronic networks for disseminating financial information, or other means authorized by the Securities Market Superintendence, the net value of the participation shares offered in the Republic of Panama. This report will be made the day after the date of calculation of the net value of their shares and will include the mention of the number of investors and the number of participation shares issued to that date.

5. Open investment societies registered with the Securities Market Superintendence are obliged to calculate the net value of their participation shares weekly, unless a lower periodicity has been fixed in their prospectus.

6. Closed investment societies registered with the Securities Market Superintendence are not obliged to calculate the net value of their participation shares, except in those cases where the right to reimbursement of their investment by investors exceptionally occurs.

The obligation to report information related to the calculation and reporting of the net value of participation shares is that of the investment manager of the investment society or the main executive of the investment manager in the case of self-administered investment societies.

The information and documentation on the valuations dealt with in this article must be available to the Securities Market Superintendence in the event that it so requires.

ARTICLE FOURTH: MODIFY Article 38 of Agreement No. 5-2004 of July 23, 2004, which will remain as follows:

Article 38. Valuation of positions in options, futures, or derivatives

Investment societies or their investment managers must value their operations in derivatives at market price, with the periodicity they determine based on the risks these instruments represent.

In cases of the non-existence of a liquid market that allows periodically valuing positions in derivatives, self-administered investment societies or investment managers must apply the International Financial Reporting Standards (IFRS) to fix the price of these securities or may use the services of price-providing entities duly registered with the Securities Market Superintendence.

ARTICLE FIFTH: MODIFY Article 39 of Agreement No. 5-2004 of July 23, 2004, which will remain as follows:

Article 39. Internal control obligations relative to investment in options, futures, or derivatives

The investment manager must execute operations on futures or derivative instruments with the greatest diligence and care that they would employ in the management of their own business. In any case, said entities, to carry out operations with derivative instruments, must verify that such operations are appropriate to the objectives of the investment society and that they have the means and experience necessary to carry out such activity and to adequately value the risks they are incurring. In particular, they must comply with the following requirements:

a) Have experts with proven experience in the matter or may contract the services of price-providing entities that are duly registered with the Securities Market Superintendence. b) Have qualified professional knowledge. c) Elaborate an investment plan and gather the necessary information to take investment decisions at all times in a consistent and solidly reasoned manner. d) Verify the coherence of operations with the investment policy informed to the shareholders of the investment society. e) Carry out permanent follow-up of the obligations resulting from derivative operations acquired by the investment society and keep available to the Securities Market Superintendence an updated position statement and evaluate the levels of obligations and potential risks that derive from them in relation to the general risks of the investment society's portfolio.

ARTICLE SIXTH: MODIFY Item 4 of Article 2 of Agreement No. 2-2010 of April 16, 2010, which will remain as follows:

Article 2: Documentation. Securities registration requests that are subject to a public offering requiring authorization from the Securities Market Superintendence must be accompanied by the following documentation:

1. ...

2. Name of all effective owners and final beneficiaries of the applicant (issuer), information related to partners, and presentation of the shareholding composition or participation level of the applicant. Such information provided will be of a confidential nature, must be presented and updated in case of changes in the shareholding composition, through...