General Provisions Applicable to Securities Transactions Conducted by Directors, Executives, and Employees of Financial Entities and Other Obligated Persons

GENERAL PROVISIONS APPLICABLE TO SECURITIES TRANSACTIONS CONDUCTED BY DIRECTORS, EXECUTIVES, AND EMPLOYEES OF FINANCIAL ENTITIES AND OTHER OBLIGATED PERSONS

Published in the Official Gazette of the Federation on November 4, 2014.

The National Banking and Securities Commission, based on the provisions of articles 105, last paragraph, 371 of the Securities Market Law and 4, fractions XXXVI and XXXVIII and 16, fraction I of the National Banking and Securities Commission Law, and

CONSIDERING

That the "Provisions applicable to securities transactions conducted by executives and employees of financial entities" have not been reformed since the entry into force of the Securities Market Law published in the Official Gazette of the Federation on December 30, 2005, it is therefore necessary to incorporate the current legal grounds that empower the National Banking and Securities Commission to issue provisions regarding such transactions, as well as to add directors of entities to its scope of application;

That it is necessary for these Provisions to include societies that administer systems to facilitate securities transactions, since the Securities Market Law considers them obligated subjects to have guidelines, policies, and control mechanisms so that their employees, directors, and executives adjust their securities transactions, in case they possess privileged or confidential information;

That in the same vein, it is indispensable to add within the scope of application of the Provisions securities issuers and investment advisors, in view of the fact that the Securities Market Law reformed through the "Decree by which various provisions in financial matters are reformed, added, and repealed and the Law to Regulate Financial Groupings is issued," published in the Official Gazette of the Federation on January 10, 2014, includes them within these obligations, and

That through the issuance of these Provisions, the corporate governance of financial entities and other obligated persons mentioned in this instrument will be strengthened, in order to avoid the improper use of confidential information related to processes of registration of securities in the National Securities Register, public offerings, purchase or sale of own shares of issuers, and transactions ordered by investor clients, allowing at the same time to classify as confidential that information that, given its particularities, financial entities and other obligated persons determine, as well as to indicate the persons who by virtue of their functions and activities will be subject to the scope of application of the guidelines, policies, and control mechanisms defined for this purpose, has resolved to issue the following:

GENERAL PROVISIONS APPLICABLE TO SECURITIES TRANSACTIONS CONDUCTED BY DIRECTORS, EXECUTIVES, AND EMPLOYEES OF FINANCIAL ENTITIES AND OTHER OBLIGATED PERSONS

INDEX

Chapter One
General Provisions

Chapter Two
On guidelines, policies, and control mechanisms

Chapter Three
Other controls

Chapter One
General Provisions

Article 1.- In addition to the definitions contained in the Securities Market Law, for the purposes of these provisions, the following shall be understood, in singular or plural, as:

I. Investment advisors, as investment advisors registered with the Commission in accordance with article 225 of the Law.

II. Directors, as members of the board of directors, equivalent body, or person in charge of administration in the event that no board of directors exists, of Financial entities and other Obligated persons.

III. Executives and Employees, as natural persons holding a position, employment, or commission in Financial entities and other Obligated persons, including proxies to conduct transactions with the public.

IV. Financial entities, as brokerage houses; credit institutions; investment fund operating societies; investment fund share distribution societies and entities authorized to act with such status; stock exchanges; securities depository institutions; securities central counterparties; securities rating agencies; financial entities that are part of financial groups to which any of the following financial entities belong: multiple banking institutions, brokerage houses, investment fund operating societies, investment fund share distribution societies, or financial entities that distribute investment fund shares.

V. Confidential information, as that which the Financial entity or other Obligated persons have qualified as such, as well as that which is expressly classified in that manner in the documents, contracts, or agreements that regulate the relationship with their clients, or when it has such character in terms of the applicable legal provisions.

VI. Privileged information, as indicated with such character in article 362 of the Law.

VII. Law, as the Securities Market Law.

VIII. Securities transactions, as those conducted on their own behalf by Directors, Executives, and Employees of Financial entities or other Obligated persons, directly or indirectly, on:

a) Securities registered in the Register;

b) Deposit certificates commonly known as "American Depositary Receipts" (ADRs) or similar instruments in foreign markets, which represent the Securities indicated in the previous fraction, or analogous or similar instruments to the first, and

c) Financial derivative instruments, provided that they have as underlying asset Securities registered in the Register.

IX. Obligated persons, as the persons referred to in fractions I, X, and XI of this article, as well as Issuers with securities registered in the Register.

X. Price providers, as price providers authorized by the Commission in accordance with article 323 of the Law.

XI. Societies that administer systems, as societies that administer systems to facilitate securities transactions authorized by the Commission in accordance with article 253 of the Law.

Article 2.- For the purposes of these provisions, securities transactions shall not be considered as investments that Directors, Executives, and Employees of Financial entities and Obligated persons make in shares of investment funds, Securities issued by the federal government, indexed fiduciary certificates referred to in article 63 Bis 1, fraction III of the Law, Securities issued by trusts constituted for that sole purpose in which such Directors, Executives, and Employees do not intervene in investment decisions, bank certificates representing a debt with a term equal to or less than one year issued by a credit institution, as well as ordinary participation certificates or optional titles referred to, in both cases, to Securities of two or more issuers, or to a group or basket of shares or price indices.

Likewise, securities transactions shall not be considered as investments that Directors, Executives, and Employees of Financial entities and Obligated persons make under the investment management service, provided that having agreed on the discretionary management of the account, the recommended investment strategy is standardized.

Regarding Price providers and securities rating agencies, securities transactions conducted by their Directors, Executives, and Employees regarding bank certificates representing a debt with a term equal to or less than one year issued by a credit institution shall be included in the definition of securities transactions. Likewise, for the case of Societies that administer systems and Price providers, investments made by the aforementioned persons regarding Securities issued by the federal government shall be included.

Article 3.- Executives or Employees of Financial entities or other Obligated persons who conduct securities transactions regarding which they have or may have access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients, must comply with these provisions and the guidelines, policies, and control mechanisms established for this purpose by the aforementioned Financial entities or other Obligated persons in which they work or provide their services. In any case, these provisions shall apply in the aforementioned situations when they use confidential information obtained in the exercise of their functions, regardless of whether they are or are not securities of the Financial entity or Obligated person itself.

In the event that Executives or Employees of Financial entities or other Obligated persons have privileged information, they must refrain from carrying out or instructing the conduct of securities transactions, on any type of Securities issued by an Issuer or credit titles representing them, as provided in article 364, fraction I of the Law.

Additionally, when they update any of the situations referred to in article 363, fractions I to IX of the Law, they must observe the provisions of article 365 of that same legal framework.

Chapter Two
On guidelines, policies, and control mechanisms

Article 4.- Financial entities and other Obligated persons must have guidelines, policies, and control mechanisms, which must be approved by their board of directors, equivalent body, or person in charge of administration, upon proposal of the general manager or equivalent, in which the terms and conditions are established under which their Executives and Employees may conduct securities transactions regarding which they have or may have access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients.

The guidelines, policies, and control mechanisms must include, at a minimum, what is indicated in article 3 previous as well as what is provided in article 5 of these provisions, being the responsibility of the board of directors, equivalent body, or person in charge of administration to make them known to the Executives and Employees of the Financial entity or other Obligated persons.

The guidelines, policies, and control mechanisms and their modifications must be submitted to the Commission within ten business days following their approval by the board of directors, equivalent body, or person in charge of administration.

In the case of Issuers referred to in fraction IX of article one of these provisions, whose securities are also listed on foreign stock exchanges that, in terms of applicable foreign laws, have guidelines, policies, and control mechanisms approved by their board of directors or equivalent body in the matter referred to in these provisions, they may submit them to the consideration of the Commission, in Spanish, in substitution of those they must submit in accordance with these provisions within twenty business days following the approval of such guidelines, policies, and control mechanisms by their board of directors or equivalent body, as well as their modifications.

When Financial entities or Obligated persons are part of a business group or consortium, they may prepare a single set of guidelines, policies, and control mechanisms in accordance with these provisions, applicable to such entities or persons, provided that their respective boards of directors have approved them. Regarding Investment advisors whose shareholders, Directors, as well as Executives and Employees, participate in the capital or in the administration bodies, or have a dependency relationship with credit institutions, brokerage houses, investment fund operating societies, investment fund share distribution societies, or securities rating agencies, the provisions of this paragraph shall also apply.

Article 5.- Financial entities or other Obligated persons when elaborating the guidelines, policies, and control mechanisms referred to in article 4 previous, must include, at least, the following:

I. The person or area responsible within the Financial entity or Obligated person who will be in charge of monitoring compliance with these provisions, as well as the guidelines, policies, and control mechanisms established by Financial entities or Obligated persons in terms of these provisions.

II. Information guides that allow Executives and Employees, in the conduct of securities transactions regarding which they have or may have access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients, to have knowledge of the applicable legal and administrative provisions in matters of the securities market and to those that, if applicable, are determined for these persons.

III. List of positions or functions that, by their nature, are performed by Executives and Employees who have access to, or are susceptible to having privileged or confidential information, and who are therefore obligated to observe the guidelines, policies, and control mechanisms indicated.

IV. Controls that, when implemented, allow privileged or confidential information to be known only by persons who by virtue of their positions or functions should or may have access to it.

For the purposes of the provisions of this fraction and the previous fraction III, Financial entities, Price providers, and Societies that administer systems must consider as subjects to the aforementioned controls Executives or Employees who are involved in any of the following services or operations, as applicable:

a) The provision of services by the Financial entity or Price provider to Issuers that intend to or have conducted a public offering of Securities.

b) The provision of advised investment services.

c) The conduct of transactions to acquire or alienate own shares of Issuers.

d) Transactions on own behalf by the Financial entity in question.

e) Preparation of analysis reports.

f) Services related to the implementation of corporate restructuring, such as mergers, spin-offs, share restructuring, or others.

g) Any other service or operation that by its nature could imply having access to privileged or confidential information.

Regarding Investment advisors, they must subject to the aforementioned controls Executives or Employees who are involved in the services or operations indicated in letters b), e), and g) previous.

For the case of Issuers, they must subject to the aforementioned controls Executives or Employees who have a relationship with the services or operations referred to in letters e), f), and g) of this fraction, as well as those who operate the repurchase fund and who carry out treasury administration.

V. Without prejudice to what is established in article 370 of the Law, the principles that Executives or Employees must observe when conducting securities transactions regarding which they have or may have access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients, establishing at least the following:

a) Transparency in the conduct of transactions.

b) Equality of opportunities before other market participants in the conduct of securities transactions referred to in this fraction.

c) Compliance with sound market practices.

d) Absence of conflicts of interest.

e) Prevention of improper conduct that may originate from the use of privileged or confidential information.

VI. Periods during which their Executives and Employees may not carry out securities transactions due to having access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients.

VII. Internal control measures that allow them to monitor compliance with the provisions of the Law and other applicable legislation, as well as the guidelines, policies, and control mechanisms, for which the person or area responsible referred to in fraction I previous must carry out, among other functions, the review of the reports referred to in fraction VIII following.

VIII. The obligation of Executives and Employees to provide a report each time they conduct securities transactions regarding which they have access to confidential information related to processes of registration of Securities in the Register, public offerings, acquisitions or alienation of own shares of Issuers, or transactions ordered by investor clients, that they have conducted. The report must be

provided truthfully and promptly to the person or area referred to in fraction I previous, no later than ten business days following the conduct of the transaction in question.

For the purposes of the foregoing, Financial entities or other Obligated persons must establish in the guidelines, policies, and control mechanisms, a simplified form that must include, at least, the following:

a) The name, position, and other data that allow full identification of the Executive or Employee conducting the transaction.

b) The price of the transaction, Issuer, volume, type, series, or class of Securities subject to such transaction, as well as the date of its conduct and the corporate name of the securities market intermediary through which the securities transactions referred to in the first paragraph of this fraction were conducted.

IX. Disciplinary, corrective, or other actions, if applicable, that will be applied in the event of non-compliance, as well as the procedure to enforce them.

Executives or Employees to whom the guidelines, policies, and control mechanisms apply, despite being obligated to observe them, must manifest in writing their knowledge, understanding, and adherence to these. Financial entities and other Obligated persons must conserve the corresponding manifestation.

The person or area responsible referred to in fraction I of this article must inform their board of directors, equivalent body, or person in charge of administration, of non-compliance with the guidelines, policies, and control mechanisms formulated in accordance with these provisions.

Article 6.- Executives and Employees of credit institutions and brokerage houses referred to in these provisions, in no case may act with the character of persons authorized to issue instructions on behalf and in representation of the holders of a brokerage intermediation contract or securities administration contract, except in those contracts where by their function, they must participate as proxies to conduct transactions with the public, regarding discretionary contracts of their clients and that the credit institution or brokerage house in which they provide their services has assigned to them. Regarding Employees of credit institutions and brokerage houses who are also proxies to conduct transactions with the public, or in the case of proxies of Investment advisors, they may not be co-owners of their clients' accounts.

Regarding Executives and Employees of credit institutions, brokerage houses, and Investment advisors, in no case may the contracts they conduct be discretionary, unless in the provision of investment services the recommended investment strategy is standardized.

Article 7.- The norms regarding the guidelines, policies, and control mechanisms referred to in articles 3; 5, fractions IV, second paragraph, letters a) to g), third and last paragraphs, V, VI, VIII, and IX, as well as the penultimate paragraph of these provisions that implement Financial entities and Obligated persons shall equally apply to their Directors, therefore they must include them in such guidelines, policies, and control mechanisms. In any case, these provisions shall apply to Directors in the situations established in the provisions themselves when they use confidential information obtained within the governance bodies in which they participate, regardless of whether they are or are not securities of the Financial entity or Obligated person itself.

Chapter Three
Other controls

Article 8.- Financial entities and other Obligated persons when implementing measures to identify and limit access to privileged or confidential information, among the

different business areas of the company and its Directors, Executives, and Employees, in accordance with what is provided in Article 5 of these provisions, must include, at a minimum, the following:

I. The establishment of a written or electronic control, with the names of the persons who have had access to the privileged or confidential information in question, the documents that have been known, the date, manner, means, and time in which such circumstances occurred. Said control must be available to the Commission and maintained for a period of at least five years, in the case of privileged information, counted from the publication of the corresponding relevant event, and in the case of confidential information, from the generation or obtaining of the information by the financial entity or by the other obligated persons.

The control referred to in this subsection shall be the responsibility of the person or area responsible referred to in subsection I of Article 5 of these provisions, and must verify that the information is exclusively known by the persons who must have access to it by reason of their positions or functions.

II. The procedures for the effective control of access to privileged or confidential information must ensure, at least:

a) That privileged or confidential information is known exclusively by the persons who must access it, in order to avoid inadequate use of such information.

b) Carry out effective separation and control of access to the files where information belonging to the substantive processes or business areas of financial entities or other obligated persons is stored.

c) Programs for updating the code of ethics or code of conduct, as applicable, as well as for training in the correct application of this among Directors, Executives, or Employees, as well as in matters of internal regulations and policies regarding Securities Transactions with respect to which they have or may have access to confidential information related to processes for the registration of Securities in the Register, public offerings, acquisitions, or alienation of shares of issuers, or operations ordered by investor clients.

Article 9.- The person or area responsible referred to in subsection I of the preceding Article 5, when derived from the exercise of their functions, detects non-compliance or violations of the guidelines, policies, and control mechanisms of the financial entity or obligated person that in their judgment could constitute violations of the Law, must inform the Commission of such facts no later than two business days following the day on which they became aware of them.

TRANSITORY PROVISIONS

FIRST.- The norms contained in these Provisions regarding the financial entities indicated in subsection IV of Article 1 and price providers referred to in subsection XI of this same instrument shall enter into force one hundred twenty days following their publication in the Official Gazette of the Federation, except for what is provided in the Second, Third, and Fourth Transitory Articles below.

SECOND.- The norms contained in these Provisions regarding securities issuers shall enter into force one hundred twenty days following their publication in the Official Gazette of the Federation.

Securities issuers whose securities are listed on foreign stock exchanges that, under applicable foreign laws, have guidelines, policies, and control mechanisms approved by their board of directors or equivalent body in this matter, must submit them to the consideration of the Commission, in Spanish, within twenty business days following the entry into force of this instrument.

THIRD.- The norms contained in these Provisions regarding investment advisors shall enter into force from the time they obtain their registration as such under Article 225 of the Securities Market Law.

Investment advisors must submit to the approval of their board of directors or equivalent body in the next session following their registration as such under Article 225 of the Securities Market Law, the policies, guidelines, and control mechanisms referred to in this instrument.

FOURTH.- The norms contained in these Provisions regarding companies that administer systems to facilitate securities transactions shall enter into force within a period of six months counted from their publication in the Official Gazette of the Federation.

FIFTH.- Upon completion of the period indicated in the First Transitory Article of this instrument, the “Provisions applicable to securities transactions conducted by executives and employees of financial entities,” published in the Official Gazette of the Federation on May 9, 2003, shall be repealed.