JPRF-V-2024-0131 — Reform to Article 27 of Section VIII "General Provisions", Chapter II "Investment Funds" to correct the calculation formula for the effective rate of administered funds

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
Resolution No. JPRF-V-2024-0131
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities; That Article 226 of the Constitution of the Republic of Ecuador prescribes that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law; having the duty to coordinate actions to fulfill their purposes and make effective the enjoyment and exercise of rights recognized in the Constitution; That Article 227 of the Fundamental Norm establishes that public administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation; That Article 13 of the Organic Monetary and Financial Code, Book I, reformed from the promulgation of the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, created the Financial Policy and Regulation Board, part of the Executive Function, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That Article 14 of the aforementioned Code, Book I, in number 2, states that, within the scope of the Financial Policy and Regulation Board, it corresponds to issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the securities system; and the aforementioned article also establishes that, for the fulfillment of these functions, the Financial Policy and Regulation Board will issue norms in matters within its competence, without altering legal provisions; being able to issue regulations by segments, economic activities, and other criteria; That Article 14.1 of the Organic Monetary and Financial Code, Book I, determines that, for the performance of its functions, the Financial Policy and Regulation Board must fulfill certain duties and exercise certain faculties; among which are those determined in numbers 1, 16, and 27, which are: regulate the creation, constitution, organization, activities, operation, and liquidation of securities entities; regulate the constitution, operation, and liquidation of funds and fiduciary businesses related to the securities market; and, exercise the other functions, duties, and faculties assigned to it by the cited Code and the law; That Article 25.1, number 1, ibidem indicates, within the functions of the Technical Secretariat of this Board, the elaboration of technical and legal reports that support the regulation proposals that the Financial Policy and Regulation Board will issue; That the Twenty-Ninth General
Provision of the Organic Monetary and Financial Code, Book I, prescribes: “In the current legislation where mention is made of the 'Monetary and Financial Policy and Regulation Board', replace it with 'Financial Policy and Regulation Board'.”; That the Fifty-Fourth Transitional Provision of the aforementioned Code determines the transitional regime of resolutions of the Codification of the Monetary and Financial Policy and Regulation Board, establishing that: “(...) The resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board and the norms issued by control bodies will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”;

Resolution No. JPRF-V-2024-0131

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
That the Securities Market Law, contained in Book II of the Organic Monetary and Financial Code, when referring to the object and scope of said Law, determines in its Article 1 that its purpose is to promote an organized, integrated, effective, and transparent securities market, in which securities intermediation is competitive, orderly, equitable, and continuous, as a result of true, complete, and timely information; whose scope covers the securities market in its stock and over-the-counter segments, stock exchanges, trade associations, securities houses, fund administrators and trusts, rating agencies, issuers, external auditors, and other participants who in any way act in the securities market; That the aforementioned law, in its unnumbered article added following Article 1, prescribes that the guiding principles of the securities market that guide the actions of the Financial Policy and Regulation Board, the Superintendency of Companies, Securities and Insurance, and participants are: i) public faith; ii) investor protection; iii) transparency and publicity; iv) symmetric, clear, true, complete, and timely information; v) free competition; vi) equal treatment of securities market participants; vii) application of good corporate practices; viii) respect and strengthening of the regulatory power of the Financial Policy and Regulation Board, subject to the Constitution of the Republic of Ecuador, public policies of the Securities Market, and the Law; and, ix) promote financing and investment in the national development regime and a democratic, productive, efficient, and solidary market; determining that these principles must always be interpreted in the sense that most favors the investor; That Article 9 of the Organic Monetary and Financial Code, Book II (Securities Market Law), enumerates the attributions that currently correspond to the Financial Policy and Regulation Board in the context of this Law, among which are those indicated in numbers 4, 6, 20, and 21, which are, respectively: i) issue the resolutions necessary for the application of the Securities Market Law; ii) regulate the creation and functioning of fund administrators and trusts, as well as the services they provide; (iii) ensure compliance with the norms governing the securities market; and, iv) regulate, concerning activities and operations of the securities market, other aspects of the performance of participants in the market; That Article 15 of the Organic Administrative Code, with reference to the principle of responsibility, provides that the State will respond for damages as a consequence of the lack or deficiency in the provision of public services or the actions or omissions of its public servants or subjects of private rights acting in the exercise of a public power delegated by the State and its dependents, controlled or contractors, with the State making effective the responsibility of the public servant for intentional or negligent acts or omissions, stating that
no public servant is exempt from responsibility; That, through Technical Report No. JPRF-CTSV-2024-007 of December 11, 2024, the Technical Coordination of Policy and Regulation of the Securities and Insurance System of this Board concluded the need and pertinence to reform Article 27 of Section VIII “General Provisions” of Chapter II “Investment Funds”, Title XII “Institutional Investors”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the objective of adapting the formula for calculating the effective annual yield rate of administered funds; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0110-M of December 18, 2024, submits to the President of the Board the Technical Report No. JPRF-CTSV-2024-007 of December 11, 2024, issued by the Technical Coordination of Policy and Regulation of the Securities and Insurance System; as well as the Legal Report No. JPRF-CJF-2024-057 of December 11, 2024, issued by the Legal Coordination of Policy and Financial Norms of this Board, as well as the respective draft resolution;

Resolution No. JPRF-V-2024-0131

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2024, and carried out via video conference on December 23, 2024, reviewed the Memorandum No. JPRF-ST-2024-0110-M of December 18, 2024, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-CTSV-2024-007 and Legal Report No. JPRF-CJF-2024-057, in addition to the corresponding draft resolution; That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2024, and carried out via video conference on December 23, 2024, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
SINGLE ARTICLE.- The content of Article 27 of Section VIII “General Provisions”, Chapter II “Investment Funds”, Title XII “Institutional Investors” of Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions is substituted by the following:
“Calculation of the effective annual yield rate of administered funds: The effective annual yield rate of an administered fund may be calculated, according to the following formula:

TRE =
[

(1 +
TRN
360
D
)
360
D
− 1
]

• 100
  Note: See description of variables in the previous article.”
  SINGLE GENERAL PROVISION.- The Superintendency of Companies, Securities and Insurance will communicate to the respective controlled entities the content of this Resolution.
  FINAL PROVISION.- This Resolution will enter into force from this date, without prejudice to its publication in the Official Register, and will be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.
  NOTIFY.- Given in the Metropolitan District of Quito, on December 23, 2024.
  THE PRESIDENT,
  Mgs. María Paulina Vela Zambrano
  The preceding Resolution was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on December 23, 2024.- I CERTIFY.
  TECHNICAL SECRETARY,
  Mgs. Luis Alfredo Olivares Murillo