Law on Financial Activities and Institutions (LAIF) (Articles 20 et seq.)

I SERIES — NO 28 «B. O.» OF THE REPUBLIC OF CAPE VERDE — APRIL 23, 2014 945

Article 67.º
Obligation to deposit documents
The following must be deposited with the Bank of Cape Verde:
a) The bylaws of the self-regulatory organization and their respective amendments; b) The nominal list of its adhering members; c) The behavioral and prudential rules established by the organization and currently in force; d) The sanctions applied and their respective proceedings.

CHAPTER XI
Final Provisions

Article 68.º
Reference to repealed provisions
When legal or contractual provisions refer to rules repealed by this law, such reference shall be understood as applying to the corresponding provisions of the Framework Law on the Financial System or complementary legislation, unless the context indicates a different interpretation.

Article 69.º
Applicable tax benefits for restricted-authorization credit institutions The tax benefits established in numbers 1 and 2 of Article 28.º of Law No. 26/VIII/2013, dated January 21, shall, upon approval of this instrument, apply respectively to restricted-authorization credit institutions and their clients.

Article 70.º
Repeal
The following legal instruments are repealed:
a) Law No. 3/V/96, dated July 1; b) Law No. 43/III/88, dated December 27; c) Decree-Law No. 12/2005, dated February 7; d) Decree-Law No. 29/2005, dated May 2.

Article 71.º
Entry into force
This instrument enters into force thirty days after its publication, and produces effects upon the entry into force of the Law regulating financial institutions' activities. Approved on February 26, 2014. The President of the National Assembly, Basílio Mosso Ramos Promulgated on April 11, 2014. Let it be published. The President of the Republic, JORGE CARLOS DE ALMEIDA FONSECA Signed on April 11, 2014. The President of the National Assembly, Basílio Mosso Ramos

Law No. 62/VIII/2014
of April 23
By mandate of the People, the National Assembly decrees, under paragraph b) of Article 175º of the Constitution, as follows:

TITLE I
GENERAL PROVISIONS

Article 1.º
Definitions
For the purposes of this instrument and complementary legislation and regulations, the following are considered:
a) «Auxiliary financial activities», activities and services that auxiliary institutions of the financial system are authorized by law to develop and provide to financial institutions, notably prospecting activities aimed at client acquisition for financial institutions, accounting and external audit services provided to financial institutions, credit information services, and risk rating activities; b) «Banking activity», activity carried out by banks involving public receipt of deposits or other repayable funds for own account use, notably in credit operations; c) «Financial activities», banking activity, financial intermediation in financial instruments and insurance activities, as defined in Article 20.º of the Framework Law on the Financial System; d) «Bank», a credit institution that carries out banking activity; e) «Autonomous guarantee», a personal guarantee provided by a financial institution intended to indemnify someone for a specified amount upon the occurrence of an event deemed relevant by the parties in a contract concluded between them; f) «Subsidiary», a legal entity over which another legal entity, designated as the parent company, holds control or dominance under law or regulation, with a subsidiary of a subsidiary also considered a subsidiary of the parent company from which both depend; g) «Auxiliary financial system institutions», individuals and entities, public or private, legally authorized to carry out one or more auxiliary financial activities and so qualified by law; h) «Credit institution», financial institutions that, in addition to other financial activities, carry out credit granting activity, listed in paragraph a) of number 2, Article 20.º of the Framework Law on the Financial System; i) «Financial institution», an individual or entity, public or private, legally authorized by the Bank of Cape Verde to carry out one or more financial activities listed in number 2, Article 20.º of the Framework Law on the Financial System; j) «Branch», an establishment of a company lacking legal personality that directly carries out, in whole or in part, operations inherent to the company's activity.

Article 2.º
Object and scope of application
This instrument regulates:
a) The establishment process in Cape Verde of financial institutions and auxiliary financial system institutions, including, where applicable, their authorization and special registration with the Bank of Cape Verde; b) The provision of services, exercise of activities and financial operations within Cape Verdean territory; c) Suppletively, financial contracts where one party is a financial institution with headquarters or a stable establishment in Cape Verde and the other party is a non-resident individual or legal entity; d) Suppletively, financial contracts where one party is a resident individual or legal entity of the Republic of Cape Verde and the other party is a Bank abroad; e) The supervisory and sanctioning regime relating to the activities, contracts and operations mentioned in the preceding paragraphs.

Article 3.º
Rules of immediate application

1. Irrespective of any other applicable law, the mandatory rules contained in this law apply if, and to the extent that, the situations, activities and acts to which they refer have a relevant connection with Cape Verdean territory.
2. A relevant connection with Cape Verdean territory is considered to exist, notably:
   a) Activities carried out and acts performed in Cape Verde; b) The dissemination of information accessible in Cape Verde concerning situations, activities or acts regulated by Cape Verdean law.

TITLE II
FINANCIAL ACTIVITY
CHAPTER I
Authorization
Section I
Authorization of financial institutions with headquarters in Cape Verde

Article 4.º
General requirements

1. Financial institutions with headquarters in Cape Verde must satisfy the following requirements:
   a) Correspond to one of the types provided for in Cape Verdean law; b) Adopt the form of a public limited company; c) Have as their object the exercise of one or more financial activities; d) Have their principal and effective place of administration situated in Cape Verde; e) Present solid corporate governance devices, including a clear organizational structure with well-defined, transparent and coherent lines of responsibility; f) Organize effective processes for the identification, management, control and communication of risks to which they are or may be exposed; g) Possess adequate internal control mechanisms, including solid administrative and accounting procedures; h) Possess remuneration policies and practices that promote and are coherent with sound and prudent risk management; i) Have their shares held by shareholders who individually meet conditions guaranteeing sound and prudent management of the financial institution.
2. Unless otherwise provided by law, financial institutions adopt the form of a public limited company, with share certificates representing their capital being mandatorily registered.
3. At the date of incorporation, the share capital must be entirely subscribed and paid up in an amount not lower than the legal minimum.

Article 5.º
Authorization

1. The establishment of financial institutions depends on authorization to be granted, case by case, by the Bank of Cape Verde.
2. Whenever the object of the financial institution includes any financial instrument intermediation activity, the Bank of Cape Verde, before deciding on the authorization request, requests information from the General Audit of the Securities Market (AGMVM) regarding the suitability of shareholders.
3. In the case referred to in the preceding number, AGMVM provides the aforementioned information within one month.

Article 6.º
Processing of authorization request

1. The authorization request is processed with the following elements:
   a) Characterization of the type of institution to be established and draft articles of association; b) Indication of the type of authorization requested, whether general or restricted, in accordance with terms provided in the Framework Law on the Financial System; c) Activity program, geographical deployment, organizational structure and human, technical and material resources to be used, as well as projected accounts for each of the first three years of activity; d) Identification of founding shareholders, with specification of capital subscribed by each; e) Justified statement on the adequacy of the shareholder structure to the institution's stability; f) Declaration of commitment that at the time of incorporation, as a condition thereof, the legally required share capital amount will be deposited in a bank in Cape Verde; g) Solid corporate governance devices, complete and proportional to the nature, level and complexity of each financial institution's activities, including:
   i) A clear organizational structure with well-defined, transparent and coherent lines of responsibility; ii) Effective processes for the identification, management, control and communication of risks to which it is or may be exposed; iii) Adequate internal control mechanisms, including solid administrative and accounting procedures and remuneration policies and practices that promote and are coherent with sound and prudent risk management.
2. The following information regarding founding shareholders that are legal entities holding qualified participations in the institution to be established must also be submitted:
   a) Articles of association or bylaws and list of administrative body members; b) Balance sheet and accounts for the last three years; c) List of partners in the participating legal entity who hold qualified participations therein; d) List of companies in whose capital the participating legal entity holds qualified participations, as well as an illustrative statement of the group structure to which it belongs.
3. Submission of elements referred to in the preceding number may be dispensed with when the Bank of Cape Verde already has knowledge thereof.
4. If the requested authorization is the restricted authorization provided for in Articles 38.º to 45.º of the Framework Law on the Financial System, the following additional elements must also be submitted:
   a) Waiver referred to in Article 38.º of the Framework Law on the Financial System, in a model approved by the Bank of Cape Verde; b) Indication of the currency chosen for accounting, reporting and disclosure of financial information; c) Indication of the prudential regime and chart of accounts, if opting for others than those provided in Cape Verdean legislation.
5. Authorization to establish a financial institution that is a subsidiary of a financial institution authorized in a foreign country, or that is a subsidiary of the parent company of such an institution, depends on prior consultation with the supervisory authority of the country in question.
6. The provision in the preceding number also applies when the institution to be established is dominated by the same individuals or legal entities that dominate a financial institution authorized in another country.
7. The Bank of Cape Verde may request complementary information from applicants and carry out investigations it deems necessary.
8. If the object of the request is authorization for a financial institution that is not a credit institution, the Bank of Cape Verde may dispense with the submission of one or more of the elements referred to in this article.

Article 7.º
Decision
The Bank of Cape Verde's decision must be notified to the interested parties within six months from receipt of the request or, if applicable, from receipt of complementary information requested from applicants, but never later than twelve months after the date of initial submission.

Article 8.º
Refusal of authorization

1. Authorization is refused whenever:
   a) The authorization request is not processed with all necessary information and documents; b) The processing of the request contains inaccuracies or falsities; c) The financial institution to be established does not meet all requirements referred to in Article 4.º; d) The Bank of Cape Verde does not consider it demonstrated that all shareholders meet conditions guaranteeing sound and prudent management of the financial institution; e) The financial institution does not have sufficient technical means and financial resources for the type and volume of operations it intends to carry out; f) Adequate supervision of the financial institution to be established is jeopardized by a proximity relationship between the institution and other persons; g) Adequate supervision of the financial institution to be established is jeopardized by legal or regulatory provisions of a third country to which some persons with whom the institution has a proximity relationship are subject, or by difficulties inherent in applying such provisions.
2. If the request is deficiently processed, the Bank of Cape Verde notifies applicants before refusing authorization, granting them a reasonable period to remedy the deficiency.

Article 9.º
Expiry of authorization

1. Authorization expires if applicants expressly renounce it or if the institution does not commence its activity within six months.
2. The Bank of Cape Verde may extend the period referred to in the preceding number once, for an equal period, upon a justified request by interested parties.
3. Authorization expires if the financial institution is dissolved, without prejudice to the performance of acts necessary for its liquidation.

Article 10.º
Revocation of authorization

1. The revocation of authorization is within the competence of the Bank of Cape Verde.
2. The revocation decision is reasoned and notified to the financial institution.
3. Grounds for revocation of authorization, in addition to other legally provided grounds:
   a) Having been obtained by false declarations or other expedients, regardless of applicable sanctions; b) Failure to meet any of the requirements provided in Article 4.º; c) Activity exercised not corresponding to the authorized statutory object; d) Cessation or significant reduction of activity for more than six months; e) Serious deficiencies in administration, supervision or accounting organization of the financial institution; f) Serious deficiencies in internal control mechanisms, risk management or segregation of client values established by the financial institution; g) Lack of guarantees for compliance with obligations towards creditors, especially regarding entrusted funds; h) Non-compliance with the institution's obligations to the guarantee system provided for in Article 51.º of the Framework Law on the Financial System; i) Violation of laws, regulations and determinations concerning exercised activity, in a manner that jeopardizes creditors' interests or normal functioning of the financial market; j) Extinction of the financial institution due to merger.
4. The following also constitute grounds for revocation, if deemed appropriate by the Bank of Cape Verde according to circumstances in each case:
   a) Revocation of authorization of a financial institution holding a controlling share participation; b) Alienation of a substantial part of assets; c) Adoption of behaviors or practices that jeopardize obligations assumed towards creditors, notably depositors.
5. Revocation of authorization implies dissolution and liquidation of the financial institution.
6. Revocation of authorization for financial institutions referred to in number 2, Article 5.º is immediately communicated to AGMVM.

Article 11.º
Access to insurance and reinsurance activity Access to insurance and reinsurance activity is subject to special legislation.

Section II
Authorization of branches of financial institutions with headquarters abroad

Article 12.º
Branch authorization

1. Establishment of a branch depends on authorization to be granted, case by case, by the Bank of Cape Verde.
2. The authorization request is submitted to the Bank of Cape Verde and processed with the following elements:
   a) Activity program, indicating notably the type of operations to be carried out and branch organizational structure, as well as a certificate that such operations are covered by the financial institution's authorization; b) Branch address in Cape Verde; c) Identification of branch managers; d) Amount of own funds of the financial institution; e) Solvency ratio of the financial institution; f) Detailed description of deposit guarantee systems in which the financial institution participates and that ensure protection of branch depositors; g) Demonstration of the branch's ability to guarantee safety of entrusted funds, as well as sufficiency of technical means and financial resources for the type and volume of operations it intends to carry out; h) Indication of projected geographical deployment for the branch; i) Projected accounts for each of the first three years of branch activity; j) Copy of the financial institution's articles of association; and k) Declaration of commitment to make deposit of capital allocated to the branch under legally prescribed terms.
3. Authorization may be refused in the following cases:
   a) The authorization request is not processed with all necessary information and documents; b) Processing of the request contains inaccuracies or falsities; c) The branch does not have sufficient technical means and financial resources for the type and volume of operations it intends to carry out; and d) The Bank of Cape Verde considers the supervisory system to which the financial institution is subject insufficient.
4. Provisions referred to in Articles 4.º to 7.º apply to branches, as provided by notice of the Bank of Cape Verde.

Article 13.º
Communication of changes
The financial institution communicates in writing to the Bank of Cape Verde, at least one month in advance, any changes to elements referred to in paragraphs a), b), c) and f) of number 2, Article 12.º.

Article 14.º
Allocated capital

1. Operations to be carried out by the branch must have allocated capital adequate to exercise its current activity, determined case by case by the Bank of Cape Verde.
2. Capital must be deposited in the Bank of Cape Verde before branch registration is effected.
3. The financial institution is liable for operations carried out by its branch in Cape Verde.

Article 15.º
Revocation and expiry of authorization in the country of origin If the Bank of Cape Verde is informed that authorization of a financial institution with a branch in Cape Verdean territory or providing services here has been revoked or expired in the country of origin, it immediately revokes authorization and registration of the branch and takes appropriate measures to prevent the entity from initiating new operations and to safeguard depositors' and other creditors' interests.

Article 16.º
Revocation and expiry of branch authorization Authorization granted to branches expires and may be revoked by the Bank of Cape Verde, respectively in situations and with grounds referred to in Articles 9.º and 10.º, as applicable.

Article 17.º
Conversion into subsidiary
The Bank of Cape Verde may require a financial institution that has established one or more branches in Cape Verde to convert them into subsidiaries if:
a) A substantial change occurs in the shareholder or administrative structure of the financial institution that, in the Bank's opinion, jeopardizes sound and prudent management of the branch; b) There is a significant decline in the financial situation of the foreign institution or it is subject to sanctions by the country of origin's authority for significant violations of law or regulations or adoption of practices contrary to sound and prudent management; c) The Bank of Cape Verde considers the country of origin's supervision inadequate.

Section III
Representative offices

Article 18.º
Registration and requirements

1. Establishment and operation in Cape Verde of representative offices of financial institutions with headquarters abroad depend, without prejudice to applicable commercial registration legislation, on prior registration with the Bank of Cape Verde, upon presentation of a certificate issued by supervisory authorities of the country of origin, specifying the institution's regime with reference to applicable law.
2. Representative offices must commence activity within three months following registration with the Bank of Cape Verde, which may extend the period if there is justified reason.