Norm on the Authorization and Operation of Stock Exchanges

Resolution No. CD-SIBOIF-492-1-AGOS2-2007
Dated August 2, 2007
NORM ON THE AUTHORIZATION AND OPERATION OF STOCK EXCHANGES The Board of Directors of the Superintendence of Banks and Other Financial Institutions.

CONSIDERING
I
That in accordance with Articles 6, letter a), and 36, of Law No. 587, Capital Market Law, published in La Gaceta No. 222, of November 15, 2006, it is the authority of the Board of Directors to authorize the establishment of stock exchange companies in accordance with the procedures and requirements established in said Law and in this Norm. II That in accordance with Articles 6, letter b), and 208, of the aforementioned Law; it is the faculty of the Board of Directors to issue general norms aimed at regulating the operation of the securities market.

In exercise of its powers,
HAS ISSUED
The following,
NORM ON THE AUTHORIZATION AND OPERATION OF STOCK EXCHANGES Resolution No. CD-SIBOIF-492-1-AGOS2-2007

CHAPTER I
CONCEPTS, OBJECT, AND SCOPE

Article 1. Concepts.- For the purposes of this Norm, the following are understood:
a. 5% Shareholder(s): Natural or legal person who, either individually or together with their related parties, holds a percentage equal to or greater than 5% of the capital of the company. b. Significant Shareholder: Refers to the natural or legal person who, either individually or together with their related parties, has direct or indirect control of twenty-five percent (25%) or more of the share capital of an issuer.

c. Capital Calculation Base: Refers to equity plus the legal reserve.
d. Board of Directors: Board of Directors of the Superintendence of Banks and Other Financial Institutions. e. Capital Market Law: Law No. 587, Capital Market Law, published in La Gaceta No. 222, of November 15, 2006. f. General Banks Law: Law No. 561, General Banks Law, Non-Banking Financial Institutions and Financial Groups, published in La Gaceta No. 232, of November 30, 2005. g. Superintendence: Superintendence of Banks and Other Financial Institutions. h. Superintendent: Superintendent of Banks and Other Financial Institutions.

Article 2. Object and Scope.- This Norm aims to define the requirements and conditions for the constitution, operation, and supervision of stock exchanges; as well as the mechanisms that guarantee the proper conduct of operations carried out therein.

CHAPTER II
REQUIREMENTS FOR CONSTITUTION AND COMMENCEMENT OF OPERATIONS

Article 3. Requirements to constitute a stock exchange.- Interested parties wishing to constitute a stock exchange must submit their application to the Superintendent accompanied by the following documents:
a) The draft deed of incorporation and its bylaws, which must contain the requirements indicated in Articles 36, 40, and 41 of the Capital Market Law. The corporate name must include the expression "stock exchange." b) The economic-financial feasibility study, which must include, among other aspects, considerations on the market, the characteristics of the institution, the projected activity, and the conditions under which it will operate according to various contingency scenarios. c) Information regarding its shareholders.

1. For natural persons:
   i. Name, age, occupation, nationality, and domicile.
   ii. Documented curriculum vitae with the information required in Annex 1 of this Norm, which becomes an integral part of it.
   iii. Photocopy of the identity card on both sides for nationals, or of the identity card for residents or of the passport in the case of foreigners, notarized according to the law on the matter.
   iv. Number of the Single Taxpayer Registry (RUC). In the case of foreigners not domiciled in the country, they must present the equivalent used in the country where they pay taxes.
   v. Certificate of judicial and/or police records issued by the corresponding national instances in the case of persons domiciled in Nicaragua, and by the competent foreign body, with the corresponding authentication, when it concerns persons not domiciled in Nicaragua or natural persons residing in Nicaragua who have been residents abroad in the last 15 years.
   vi. Declaration before a public notary stating that they are not subject to any of the situations contemplated in Article 29 of the General Banks Law.
2. For legal persons:
   i. Notarially certified copy of the testimony of the public deed of incorporation of the company, bylaws, and their modifications, if any. In the case of foreign legal persons, the equivalent documents.
   ii. Names of the members of the board of directors, as well as the curriculum vitae of each of its members, which shall be presented in accordance with Annex 1 of this Norm.
   iii. Certificate of judicial and/or police records of the legal representative and members of the board of directors of the company, issued by the corresponding national instances in the case of persons domiciled in Nicaragua, and by the competent foreign body, with the corresponding authentication, when it concerns persons not domiciled in Nicaragua or natural persons residing in Nicaragua who have been residents abroad in the last 15 years.
   iv. List and percentage of participation of the 5% Shareholders, natural persons, ultimate owners of the shares in a succession of legal persons.

In order to determine if the natural persons indicated here are 5% Shareholders, the calculation methodology established in Annex 2 of this Norm must be followed, which is an integral part of it. The natural persons who, according to the aforementioned calculation methodology, are 5% Shareholders must comply with the information requirements established in numeral 1, of letter c), of the present article.

d) Organizational chart of the shareholding structure of the 5% Shareholders, reflecting whether this percentage of participation is individual or together with their related parties, indicating the full names of the natural or legal persons contained in this chart. e) For all shareholders, documentary evidence of the lawful origin of the equity to be invested in the new institution. As a minimum, such documentation must include:

1. Information on the bank accounts from which the money comes.
2. Information on the origin of the money deposited in said accounts.
3. Information on the origin of the equity (information on the activities from which the equity comes, such as: businesses, inheritances, donations, among others) and evidence that the money comes from the same.
   f) The name of the members who will make up the Board of Directors and the main management team; as well as the curriculum vitae of each of them, which shall be presented in accordance with Annex 1 of this Norm. g) The relationships of significant linkage and the determination of their units of interest, in the terms established in Article 55 of the General Banks Law; of the persons who will be shareholders of the institution, members of its board of directors, and other persons who will make up the main management team. h) Minutes denoting deposit in the current account of the Superintendence, for the value of 1% of the minimum capital amount, for the processing of the application. Once they have commenced operations, said deposit will be returned to the promoters. In case the application is denied, 10% of the deposited amount will be paid to the Treasury of the Republic; the balance will be returned to the interested parties. In case of withdrawal, 50% of the deposit will be paid to the Treasury. i) Notarial declaration by each of the proposed directors not to be subject to any of the impediments established in Article 8 of this Norm.

All information and/or documentation required by this article that is in a language other than Spanish must be presented with its corresponding translation, which must comply with what is stipulated in the national laws on the matter or with the laws of the country where the translation is carried out. Documents coming from abroad that are required of natural or legal persons in this article must comply with the requirements established by the laws on the matter for them to have legal effects in the country.

Article 4. Exceptions.- The Superintendent may authorize exceptions to one, several, or all of the information requirements established in letter c), of Article 3 of this Norm in the following cases:
a) When the legal person partner is a public law institution. b) When the legal person partner is a bank or international or multilateral development organization, recognized internationally as such. c) When the legal person partner is an institution directly supervised by the Superintendence. d) When the legal person partner is a foreign financial institution subject to supervision according to international practices. e) When the legal person partner lists its shares on a stock exchange or regulated market. When pertinent, the documents justifying the case must be presented.

Article 5. Authorization of constitution.- Once the documents referred to in the preceding article have been presented, the Superintendent will submit the application to the consideration of the Board of Directors, who will grant or deny the corresponding authorization within a period not exceeding 120 days, counted from the receipt of the application.
In case of a positive resolution, the authorizing notary must mention the edition of "La Gaceta" in which the resolution of authorization to constitute as a stock exchange, issued by the Board of Directors, was published, and insert in its entirety in the deed the certification of said resolution. The registration in the Public Mercantile Registry will be null if this requirement is not met.

Article 6. Requirements to commence operations.- To commence operations, constituted stock exchanges must comply, at least, with the following requirements:
a) Have the minimum social capital fully paid in cash. Eighty percent (80%) of this in sight deposit at the Central Bank. b) Testimony of the social deed and its bylaws with the corresponding reasons for registration in the Public Registry. c) Opening Balance Sheet. d) Certification of the appointments of the Directors for the first term, of the Manager or main executive of the stock exchange, disciplinary committee, and internal auditor. e) Verification by the Superintendent that the stock exchange has the necessary physical facilities and technological means for the performance of its functions. f) Present the regulations, organization manuals, negotiation methods, and operating procedures of the exchange. g) Have operational staff dedicated exclusively to the activities proper to the activity as well as for its supervision and regulation functions. If the application for authorization of operation with evidence of compliance with the aforementioned requirements is not presented within one hundred eighty (180) days counted from the resolution that authorizes its constitution, it will become void and the amount of the deposit referred to in clause h), of Article 3 of this Norm, will be paid to the Treasury of the Republic.

Article 7. Authorization of operation.- The Superintendent will verify whether the applicants have met all the requirements demanded by the Capital Market Law and by this Norm for the operation of a stock exchange, and if they find them met, will grant the authorization of operation within a maximum period of 15 days counted from the date of presentation of the application referred to in the preceding article; otherwise, it will communicate to the petitioners the deficiencies noted so that they meet the omitted requirements and once the deficiency is remedied, will grant the requested authorization within a term of five (5) days counted from the date of correction. The authorization must be published in "La Gaceta", Official Diary, at the expense of the authorized stock exchange and must be registered in the corresponding Public Mercantile Registry in the Second Book of Companies of said Registry, also at its expense.

CHAPTER III
IMPEDIMENTS

Article 8. Impediments to be a director.- The following may not be members of the Board of Directors of a stock exchange:

1. Persons who are direct and indirect debtors in default for more than 90 days or for a number of three times during a period of twelve months, to any bank or non-banking financial institution subject to the supervision of the Superintendence or who have been judicially declared insolvent, in bankruptcy, or liquidation.
2. Those who, with any other member of the board, are spouses or partners in a stable de facto union, or have a relationship of kinship within the second degree of consanguinity or second degree of affinity. This cause will not be incurred when the relationship exists between an owner director and their respective substitute.
3. Directors, officials, or employees of other stock exchanges.
4. Significant shareholders of issuers whose securities are traded on the stock exchange.
5. Managers, executive officials, and employees of the same exchange, with the exception of the main executive.
6. Those who directly or indirectly are holders, partners, or shareholders who exercise share or administrative control over companies that have overdue credits for more than ninety (90) days or for a number of three times during a period of twelve months, or that are in judicial collection in the same company or in another of the financial system.
7. Persons who have been sanctioned in the fifteen (15) previous years for causing patrimonial damage to a bank, a non-banking financial institution, or public faith by altering its financial status.
8. Those who have participated as directors, managers, deputy managers, or officials of equivalent rank of a bank or non-banking financial institution that has been subjected to intervention processes and declaration of forced liquidation status, to whom by judicial or administrative resolution of the Superintendent has been established or will be established responsibilities, presumptions, or indications linking them to the aforementioned situations. The foregoing admits proof to the contrary.
9. Those who have been convicted of intentional crimes deserving penalties more than corrective.
   The impediments mentioned above will be applicable at all times and the person subject to any of them will cease in their position from the notification by the Superintendent.

CHAPTER IV
INVESTMENT REGIME.

Article 9.- Investment Regime for Own Account of Exchanges.1 Stock exchanges may invest on their own account, in securities traded within their own sphere. These investments must not exceed in a combined manner 10% of the issuance nor 10% of the total assets of the exchange.
Excluded from the above limits are investments in securities issued by the Ministry of Finance and Public Credit and the Central Bank of Nicaragua; securities issued by similar organs of Central American governments; as well as securities traded in other stock exchanges. Own account investments carried out within their own sphere, in addition to complying with the above limits, must be carried out through a member stock exchange broker, and must be announced to the rest of participating brokers at the same moment it is carried out. For these purposes, stock exchanges must establish policies containing mechanisms aimed at preventing possible conflicts of interest, and procedures for the selection of the stock exchange broker(s) that will intermediate in the operations, which must ensure that all stock exchange brokers can participate in the selection process on equal conditions. In all cases, the securities in which the exchange can invest must have a first-order risk rating, local or international, according to the table contained in Annex 3 of this norm, which becomes an integral part of it.

CHAPTER V
REGULATIONS, CODE OF CONDUCT, AND OTHER PROVISIONS

Article 10. Internal Regulation of the Exchange.- Stock exchanges must have an internal regulation approved by the Superintendent, which aims to promote the correct and transparent formation of prices aimed at protecting investors, avoiding conflicts of interest, promoting the dissemination of information, compliance with the law and applicable norms, among others.
To these effects, said Regulation must contain, at least, the following aspects:
a) Objective and powers of the exchange as an organized securities market. b) Administrative organization of the exchange with the functional detail of each area. c) Requirements for the constitution and authorization procedures for stock exchange brokers and agents.

d) Regulation on its primary markets. e) Requirements for the registration of issuers and securities. f) Standards for the presentation and disclosure of information on groups and business relationships of registered issuers. g) Grounds for suspension and cancellation of an issuer. h) Grounds for suspension and cancellation of the negotiation of a security, as well as of the registration of the corresponding issuance. i) Grounds for suspension and cancellation of a stock exchange broker. j) Regulation on its secondary markets, in aspects such as, types of operations to be carried out in its market with the concept, characteristics, conditions of realization, and forms of settlement. k) Supervision regime for stock exchange brokers and agents participating in the operations of its primary and secondary markets. l) Rights and obligations of stock exchange brokers and their agents regarding the operations in which they intervene. m) Establish the requirement for stock exchange brokers to have an internal control system that, at a minimum, contains policies, procedures, and control mechanisms aimed at protecting the interests of investors; as well as to ensure the integrity and transparency of the negotiation and the adequate management of risks.

n) Procedure to be followed to exercise discipline, correct the faults committed by directors, officials, and employees of this, by stock exchange brokers and their agents, as well as to impose the sanctions that the legal order allows. o) Settlement systems and guarantees when the nature of the traded products requires it, explaining its form of realization. p) Establish the compliance with guarantees for stock exchange brokers and the regime of coverage for credit and term operations. q) Recommendations on minimum and maximum levels of commissions that brokers will charge their clients, as well as the criteria and parameters that must be taken into account, such as: the type of security traded, the availability of said security in the market, the amount of the transaction, and the capacity in which the broker acts, whether on its own account or on behalf of third parties. r) Those others that are necessary to fulfill its object of facilitating transactions with securities and exercising the supervision and regulation functions conferred by the Capital Market Law and this Norm. The foregoing without prejudice to the fact that after the commencement of its operations, exchanges develop other general provisions or regulations for the carrying out of specific operations, as well as the updating thereof. Any modification to the Internal Regulation must be submitted to the approval of the Superintendent.

Article 11. Code of Conduct. Stock exchanges must develop a Code of Conduct by means of which their directors, managers, officials, advisors, and users of their services (brokers and agents) are subjected to a regime of compliance with the principles determined by Title VII, named "Conduct Standards", of the Capital Market Law. Within it, policies, norms, and procedures must be developed to regulate, at least, the following topics:
a) The knowledge, handling, access, and use of privileged information. b) The registration of persons who handle and have access to privileged information and the creation of barriers to prevent the use of said information. c) The regulations and provisions to be complied with to avoid price manipulation and the detail of types of operations under which it is presumed that there is price manipulation in the market. d) The principle of absolute priority to the interests of clients. e) The regime of mandatory abstentions applicable to their activity, according to Article 129 of the Capital Market Law. f) The action of the participants in their market according to the instructions of their clients. g) Information that stock exchange brokers and agents must supply to clients. h) Form of control and administration of potential conflicts of interest that arise in their daily activity. i) Regulations and principles to be respected in the application of legislation on the prevention of money laundering.

Article 12. Conflicts of Interest.- For the purposes of what indicated in letter h) of the previous article, the board of directors of stock exchanges must approve internal policies and issue regulation for the control, administration, and

1 Art. 9, reformed on June 27, 2014 - Resolution No. CD-SIBOIF-840-1-JUN27-2014

disclosure of conflicts of interest; as well as for incompatibilities that meet the minimum content of the regulations governing this matter and that could arise, among others, from the following situations:
a) Transactions or other operations between entities or officials of the same economic group; b) Activities carried out by shareholders, executives, and officials of the stock exchange, stock exchange positions, and issuers in relation to their clients, as well as the related parties of said shareholders, directors, and officials; c) Other situations that have the potential to generate a conflict of interest. In any case, any shareholder, member of the board of directors, or any official of the stock exchange who has a personal interest or conflict of interest with the stock exchange itself in the processing or resolution of any matter or operation, or whose financial group, partners, or the firm or company to which they belong, or their spouse, stable de facto partner, or relatives within the fourth degree of consanguinity or second degree of affinity, shall not influence the officials and bodies of the respective stock exchange responsible for the processing, analysis, recommendation, and resolution of the same, nor be present during the discussion and resolution of the related topic.

CHAPTER VI
DUTIES TO SUPPLY INFORMATION AND TECHNOLOGY

Article 13. Duties of Information.- Stock exchanges must make available to the public updated information on securities admitted to trading, issuers and their rating, volume, price, stock exchange positions participating in stock market operations, lists of authorized rating agencies, as well as the financial situation of stock exchange positions and the exchanges themselves, among others.
For the foregoing purposes, stock exchanges must have mechanisms and internal rules to communicate such information to the general public, which must be clear, correct, precise, sufficient, and timely; likewise, it must indicate the risks involved.

Article 14. Information to the Superintendent and other duties of the exchanges.- Exchanges must provide the Superintendent at all times with any information requested without any limitation, at the frequency deemed appropriate, as well as keep updated the information required by law and other regulations.
The details of the information, as well as the formats, content, means, and deadlines for delivery to the Superintendent, shall be carried out in accordance with the regulations on the matter.

Stock exchanges must guarantee the Superintendent permanent interconnection to their information and trading systems in order to facilitate the supervision and oversight functions corresponding to it by law.

Article 15. Annual Audit Plan.- Stock exchanges must present to the Superintendent, during the first thirty days of each year, their annual audit plan.

Article 16. Computer Systems.- Exchanges and positions operating in them must have computer systems that allow the communication, centralization, and control of information related to negotiable securities and operations carried out. Such system must comply with the provisions established in the regulations governing the matter of technological risk.

CHAPTER VII
FINAL PROVISIONS

Article 17. Modification of Annexes.- The Superintendent is authorized to make the necessary modifications to the annexes of this Norm, which are an integral part of it.

Article 18. Transitional.- Stock exchanges must comply with the following:
a) Adjust and present to the Superintendent for approval, the draft regulations, codes, and procedures indicated in this Norm within a period not exceeding four (4) months, counted from the entry into force of the same. The Superintendent, by motivated decision, may extend the aforementioned period for a term equal to the originally established one. b) Form the Disciplinary Committee referred to in article 40, subsection b), of the Capital Market Law, no later than within two (2) months, counted from the entry into force of this Norm. c) Stock exchanges that, at the entry into force of this Norm, have investments not contemplated in it, will have a period of up to ten (10) months or until the corresponding maturity of the instrument, whichever is shorter, for their withdrawal. d) Stock exchanges that, at the entry into force of this Norm, have a shareholding percentage in value centers higher than the percentage established in subsection d), of article 142 of the Capital Market Law, will have a period of up to five (5) years to adjust to said percentage. e) Shareholders of already authorized stock exchanges that individually have a shareholding exceeding twenty percent (20%) of the total capital of the society, must adjust to what is provided in article 36 of the Capital Market Law no later than within a period of ten (10) months counted from the entry into force of this Norm.

f) Directors of already authorized stock exchanges who are subject to any of the impediments referred to in article 8 of this Norm, must cease immediately from performing their duties, in accordance with what is established in article 205 of the Capital Market Law.

Article 19. Repeal.- The Norm on the Authorization and Operation of Stock Exchanges, contained in Resolution CDSIBOIF-467-1-FEBR21-2007, published in La Gaceta, Official Journal No. 78, of April 26, 2007, is hereby repealed.

Article 20. Validity.- This Norm shall enter into force from its publication in the Official Journal, La Gaceta.

ANNEX 1
CURRICULUM VITAE OF SHAREHOLDERS,
DIRECTORS AND MANAGEMENT TEAM
Strictly Confidential Information
INSTITUTION:
_______________________________________________________________ GENERAL DATA Full Name:
____________________________________________________________ Nationality:
____________________________________________________________ Profession or trade:
____________________________________________________________ Place and date of birth:
____________________________________________________________ National Identity Card Number (nationals):
_____________________________________________________________ Residence Card (in the case of foreigners residing in the country):
_______________________________________________________ Passport Number (in the case of non-resident foreigners):

---

RUC No. (or its equivalent, as applicable):
____________________________________________________________ Position held in the institution:
____________________________________________________________ In the case of being foreign, your migratory status:
____________________________________________________________ Do you have authorization to work in the country? (only for foreign shareholders holding administrative or Board of Directors positions)

YES ( ) NO ( )
Authorization Number: _________________________________ Date of Authorization: ___________________________________ Validity of Authorization: _______________________________ KNOWLEDGE AND EXPERIENCE Knowledge and experience in stock market and financial activity:
Entity Position Period from ... to...
Main
Functions

Positions held or currently held in other entities:
Entity Position Period from ... to...
Main
Functions

Studies and training completed:
Establishment
Title or course name
Period from
... to...
Observations

OTHER INFORMATION
Have you been declared bankrupt? YES ( ) NO ( ) If affirmative, indicate the reasons and state if you have been rehabilitated:
_____________________________________________________________ _____________________________________________________________ Have you ever been subject to judicial proceedings? YES ( ) NO ( ) If affirmative, indicate:
Reason Type of
Proceeding Date Final Result

Have you been administratively sanctioned or judicially processed for money laundering or other assets? YES ( ) NO ( ) If affirmative, indicate the sanction or process.
Are you a partner of any entity? YES ( ) NO ( ) If affirmative, provide the following information:
Name of the
Entity Country
RUC No. or equivalent
% participation
Amount in C$

I declare that the data above are true, subjecting myself to the sanctions determined by law for any inaccuracy thereof.
Place and date:
_____________________________________________________________ f) __________________ Name: ______________

ANNEX 2
METHODOLOGY FOR CALCULATING 5% SHAREHOLDING PARTICIPATION PN1 ----------> PJ2 ----------> PJS ---------- PJ(n-1)% ----------> PJ(n) P1% P2% P(n-1)% Where K% is the percentage of participation of PN1 in PJ(n) Conditions:

1. If P1% ≤ 50%:
   K% = P1% * P2% * ----- * P(n-1)%
2. If P1% > 50%, P1% is considered 100%:
   a) Where P2% ≤ 50%:
   K% = 100% * P2% * ----- * P(n-1)% and so on. b) Where P2% > 50%:
   K% = 100% * 100% * P3% * ----- * P(n-1)% and so on.
   Abbreviations:
   PN: Natural Person
   PJ: Legal Person

Pi%: Percentage of participation of natural person “i” in the capital of legal person “i+1”. For i = 1, 2, 3, …., n-1.
ANNEX 3
RISK RATING
Rating of
Issuer
Short-term
Obligations
Long-term
Obligations
Sovereign Risk
Rating
Fitch IBCA Rating BBB- or higher
Rating F3 or higher
Rating BBB- or higher
Rating BBB- or higher
Moody’s Investors
Services
Rating Baa- or higher
Rating P-3 or higher
Rating Baa- or higher
Rating Baa- or higher
Standard & Poor’s
Corporation
Rating BBB- or higher
Rating A3 or higher
Rating BBB- or higher
Rating BBB- or higher
Dominion Bond
Rating Service
Limited
Rating BBB- or higher
Rating A3 or higher
Rating BBB- or higher
Rating BBB- or higher
Pacific Credit Rating Rating BBB- or higher
Rating P3 or higher
Rating BBB- or higher
Rating BBB- or higher
Equilibrium
Risk Rating S.A.
Rating BBB- or higher EQL-3 or higher Rating BBB- or higher Rating BBB- or higher SC Central American Risk Rating scr- BBB- or higher SCR-3 or higher Rating scr- BBB- or higher Rating scr- BBB- or higher Rating Categories Risk Rating Agency (f) Antenor Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Roberto Solórzano Ch. (f) A. Cuadra G. (f) U. Cerna B.

URIEL CERNA BARQUERO
Secretary of the Board of Directors SIBOIF