Norm on the Integration of the Nicaraguan Capital Market with Other Foreign Markets

Resolution No. CD-SIBOIF-1296-5-FEB15-2022
Dated February 15, 2022

NORM ON THE INTEGRATION OF THE NICARAGUAN CAPITAL MARKET WITH OTHER FOREIGN MARKETS

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

I
That Article 4 of Law No. 587, "Capital Market Law," published in La Gaceta, Official Gazette No. 222, on November 15, 2006, contained in Law No. 974, Law of the Nicaraguan Legal Digest on Banking and Finance, published in La Gaceta, Official Gazette No. 164, on August 27, 2018, and its reforms (Legal Digest), establishes that the Superintendence of Banks and Other Financial Institutions, in fulfillment of said Law, shall ensure the transparency of securities markets and the protection of investors, regulating, supervising, and auditing said markets, as well as the activities of natural and legal persons who intervene directly or indirectly in them and the acts or contracts related to them.

II
That Article 214 of the aforementioned Law establishes that the Board of Directors of the Superintendence of Banks and Other Financial Institutions may issue general norms to regulate transactions with foreign securities traded on stock exchanges, issued by foreign issuers, provided they comply with the requirements regarding information and registration in their country of origin and when these requirements are at least equivalent to those required in Nicaragua.

III
That the capital markets of the region have begun integration processes through efforts related to the provision of information between stock exchanges, the facilitation of investment order management processes, cooperation between supervisors, access to stock exchange seats to operate in different countries, as well as in matters of integration of trading platforms, among others; therefore, a framework is required to regulate the integration of our capital market with the markets of other countries.

In exercise of its powers,

HAS ISSUED

The following:
CD-SIBOIF-1296-5-FEB15-2022

NORM ON THE INTEGRATION OF THE NICARAGUAN CAPITAL MARKET WITH OTHER FOREIGN MARKETS

CHAPTER I
GENERAL PROVISIONS

Article 1. Concepts.- For the purposes of this norm, the terms indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a) Stockbroker: Natural person authorized to carry out brokerage intermediation activities, in the name and on behalf of a remote operator. b) Stock Exchange: Company authorized by the competent authority of its country of origin to facilitate transactions with securities, as well as to exercise the functions of authorization, supervision, and regulation of stockbrokers. c) Securities Clearinghouse: Company specialized in the deposit and custody of securities, constituted as a joint-stock company, registered and authorized before the competent authorities. d) Issuer: Legal person, public or private, national or foreign, that issues securities for trading on the securities market. e) IOSCO: International Organization of Securities Commissions. f) Law No. 587: Capital Market Law, published in La Gaceta, Official Gazette No. 222, on November 15, 2006, contained in Law No. 974, Law of the Nicaraguan Legal Digest on Banking and Finance, published in La Gaceta, Official Gazette No. 164, on August 27, 2018, and its reforms. g) Remote Operator: Stock exchange seat that holds a license granted by the competent authority of its country of origin, where its principal domicile is located, to trade securities issued by foreign issuers, within a stock exchange authorized by the competent authority of the other country where the securities will be traded, operating under the "Remote Securities Trading System." h) AML/CFT/CPF: Anti-Money Laundering, Counter-Terrorist Financing, and Counter-Proliferation Financing. i) Stock Exchange Seat: Legal person authorized by a stock exchange to carry out the activities established in the law of the country of origin where its principal domicile is located. j) Securities Register: The register referred to in Article 7 of Law No. 587 and the regulations governing the matter on the organization and functioning of the securities register of the Superintendence of Banks and Other Financial Institutions, in which securities for public offering, both national and foreign, must be registered.

k) Regulations of stock exchanges and stock exchange seats: Internal regulations of stock exchanges and stock exchange seats, which integrate elements and rules corresponding to the authorization, regulation, and registration system of operations in other markets. l) Remote Securities Trading System (RSTS): Mechanism under which a remote operator can access, from its country of origin, in real time, the trading systems of a foreign stock exchange, to offer in its country of origin and/or trade securities issued by foreign issuers, either on its own account and/or on behalf of third parties from its country of origin, in accordance with this norm and the agreements signed regarding the matter. m) Superintendence: Superintendence of Banks and Other Financial Institutions. n) Superintendent: Superintendent of Banks and Other Financial Institutions.

Article 2. Object.- This norm aims to regulate the mechanisms for trading securities through remote operators, within the framework of agreements or conventions signed among themselves, both between the Superintendencies or Commissions regulating the securities markets, and between the stock exchanges of the different countries involved in the trading.

Article 3. Scope.- This norm is applicable to the following natural or legal persons:
a) Stock exchanges; b) Stock exchange seats interested in operating as remote operators; c) Remote operators; d) Stockbrokers; e) Securities Clearinghouses.

Article 4. Special Provision.-
1 In accordance with what is provided in Article 214 of Law No. 587, securities issued by foreign issuers may be traded on stock exchanges authorized by the Superintendence, provided they comply with the requirements regarding information and registration in their country of origin and when these requirements are at least equivalent to those required in Nicaragua. Consequently, such securities may be the subject of public offering in the primary and secondary markets of Nicaragua, without the need for their inscription in the Securities Register of the Superintendence. For the purposes of this norm, it shall be understood that securities issued by foreign issuers comply with the requirements established in Article 214 of Law No. 587 when the following conditions concur:
a) That they come from member countries of IOSCO and/or member countries of the Association of Capital Markets of the Americas (AMERCA). b) That they are registered in the securities registers of the homologous regulatory entities or listed for trading on the stock exchanges of their country of origin, with which the Superintendence and the stock exchanges authorized to operate in Nicaragua, respectively, have signed agreements or conventions for the integration of capital markets, under the terms of this norm; and c) That they are traded through an RSTS. The trading of foreign securities that do not meet the aforementioned characteristics shall continue to be subject to the provisions of the regulations governing the matter on securities trading in the secondary market.

1 Article 4 modified on October 11, 2022, by Resolution No. CD-SIBOIF-1338-1-OCT11-2022

CHAPTER II
MINIMUM CONDITIONS FOR TRADING

Article 5. Integration Agreements.- For the trading of securities under the terms of this norm, the Superintendence and the stock exchanges authorized to operate in Nicaragua must have signed agreements or conventions with their foreign counterparts, aimed at facilitating the integration of capital markets, and in which a framework is established for the exchange of information, use of trading systems, tariffs, among other aspects, that allows investors from each of the involved jurisdictions to acquire and trade securities authorized by the corresponding stock exchanges.

All of the above shall be subject to the principle of reciprocity, in the sense that there are no other special requirements, other than those established in this norm, for the trading of securities through remote operators.

Article 6. Activities of foreign remote operators.- Foreign remote operators may carry out the following activities:
a) Acquire, trade, and place buy and sell orders for securities in the trading systems of stock exchanges authorized by the Superintendence, on their own account and/or on behalf of investors from their country of origin. b) Settle their operations through the mechanisms established by the securities clearinghouses authorized by the Superintendence.

Article 7. Authorization and registration of foreign remote operators.-
2 The stock exchanges authorized by the Superintendence shall establish in their internal regulations the procedures for the authorization of foreign remote operators. These, once authorized by a stock exchange, shall request their registration with the Superintendence and attach the following information to their application:

a) Trade name and corporate name. b) Address, telephone, email, website. c) Personal identification document and other legal details of the persons serving as the chief executive, compliance officer, and stockbrokers.

2 Article 7 modified on March 19, 2024, by Resolution No. CD-SIBOIF-1436-1-MAR19-2024

d) Authorization credential from the stock exchange of their country of origin. e) Certification of registration or authorization from the regulator of their country of origin. f) Deed of incorporation and bylaws of the remote operator registered in the competent registry, which must be constituted as a joint-stock company in accordance with the commercial code or legislation of their country of origin. g) Guarantee provided in favor of the stock exchange, the amount of which must be at least equal to the amount required for national stock exchange seats in accordance with the regulations on the matter. This guarantee may be constituted through a bond contracted with an insurance company authorized to operate in Nicaragua or with cash, deposit certificates constituted in Nicaragua or in the country of origin of the remote operator, public debt securities issued in Nicaragua or in the country of origin of the remote operator, and negotiable serial debt securities issued by multilateral credit organizations or member countries of the Organization for Economic Co-operation and Development (OECD). In the event that such guarantee is constituted with cash or with any of the aforementioned securities, the stock exchanges and securities clearinghouses must include in the agreements they sign according to Article 5 of this norm, the guarantee regime to comply with what is established in this article. In said agreements, the entities that will custody the securities and their risk rating must be indicated, the conditions of the deposits and cash safeguarding, the mechanisms to execute the guarantees, the term and method to replenish or modify them, among other relevant aspects to the process of constitution, valuation, and execution thereof. The content of these agreements must have the non-objection of the Superintendent. h) Power of attorney of the person designated by the remote operator to act in Nicaragua as its representative and a copy of their identity document, who must have experience in the banking or securities industry, with broad and sufficient powers to be notified of any administrative and/or judicial proceedings. Such representative may not cease their functions until another representative is formally designated before the Superintendence.

The documents referred to in letters c) to h) above must be presented in notarially certified copy. i) Original letter from the stock exchange on the admission of the remote operator and a notarially certified copy of the agreement or convention referred to in Article 5 of this norm.

Having received the complete information and finished the review of the application, the Superintendence shall proceed to issue the resolution authorizing the registration of the foreign remote operator within a maximum period of 30 days. No payment of registration fees shall be charged, provided that this practice is reciprocal; otherwise, the fee applied to national stock exchange seats shall be charged.

Article 8. Requirements for maintenance of registration.- Foreign remote operators operating under the RSTS must comply at all times with the following requirements:

a) Hold a valid license or authorization from the regulator and stock exchange of their country of origin. b) Comply with the delivery of reports, documents, and information required, with the periodicity, format, and content established by both the Superintendence and the respective stock exchanges, as well as comply with all regulations and norms applicable to this type of operation. c) Comply with the applicable legal framework in matters of AML/CFT/CPF in their country of origin.

Article 9. Due Diligence.- The internal regulations issued by stock exchanges, as well as the conventions they sign with foreign remote operators, must expressly establish the duty of compliance by remote operators with the current laws, regulations, and circulars on AML/CFT/CPF in the country of origin. The AML/CFT/CPF manual of the stock exchanges must include a due diligence procedure for knowing the foreign entities requesting to be remote operators.

Article 10. Cancellation of the registration of the foreign remote operator.- The foreign remote operator may voluntarily request the cancellation of its registration with the Superintendence, through a request signed by its representative and accompanied by the following documentation:
a) Power of attorney of the signatory of the request. b) Certification from the stock exchange accrediting the completion of its authorization as a remote operator and that there are no pending operations to settle. c) Certification from the regulatory body of its country of origin stating that the remote operator currently complies with the applicable legal framework.

Having received the complete information and finished the review of the request, the Superintendence shall proceed to issue the resolution canceling the registration of the foreign remote operator within a maximum period of 30 business days.

The Superintendence, through a reasoned resolution, may also admonish, suspend, and/or revoke ex officio the registration of a foreign remote operator when it fails to comply with what is established in this norm and other applicable provisions.

Article 11. National remote operators.- National stock exchange seats that opt to act as a remote operator within a foreign stock exchange, within the framework of the conventions referred to in Article 5 of this norm, must previously have authorization to trade foreign securities as established in the regulations governing the matter on securities trading in the secondary market. If applicable, stock exchange seats may trade on their own account and on behalf of their clients, securities issued by foreign issuers within a foreign stock exchange, through an RSTS.

The transactions carried out by such remote operators must be reported to the corresponding stock exchange in Nicaragua and will be disclosed in the reports it publishes on its website.

Stock exchange seats acting as remote operators are responsible for providing their clients with all necessary information regarding the conditions, characteristics, and risks that they assume when deciding to buy or sell foreign securities, as well as providing them with the information contained in the international information system to which the stock exchange seat has access.

All issuances of foreign securities traded under the terms of this norm shall be subject to the provisions on periodic information supply, material events, and the presentation of documentation in accordance with the regulations of their home supervisor. Material events shall be published by the media and within the timeframes established by the regulation of each country where the issuer or the securities issuance is registered. The stock exchange seat acting as a remote operator must inform its investors where the issuer's information is available.

Furthermore, they shall be responsible for informing investors that the operations carried out are under conditions different from those observed in negotiations with local securities, leaving evidence of the transmission to the client of the following information:
a) That the securities are not subject to local laws; and b) That, in the event of litigation, dispute resolution, situations of non-payment by the foreign issuer, or other similar events, recourse must be made to the respective foreign issuer or to the authorities of the country of origin from which these securities originate, to resolve them. Likewise, that the information on these securities may be in a language other than Spanish.

The above indicated in this article shall be incorporated into the contracts that stock exchange seats sign with their clients; likewise, all communication between the stock exchange seat and the investor must contain a warning that includes what is expressed in letters a) and b) above.

Article 12. Regulations of stock exchanges.-
3 For the application of this norm, the internal regulations of the stock exchanges authorized by the Superintendence must include at minimum the following aspects:

a) Procedures for the authorization of foreign remote operators, within the framework of conventions signed with other stock exchanges. b) Regulations for local stock exchange seats, authorized as remote operators in other markets. c) Requirements for the authorization of stockbrokers of foreign remote operators. d) Procedures and controls for the settlement of operations of foreign remote operators. e) Registration system of operations in other markets and information to the public.

3 Article 12 modified on March 19, 2024, by Resolution No. CD-SIBOIF-1436-1-MAR19-2024

f) Supervision of operations of foreign remote operators. g) Constitution, valuation, monitoring, and execution of guarantees.

Stock exchanges must inform the Superintendence of any case of possible irregularity carried out by a foreign remote operator, as well as apply sanctioning procedures, if necessary. Additionally, stock exchanges must publish material or important events related to the business of foreign remote operators that must be disclosed for the protection of investors. These material events must be reported to the stock exchanges immediately by the foreign remote operator or its authorized representative in Nicaragua.

Stock exchanges must also have a robust and secure technological platform that allows the installation of electronic trading systems that provide direct access to remote operators from other countries as local users.

Article 13. Regulations of securities clearinghouses.- Securities clearinghouses must draft and authorize a special regulation to regulate the necessary procedures for the settlement of operations executed from abroad by national remote operators and for the operations settled locally by foreign remote operators.

Article 14. Legalization of documents from abroad.- Documents from abroad required of natural or legal persons in this norm must meet the requirements established by the laws on the matter so that they can have legal effects in the country.

CHAPTER III
FINAL PROVISIONS

Article 15. Validity.- This norm shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette.

(Signature) legible Magaly María Sáenz Ulloa (Signature) Illegible (Luis Ángel Montenegro E) (Signature) Illegible Fausto Reyes (Signature) Illegible (Silvio Moisés Casco Marenco) (Signature) Illegible (Ervin Antonio Vargas Pérez).

SAÚL CASTELLÓN TÓRREZ
Ad Hoc Secretary, Board of Directors SIBOIF