Resolution No. CD-SIBOIF-558-1-OCT29-2008

Date: October 29, 2008

NORM ON THE REGISTRATION OF DEMATERIALIZED SECURITIES

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

CONSIDERING

I
That Article 137 of Law No. 587, "Capital Markets Law," published in La Gaceta, Official Journal No. 222, of November 15, 2006, establishes that securities issuances registered in the Securities Register of the Superintendence of Banks and Other Financial Institutions (Superintendence) may be represented by physical documents known as physical securities, or by electronic records known as dematerialized securities.

II
That pursuant to Article 155 of said Law 587, stock exchanges, value centers, and clearing and settlement societies must promote the dematerialization of securities, except for those exceptions authorized by the Superintendent based on market circumstances or the particular nature of certain securities.

III
That it is necessary to establish general guidelines regulating the constitution and negotiation of dematerialized titles from public and private issuers, not only to develop and streamline the local securities market but also to facilitate its adherence to globalized markets.

IV
That Article 6, letter b), and Article 208 of the Capital Markets Law empower the Board of Directors of the Superintendence to issue general norms aimed at regulating the functioning of the securities market, as well as compliance with said Law.

In exercise of its powers,

HAS ISSUED

Resolution No. CD-SIBOIF-558-1-OCT29-2008

The following:

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NORM ON THE REGISTRATION OF DEMATERIALIZED SECURITIES

CHAPTER I

CONCEPTS, OBJECT, AND SCOPE

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) Administration of the Securities Accounting Register: Function entrusted by the Capital Markets Law to the Central Bank of Nicaragua and to the Value Centers so that, at the request of the State and of public institutions and private issuers, respectively, they constitute dematerialized securities by registering new issuances in the Securities Accounting Register and so that they record therein the transfers to which said securities are subject, under the terms referred to in said Law and in this Norm. Administration does not imply qualification regarding the issuance or the solvency of the issuers, since these are obligated to comply with the obligations assumed.

b) Registration Entry or Electronic Account Entry: Refers to the accounting entry made in the Securities Accounting Register of dematerialized securities.

c) BCN: Refers to the Central Bank of Nicaragua.

d) Delegated Value Center: That Value Center to which the Central Bank of Nicaragua delegates the administration of the accounting register of dematerialized securities issued by the State and public institutions, in accordance with Article 145, clause a), numeral 1, of the Capital Markets Law.

e) Depositories: National or foreign entities that contract the services of a Value Center and may be: stock exchange positions, banks, investment companies, financial societies, pension fund administrators, insurance companies, stock exchanges, value centers, financial lessors, warehouses, investment fund administrator societies, securitization fund administrator societies, and any other entity authorized by the Board of Directors of the Superintendence.

f) Capital Markets Law: Law No. 587, Capital Markets Law, published in La Gaceta No. 222, of November 15, 2006.

g) Securities Accounting Register of Dematerialized Securities: Refers to the two-level securities accounting register system, in which the Central Bank of Nicaragua, the Value Centers, and the depositories participate.

h) Superintendence Securities Register: Refers to the register of securities issuance inscriptions maintained by the Superintendence.

i) Superintendence: Superintendence of Banks and Other Financial Institutions.

j) Superintendent: Superintendent of Banks and Other Financial Institutions.

k) Holder: The person who appears legitimized in the entries of the Securities Accounting Register of Dematerialized Securities of a depository.

l) Security (securities): In accordance with what is provided in Article 2 of the Capital Markets Law, securities are understood to be negotiable instruments and any other right of economic or patrimonial content, incorporated or not in a document, which by their own legal characteristics and transmission regime can be the object of negotiation in a stock market.

m) Dematerialized Security: That right of economic or patrimonial content not incorporated in a document, represented by an electronic account entry.

n) Physical Security: That right of economic or patrimonial content incorporated in a document. Negotiable instrument.

o) Private Security: One issued by entities of the private sector.

p) Public Security: One issued by the State and public institutions.

Article 2. Object. This Norm aims to establish the principles and rules to which the accounting register of dematerialized securities resulting from public and private issuances must be subject; as well as the minimum requirements and obligations that Delegated Value Centers and Value Centers in general must fulfill, the latter for the administration of accounting registers of securities in the case of private issuances.

Article 3. Scope. The provisions of this Norm shall be applicable to the Central Bank of Nicaragua, to the Value Centers, and to the depositories, insofar as relevant.

CHAPTER II

REQUIREMENTS AND AUTHORIZATION PROCEDURES

Article 4. Minimum requirements for providing the service of administration of the accounting register of dematerialized securities. To provide the service of administration of the accounting register of dematerialized securities of private issuers or public issuers (in the latter case, when the BCN delegates the administration of said register), Value Centers must comply, in addition to the requirements established in the norm regulating the matter on securities custody and authorization and functioning of value centers, with the following minimum requirements:

a) Develop the procedure to be followed for the registration of a new issuance of private dematerialized securities in the securities accounting register, as well as the procedure for the dematerialization of private physical securities issuances that are in circulation. For the case of the registration of a new issuance of public dematerialized securities in the securities accounting register and for the dematerialization of public physical securities in circulation, the BCN will be the entity responsible for approving said procedures.

b) Have specialized operational personnel to provide the service of administration of the accounting register of securities.

c) Have an computer system that complies with the requirements established in the regulations governing the matter of technological risk, and additionally, allows communication, centralization, and control of information relative to the securities recorded in the accounting register of dematerialized securities, and meets the conditions of security, availability, auditability, and integrity specified in Annex 1 of this Norm, which is an integral part thereof.

d) Have a computer system that complies with the operational requirements contained in Annex 2 of this Norm, which is an integral part thereof.

e) In the case of Delegated Value Centers, they must additionally present the certification of the resolution of the Board of Directors of the BCN in which it approves delegating the administration of the accounting register of securities of public issuers. Likewise, they must comply with the conditions established in the resolutions issued by said body regarding the administration of the accounting register of dematerialized securities of the State and public institutions.

f) Any other requirement that, according to the characteristics and nature proper to this service, the Superintendent determines it is necessary to require.

Article 5. Authorization procedure for functioning to provide the service of administration of the accounting register of dematerialized securities. The authorization to provide the service of administration of the accounting register of dematerialized securities will be subject to the procedures, processes, and timeframes for functioning authorization provided for in the regulations governing the matter on securities custody and authorization and functioning of value centers.

CHAPTER III

ACCOUNTING REGISTERS OF DEMATERIALIZED SECURITIES

Article 6. Structure and organization of the accounting register. The accounting registers of dematerialized securities will be organized under a two-level system:

a) A first level constituted by the following entities:

1. The BCN, who will keep the accounting register of public issuances, being able to delegate the administration of said register to any authorized Value Center.
2. Authorized Value Centers, who will keep the accounting register of private issuances.

b) A second level constituted by the depositories.

Article 7. Content of the double-level system. The accounting registers of dematerialized securities will be organized under a system that allows the individualization of the holders of the securities at the level of the accounting register that the BCN and the Value Centers will keep, as the case may be. Nevertheless, the full identification of the holders will be maintained in the depositories' registers, so that in the first-level securities accounting register, ownership will be established by means of codes.

Article 8. Constitution of dematerialized securities. Securities represented by means of electronic account entries will be constituted as such by virtue of their registration in the accounting register. For this effect, the issuer must request the registration of the issuance in the corresponding securities accounting register, prior to complying with the requirements and procedures established by the BCN or the respective Value Center, as the case may be. From this registration, the records of the securities in the corresponding accounts will be made according to the levels of the structure and organization of the accounting register of dematerialized securities referred to in Article 6 of this Norm.

Article 9. Entities in charge of the registration of issuances, ownership of securities, and movements affecting them. At the request of the issuer, the BCN, in the case of public issuances, and the Value Centers, in the case of private issuances, will be responsible for carrying out the registration of a new issuance in the first level of the accounting register of dematerialized securities.

The BCN and the Value Centers will be the entities responsible for keeping the entries of all public or private securities represented by means of electronic account entries registered in the Superintendence Securities Register. To this effect, the BCN and the Value Centers must maintain two types of accounts for each depository: one for securities on their own account (of the depository) and another for securities on behalf of third parties.

Depositories must keep entries of natural or legal persons who are not authorized to participate as depositories in the BCN or in a Value Center, as the case may be. The total sum of third-party securities represented by the entries kept by a depository at all times must be the exact counterpart of the sum corresponding to securities on behalf of third parties that said entity has, in accordance with what is established in the previous paragraph, in the BCN or in the Value Center, as the case may be.

Depositories will be the entities responsible for practicing the registrations of ownership over dematerialized securities, in the second level, as well as the movements affecting them.

Co-owned securities will be entered in the corresponding accounting register in the name of all co-holders.

These registrations must be carried out in accordance with the procedures and timeframes established by the BCN or by the Value Centers, as the case may be.

Article 10. Fungibility of dematerialized securities. Regarding standardized securities, whoever appears as holder in the entry register will be the holder of a determined quantity of securities, so that these will be identified by balances. This without prejudice to the identification needs that may arise from the constitution of real rights, liens, or attachment annotations.

Article 11. Administration of accounting registers. The BCN is the entity responsible for administering the accounting register of dematerialized securities issuances of the State and public institutions, being able to delegate the administration of said register to any of the Value Centers authorized by the Superintendence. When it comes to dematerialized securities of private issuances, such administration will be in charge of the Value Centers.

Article 12. Principles governing the annotation of securities and movements in the register. The accounting register of dematerialized securities will be governed by the principles of priority of annotation and successive tract.

In accordance with the principle of priority, regarding requests for annotations of transactions on the same security, the one presented first to the securities accounting register will be attended. Once one has been practiced, no other on the same security that results opposite or incompatible with the previous one may be practiced.

According to the principle of successive tract, for the transfer of securities, the prior registration of these in favor of the transferor in the corresponding accounting register will be essential. Likewise, it will be required for the constitution, modification, or extinction of real rights over registered securities.

Article 13. Rectification or correction of annotations. The BCN, the Value Centers, and the depositories will be the only entities that may rectify inaccurate annotations by virtue of a judicial resolution. In the case of errors resulting from the annotation itself or from the confrontation with the document by which the annotation was practiced, the rectifications will be carried out in accordance with the procedures established internally for this purpose, for which the BCN or the Value Centers, as the case may be, must implement the necessary security and internal control mechanisms, as well as keep logs of the changes made.

Article 14. Transmission of dematerialized securities. The transmission of dematerialized securities will be effected through the debit in the account of the transmitter and the credit in the account of the acquirer. The annotation of the transmission in favor of the acquirer will produce the same effects as the tradition of the title. The transmission will be enforceable against third parties from the moment the annotation has been practiced in the accounting register of the BCN or of the Value Center, as the case may be.

Article 15. Constitution of real rights, liens, and attachment annotations on dematerialized securities. The constitution of any real right, lien, or attachment annotation on dematerialized securities will be carried out in accordance with the procedures established in the law on the matter. These encumbrances must be annotated by the depository in the corresponding account prior to presentation of the legal document proving the act, or by means of the respective judicial order. Excluded from the foregoing are those movements that affect securities on the depository's own account, in which case, it will correspond to the BCN or to the Value Center, as the case may be, to make the corresponding annotation.

In accordance with the principle of priority, regarding the request for the constitution of any real right, lien, or attachment annotation on the same dematerialized security, the one presented first to the depository, to the BCN, or to the Value Center, as referred to in the previous paragraph, will be attended. To this effect, these must establish the necessary control mechanisms that evidence the order of receipt of said requests. The constitution of the lien will be enforceable against third parties from when the annotation has been practiced in the securities accounting register.

The annotation of the pledge in the respective account will be equivalent to the displacement of possession of the title. In the case of the annotation of pledges and attachment annotations, the annotation of the lien will imply the immobilization of the securities.

The cancellation of rights, liens, or attachment annotations will be carried out in the same manner established in the previous paragraphs.

CHAPTER IV

FINAL PROVISIONS

Article 16. Transitional. For the effect of what is provided in Article 202 of the Capital Markets Law, the following provisions are established:

From the entry into force of this Norm, every new issuance of private securities must be registered as an electronic account entry to be admitted to quotation on the Stock Exchange.

For the case of public securities, every new issuance made one hundred and eighty days after the entry into force of this Norm must be registered as an electronic account entry to be admitted to quotation on the Stock Exchange.

Likewise, the one-year period referred to in the final part of Article 202 of the Capital Markets Law, to transform into electronic account entries the physical securities, private and public, in circulation, must be calculated starting one hundred and eighty days after the entry into force of this Norm.

What is provided in this article is without prejudice to the exceptions that the Superintendent might authorize in accordance with Article 155 of the Capital Markets Law.

Article 17. Modification of annexes. The Superintendent is empowered to make the modifications that are necessary to the annexes of this Norm, which are an integral part thereof.

Article 18. Repeal. The Norm on the Registration of Dematerialized Securities, issued by the Board of Directors of the Superintendence contained in Resolution No. CD-SIBOIF-480-1-MAY23-2007, dated May 23, 2007, and published in La Gaceta, Official Journal No. 134, of July 16, 2007, is repealed.

Article 19. Validity. This Norm will enter into force from its publication in La Gaceta, Official Journal.

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ANNEX 1

CONDITIONS OF SECURITY, AVAILABILITY, AUDITABILITY, AND INTEGRITY OF COMPUTER SYSTEMS

I. Security: Documented and updatable schemes of physical and logical information security that allow it to preserve and guarantee its inviolability, integrity, and confidentiality. For this, the computer system must have, at least, the following elements:

a) Communications with participants through private network lines or private tunnels, which will be dedicated exclusively to the data transport activities of the value center (VC).

b) Centralized administration of computing and telematic resources in the value center.

c) Documented policies and procedures for access, registration, and authorization of entry and exit to the Computer Center and to critical hardware.

d) Authentication, authorization, and audit mechanisms of accesses both at the network level, as well as session (Operating System) and application (VC) level.

e) Documented policies and procedures for the creation and administration of accounts and passwords for access to resources that at least contemplate: expiration time, number of allowed access retries, size, composition, and history.

f) Documented policies and procedures for the management of "electronic keys".

g) Documented policies and procedures for the creation and administration of access roles by participant both at the application level and at the database level in accordance with the principle of required minimum rights.

h) Performance and documentation of tests to ensure that installed mechanisms do not allow any participant to be in conditions to access directly the system administrator of the value center's database.

i) Access and activity logs (transactional logs) of users in the value center systems.

10 j) Conducting and documenting tests to verify logical isolation between the internal network of each participant and the private network of the securities depository. k) Conducting and documenting tests to verify the existence of mechanisms that authenticate and guarantee the origin and destination of information received and sent through communication lines, and that the service is requested from authorized equipment and by authorized users to use that equipment. l) Documented policies and procedures for protection against computer virus attacks and other malicious programs. m) Documented policies and procedures regarding backup administration.
II. Availability: The electronic book-entry computer system and its platform must have mechanisms that guarantee the continuity of the services they provide. To this end, they must have, at a minimum, the following components and/or mechanisms:
a) Independent backup storage sites geographically distant from the main site, which meet security conditions that guarantee their control and have adequate environmental conditions for the physical medium used. b) Contingency plans that ensure the integrity and preservation of the information contained in the register of dematerialized securities. These must include the definition of an alternative processing site that "activates" within a reasonable timeframe to guarantee the operation of the securities depository in the event of major failures. This alternative site must be located at a reasonably distant place from the main site, and all security restrictions described in the security section apply to it. Contingency plans must be evaluated annually. c) Technical feasibility studies that evaluate the capacity of the communications platform to efficiently support current and estimated information traffic requirements to and from the securities depository for a period of at least five (5) years. d) Technical feasibility studies that evaluate the capacity of the hardware and software platform to efficiently process and store information in the securities depository for at least five (5) years.

11 e) Technical reports and documented tests on fault tolerance mechanisms that ensure uninterrupted system operation. f) Mechanism that ensures normal system operation for at least ten working hours in the event of power suspension.
III. Auditability: The electronic book-entry system must have modules that maintain an auditable record of all activity of participants using its services, as well as of the processes. It must consider and implement the necessary facilities so that regulatory entities can access all required information quickly and easily, so that they can fulfill their responsibilities.
The system must have methodologies for the development, maintenance, and administration of software that guarantee quality standards, in accordance with the instructions established by the Superintendent.
IV. Integration: The electronic book-entry computer system must have mechanisms that allow simple and secure integration with participants requiring its services. It must allow each member of the system to obtain a copy of the records belonging to them that are stored in the securities depository's databases. The electronic book-entry computer system must have mechanisms for transferring "inactive" information stored in its databases to historical archives, ensuring its availability to participants and supervisory entities when they require it.
ANNEX 2
MINIMUM OPERATIONAL REQUIREMENTS OF THE COMPUTER SYSTEM The computer system must comply with the following operational requirements, for whose verification a technical report must be provided indicating the mechanisms implemented to comply with them, as well as the documentation of the tests performed that demonstrate their implementation:
a) It must allow the recording of issuances and their payment schedules, as well as the financial events to which such issuances may eventually be subject. b) It must allow the identification by global balances of all securities of the same type. c) It must allow the opening, suspension, and closing of securities accounts, allowing the holder to optionally fully identify themselves.

12 d) It must allow the recording of liens or limitations on the account as a whole or on specific security balances in the account. e) It must allow the daily update of information received from depositors. f) It must keep logs of all securities transactions that allow reconstructing all changes in ownership and movements that each particular issuance has experienced during the last five years. g) It must allow reconciliation between the allocations made and the transfer instructions issued by depositors. h) It must have balancing controls that guarantee reconciliation at all times between the placed balances of registered issuances and the balances presented by the holders of securities accounts. i) It must have total autonomy from the securities trading systems, such that securities not securing operations can be freely traded. j) It must be capable of receiving and processing compliance instructions from depositors who have not participated in the trading of the securities. k) It must have the necessary procedures and connections with cash settlement systems to ensure that the delivery of securities is made against the respective payment, where applicable. l) It must have sufficient flexibility to receive and process settlement instructions of any type, whether bilateral or multilateral, as well as to facilitate the activation of risk management mechanisms by market organizers, where applicable. m) It must be capable of generating account statements for each holder, showing both the asset situation and the positions held open. Regarding the asset situation, it must identify which securities are freely available to the holder, which are in the process of settlement, and which have some type of lien or limitation. Regarding open positions, it must allow specifying both their origin and details. An open position is understood to be one that is not covered.

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(f) A. 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