Norm Reforming Articles 3, 8, 11 and Annex 1 of the Standard on Requirements for the Establishment of General Warehouses and Branches of Foreign General Warehouses

Resolution No. CD-SIBOIF-1088-4-DIC6-2018
Dated December 6, 2018

STANDARD REFORMING ARTICLES 3, 8, 11 AND ANNEX 1 OF THE STANDARD ON THE REQUIREMENTS FOR THE CONSTITUTION OF GENERAL WAREHOUSES OF DEPOSIT AND BRANCHES OF FOREIGN GENERAL WAREHOUSES OF DEPOSIT

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

CONSIDERING

I

That on June 1, 2011, the Standard on the Requirements for the Constitution of General Warehouses of Deposit and Branches of Foreign General Warehouses of Deposit was approved, contained in Resolution No. CD-SIBOIF-679-1-JUN1-2011, published in La Gaceta, Official Journal, No. 132 of July 15, 2011.

II

That it is necessary to adapt the provisions contained in the aforementioned standard, in accordance with the current regulations on the prevention of money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction; and to the new Accounting Framework applicable to General Warehouses of Deposit.

III

That based on the authority conferred by Articles 2 and 139 of Law 734, General Warehouse of Deposit Law; and Article 2, fourth paragraph, Article 3, numeral 13), and Article 10, numeral 2) of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; contained in Law No. 974, Law of the Nicaraguan Legal Digest on Banking and Finance Matters, published in La Gaceta, Official Journal No. 164, of August 27, 2018, and its reforms.

In exercise of its powers,

HAS ISSUED,

The following:

Resolution No. CD-SIBOIF-1088-4-DIC6-2018

STANDARD REFORMING ARTICLES 3, 8, 11 AND ANNEX 1 OF THE STANDARD ON THE REQUIREMENTS FOR THE CONSTITUTION OF GENERAL WAREHOUSES OF DEPOSIT AND BRANCHES OF FOREIGN GENERAL WAREHOUSES OF DEPOSIT

FIRST: Articles 3, 8, and 11 of the Standard on the Requirements for the Constitution of General Warehouses of Deposit and Branches of Foreign General Warehouses of Deposit, contained in Resolution No. CD-SIBOIF-679-1-JUN1-2011, dated June 1, 2011, published in La Gaceta, Official Journal, No. 132 of July 15, 2011, are hereby amended, which shall read as follows:

“Art. 3. Application.- The application to obtain authorization for the constitution of a General Warehouse of Deposit shall be submitted to the Superintendence and must contain, at a minimum:

a) The draft deed of incorporation and its bylaws. b) An economic-financial feasibility study, which must contain the information required in Annex 1 of this standard, which is an integral part of it. c) A deed indicating the 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 operations have begun, this deposit will be returned to the promoters. If the application is denied, 10% of the deposit amount will be paid to the Treasury of the Republic, and the balance will be returned to the interested parties. In the event of withdrawal, 50% of the deposit will be paid to the Treasury, and the remaining 50% will be returned to the promoters. For the purposes of the above, a request must be made to the Superintendence for the account number and the name of the banking entity where the deposit will be made. d) Plans of the warehouses to be used, indicating capacity and all pertinent specifications, including the location or locations where such warehouses will be situated. e) Complete model of the forms to be used for deposit certificates and pledge bonds. f) In order to verify compliance with the provisions of numerals 3, 4, and 8 of Article 6 of the LAGD, each of the 5% Shareholders of the proposed company, as well as the members of the board of directors and the main management team: principal executive, general manager, managers and deputy managers of areas, money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction prevention administrator (AML/FT/Proliferation Administrator) and internal auditor, must present, as indicated, the following information and documentation:

1) For natural persons:
i. Name, age, occupation, nationality, and domicile.
ii. Documented curriculum vitae with the information required in Annex 2, which becomes an integral part of this standard.
iii. Financial statements and a list of income and expenses, with the information required in Annex 3, which becomes an integral part of this standard, signed by the interested party and certified by an authorized public accountant or equivalent professional in the country where it is issued. The figures must be expressed in book value in accordance with accounting standards. This information is only required for the 5% Shareholders.

iv. 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.
v. Photocopy of the Record of Taxpayers (RUC), notarized according to the law on the matter. In the case of foreigners not domiciled in the country, they must present the equivalent used in the country where they pay taxes.
vi. 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, when it concerns persons not domiciled in Nicaragua or natural persons residing in Nicaragua who have been residents abroad in the last 15 years.
vii. A minimum of 5 personal, banking, or commercial references recent to the date of the application (national or foreign).
viii. In the case of those who will form the main team, they will present a declaration before a public notary stating that they are not subject to any of the situations contemplated in numerals 1, 3, 4, 5, 6, 7, and 8 of Article 32 of the LAGD. In the case of Directors, they will present a declaration before a public notary stating that they are not subject to the impediments of the aforementioned Article 32.
ix. Detailed list of related natural and legal persons, as well as those constituting their unit of interest, based on the criteria established in Article 52 of the LAGD and the corresponding regulations.

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. A minimum of five recent banking or commercial references to the date of the application (national or foreign).
iii. Names and curriculum vitae of the members of the board of directors, which will be presented according to Annex 2.
iv. Notarial certification in original of the minutes in which the authorization granted by the corresponding corporate body to participate as organizer and/or shareholder of the new Warehouse and the amount of investment destined for that purpose is recorded.

v. Copy of the report of independent auditors on the audited financial statements, corresponding to the two accounting periods prior to the date of the application.
vi. List and percentage of participation of the 5% Shareholders, natural persons, ultimate owners of the shares, in a chain of legal persons, of the legal person shareholder promoting the Warehouse in formation. In order to determine if the natural persons indicated here are 5% Shareholders, the calculation methodology established in Annex 4, which is an integral part of this standard, must be followed.
The natural persons who, according to the aforementioned calculation methodology, are 5% Shareholders must comply with the information requirements established in numeral 1 of this letter f).
The Superintendent is empowered to request any information deemed necessary regarding the legal persons in which the 5% Shareholders, natural persons, participate, such as: members of boards of directors, activity to which they are dedicated, data of constitution and registration, among others. Likewise, a scheme reflecting the shareholding structure of the 5% Shareholders must be presented, 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 organizational chart.

g) For all shareholders, documentary evidence of the lawful origin of the patrimony to be invested in the new Warehouse is required. At 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 patrimony (information on the activities from which the patrimony comes, such as: businesses, inheritances, donations, etc.), and evidence that the money comes from them.
The Superintendent is empowered to request any other information deemed necessary in order to comply with the object of this standard.

Art. 8. Documentation.- The application for the establishment of a branch of a foreign AGD must be accompanied by the following documentation:

a) An economic-financial feasibility study that must contain the information required in Annex 1.

b) Notarially certified photocopy of the deed of incorporation or constitutive act and bylaws of the requesting AGD and of the legal authorization supporting its constitution and operation in the country of origin, as well as the certificate of validity of all of the above. c) Audited Financial Statements and annual reports of the requesting AGD, corresponding to the last 3 years, including their notes and complementary information. d) Proof that the requesting foreign AGD is legally authorized to establish branches in Nicaragua, according to its bylaws and the laws of its country of origin, accompanied by certification issued by the supervisory authority of that country stating its conformity with the application. e) Original of the resolution adopted by the corresponding corporate body of the parent company, by which the opening of the branch in the country is decided; as well as a notarially certified copy according to the law on the matter of the instrument in which the legal representative is authorized to conduct business, execute acts, enter into contracts, and represent judicially and extrajudicially the AGD registered in the respective records. f) For the future principal executive or general manager, managers and deputy managers of areas, internal auditor, and AML/FT/Proliferation Administrator, including their legal representative:
1) Declaration before a public notary stating that they are not subject to the impediments stated in Article 32 of the LAGD.
2) A minimum of five recent banking or commercial references to the date of the application.
3) 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.
4) Curriculum vitae according to Annex 2.
g) Declaration of the foreign parent AGD indicating:
1) The national or foreign entities that are part of the financial group to which the parent AGD belongs, in accordance with what is indicated in Title V of the General Law of Banks, Non-Banking Financial Institutions, and Financial Groups.
2) The ownership structure of the parent AGD, which allows determining with precision the identity of the natural persons who are ultimate owners of the shares in a chain of legal person shareholders of the parent, who hold 5% or more of the paid-up capital, following what is indicated in letter f), of numeral 2, roman vi, of Article 3 of this standard.
Processing will only be given to applications for the establishment of branches of foreign AGDs when institutional information exchange can be carried out between the supervisors of both countries and when the parent company has been operating and carrying out general warehouse of deposit activities in the country that granted the license for more than five years. If it is a foreign AGD resulting from a merger, the years of operation of the oldest company will be counted.

Article 11. Requirements to commence operations.- To commence operations, AGDs or branches of foreign AGDs, constituted in accordance with this standard, must comply with the following requirements:

a) Minimum social capital fully paid in cash, eighty percent (80%) of which in demand deposit in a banking or financial entity authorized by the Superintendence for such effect. b) Testimony of the deed of incorporation and its bylaws, with the corresponding registration in the Public Registry. c) Opening Financial Position Statement certified by an authorized public accountant, adjusted to the presentation established in the Accounting Framework for General Warehouses of Deposit. d) Certification of the appointments of the directors for the first term, of the manager or principal executive, the AML/FT/Proliferation Administrator, and of the internal auditor, according to what was presented attached to the authorization application to constitute. e) Verification by the Superintendent that the AGD has the necessary physical facilities, machinery, operational equipment, adequate technological platform, contracts, insurance, manuals, strategic business plan, and regulations approved by the board of directors, as well as the systems, procedures, and necessary administrative infrastructure to provide the services inherent to its corporate object, which comply, at a minimum, with the provisions contained in the regulations governing the matter on control, security, and surveillance measures of general warehouses of deposit; in the operational and financial regulations of general warehouses of deposit; and in the regulations governing the matter on the prevention of money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction, issued by the Superintendence, such as:
1) Registration of its operations;
2) Accounting;
3) Valuation of asset and liability portfolio;
4) Electronic processing of accounting and financial information;
5) Integrated System for the Prevention and Administration of Money Laundering, Goods or Assets Risks; and of Terrorist Financing; and of the Financing of the Proliferation of Weapons of Mass Destruction.
If the application for operating authorization with evidence of compliance with the aforementioned requirements is not presented within 6 months from the notification of the resolution authorizing its constitution, it will become void, and the amount of the deposit referred to in Article 3, letter c) of this standard, will be paid to the Treasury of the Republic.”

SECOND: Sections III and IV of Annex 1 of the Standard on the Requirements for the Constitution of General Warehouses of Deposit and Branches of Foreign General Warehouses of Deposit, referred to in the first section of this resolution, are hereby amended, which shall read as follows:

“ANNEX 1
CONTENT OF THE ECONOMIC-FINANCIAL FEASIBILITY STUDY

III. TECHNICAL STUDY.
It must contain all information that allows establishing the necessary infrastructure to serve its target market, specifying the following:

a) Facilities, machinery, and operational equipment. b) Business organization. The internal organization of the warehouse will be described, as well as the different administrative bodies, specifying the number of personnel, experience, academic level, and location within the organization. c) Location and description. Probable geographic location of the head office, as well as a technical explanation of that decision. d) Information systems. Description of accounting, administrative, communication, and risk monitoring systems, prevention of money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction, as well as the software and hardware to be used. e) Legal framework. The study must be supported by the current applicable legal and regulatory provisions, considering their impact on the financial projections of the AGD. f) Conclusions. Having developed the bases and elements comprising the technical study, the corresponding conclusions must be issued, which will also include the favorable and unfavorable aspects found in the research.

IV. STUDY AND FINANCIAL EVALUATION OF THE PROJECT.
In this section, the amount and origin of the economic and financial resources available to carry out the project must be explained, including the following aspects:

a) Investment plan and Working Capital. b) Origin and amount of capital. For this purpose, the authorized, subscribed, and paid capital with which the AGD will start must be indicated, as well as the description and documentation proving the origin and legitimacy of the funds.

c) Policies, methodology, and assumptions. The policies, methodology, and assumptions that will be used to take advantage of the opportunities offered by the market in particular and the economy in general, regarding aspects concerning the warehouse industry, will be described. d) Financial projections. Financial projections must be prepared covering a period of no less than five (5) years of operation, presenting the following information:
1) Assumptions for each year of the financial projections;
2) Financial Position Statement;
3) Income Statement;
4) Cash Flow;
5) Break-even point;
e) Calculation of financial indicators. Among the aspects to be evaluated are:
1) Minimum expected rate of return;
2) Net present value, indicating the discount rate used;
3) Internal rate of return of the project; and,
4) Benefit/Cost Ratio
5) Sensitivity analysis. The project's sensitivity analysis must consider endogenous and exogenous factors that could affect the project, proposing pessimistic, normal, and optimistic scenarios.
f) Conclusions. Having developed the bases and elements comprising the study and financial evaluation, the corresponding conclusions must be issued, which will also include the favorable and unfavorable aspects found in the analysis.”

THIRD: This standard will enter into force upon its notification, without prejudice to its publication in La Gaceta, Official Journal. (F) S. Rosales C (F) V. Urcuyo (F) Fausto Reyes B. (F) Illegible (Silvio Moisés Casco Marenco) (F) Illegible (Rafael Ángel Avellán Rivas) Secretary. RAFAEL ÁNGEL AVELLÁN RIVAS Secretary of the Board of Directors SIBOIF