R-CNMV-2022-04-MV — Regulation of the Administrative Sanctioning Procedure

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Superintendencia del Mercado de Valores de la República Dominicana CERTIFICATION

The undersigned, Mr. Ervin Novas Bello, Manager of the Central Bank of the Dominican Republic (hereinafter "Central Bank"), representing the Governor of the Central Bank, ex officio member and President of the National Securities Market Council (hereinafter "Council"); and Mrs. Fabel Maria Sandoval Ventura, Secretary of the Council, CERTIFY that the text below constitutes a faithful copy, transcribed in its entirety in accordance with the original of the Fourth Resolution, R-CNMV-2022-04-MV, adopted by the Council in the meeting held on Thursday, the twenty-fourth (24) day of March in the year two thousand twenty-two (2022), which is kept in the archives of this Secretariat, namely:

"FOURTH RESOLUTION OF THE NATIONAL SECURITIES MARKET COUNCIL OF DATE TWENTY-FOURTH (24) OF MARCH OF TWO THOUSAND TWENTY-TWO (2022).
R-CNMV-2022-04-MV
Reference: Approval of the Regulation of the Administrative Sanctioning Procedure.

Whereas:

That on the eighteenth (18) day of March in the year two thousand twenty-two (2022), the Mr. Superintendent of the Securities Market (hereinafter "Superintendent") submitted to the knowledge and consideration of the National Securities Market Council (hereinafter "Council"), the draft Regulation of the Administrative Sanctioning Procedure (hereinafter "draft Regulation").

That in accordance with the powers granted by Law No. 249-17, of the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00, of the eighth (8) day of May in the year two thousand (2000), promulgated on the nineteenth (19) day of December in two thousand seventeen (2017), and its modification (hereinafter "Law No. 249-17"), and the Internal Regulation of the Council, adopted by this collegiate body through the First Resolution, R-CNMV-2018-06-MV, issued on the twenty-ninth (29) day of November in the year two thousand eighteen (2018) (hereinafter "Internal Regulation of the Council"); the Council, meeting validly after proper summons, deems it appropriate to state the following:

Considering:

1. That, in accordance with Article 10 of Law No. 249-17, the Securities Market Superintendence (hereinafter "Superintendence") is integrated by a collegiate body, the Council, and an executive official, the Superintendent.

2. That the aforementioned law, in the main part of its Article 13, establishes that the Council is the superior body of the Superintendence with essentially normative, supervisory, and control functions.

3. That, in addition to the above, numeral 5 confers upon the Council the attribute to "[i]ssue, upon proposal of the Superintendent, the regulations for the application of this law."

4. That, likewise, Article 25 of Law No. 249-17 reiterates that "[t]he Council is the competent body to establish regulations regarding the securities market activities indicated in this law."

5. That paragraph I of said article adds that "[i]n the exercise of regulatory power, the Council and the Superintendence will observe the principles of legality and the rules of public consultation, participation, and transparency contained in the Constitution of the Republic and the laws in force."

6. That Article 4 of the aforementioned Law No. 249-17 establishes that the securities market will be governed with strict adherence to the Constitution of the Republic, what is prescribed in this Law and in the regulations and resolutions issued by the Council and the Superintendence, in the area of their respective competencies. Supplementary application in matters not specifically provided for in the aforementioned norms will be governed by the general provisions of administrative law, corporate, commercial, monetary, and financial legislation, trust law, common law, and commercial usages, in the order cited.

7. That it is noteworthy that Article 2 of the aforementioned Law No. 249-17 reveals that the provisions contained in said statute apply to all natural and legal persons who carry out activities, operations, and transactions in the securities market of the Dominican Republic with public offer securities that are offered or traded within the national territory.

8. That, parallel to this, in the paragraph of the aforementioned article it is established that "[n]atural and legal persons who carry out any of the activities or services provided for in this law, will be subject to the regulation, supervision, and inspection of the Securities Market Superintendence, regarding the exercise of said activities or services mentioned." [underlining ours]

9. That, for these purposes, among the powers vested in the Superintendent in accordance with Article 17, numerals 15, 16, and 17, the following stand out:
   "15) Evaluate, investigate, and decide regarding complaints or reports on operations contrary to this law detected in the securities market.
   16) Detect and investigate, through administrative procedure, acts contrary to this law and its regulations, in which participants of the securities market incur, including their shareholders, members of their board of directors, main executives, and employees.
   17) Sanction, in the manner prescribed by this law and its regulations, the violators of its provisions."

10. That, for its part, among the powers of the Council is that of hearing hierarchical appeals against the decisions of the Superintendent, in accordance with Article 13, numeral 10 of Law No. 249-17.

11. That Law No. 107-13, on the Rights of Persons in their Relations with the Administration and Administrative Procedure, of date six (6) of August in two thousand thirteen (2013) (hereinafter "Law No. 107-13"), provides in its Article 35 that "[t]he sanctioning power of the Public Administration can only be exercised by virtue of express legal authorization. Its exercise corresponds exclusively to the administrative bodies that have it legally attributed."

12. That, in that same vein, the aforementioned Law No. 107-13 highlights the definition of typicity that the administrative sanctioning procedure possesses, as "administrative infractions are the facts or conduct so typified in the law, which will establish the corresponding administrative sanctions."

13. That, likewise, paragraph I of the aforementioned article clarifies that "[r]egulations can only specify or grade the infractions or sanctions legally established with the aim of a more correct and adequate identification of the conduct object of the infractions or a more precise determination of the sanctions to which there is cause."

14. That, in turn, Law No. 107-13 in Article 41 establishes that "[t]he exercise of the sanctioning power of the Public Administration will always be carried out within the framework of the procedure that is determined by regulation, which will be common both for the National Administration and for the Local Administration."

15. That it is important to highlight the principles and criteria of the sanctioning procedure, in accordance with Article 42 of the aforementioned Law 107-13:
"1. Separation between the instructional function and the sanctioning function, which will be entrusted to different officials and, if possible, from other public entities.
2. Guarantee of the right of the alleged responsible party to be notified of the facts imputed, of the infractions that such facts may constitute, and of the sanctions that, in their case, will be imposed, as well as of the identity of the instructors, of the competent authority to sanction, and of the legal norm that attributes such competencies.
3. Guarantee of the right of the alleged responsible party to formulate allegations and use of the means of defense provided, which must be considered in the decision of the procedure.
4. Guarantee of the rights of persons, insofar as the alleged responsible party is an interested party in the administrative sanctioning procedure.
5. Adoption, when appropriate, and by virtue of a motivated agreement, of provisional measures that are necessary to ensure the effectiveness of the final resolution that may be issued.
6. Guarantee of the presumption of innocence of the alleged responsible party until the contrary is proven."

16. That Article 43 of the same Law No. 107-13 explains the probative regime within the framework of the administrative sanctioning procedure.

17. That, likewise, Article 44 of the aforementioned Law No. 107-13 establishes the characteristics of the resolution that ends the administrative sanctioning procedure.

18. That Title XIX of the aforementioned legislative piece establishes the conduct that constitutes infractions, the sanctions applicable to said conduct, and the general rules of the administrative procedures that must be followed for the determination of said harmful conduct and the application of the corresponding sanctions, on the occasion of transgressions committed against the Dominican securities market.

19. That, on the other hand, Article 333 of Law No. 249-17 refers to the power of the Superintendence to impose administrative sanctions, which indicates that this power can be exercised "directly against natural or legal persons, subject or not to its regulation, for the commission of an infringement established in this law. Administrative sanctions will not have an indemnifying or compensatory nature, but merely punitive, and the sanctioned must comply with the sanction and additionally comply with the provisions whose infringement motivated the sanction."

20. That, likewise, administrative sanctions are classified as minor, serious, and very serious in light of Article 335 of Law No. 249-17.

21. That Article 347 of Law No. 249-17 mentions that the administrative sanctions imposed by the Superintendence for the commission of administrative infractions provided for in this Law, may be appealed through a reconsideration appeal before the Superintendent or a hierarchical appeal before the Council.

22. That, following the above, from the reading of paragraphs I and II of the same article, it is understood that the form and deadline of administrative appeals will be governed by what is established in Law No. 107-13, and that the filing of administrative appeals does not suspend the execution of the impugned act.

23. That, likewise, Article 348 of Law No. 249-17 establishes that the application of administrative sanctions by the Superintendence will be subject to the principles of the administrative sanctioning procedure contained in Law No. 107-13 and other norms applicable to it.

24. That Article 2, numeral 2, of Law No. 155-17, Against Money Laundering, Terrorism Financing, and Proliferation of Weapons of Mass Destruction, of date first (1st) of June in the year two thousand seventeen (2017) (hereinafter "Law No. 155-17"), establishes as competent authorities those that, in accordance with the attributions granted to them by the laws, are guarantors of the prevention, prosecution, and sanction of money laundering, terrorism financing, and proliferation of weapons of mass destruction.

25. That, to that effect, said article expresses that it will be considered a competent authority, in a non-limiting manner, among others, the Securities Market Superintendence; as well as any other entity to which the regulatory or supervisory power over an activity or economic sector subject to said law is attributed.

26. That the existence of a regulation that orders the procedure to be followed from the beginning to the culmination of any administrative sanctioning procedure initiated against violators of Law No. 249-17, Law No. 155-17, and any other norm whose content falls within the regulatory scope of this Superintendence is fundamental.

27. That from the pieces that make up the file, it is highlighted that, through the Sixth Resolution, R-CNMV-2020-11-MV, of the Council of date three (3) of November in the year two thousand twenty (2020), the submission of the draft Regulation on Administrative Sanctioning Procedure to a first public consultation of market participants and interested sectors was authorized.

28. That, subsequently, through the Second Resolution, R-CNMV-2021-23-MV, issued by the Council on date fourteen (14) of December in two thousand twenty-one (2021), the Superintendent of the Securities Market was authorized to effect the publication of the draft Regulation in one or more newspapers of wide national circulation for a period of twenty-five (25) business days, for the purposes of the second public consultation of interested sectors; in compliance with the provisions contained in Law No. 200-04, General Law on Free Access to Public Information, of date twenty-eight (28) of July in the year two thousand four (2004) and its Application Regulation, approved through Decree No. 130-05, of date twenty-five (25) of February in the year two thousand five (2005).

29. That, in accordance with the document titled "Statement of Reasons," the consultative process was carried out, which took place from the twenty-seventh (27) of December in two thousand twenty-one (2021) to the fourth (4) of February in two thousand twenty-two (2022), inclusive.

30. That, as a result of the public consultation, observations were received from the Cibao Savings and Loans Association, the Dominican Association of Investment Fund Management Companies, the Stock Exchange Association (APB), Banco Popular Dominicano, Securities Exchange of the Dominican Republic, Fitch Ratings, Jorge Prats Lawyers & Consultants, Dominican Securitization Society, and CEVALDOM Centralized Securities Depository.

31. That said observations were duly analyzed and weighed by a technical team of the Superintendence; highlighting among those accepted the following, according to the report titled "Relationship containing the relevant data of the file," prepared by the Regulation Directorate:

• The order of precedence of notifications carried out during the corresponding administrative procedure was adequate.
• The clarification of the starting point for the computation of the deadlines established in the Regulation was carried out.
• The requirement to safeguard written records of those actions or diligences that were carried out verbally.
• Clarification that provisional measures may be invoked ex officio or at the instance of the interested party.
• It was included that in case of absence of the expert or witness, the hearing may be postponed within the deadline of the next 5 days.
• Notification by the Instructional Official of the closing act of the instruction to the Alleged Responsible or Interested Party.
• The starting point of the deadline for the maximum duration of the administrative sanctioning procedure was modified.
• The possibility of requesting the suspension of the administrative sanctioning act was expressly incorporated, in consonance with that provided in Article 50 of Law No. 107-13."

32. That, subsequently, as part of the administrative procedure, prior to the definitive approval of the draft Regulation and in accordance with the principles of transparency and participation, virtual working tables were held with interested sectors on dates sixteen (16), seventeen (17), and eighteen (18) of March in the year two thousand twenty-two (2022).

33. That on date eighteen (18) of March in the year two thousand twenty-two (2022), the Mr. Superintendent submitted to this collegiate body a communication requesting the definitive approval of the draft Regulation.

34. That the communication of the Mr. Superintendent was accompanied by a matrix that collects the observations resulting from the consultative process, a report on the consultative process, a relationship containing the relevant data of the file, as well as a document titled "Statement of Reasons," prepared by the Regulation Directorate.

35. That in the document titled "Statement of Reasons," the draft Regulation explains the following aspects, namely:

• Regulation of prior actions, which are those actions carried out by the technical areas of the Superintendence with the object of determining preliminarily, if circumstances concur that justify the initiation of the administrative sanctioning procedure.
• Guiding principles of the administrative sanctioning procedure.
• Division of the phases of the procedure. First, the instructional phase, in which the Instructional Official collects evidence and receives from the Imputed party their defense arguments and evidence, in order to determine whether or not to recommend the imposition of sanctions. Finally, the sanctioning phase, in which the Sanctioning Official verifies the documentation and actions carried out in the instruction, in order to decide whether or not to impose sanctions.
• The criteria for grading sanctions, taking into account the background of the Responsible party, if there was obstruction in the investigation, the impact of the actions on the securities market, among others.
• The amounts applicable to infractions related to the failure to send or late remittance of information.
• The procedure for the recognition of responsibility and voluntary payment, as an alternative mechanism for ending the administrative sanctioning procedure."

36. That, in accordance with everything previously stated, observing the favorable opinion of the Mr. Superintendent, along with the reports and documentation rendered by the technical area of the Superintendence, this collegiate body is of the opinion that the draft Regulation can be favorably accepted.

Seen:

a. The Constitution of the Dominican Republic, voted and proclaimed by the National Assembly on date thirteen (13) of the month of June in the year two thousand fifteen (2015), published on the tenth (10) of July in two thousand fifteen (2015). b. Law No. 249-17, of the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00, of the eighth (8) of May in the year two thousand (2000), promulgated on the nineteenth (19) of December in two thousand seventeen (2017), and its modification.
c. Law No. 155-17, against Money Laundering, Terrorism Financing, and Proliferation of Weapons of Mass Destruction, of date first (1st) of June in the year two thousand seventeen (2017).
d. Law No. 107-13, on the Rights of Persons in their Relations with the Administration and Administrative Procedure, of date six (6) of August in the year two thousand thirteen (2013). e. Law No. 479-08, of Commercial Societies and Individual Limited Liability Enterprises, of the eleven (11) of December in the year two thousand eight (2008), and its modifications. f. Law No. 200-04, General Law on Free Access to Public Information, of date twenty-eight (28) of July in the year two thousand four (2004). g. The Internal Regulation of the National Securities Market Council, issued through the First Resolution, R-CNMV-2018-06-MV, of date twenty-ninth (29) of November in the year two thousand eighteen (2018). h. The Regulation of the General Law on Free Access to Public Information, approved through Decree No. 130-05, of date twenty-five (25) of February in the year two thousand five (2005).
i. Communication of date eighteen (18) of March in the year two thousand twenty-two (2022), signed by the Superintendent of the Securities Market, and annexes cited.
j. The other documents that make up the file.

THEREFORE:

After having studied and deliberated on the matter, the Council, in the exercise of the powers conferred by Law No. 249-17, by unanimous vote of its members, attending to the motives exposed,

RESOLVES:

FIRST: APPROVE the definitive version of the draft Regulation of the Administrative Sanctioning Procedure; whose text is transcribed below, in accordance with the document submitted by the Superintendence:

"REGULATION OF THE ADMINISTRATIVE SANCTIONING PROCEDURE TITLE I GENERAL PROVISIONS
CHAPTER I
OBJECT AND SCOPE
Article 1. Object. Establish the administrative procedure for the exercise of the sanctioning power of the Securities Market Superintendence (hereinafter, the "Superintendence") established in Law No. 249-17 of the Securities Market, promulgated on the nineteenth (19) of December in the year two thousand seventeen (2017), which repeals and substitutes Law No. 19-00 of the Securities Market of the Dominican Republic, of the eighth (8) of May in the year two thousand (2000) (hereinafter, the "Law") and Law No. 155-17 which repeals Law No. 72-02 of the twenty-sixth (26) of April in two thousand twelve (2002), on Money Laundering Proceeding from Illicit Drug Trafficking, with the exception of Articles 14, 15, 16, 17, and 33, modified by Law No. 196-11, promulgated on the first (1) of June in two thousand seventeen (2017) (hereinafter, the "Law No. 155-17").
Paragraph. Likewise, this Regulation establishes the policies, criteria, standards, and principles that serve as the basis for the application of the sanctioning regime and on which the administrative sanctioning procedure is based, as well as the administrative appeals that are filed against the decisions of the Superintendence, the hierarchical appeals that are filed before the National Securities Market Council (hereinafter, the "Council")..."