Resolution JPRF-V-2024-0107: Reforms to the Constitution, Authorization, and Registration of Centralized Securities Depositories and Clearing and Settlement Depositories

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
Resolution No. JPRF-V-2024-0107
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That Article 82 of the Constitution of the Republic of Ecuador prescribes that legal certainty is based on respect for the Constitution and the existence of prior, clear, public, and applied legal norms by competent authorities; That number 6 of Article 132 of the Magna Carta grants public regulatory bodies the authority to issue general norms in matters within their competence, without altering or innovating legal provisions; That Article 226 of the Fundamental Norm provides that State institutions, their bodies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law; That Article 227 of the Supreme Norm orders that the Public Administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation; That Article 13 of the Organic Monetary and Financial Code, Book I, reformed following the promulgation of the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, created the Financial Policy and Regulation Board, part of the Executive Function, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for formulating credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation; That Article 14, numbers 1 and 2, of the aforementioned Code, regarding the scope of competence of the Financial Policy and Regulation Board, determines that it corresponds, among others, to formulate securities policy; as well as to issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the securities system; That numbers 1, 7, 9, and 27 of Article 14.1 ibidem stipulate that it corresponds to the Financial Policy and Regulation Board, among other faculties, the following: i) regulate the creation, constitution, organization, activities, operation, and liquidation of securities entities; ii) issue the prudential regulatory framework to which securities entities must adhere, which must be coherent and not give rise to regulatory arbitrage; iii) issue the non-prudential regulatory framework for all securities entities, which includes, among others, norms on accounting, transparency and information disclosure, market integrity, and consumer protection; and, (iv) exercise the other functions, duties, and faculties assigned by the Organic Monetary and Financial Code and the law; That number 1 of Article 25.1 of the aforementioned Code states that, within the functions of the Technical Secretariat of the Financial Policy and Regulation Board, is the elaboration of technical and legal reports that support the regulatory proposals to be issued by the Financial Policy and Regulation Board;

Resolution No. JPRF-V-2024-0107

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
That Article 194 of the Organic Monetary and Financial Code, Book I, regarding the operations that financial entities may carry out, in accordance with the authorization granted by the respective control body, establishes that both financial entities from the public and private financial sectors and financial entities from the popular and solidary financial sector may negotiate securities and acquire, conserve, and alienate, on their own account or on behalf of third parties, securities issued by the entity in charge of public finances and by the Central Bank of Ecuador, as well as receive and conserve securities in deposit for custody; That General Provision Twenty-Ninth of Book I of the Organic Monetary and Financial Code prescribes: “In the current legislation where mention is made of the 'Financial Monetary and Regulation Board', replace it with 'Financial Policy and Regulation Board.'”; That Transitory Provision Fifty-Fourth ibidem provides: “Transitory regime of Resolutions of the Codification of the Financial Monetary and Regulation Board. The resolutions contained in the Monetary, Financial, Securities, and Insurance Resolutions Codification of the Financial Monetary and Regulation Board and the norms issued by control bodies will maintain their validity until the Financial Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”; That Article 9 of the Securities Market Law, contained in Book II of the Organic Monetary and Financial Code, enumerates the attributions that currently correspond to the Financial Policy and Regulation Board in the context of the Securities Market Law, among which are those indicated in numbers 1, 4, 6, 25, and 26, which are, respectively: establish the general policy of the securities market and regulate its functioning; issue the necessary resolutions for the application of said Law; regulate the creation and functioning of securities clearing and settlement depositories, as well as the services they provide; establish the norms necessary to prevent cases of conflict of interest and linkage of market participants; and, establish the standardization, numbering, and identification requirements for securities; That Article 57 supra provides that securities houses shall be responsible for the identity and legal capacity of the persons they contract through their intermediation, the existence and integrity of the securities they negotiate, and the authenticity of the last endorsement, when applicable; That, in accordance with what is prescribed in Article 60 ibidem, regarding centralized securities clearing and settlement depositories, establishes that these are public institutions or anonymous companies, authorized by the Superintendency of Companies, Securities and Insurance to receive in deposit securities registered in the Public Registry of the Securities Market, take charge of their custody and conservation, and provide clearing
and transfer registration services, and operate as a securities clearing house; That the same Article 60 determines that, regarding centralized securities clearing and settlement depositories that are anonymous companies, the minimum capital shall be fixed by the Financial Policy and Regulation Board based on their corporate object, authorized activities, and market conditions, which must be subscribed and paid in cash in its entirety; and precepts that the paid capital of these companies, which will be divided into registered shares, may belong to stock exchanges, securities houses, legally authorized public sector entities, issuers registered in the Public Registry of the Securities Market, and other persons authorized by the Financial Policy and Regulation Board;

Resolution No. JPRF-V-2024-0107

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
That Article 62 of the Securities Market Law states that centralized securities clearing and settlement depositories are authorized to provide numbering agency services, under the norms issued by the Financial Policy and Regulation Board and the supervision of the Superintendency of Companies, Securities and Insurance; That Article 63 of the aforementioned Law, regarding the deposit contract, prescribes that the following may act as direct depositors: stock exchanges, securities houses, financial system institutions, issuers registered in the Public Registry of the Securities Market, institutional investors, and other persons determined by the Financial Policy and Regulation Board, through a general norm; That the Acting Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0054-M of April 26, 2024, submits to the President of the Board the Technical Report No. JPRF-CTVS-2024-003 of April 25, 2024, issued by the Technical Coordination of Policy and Regulation of the Securities and Insurance System; as well as the Legal Report No. JPRF-CJF-2024-017 of April 25, 2024, issued by the Legal Coordination of Policy and Financial Norms of this Board, as well as the respective draft resolution; That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on April 26, 2024, and carried out via video conference on April 30, 2024, reviewed the Memorandum No. JPRF-ST-2024-0054-M of April 26, 2024, issued by the Acting Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-CTVS-2024-003 and Legal Report No. JPRF-CJF-2024-017, in addition to the corresponding draft resolution; That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on April 26, 2024, and carried out via video conference on April 30, 2024, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE FIRST.- In Chapter I “Common Provisions to the Public Offering of Securities”, Title II “Public Offering”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, Article 12 is incorporated as follows:
“Art. 12.- ISIN Codes: The issuer of securities that will be quoted in the market must request the issuance of ISIN codes from the authorized numbering agency for this purpose, prior to their authorization and registration in the Public Registry of the Securities Market.”
ARTICLE SECOND.- The text of Article 1 of Section I “On Constitution and Authorization of Functioning”, Chapter I “Constitution, Authorization of Functioning, and Registration in the Public Registry of the Securities Market of Centralized Securities Clearing and Settlement Depositories”, Title XI “Centralized Securities Clearing and Settlement Depositories”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions is replaced by the following:
“Art. 1.- Constitution: In addition to the requirements established in the Securities Market Law, the following must be observed:

1. The name of this company must necessarily include the mention 'Centralized Securities Clearing and Settlement Depository', to which a peculiar expression will be added.
2. In the case that Centralized Securities Clearing and Settlement Depositories are anonymous societies, the paid capital will be divided into registered shares that may belong to: stock exchanges; securities houses; legally authorized public sector entities; issuers registered in the Public Registry of the Securities Market; natural persons; entities under the control and supervision of the Superintendency of Companies, Securities and Insurance, with the exception of simplified joint-stock companies; and, entities under the control and supervision of the Superintendency of Banks.
3. Each shareholder may not own more than fifteen (15) percent of the amount of subscribed capital, with the exception of country stock exchanges, legally authorized public sector entities, value depositories, or international custodians, who may own up to fifty (50) percent of the subscribed capital.
4. For the case of affiliated companies, these collectively may not have a participation greater than fifteen (15) percent of the amount of subscribed capital.”
   ARTICLE THIRD.- In Article 6 of Section II “Maintenance of Registration in the Public Registry of the Securities Market”, Chapter I “Constitution, Authorization of Functioning, and Registration in the Public Registry of the Securities Market of Centralized Securities Clearing and Settlement Depositories”, Title XI “Centralized Securities Clearing and Settlement Depositories”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following text is incorporated as number 13:
   “13. The centralized securities clearing and settlement depository authorized to act as a numbering agency must remit, by the next business day, the information of the ISIN codes granted to the securities to the control body, to the stock exchanges, and to other centralized securities clearing and settlement depositories, if any.”
   ARTICLE FOURTH.- In Article 11 of Section III “General Provisions”, Chapter I “Constitution, Authorization of Functioning, and Registration in the Public Registry of the Securities Market of Centralized Securities Clearing and Settlement Depositories”, Title XI “Centralized Securities Clearing and Settlement Depositories”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following text is incorporated as the second paragraph:
   “The responsibility for determining the identity and legal capacity of buyers and sellers, as well as the existence and integrity of the negotiated securities, lies with the securities houses participating in the negotiation, in accordance with what is prescribed in the Securities Market Law.”
   ARTICLE FIFTH.- The text of Article 14 of Section III “General Provisions”, Chapter I “Constitution, Authorization of Functioning, and Registration in the Public Registry of the Securities Market of Centralized Securities Clearing and Settlement Depositories”, Title XI “Centralized Securities Clearing and Settlement Depositories”, Book II “Securities Market” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions is replaced by the following:

Resolution No. JPRF-V-2024-0107

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
“Art. 14.- Deposits on behalf of third parties: With the exception of securities houses and financial entities duly authorized by their control body, for this purpose, the other depositants provided for in the Securities Market Law may not request the registration of operations on behalf of third parties for their custody.
Clearing and settlement depositories that proceed with the registration of operations on behalf of third parties requested by unauthorized depositants in accordance with what is established in this article will be administratively responsible, without prejudice to civil and criminal liabilities that may arise.”
GENERAL PROVISION FIRST.- The Superintendency of Companies, Securities and Insurance will communicate to the respective controlled entities the content of this Resolution.
GENERAL PROVISION SECOND.- In case of doubt regarding the content or scope of the provisions of this Resolution, it will correspond to the Superintendency of Companies, Securities and Insurance to resolve them.
FINAL PROVISION.- This Resolution will enter into force from the present date, without prejudice to its publication in the Official Register, and will be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.
COMMUNICATE.- Given in the Metropolitan District of Quito, on April 30, 2024.
THE PRESIDENT,
Mgs. María Paulina Vela Zambrano
The preceding Resolution was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on April 30, 2024.- I CERTIFY.
ACTING TECHNICAL SECRETARY
Mgs. Luis Alfredo Olivares Murillo