Resolution Reforming Article 11 of the General Standard on Imposition of Fines Applicable to General Warehouses

Resolution No. CD-SIBOIF-959-2-SEPT13-2016
Dated September 13, 2016

NORM REFORMING ARTICLE 11 OF THE GENERAL STANDARD ON IMPOSITION OF FINES APPLICABLE TO GENERAL WAREHOUSES

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

CONSIDERING

I
That on May 11, 2011, the General Standard on Imposition of Fines applicable to General Warehouses was approved, contained in Resolution No. CD-SIBOIF-676-1-MAY11-2011, published in La Gaceta, Official Gazette No. 107, on June 10, 2011.

II
That it is necessary to reform Article 11 of the aforementioned standard, to adapt the infractions and sanctions contained therein to the recent updates made to the regulatory framework applicable to General Warehouses.

III
That according to the considerations stated above, and based on what is established in the second paragraph of Article 152 of Law 734, General Warehouses Law, published in La Gaceta, Official Gazette, Numbers 201 and 202, on October 21 and 22, 2010, respectively, which empowers this Board of Directors to establish, through general standards, the amounts of fines within the ranges indicated in the aforementioned Law, adapted to the gravity of the offense, as well as their cycles of recurrence.

In exercise of its powers,

HAS ISSUED

The following:

Resolution CD-SIBOIF-959-2-SEPT13-2016
NORM REFORMING ARTICLE 11 OF THE GENERAL STANDARD ON IMPOSITION OF FINES APPLICABLE TO GENERAL WAREHOUSES

FIRST: Article 11 of the General Standard on Imposition of Fines applicable to General Warehouses, contained in Resolution No. CD-SIBOIF-676-1-MAY11-2011, published in La Gaceta, Official Gazette No. 107, on June 10, 2011, is hereby amended, to read as follows:

"Art. 11.- Imposition of fine for infractions of laws, regulations, and resolutions of the Superintendence.- In accordance with what is indicated in Article 150 of the Warehouses Law, when Warehouses infringe any of the provisions contained in the Warehouses Law; in the regulations issued by the Board of Directors of the Superintendence; in the orders, resolutions, or instructions issued by the Superintendent; as well as in other laws and norms of a warehouse, or if documents or reports are received from them that do not correspond to their true situation, the Superintendent may impose fines in accordance with the following:

Gravity of Infractions:
For the purposes of this article, infractions are classified as minor, moderate, and serious.

1. Minor Infractions: The following constitute minor infractions, among others:
   a) When the corresponding pending interest and commissions are not paid in advance at the time of renewal of commercial credits with certificate of deposit and pledge bond. b) When provisions for accounts receivable are not made in accordance with the regulations governing the matter on evaluation of balances in accounts receivable and goods acquired in recovery by general warehouses. c) When, in the case of adjudication of goods received in recovery of accounts receivable, provisions are not implemented in the amounts, percentages, and times established in the regulations governing the matter on evaluation of balances in accounts receivable and goods acquired in recovery by general warehouses. d) When, in sales operations of merchandise on behalf of third parties, the sales conditions are not clearly established, such as prices, currency, maximum and minimum quantities of merchandise to be sold, place of delivery of the merchandise, handling of funds, commissions, and other requirements that must be observed in the operation. e) When the warehouse issues an invoice for the sale of merchandise received in deposit.

f) When, in purchase operations of merchandise on behalf of third parties, the corresponding agreement or contract does not clearly establish the purchase conditions, such as prices, currency, quantities, class, and qualities of the merchandise, place where they will be stored, storage costs, surveillance, insurance, and transport, if applicable, handling of funds, commissions, and other requirements that must be observed in the operation. g) When, in purchase operations of merchandise on behalf of third parties, the warehouse's own funds are used, except for purchase operations of imported products, which shall be governed by the regulations governing the matter on financing granted by general warehouses and goods they acquire in recovery. h) When, in purchase operations of merchandise on behalf of third parties, such merchandise is not delivered to its owner within the period established in the corresponding agreement or contract, after covering expenses, commissions, and other services provided by the warehouse, or within the period and conditions established in the deposit titles or contracts, if they have been issued or signed. i) When, in sales operations of merchandise on behalf of third parties, the proceeds of the sale are not delivered to the owner of the merchandise within the period established in the corresponding agreement or contract, after covering the warehouse's expenses, commissions, and advances, without prejudice to the priority of payment of obligations referred to in Article 77 of the Warehouses Law, as applicable. However, this offense will be considered serious if the payment priority is violated and State institutions and municipal governments are harmed. j) When the weighing services provided by warehouses are carried out using scales that are not calibrated and certified by experts in the matter and whose calibrations and certifications are older than one year at the time of the corresponding weighings. k) When storage premises, where required, are not equipped with precise scales certified by specialists in the matter and whose certification age exceeds one year at the time of the corresponding weighings; however, the warehouse must periodically review the proper functioning of said scales. l) The lack of signs with the warehouse's distinctive mark, placed in visible places in the authorized premises. m) When inspections are not carried out monthly, selectively, and with the minimum scope established in the operational and financial regulations of general warehouses. n) The lack of updated documentation in insurance files. o) Regarding auctions:
i. The lack of written communication to the Superintendent, at least three days in advance, of the auction or auctions to be carried out in accordance with Article 74 of the Warehouses Law.
ii. The publication of incomplete information in auction notices.
iii. Preventing or limiting interested public from physically observing the merchandise within the three-day period prior to the auction.
p) That valid and/or unpaid Deposit Certificates with Pledge Bonds taken by the warehouse, and/or blank forms, are not kept in secure places under the control of officials appointed by the Board of Directors or by the General Management of the warehouse. q) That the originals of the Deposit Certificates and Pledge Bonds that are returned by their holders for substitution, or because the merchandise has been released and/or withdrawn and/or all obligations derived from these documents have been canceled, are not invalidated with a date and "canceled" stamp and/or that invalidated titles are not invalidated with an "invalidated" stamp and their originals and copies are not archived chronologically. r) That the Single Control Archive for each Deposit Certificate issued and Pledge Bonds, if applicable, is not updated and/or immediately available to the Superintendence personnel. s) When complete and/or permanently updated records of merchandise inventory in deposit, Deposit Certificates, and, if applicable, Pledge Bonds issued, canceled, unpaid, and invalidated are not kept.

t) Any other infractions of equal or similar gravity committed against legal, regulatory, and other applicable provisions, as well as instructions of the Superintendent.
For this type of infractions, the Superintendent will apply a sanction of 250 to 1,000 fine units.

2. Moderate Infractions: The following constitute moderate infractions, among others:
   a) Not provisioning 100% of documented credits (commercial credits without Pledge Bonds) that have not been converted to credits backed by Deposit Certificates and Pledge Bonds within thirty (30) days of maturity. b) When, in the case of adjudication of goods received in recovery of credits, provisions are not implemented in the amounts, percentages, and times established in the regulations governing the matter on financing granted by general warehouses and goods they acquire in recovery. c) When fidelity insurance for warehousemen and inspectors who answer for eventual failures in the fulfillment of their responsibilities does not exist or is not valid, or when the insured amount is less than fifty thousand United States dollars (US$50,000.00) or its equivalent in córdobas. d) When existing inventory control is not carried out individually and by product, by physical or electronic means, and/or under the perpetual inventory system. e) When, in the storage of merchandise, its ordering is not maintained to facilitate location, counting, and verification, and/or when applicable, a uniform system of pallets, units of measurement (boxes and/or packages and/or bales, etc., of the same characteristics and content) and/or equal weights, and if applicable, labels and/or control cards is not used. f) The lack of indication in the deposit certificate and pledge bond or on an attached sheet, of the risks covered by the corresponding insurance policy. g) The lack of annotation and/or countersigning of merchandise deliveries in the copies of the control file of the Single Deposit Certificate file and releases in the copy of the Pledge Bond.

h) Issuing deposit certificates and pledge bonds with blank spaces, smudges, stains, amendments, or alterations of any type and/or not indicating whether the merchandise is subject to the payment of taxes, as well as, that any other special condition or observation regarding the merchandise and/or that the general terms and conditions specifying the rights and obligations of the parties are not on the reverse of those documents and are not printed in easily legible lettering. i) When the minimum five-year (5) period for the conservation of documents, accounting records, and instruments containing figures, and any other pertinent information supporting financial operations, is not met, and/or such documentation is not archived in places with adequate security levels and with due protection, to avoid damage from humidity, pests, fungi, solar rays, and/or internal or external contamination and any other circumstance detrimental to its good condition. j) Any other infractions of equal or similar gravity committed against legal, regulatory, and other applicable provisions, as well as instructions of the Superintendent. For this type of infractions, the Superintendent will apply a sanction of 1,001 to 3,000 fine units according to materiality.

3. Serious Infractions: The following constitute serious infractions, among others:
   a) Granting documented credits (commercial credits without Pledge Bonds) violating any of the following conditions:
   i. That such credits are to finance operations not linked to goods or merchandise deposited in the warehouse's warehouses or whose import destination and/or export origin is the same warehouse.
   ii. That they are granted for terms longer than sixty (60) calendar days.
   iii. That they are granted for amounts greater than seventy-five percent (75%) of the estimated value of the total merchandise.
   b) Granting commercial credits with deposit certificates and pledge bonds that violate any of the following conditions:
   i. That their amount exceeds seventy-five percent (75%) of the estimated value of the merchandise or goods consigned in said titles.
   ii. That their sole renewal exceeds the period of 180 days after the expiration of the title that gave rise to the renewal and/or that it does not incorporate in the observations section the legend "Renewal of the title", including in it the number of the title being renewed.
   iii. That they are renewed more than once.
   c) When an updated analysis of the characteristics of the merchandise is not available, with the scope indicated in the regulations governing the operational and financial matter of general warehouses and/or an updated acceptable valuation of the goods or merchandise backing the corresponding deposit certificate and pledge bond. d) When commercial credits with deposit certificates and pledge bonds that have not been paid at maturity are not transferred to overdue commercial credits at sixty-one (61) days from maturity and/or when these, once classified as overdue, are not provisioned at one hundred percent (100%). e) When the value of all Deposit Certificates issued by a warehouse exceeds 30 times the amount of its capital calculation base. f) When the value of all deposit certificates issued by a warehouse for the same client, natural or legal person, in authorized premises, exceeds 15 times its capital calculation base. g) When the value of all merchandise received in deposit exceeds the limit established in Article 96 of the Warehouses Law. h) Storing merchandise in premises not authorized by this Superintendence and/or when the requirements and conditions authorized by the Superintendent for the use of these premises have not been met and maintained. i) Providing inventory management services in foreign premises, constituting themselves as depositors of the merchandise. j) When it is not stated in the Deposit Certificate issued with or without Pledge Bond that the merchandise may be subject to value-added processes and transformation, repair, and assembly, in accordance with letters e) and f) of Art. 57 of the Warehouses Law. k) That the sale of merchandise takes place when pledge bonds have been issued on them. l) When the certification of the qualities of the merchandise and its valuation are carried out with merchandise that is not in deposit quality under the responsibility of the warehouse and in premises authorized by the Superintendence, whether owned, rented, or authorized. m) Non-existence or unjustified absence of the warehouseman or inspector, as applicable, and/or permanent surveillance by the warehouse 24 hours a day, in accordance with what is established in the regulations governing the matter on control, surveillance, and inspection of general warehouses. n) When pallets are not used to stack merchandise that may suffer damage from humidity or when this is not complied with in accordance with the corresponding insurance policy and if the policy indicates special particularities, these and their effects are not stated in the respective Deposit Certificate and Pledge Bond, or on a sheet attached to both titles. o) When merchandise that may suffer damage from being exposed to the elements is stored in plots and yards or in warehouses that are only roofed, unless its nature and process allow it. p) When the corresponding habilitation contract and appointment of warehouse keeper in authorized warehouses is not signed. q) When there
   are shortages of merchandise, the warehouse: 1) does not take, at minimum and immediately, the necessary provisions to guarantee its interests and those of third parties and/or does not notify the Superintendent of said shortage immediately and/or, 2) does not carry out the pertinent investigation to know the final detail of the shortage in physical units and values within 15 days following its discovery and does not notify the Superintendent within the following 3 days of the actions taken before the corresponding authorities and the respective insurance company. r) When the validity of the Superintendence's authorization and the lease or loan agreement, as applicable, is not maintained while issued and unpaid titles exist with merchandise deposited in the corresponding premises. s) When there is no written and documented pronouncement derived from the review and analysis process of storage requests, evaluating, at least, the substantive aspects established by the operational and financial regulations of general warehouses. t) When there is no written approval by the General Management of the warehouse or by another instance duly authorized for this purpose, of merchandise deposits. u) When there is no type of inventory control. v) The non-existence of insurance and/or their lack of validity that protect:
   i. The merchandise in deposit and warehouses or deposits owned by the warehouse,
   ii. Rented real estate owned by third parties, unless these were insured by their owner, or if the owner exempts the warehouse from all responsibility in case of a disaster affecting them.
   w) The acceptance of endorsements failing to comply with one or more of the necessary information requirements, and/or the acceptance of partial endorsements of insurance policies in which the warehouse is not first in the order of payment priority and/or the lack of supervision and timely follow-up of insurance endorsed in favor of the warehouse, in accordance with what is established in the operational and financial regulations of general warehouses. x) The direct contracting or endorsement of policies in which indiscriminate location coverage is established. y) The celebration of agreements, addendums, or backup clauses naming and/or other instrument or legal document in which, explicitly and/or tacitly, insurance companies, national or international located in the country, evade or exempt themselves from the direct responsibility of assuming the risks of disasters and the indemnities derived from their occurrence. z) The insufficiency of the insured sum such that it does not cover the value of the stored merchandise and other assets that are obliged to insure in order to avoid, if applicable, situations of underinsurance and consequently, the effect derived from the application of the proportional rule or similar measures.

aa) Failing to comply with the contractual conditions established in insurance policies, addendums, and other documents received in writing from the corresponding insurance company. bb) Auctioning merchandise that is expired. cc) When merchandise is released and in its moment delivered in full, without the return to the warehouse of the originals of the Deposit Certificate and Pledge Bond, if applicable, and prior payment of pending balances, taxes, liens, warehouse services, etc. dd) Delivering the merchandise to the legitimate holder of the Deposit Certificate without the original Pledge Bond, when the latter only delivers the Deposit Certificate and does not pay the warehouse the sums corresponding to pending debts according to the value lent, term, rate, maturity, and other conditions established in the Pledge Bond until the day of its maturity, plus other pending debts for taxes, liens, warehouse services, etc. ee) In partial deliveries of merchandise:
i. Carrying out partial deliveries of merchandise in operations with Deposit Certificate without Pledge Bond, prior to presentation of the original certificate, without these allowing easy division.
ii. Carrying out partial deliveries of merchandise in operations with Deposit Certificate and Pledge Bond, without the originals of both titles being presented or, if applicable, when only the original of the Deposit Certificate is presented and merchandise is delivered without payment to the warehouse of a sum of money proportional to the amount of the debt consigned in the Pledge Bond and to the merchandise specified in the Deposit Certificate, plus the proportional charges corresponding according to the interest rate, term, and other conditions established in the Pledge Bond until the day of its maturity.
iii. When deliveries and/or releases are not noted in the respective titles and/or not countersigned by the corresponding authorized signature.
ff) Delivering merchandise without the instruction of the General Manager or the corresponding official authorized by the Board of Directors for this purpose. gg) Granting credits with deposit certificates and pledge bonds contrary to the amounts, terms, and maturities established in the regulation governing the operational and financial matter of general warehouses. hh) When changes and/or modifications made to the titles, as well as the special conditions to which they are subject, are not stated in them or, if necessary, on a sheet attached to them, and/or are not authorized and signed by their legitimate holders, and/or are not countersigned by the general manager or person authorized by the Board of Directors and the stamp of the issuing warehouse. ii) When in operations with non-negotiable and non-transferable Deposit Certificates and Pledge Bonds, the following is not complied with:
i. They are issued without indicating that they are non-negotiable, non-order, or with another equivalent expression and cannot be transferred in ownership or offered as guarantee to third parties.
ii. They do not include the addendum of special conditions in which, among others, the agreements on inventory changes and the rest of the rights, obligations, and attributions of the original parties, agreed upon between the Depositor and the Holder of the Pledge Bond and/or this is not signed by the interested parties and countersigned and stamped by the issuing warehouse, and/or attached to said titles.
iii. That in the addendum of special conditions it is not stated that the last inventory list found in the warehouse's files will serve for all legal effects.
iv. That the initial inventory serving as the basis for the issuance of the titles is not signed by the issuing warehouse and/or attached to the original titles.
v. That the relationship between the value of the merchandise backing the Deposit Certificate and the credit balance registered in the Pledge Bond is less than that originally reflected.
vi. That the inventory lists subsequent to the original list are not archived in the single file of the title and signed by the issuing warehouse.
jj) That the