Resolution SBS No. 8517-2012: Modifications to Title V of the Compendium of Regulatory Supervisory Norms of the Private Pension System

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Lima, November 7, 2012. Resolution S.B.S. No. 8517-2012

The Superintendent of Banks, Insurance and Private Pension Fund Administrators

CONSIDERING:

That, by Law No. 29903, the Law Reforming the Private Pension System was approved, which modifies the Single Text of the Law on the Private Administration of Pension Funds System, hereinafter SPP, approved by Supreme Decree No. 054-97-EF;

That, through Supreme Decree No. 137-2012-EF, provisions were issued for the application of Law No. 29903, specifically regarding the first bidding and awarding of the individual account service;

That, according to Article 2 of Law No. 29903, the bidding for the administration service of individual capitalization accounts is established for workers who join the SPP;

That, through Resolution SBS No. 6641-2012, the ad hoc procedure for the assignment of workers who join the SPP was approved, with the aim that they be affiliated with the AFP that offers the lowest administration commission, in the period between 45 days after the publication of Law No. 29903 until before the start of the first bidding referred to in Article 7A of the Single Text of the SPP Law;

That, Article 7A of the Single Text of the SPP Law, establishes that the Superintendence will bid the service of administration of the individual capitalization accounts of mandatory contributions of workers who join the SPP, with the aim that they be affiliated with the AFP that offers the lowest administration commission, every twenty-four (24) months, and the maximum deadline for the first bidding and awarding is December 31, 2012;

That, to this end, it is necessary to establish the regulatory framework that allows the full application of the bidding for the administration service of individual capitalization accounts of workers who join the SPP, to the AFP with the lowest administration commission, in accordance with the provisions of the legislation on the matter;

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Being in accordance with the opinion of the Deputy Superintendencies of Private Pension Fund Administrators and Insurance, of Economic Studies and of Legal Advice; and,

In exercise of the powers conferred by numeral 9 of article 349 of the General Law of the Financial System and of the Insurance System and Organic Law of the Superintendence of Banks and Securities, Law No. 26702 and its amendments, paragraph d) of article 57 of the Single Text of the Law on the Private Administration of Pension Funds System, approved by Supreme Decree No. 054-97-EF, and the second complementary and final provision of Law No. 29903, and based on the exceptional conditions established in numeral 3.2 of article 14 of Supreme Decree No. 001-2009-JUS;

RESOLVES:

Article First.- Incorporate letter e) into Article 3 of Title V of the Compendium of Regulatory Supervisory Norms of the SPP, under the following text:

“Article 3.- Affiliation Modalities. The following are affiliation modalities:

(…)

e) Bidding: is the procedure by which workers who join the SPP are affiliated with the AFP that offers the lowest administration commission of the pension fund, referred to in paragraph d) of article 24 of the SPP Law, for a mandatory stay period determined and subject to the exit mechanisms established by law and corresponding regulations.”

Article Second.- Incorporate Subchapter II-C into Chapter I of Title V of the Compendium of Regulatory Supervisory Norms of the SPP, under the following text:

“SUBCHAPTER II-C OF THE BIDDING FOR AFFILIATES LAW NO. 29903

Article 17P.- Bidding for affiliates. Workers who join the SPP from 01.02.2013, will affiliate with the AFP that offers the lowest administration commission under the procedure provided in this subchapter. The maximum mandatory stay period of the affiliate in said AFP will be twenty-four (24) months counted from the moment of their incorporation into the SPP, subject to the transfer mechanisms determined by the SPP Law and corresponding regulations. The Superintendence will bid the service of administration of individual accounts every twenty-four (24) months, unless in application of what is provided for in article 7-A of the SPP Law, the Bases establish a different period.

The bidding act implies that any incorporation that takes place in the SPP will be directed to the winning AFP of the Bidding. Therefore, the set of workers included in this bidding process includes, among others:

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i. Those who start work as dependents, join a pension system and choose the SPP; ii. Those independent workers who join a pension system and choose the SPP, as established in the second paragraph of article 6 of the SPP Law; and, iii. Those who, belonging to the SNP, opt to transfer to the SPP from the date cited in the first paragraph of this article.

Workers who have the quality of re-affiliates, provided for in letter c) of article 3 of this title, will not be included in this group.

The Superintendence may include within the set of workers those workers who, belonging to the Social Pension System, established by article 58 of the Single Text of the Law on Promotion of Competitiveness, Formalization and Development of Micro and Small Enterprises and Access to Decent Employment approved by Supreme Decree 007-2008-TR, choose that their contributions be administered by a Private Pension Fund Administrator (AFP).

For all purposes, and in accordance with what is established in article 5 of this Title V of the SPP Compendium, incorporation into the SPP is carried out through the signing of the affiliation contract by the worker, starting their rights and obligations in the SPP from the date on which the Superintendence grants them the Unique Identification Code (CUSPP) corresponding. Complementarily, based on the particular conditions associated with the bidding processes for the administration service of individual capitalization accounts, the incorporation of workers into the SPP can be done under information loading procedures by the employer that give rise to electronic affiliation procedures, in accordance with the provisions issued by the Superintendence on the matter.

Article 17Q.- Commission Presentation Process. Existing or forming AFPs that voluntarily decide to participate will be subject to the following procedure:

1. Until the date provided in the Bidding Bases, they must send to the Superintendence the Guarantee of Seriousness of the Offer, as indicated in article 17V of this title and in the Bidding Bases.

2. On the date and time indicated in the Bidding Bases, the representative of the participating AFP will present themselves at the premises of the Superintendence of Banks, Insurance and AFPs located at Av. Prescott No. 160, carrying in three (3) sealed envelopes the following:

a. A first envelope (Envelope No. 1) in which accompany: A communication signed by the general manager that designates the representative who will obligatorily present the commissions referred to in paragraph d) of article 24 of the SPP Law, for the administration of mandatory contributions, which will constitute the credential of the designated representative for their participation in this process; and,

b. A second envelope (Envelope No. 2) in which accompany the guarantee of seriousness of the offer, which is materialized with the presentation of the letter

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bond, whose characteristics are referred to what is provided in the circular of Bases for the first bidding of new affiliates 2012, Law No. 29903.

c. A third envelope (Envelope No. 3) in which accompany: An official communication signed by the general manager, with the values of the commissions referred to in the aforementioned letter d), identifying the two components:

• a percentage commission calculated on the insured remuneration of the affiliate (commission on the flow); and,
• a commission on the balance of the Pension Fund administered by the new contributions that will be generated from the entry into force of the first bidding referred to in article 7-A (commission on the balance) of the SPP Law.

These percentage values will be expressed with two (2) decimals and will be charged to all affiliates of the winning AFP under the mixed commission scheme from the accrual month established in the Bidding Bases.

In the case of the presentation of a forming AFP, the communication referred to in letter a. must be signed by the representative of the forming AFP.

For all purposes, in accordance with what is established in article 7-C of the SPP Law, for the mixed commission offered by the AFPs to be considered in the process, it must be lower than the lowest administration commission for mandatory contributions in the market in the last twelve (12) months.

3. In a first act, the officials designated by the Superintendence by resolution for this purpose, will be in charge of receiving and opening Envelopes No. 1 and 2, proceeding to verify, in the presence of a public notary, the credentials of each of the AFP representatives, as well as the receipt of the corresponding bond letter.

4. In a second act, the officials designated by the Superintendence will proceed to request the presence, in alphabetical order, of the representatives of the existing and forming AFPs, to receive and open envelopes No. 3 and to read the value of the commissions presented. In the event that any of the commission proposals presented by existing or forming AFPs do not meet the requirement established in the Reference Value of the Administration Commission provided in numeral 3.1.3 of the Bases corresponding to the First Bidding of New Affiliates Law No. 29903, the relevant part of the regulation on the matter will be read and such proposal will not be admitted in this bidding.

5. Finally, based on the application of the methodology described in article 17R, the Superintendence officials will display the result of the final commission value resulting from each of the AFPs and, having done so, will declare the winning company of the bidding process and the corresponding minutes will be elevated. Such minutes must be signed by the officials who participated in the public act, as well as by the intervening public notary and the representatives designated by each AFP to present the envelopes. The absence of signature of any of the AFP representatives does not invalidate the act. If an administrator fails to comply with any of the obligations contained in this article, the process will not be invalidated.

Article 17R.- Selection of winning company. The company that presents the lowest commission value will be chosen as the winning AFP of the bidding process, under the following methodology:

C = α * A + β * B

Where:

α and β are the participation percentages of each component of the commission, which will be determined by the Superintendence in the Bidding Bases and where α + β = 1.

A: value of the commission proposed by the AFP for the flow commission component, expressed as a percentage on the monthly remuneration;

B: value of the commission proposed by the AFP for the component applicable on the balance, expressed as a percentage on the balance that is managed annually;

C: value of the final resulting commission, calculated by the Superintendence, expressed as a percentage and rounded to the fifth decimal.

The Superintendence will establish the appropriate criteria for comparison between the aforementioned commissions. For the first bidding, the flow commission component will be applicable for what is stated in the fourth paragraph of numeral 2 of article 17Q of this Title.

In case of a tie between two (2) or more administrators, the winning company will be determined at that moment, by applying the following criteria:

i. First selection criterion: that which has a lower value in that component that, according to the corresponding bidding, has a higher participation percentage; ii. Second selection criterion: in case the tie persists under the first criterion, by lottery among the corresponding AFPs, in the presence of the public notary.

In the case of the winning AFP, it must maintain the commission value unchanged during the commitment period of stay, for the affiliates included in letters i., ii., and iii, of article 17P, except for a subsequent reduction, in which case the lower commission value will apply for the remainder of the period.

Article 17S.- Of the Bidding Bases: The Superintendence will dispose by circular the publication of the Bidding Bases for new affiliates; likewise, it will make this known to affiliates and the general public on its website (www.sbs.gob.pe). Additionally, this act will be announced, through an official communication to be published in the Official Newspaper “El Peruano”.

The Bidding Bases will establish the norms referred to the bidding process regarding the determination of the publicity of its call, deadlines, modes of participation,

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commitments of AFPs as bidders, both of existing AFPs and forming AFPs, guarantees, mechanism of awarding and transparency of information to new affiliates, among other aspects determined by the Superintendence.

The deadlines for the bidding of the individual account administration service as well as for the stay of an affiliate, may be different from those referred to in the first paragraph of article 17P, after the first bidding that takes place, as provided by the corresponding Bidding Bases.

Article 17T.- Publication of commissions. The winning administrator must publish in a newspaper of national circulation and in the Official Newspaper “El Peruano”, for a period of two (2) calendar days, these new values of the commissions applicable to all its affiliates from the date indicated in the Bidding Bases, within three (3) calendar days following the selection of the winning AFP. Likewise, the administrator and the Superintendence will place the obtained results on their institutional electronic portals.

Complementarily, the winning AFP will be responsible for communicating the new commission structure to employers who have workers affiliated with the referred administrator, as well as for establishing mechanisms and processes that facilitate to employers and the general public the timely knowledge and verification of its new commission structure.

Complementarily, this commission information will comprise the operational facilities that the AFPnet application must have from the recognition, validation and payment of mandatory contributions that correspond from the month of bidding onwards established in the Bidding Bases.

Article 17U.- Complementary procedures for the assignment of CUSPPs. The winning AFP will send, with the corresponding files for the process of obtaining the CUSPP, the list of new workers who join the SPP and its AFP under the bidding process, in order to have the corresponding CUSPP.

In the case where the winning AFP of the bidding is not the winning AFP of the assignment process referred to in Resolution SBS No. 6641-2012, the maximum deadline that the assigned administrator will have to report the list of affiliates whose affiliation contracts have been signed prior to the entry into force of the affiliate bidding process will be established in the Bidding Bases. After this deadline has passed, it will not be possible to report affiliation contracts that do not correspond to the winning AFP of the bidding.

Article 17V.- Of the guarantees required in the bidding process. AFPs participating in the bidding process must present, as appropriate, the following guarantees:

1. Guarantee of seriousness of the offer.
2. Guarantee of faithful fulfillment of the contract.

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The Bidding Bases will establish the amount, deadlines and characteristics of the guarantees mentioned in the aforementioned numerals.

In case the winner of the bidding process turns out to be a forming AFP and, subsequently, the Superintendence executes any of the aforementioned guarantees, the process of obtaining the operating license of the referred AFP will be concluded, with a negative response. For these purposes, the Superintendence will issue the resolution of expiration of the certificate within five (5) business days following the execution of the guarantee.”

Article Third.- Incorporate the thirty-ninth, fortieth, forty-first, forty-second, forty-third and forty-fourth final and transitory provisions of Title V of the Compendium of Regulatory Supervisory Norms of the SPP, under the following text:

“Thirty-ninth.- Of the presentation of commissions in the first bidding. For the purposes of the first bidding of affiliates to be carried out before December 31, 2012 and of the commission presentation process referred to in article 17-Q, the lowest administration commission for contributions in the market in the last twelve (12) months is that referred to the commission resulting from the AFP winning the assignment process provided for in Resolution SBS No. 6641-2012.

The commission referred to in the previous paragraph does not include those schemes of commission reduction based on the stay commitments of affiliates in the AFPs in which they are registered.

Fortieth.- Of the publicity of the commission structure of non-winning and/or non-participating AFPs in the first bidding. AFPs, that are not the winning and/or have not participated in the first bidding to be carried out before December 31, 2012, must comply with presenting before the Superintendence their commission structure under the following scheme:

i. Mixed commission scheme (flow component and balance component), in accordance with what is established in the first paragraph of article 17T of the present; ii. Commission, only on the flow (applicable to affiliates who have opted for this scheme).

These structures will be presented within eight (8) calendar days following the date of awarding of the bidding and complementarily to what is provided in Resolution SBS No. 8514-2012, which establishes the norms for the reduction and choice of the flow commission.

Forty-first.- Transfer of affiliates incorporated in the bidding. The Superintendence, by means of a general norm, will establish the conditions for the exercise of transfers of those affiliates incorporated in the bidding for the lowest administration commission, based on what is established in article 7-A of the SPP Law, incorporated by Law No. 29903.

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Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 8 / 9 Forty-second.- On the extension of the assignment period. The duration of the assignment process for new affiliates, in accordance with what is established in Resolution SBS No. 6641-2012, will extend inclusive until January 31, 2013.

Forty-third.- On the coverage of the disability, survival, and burial expense insurance of the first bidding process. In the event that in the first bidding process for the administration service of individual accounts of affiliates, the winning AFP is an AFP in formation, the coverage for the disability, survival, and burial expense insurance for its affiliates during the period between the date that corresponds, according to the scenarios provided in numeral 3.9 of the Bases of the first Bidding Process Law 29903 and the date when the collective administration of the disability, survival, and burial expense insurance under the public bidding modality referred to in article 52 of the Text of Approved Ordinance of the Law of the SPP, modified by Law No. 29903, comes into effect, shall be the responsibility of the insurance company that registers a lower premium in the selection contests to initiate the administration of the aforementioned risks as of January 1, 2013. In case of a tie, it will be assigned to that one whose AFP with the celebrant has a lower level of commission for the administration of pension funds.

In the event that the winning AFP is an existing AFP, as well as for the rest of the participants in the bidding process, individual contracting processes between the AFP and the insurance company will apply, in accordance with the selection procedures that have been carried out periodically in the SPP, with such coverage remaining in effect until the date when the collective administration of the disability, survival, and burial expense insurance under the public bidding modality referred to in article 52 of the Text of Approved Ordinance of the Law of the SPP, modified by Law No. 29903, comes into effect.

Forty-fourth.- On discounts for permanence. In accordance with what is established in subsection a) of article 24 of the Text of Approved Ordinance of the Law of the SPP, the discount plans in remuneration based on time of permanence or regularity of contributions that the AFPs offer from this date, will be accounted for solely based on the periods incurred or registered by the affiliates, without requiring commitments of future permanence, in accordance with the regulation issued by the Superintendence on the matter, which will replace that which disposes of Subchapter I of Chapter III of Title III of the Compendium of Norms of the Superintendence of the Private Pension System.

The AFPs may maintain the schemes of commission reduction based on commitments of future permanence with respect to those affiliates who have subscribed to plans prior to the entry into force of this resolution, and only until the date of validity of the respective plan, being able to extend it only once for a period of one (1) year, under the same terms and conditions as those subscribed. In the case that the affiliates have opted for the mixed commission scheme, the offer of this extension, in no case, shall imply a condition of lesser benefit with respect to those that could be obtained by affiliates of similar condition, who had opted for the flow commission scheme, as well as they must also be within the values that refer to the stages of the commission reduction schedule referred to in the respective resolution.”

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 9 / 9 Article Fourth.- Any other complementary provision that refers to the process provided for in this subchapter will be established and/or instructed by the Superintendence, based on the principle of greater protection for the affiliates.

Article Fifth.- This resolution will enter into force from the day following its publication in the Official Gazette “El Peruano”.

Register, communicate, and publish

DANIEL SCHYDLOWSKY ROSENBERG Superintendent of Banks, Insurance and Private Pension Fund Administrators