Securities Market Law No. 249-17 of the Dominican Republic

THE NATIONAL CONGRESS
In the Name of the Republic
Law No. 249-17

FIRST CONSIDERATION: That the growth registered in recent years by the Dominican Securities Market makes a comprehensive review of the current legislation in this matter necessary, in consonance with internationally accepted principles.

SECOND CONSIDERATION: That it is imperative that the legal basis of the Dominican Republic effectively incorporate the objectives and fundamental principles of the International Organization of Securities Commissions (IOSCO) that apply to the regulation of securities markets, and those of the Organization for Economic Co-operation and Development (OECD).

THIRD CONSIDERATION: That the objectives that the regulation of the Dominican Securities Market must pursue are the protection of investors, the guarantee that markets are fair, efficient, and transparent, and the reduction of systemic risk.

FOURTH CONSIDERATION: That it is urgent to promote market transparency under conditions of competition, through the reform of the structure of the Dominican Securities Market and its rules of conduct.

FIFTH CONSIDERATION: That the structure of the new law must respond to the idea of a framework text, in which the regulatory body has broad normative power to develop specific regulations on each area of regulation, allowing for its adaptation to the dynamic environment of this market, in an agile and efficient manner.

SIXTH CONSIDERATION: That it is necessary for the regulatory body to have the authority to ensure the protection of investors, the efficiency and transparency of the markets under its supervision, the correct formation of prices, and the dissemination of necessary information for such purposes, through the regulation, inspection, and sanctioning of unlawful conduct.

SEVENTH CONSIDERATION: That the Securities Market constitutes an additional financing alternative, which contributes to the achievement of macroeconomic purposes and poverty reduction through job generation, the incentive to creativity, and the creation of savings tools, through the issuance of public offering securities.

EIGHTH CONSIDERATION: That in light of the Dominican reality, the participation of a greater number of entities in resource collection must be promoted, including small and medium-sized enterprises, so that this financing modality can be developed while offering investors a variety of investment options that allow them to diversify their savings, which contributes to the strengthening and growth of our country's economy.

NINTH CONSIDERATION: That public policies must be articulated around the National Development Strategy and its four Strategic Axes, and in particular, the third Axis which seeks a sustainable, inclusive, and competitive economy.

VIEWED: The Constitution of the Dominican Republic, proclaimed on June 13, 2015.

VIEWED: The Civil Code of the Dominican Republic.

VIEWED: The Commercial Code of the Dominican Republic.

VIEWED: The Civil Procedure Code of the Dominican Republic.

VIEWED: The Penal Code of the Dominican Republic.

VIEWED: The Criminal Procedure Code of the Dominican Republic.

VIEWED: The Tax Code of the Dominican Republic and its modifications.

VIEWED: Law No. 19-00, which regulates the Securities Market of the Dominican Republic, dated May 8, 2000.

VIEWED: Law No. 87-01, which creates the Dominican Social Security System, dated May 9, 2001.

VIEWED: Law No. 183-02, Monetary and Financial, dated November 21, 2002;

VIEWED: Law No. 488-08, for the Development and Competitiveness of Micro, Small, and Medium Enterprises (MSMEs), dated December 30, 2008.

VIEWED: Law No. 479-08, General of Commercial Companies and Individual Limited Liability Enterprises, dated December 11, 2008, modified by Law No. 31-11, of February 8, 2011.

VIEWED: Law No. 189-11, for the Development of the Mortgage Market and Trusts in the Dominican Republic, dated July 16, 2011.

VIEWED: Law No. 1-12, which establishes the National Development Strategy 2030, dated January 25, 2012.

VIEWED: Law No. 247-12, Organic of Public Administration, dated August 9, 2012.

VIEWED: Law No. 107-13, on the Rights and Duties of Persons in their Relations with the Administration and Administrative Procedure, dated August 6, 2013.

VIEWED: The Implementation Regulation of the Securities Market Law, approved by Executive Decree No. 664-12, dated December 7, 2012.

VIEWED: The Objectives and Principles for the Regulation of Securities Markets of the International Organization of Securities Commissions (IOSCO).

VIEWED: The Corporate Governance Principles of the Organization for Economic Co-operation and Development (OECD).

VIEWED: International Financial Reporting Standards (IFRS).

HAS ENACTED THE FOLLOWING LAW:

TITLE I
INITIAL PROVISIONS

CHAPTER I
Object and Scope

Article 1.- Object. This law aims to regulate, supervise, develop, and promote an orderly, efficient, and transparent securities market, with the purpose of protecting the rights and interests of the investing public, minimizing systemic risk, fostering healthy competition, and preserving confidence in the securities market, establishing conditions for information to be truthful, sufficient, and timely, with the aim of contributing to the economic and social development of the country.

Article 2.- Scope. This law applies to all natural and legal persons who carry out activities, operations, and transactions in the securities market of the Dominican Republic, with public offering securities that are offered or traded within the national territory.

Paragraph: Activities and services exclusive to the securities market are all those regulated by this law and its regulations. Natural and legal persons who carry out any of the activities or services provided for in this law shall be subject to the regulation, supervision, and inspection of the Securities Market Superintendence, regarding the exercise of those mentioned activities or services.

Article 3.- Fundamental definitions of the securities market. For the application of this law and its regulations, the following shall be understood:

1. Book Entries. They are accounting registry entries that constitute in themselves the immaterial representation of securities and grant ownership thereof to the holder registered in a centralized securities depository.

2. Investment Advice. It is the remunerated activity aimed at providing information, advice, opinion, analysis, recommendation, and in general, providing assistance or influencing investment modalities, maintenance or change of investments, or opportunities for carrying out investment operations in the securities market.

3. Risk Rating. It is the technical and specialized opinion issued by rating agencies.

4. Conflict of Interest. It is any situation, as a consequence of which a natural or legal person may obtain advantages or benefits, for themselves or for third parties, and that affects their independence at the time of decision-making.

5. Securities Broker. It is a natural person dependent on a securities intermediary who, on their behalf, carries out activities with public offering securities.

6. Duty of Best Execution. It is the adoption of reasonable measures to obtain the best possible result for operations and transactions in the securities market, taking into account the type of investor, price, costs, speed and probability of execution and settlement, volume, nature of the operation, and any other relevant element for the execution of the client's order or instruction.

7. Senior Executives. They are the natural persons who hold executive positions in the direction and operation of a company's business, as well as other persons who perform high-level administration, direction, and control functions within the same.

8. Issuance. It is the set of negotiable securities originating from the same issuer and that can be considered homogeneous among themselves, attributing to their holders a similar content of certain rights and obligations, which are part of the same financial operation and respond to a unit of purpose.

9. Issuer. It is the legal person that registers in the Securities Market Registry to carry out a public offering of securities, prior authorization from the Superintendence.

10. Differentiated Issuer. They are the Central Government of the Dominican Republic, the Central Bank of the Dominican Republic, multilateral organizations of which the Dominican Republic is a member, foreign central governments and central banks, whose securities are traded in the Dominican Republic under conditions of reciprocity.

11. Central Counterparty Entity: It is an entity that interposes itself between the counterparties of contracts traded in one or more financial markets, becoming the buyer for each seller and the seller for each buyer, thereby guaranteeing the execution of open contracts.

12. Public Offering Trust. It is the public offering trust of securities and products, established in Law No. 189-11, for the Development of the Mortgage Market and Trusts in the Dominican Republic, dated July 16, 2011.

13. Investment Fund. It is a collective investment scheme through an autonomous patrimony constituted with the contribution of sums of money from natural or legal persons, called contributors, for their investment, on their behalf and risk, in real estate, securities, or any right of economic content, depending on the nature of the fund, and whose returns are established based on its results.

14. Financial Group. It is the controlling company that integrates legal persons that predominantly maintain activities of a financial nature, whether involving intermediation or not, support activities, connected or affiliated, and which present links of ownership, administration, kinship, or control, in which the economic and financial performance of its members is guided by common interests of the group or subordinate to them.

15. Relevant Event. It is the fact or event regarding a market participant and its financial group, which could positively or negatively affect its legal, economic, or financial position, or the price of securities in the market.

16. Confidential Information: It is information that by its nature or possible impact must be handled with strict discretion by Members of the National Securities Market Council, officials, and staff of the Superintendence.

17. Non-public Information: It is information not included in the scope of Law No. 200-04 General of Free Access to Public Information, dated July 28, 2004.

18. Inside Information. It is information referring to one or more market participants, their businesses, their public offering securities, or the market that could affect their legal, economic, or financial position, when it is not public domain.

19. Reserved Information. It is inside information that is outside public access, because its dissemination could put at risk the stability or financial security of the securities market or its participants.

20. Derivative Instruments. It is the operation, contract, or convention, standardized or not, whose financial result derives from or is conditioned by the variation or evolution of the price or profitability of one or more underlying financial or non-financial assets.

21. Institutional Investors. They are financial intermediation entities, insurance and reinsurance companies, pension fund administrators, investment fund management companies, securities intermediaries, fiduciary companies, securitization companies, as well as any legal person legally authorized to administer third-party resources, primarily for investment purposes through the securities market.

22. Professional Investors. They are institutional investors and those natural or legal persons, duly recognized by the Securities Market Superintendence, who habitually carry out operations with public offering securities or who by their profession, experience, knowledge, activity, or patrimony, it can be presumed that they possess high knowledge of the securities market.

23. Companies Law. It is Law No. 479-08, General of Commercial Companies and Individual Limited Liability Enterprises, dated December 11, 2008, and its modifications.

24. Trust Law. It is Law No. 189-11, for the Development of the Mortgage Market and Trusts in the Dominican Republic, dated July 16, 2011.

25. Market Manipulation. It is the act carried out by one or more persons, both natural and legal, through which they interfere or influence the free interaction between supply and demand, artificially varying the volume or price of public offering securities, with the aim of obtaining a benefit for themselves or third parties, as well as disseminating false or misleading information to the market for this purpose.

26. Centralized Trading Mechanisms. They are multilateral and transactional systems, which through a set of specific rules of admission, quotation, conduct, transparency, and convergence of participants, gather or interconnect simultaneously several buyers and sellers, with the object of trading public offering securities and disseminating information to the market regarding such operations.

27. OTC Market. It is the market that develops outside the centralized trading mechanisms with public offering securities as established in this law.

28. Securities Market. It is the market that comprises the supply and demand of securities organized in centralized trading mechanisms and in the OTC Market, to allow the process of issuance, placement, and trading of public offering securities registered in the Securities Market Registry, under the supervision of the Superintendence.

29. Primary Securities Market. It is that in which issuances of public offering securities are placed for the first time in the securities market to finance the activities of the issuers.

30. Secondary Securities Market. It is that which comprises all transactions, operations, and negotiations of public offering securities, previously issued and placed.

31. Public Offering. It is any offer, direct or indirect, made by any person to the general public or to specific sectors or groups thereof, through any means of communication or dissemination, for them to subscribe to, acquire, alienate, or trade individually an indeterminate number of securities.

32. Originator. It is the person owning goods or assets over which they can act freely, to irrevocably transfer them to a securitization company for the development of a securitization process.

33. Securities Market Participant. It is the natural or legal person, registered in the Securities Market Registry and regulated by the Securities Market Superintendence.

34. Autonomous Patrimony. It is patrimony of exclusive purpose, without legal personality, unseizable, independent and separate, both legally and accountingly, from the patrimony of the legal person that administers it and from any other patrimony that it administers.

35. Separate Patrimony. It is an autonomous patrimony constituted by a securitization company within a securitization process.

36. Investment Promoter. It is the natural or legal person who fulfills the main function of guiding potential contributors for the acquisition of shares in open investment funds.

37. Issuance Prospectus. It is a written document of a public nature that contains the specific characteristics of the securities offered and, in general, the data and relevant information regarding the issuer and the interveners in the public offering process.

38. Book Entry System. It is the mechanism aimed at establishing the registry of securities of authorized companies, through book entries, the acquisition and transmission of ownership thereof, through accounting charges and credits made by a centralized securities depository, according to the instructions of participants authorized for such purposes.

39. Listed Companies. They are anonymous companies whose shares are admitted to trading on a stock exchange.

40. Securitization. It is the process consisting of the grouping or packaging of goods or assets generating cash flows, through the creation of a separate patrimony administered by a securitization company, or a public offering trust administered by an authorized trustee.

41. Security. It is a right or set of rights of essentially economic content, which incorporates a literal and autonomous right exercised by its legitimate holder. Derivative instruments registered in the Securities Market Registry are included within this concept.

42. Equity Securities. They are securities that grant their holders rights or proportional shares of participation in the issuer's patrimony pro rata of the investment, with variable returns in the form of capital gains or periodic dividend distributions, according to the established dividend policy.

43. Fixed Income Securities. They are debt securities originating from the issuer's liabilities, whose return does not depend on their financial results, therefore representing an obligation to return the invested capital plus a predetermined return, in the terms and conditions indicated in the respective security.

Article 4.- Applicable Regulation. The securities market shall 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 National Securities Market Council, hereinafter, the "Council"; and the Securities Market Superintendence, hereinafter "Superintendence", in the area of their respective competencies. Supplementary application in matters not specifically provided for in the aforementioned norms shall be given to the general provisions of administrative law, corporate, commercial, monetary and financial legislation, trust law, common law, and commercial usages, in the order cited.

Article 5.- Exclusivity of Denomination. The denominations and terms indicated in this law and their equivalents in any language, or other similar or combinations thereof, are reserved to be used exclusively by natural and legal persons, of exclusive object related to the securities market, that according to this law, are authorized by the Council or the Superintendence, as applicable, and that are duly registered in the Securities Market Registry, hereinafter, "Registry".

TITLE II
REGULATORY BODY OF THE SECURITIES MARKET

CHAPTER I
Of the Securities Market Superintendence

Article 6.- Legal Nature. The Securities Market Superintendence is an autonomous and decentralized organism of the State, invested with legal personality, own patrimony, administrative, financial, and technical autonomy, with capacity to sue and be sued. The patrimony of the Superintendence is unseizable. Its domicile shall be in the city of Santo Domingo de Guzmán, and it may establish offices in other places of the national territory.

Article 7.- Object. The Superintendence shall have as its object to promote an orderly, efficient, and transparent securities market, protect investors, ensure compliance with this law, and mitigate systemic risk, through the regulation and inspection of natural and legal persons operating in the securities market.

Article 8.- Income. The income of the Superintendence shall come from the following sources:

1. Charges for registration in the Registry.
2. Periodic charges for maintenance and supervision of participants registered in the Registry, and
3. Charges for supervision of negotiations and operations in the securities market.

Paragraph I: Similarly, the Superintendence may receive income from the following sources:

1. The transfer assigned to the Superintendence in the General Budget of the Nation.
2. Charges for activities developed for the market or the general public.
3. Technical cooperation agreement with the Central Bank of the Dominican Republic, and
4. Donation and cooperation from the Central Government, multilateral organizations, and foreign governments.

Paragraph II: The amount and method of calculation of the charge concepts established in this article, and their method of payment, shall be determined in the regulation issued for such purposes by the Council, being empowered to dispose of reduced amounts for public offerings carried out by small and medium-sized enterprises. Said regulation must be approved by a qualified majority of two-thirds (2/3) of the members of the Council.

Paragraph III: The periodicity and amount of collection of the incomes referred to in this article, shall be reviewed by the Council.

Article 9.- Inspection. The Superintendence is subject to the public funds control system provided for in the Constitution of the Republic.

Article 10.- Administrative Organization. The Superintendence is integrated by a collegiate body called the National Securities Market Council and an executive official called the Superintendent of the Securities Market, who shall have in charge the direction, control, and representation of the Superintendence.

Article 11.- Personnel Regime. The labor relationship of officials and employees serving the Superintendence and the Council shall be governed by what is provided in the current regulation for autonomous organs of the State, whose activity requires functional and administrative independence for the exercise of the sectoral activity entrusted, as well as by the provisions of the Social Security Law.

Paragraph: A Code of Conduct of mandatory compliance by personnel serving the organs of the Superintendence shall be established by regulation. Personnel shall be subject to an administrative disciplinary responsibility regime, which shall be enforceable through the corresponding disciplinary procedure, without prejudice to civil or criminal responsibility that may correspond.

Article 12.- Exigibility of Responsibility by Third Parties. No personal, civil, or penal action may be brought against members of the Council, the Superintendent, or the Inspector, nor the personnel who provide their services to the Superintendence or the Council for the administrative acts carried out during...

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