Superintendency of Banks and Other Financial Institutions

REPUBLIC OF NICARAGUA - CENTRAL AMERICA

Resolution No. CD-SIBOIF-696-1-OCT5-2011
Dated 05 October 2011

STANDARD FOR THE REFORM OF ARTICLE 11 OF THE GENERAL STANDARD ON THE IMPOSITION OF FINES APPLICABLE TO GENERAL DEPOSIT WAREHOUSES

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

WHEREAS

SOLE

That in accordance with the provisions of the second paragraph of article 152 of Law 734, Law on General Deposit Warehouses, this Board of Directors is empowered to establish through general standards the amounts of fines within the ranges indicated in the aforementioned Law, adapted to the seriousness of the offense, as well as their recurrence cycles.

In exercise of its powers,

HAS ISSUED

The following,

CD-SIBOIF-696-1-OCT5-2011

STANDARD FOR THE REFORM OF ARTICLE 11 OF THE GENERAL STANDARD ON THE IMPOSITION OF FINES APPLICABLE TO GENERAL DEPOSIT WAREHOUSES

FIRST: Reform article 11 of the General Standard on the Imposition of Fines Applicable to General Deposit Warehouses contained in Resolution No. CD-SIBOIF-676-1-MAY11-2011, of 11 May 2011, published in La Gaceta, Official Gazette No. 107, of 10 June 2011, which shall read as follows:

"Art. 11.- Imposition of fines for infractions of laws, regulations and resolutions of the Superintendency.- In accordance with the provisions of article 150 of the Warehouses Law, when the Warehouses infringe any of the provisions contained in the Warehouses Law; in the regulations issued by the Board of Directors of the Superintendency; in the orders, resolutions or instructions issued by the Superintendent; as well as in the other laws and standards of a warehouse, or if documents are received from them

Managua, Nicaragua

SIBOIF Building - Km. 7 Carretera Sur

Telephone PBX: 2265-1555 P.O. Box 788

web: www.siboif.gob.ni

Email: correo@siboif.gob.ni

or reports that do not correspond to their true situation, the Superintendent may impose fines in accordance with the following:

Seriousness of the 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 interest and commissions pending payment at the time of the renewal of commercial credits with deposit certificate and pledge bond are not paid in advance.

b) That provisions for accounts receivable are not made in accordance with the regulations governing the matter on the evaluation of balances in accounts receivable and of assets acquired in recovery by general deposit warehouses.

c) That in the case of an adjudication of assets received in recovery of accounts receivable, the provisions are not implemented in the amounts or percentages and times established in the regulations governing the matter on the evaluation of balances in accounts receivable and of assets acquired in recovery by general deposit warehouses.

d) When in the operations of sale of merchandise on behalf of third parties, the conditions of sale 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 the operations of purchase of merchandise on behalf of third parties, the corresponding agreement or contract does not clearly establish the conditions of the purchase, such as prices, currency, quantities, class, and qualities of the merchandise, place where they will be stored, storage, surveillance, insurance and transportation expenses, as applicable, of the merchandise, handling of funds, commissions and other requirements that must be observed in the operation.

g) When in the operations of purchase of merchandise on behalf of third parties, the warehouse's own funds are used, except for operations of purchase of imported products, which shall be governed in accordance with the regulations governing the matter on financing granted by general deposit warehouses and assets they acquire in recovery.

Superintendency of Banks and Other Financial Institutions

REPUBLIC OF NICARAGUA, CENTRAL AMERICA

h) When in the operations of purchase of merchandise on behalf of third parties, such merchandise is not delivered to its owner within the term established in the corresponding agreement or contract, after covering the expenses, commissions and other services provided by the warehouse or within the term and conditions established in the deposit titles or contracts, if they have been issued or signed.

i) When in the operations of sale of merchandise on behalf of third parties, the proceeds of the sale are not delivered to the owner of the merchandise within the term established in the corresponding agreement or contract, after covering the expenses, commissions and advances of the warehouse, without prejudice to the priority of payment of obligations referred to in article 77 of the Warehouses Law, as applicable. However, this offense shall be considered serious if the priority of payments is violated and state institutions and municipal governments are harmed.

j) When the weighing services provided by the warehouses are carried out using scales that are not calibrated and certified by experts in the field and whose calibrations and certifications are more than one year old at the time of the corresponding weighings.

k) When the storage premises that so require are not equipped with precise scales certified by specialists in the field and whose certifications are more than one year old 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 locations in the authorized premises.

m) When physical inventories are not carried out, at least monthly on a selective basis, and record of said inventories must be kept in minutes that will be signed by the participating officials.

n) The lack of updated documentation in the insurance files.

o) Regarding auctions:

i. The lack of communication to the Superintendent, in writing and at least three days in advance, of the auction or auctions to be held in accordance with the provisions of article 73 of the Warehouses Law.

ii. The publication of incomplete information in the auction notices.

iii. Preventing or limiting the public interested in the auction from being able to physically observe the merchandise within the three-day period prior to the holding thereof.

Managua, Nicaragua

SIBOIF Building - Km. 7 Carretera Sur

Telephone PBX: 2265-1555 P.O. Box 788

web: www.siboif.gob.ni

Email: correo@siboif.gob.ni

p) That the Deposit Certificates with Pledge Bonds in force and/or not cancelled taken by the warehouse, and/or the 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 replacement, or because the merchandise has been released and/or withdrawn and/or all obligations derived from these documents have been cancelled, are not invalidated with the date and seal of cancelled and/or that the securities that are invalidated are not invalidated with the seal of annulled and their originals and copies are not filed in chronological order.

r) That the Single Control File for each Deposit Certificate they issue and for the Pledge Bonds, as applicable, is not updated and/or immediately available to the personnel of the Superintendency.

s) When they do not keep complete and/or permanently updated records of the merchandise stocks in deposit, Deposit Certificates and, as applicable, Pledge Bonds issued, cancelled, not cancelled and annulled.

t) Any other infractions of equal or similar gravity committed against legal, regulatory and other provisions applicable to them, as well as instructions of the Superintendent.

For this type of infraction, the Superintendent shall 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), which have not been converted to credits secured by Deposit Certificates and Pledge Bonds no later than thirty (30) days after maturity.

b) That in the case of adjudication of assets received in recovery of credits, the provisions are not implemented in the amounts or percentages and times established in the regulations governing the matter on financing granted by general deposit warehouses and assets they acquire in recovery.

c) That the fidelity insurance for warehouse keepers and fiscal officers does not exist or is not in force, to respond to eventual failures of the same in the fulfillment of their responsibilities, or that the insured amount is less than fifty thousand United States dollars (US$50,000.00) or its equivalent in córdobas.

d) When the stock control that exists is not kept individually and by product, by physical or electronic means, and/or under the perpetual inventory system.

e) When in the storage of merchandise, its arrangement that facilitates the location, counting and verification thereof is not maintained and/or that when applicable, a uniform system of stacks, units of measure (boxes and/or packages and/or bales etc., of the same characteristics and content) and/or equal weights, and where applicable, labels and/or control cards is not used.

f) The lack of indication in the deposit certificate and in the pledge bond or in an attached sheet, of the risks covered by the corresponding insurance policy.

g) The lack of annotation and/or endorsement of merchandise deliveries in the copies of the control file of the single file of the Deposit Certificate and the releases in the copy of the Pledge Bond.

h) Issuing deposit certificates and pledge bonds with blank spaces, with smudges, stains, amendments or alterations of any kind and/or failing to indicate whether the merchandise is subject or not to the payment of taxes, as well as, that any other special condition or observation referring to the merchandise and/or that the general terms and conditions specifying the rights and obligations of the parties do not appear on the reverse of those documents and are not printed in easily legible lettering.

i) When the minimum period of five years (5) is not complied with for the conservation of documents, accounting records and instruments containing figures, and any other pertinent information that supports the financial operations, and/or this documentation is not filed in places with adequate security levels and with due protection, so as to avoid damage from humidity, pests, fungi, sunlight 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 provisions applicable to them, as well as instructions of the Superintendent.

For this type of infraction, the Superintendent shall apply a sanction of 1,001 to 3,000 fine units according to the materiality.

3. Serious infractions: The following constitute serious infractions, among others:

a) Granting documented credits (commercial credits without Warehouse Receipts) in violation of any of the following conditions:

i. That said credits are to finance operations that are not linked to goods or merchandise

that are deposited in the warehouse's storage facilities 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 warehouse receipts 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 securities.

ii. That their sole renewal exceeds the term of 180 days after the maturity of the security that gave rise to the renewal and/or that it does not include in the observations section the legend "Renewal of the security", including in it the number of the security 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 by the regulations governing the operational and financial matters of general deposit warehouses and/or an acceptable updated valuation of the goods or merchandise backing the deposit certificate and the corresponding warehouse receipt.

d) When commercial credits with deposit certificates and warehouse receipts, which have not been paid at maturity, are not transferred to overdue commercial credits within sixty-one (61) days of 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 that a warehouse issues exceeds 30 times the amount of its capital calculation base.

f) That the value of all deposit certificates that a warehouse issues 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 Superintendency.

i) Providing inventory administration services in third-party premises, acting as depositaries of the merchandise.

j) When it is not stated in the Deposit Certificate issued with or without Warehouse Receipt, that the merchandise may be subject to the incorporation of value-added processes and transformation, repair and assembly, in accordance with literals e) and f) of Art. 57 of the Warehouses Law.

k) That the sale of merchandise is carried out when warehouse receipts have been issued on them.

l) When in operations of purchase of merchandise on behalf of third parties, such merchandise is not deposited in the warehouses' own storage facilities, where it will be stored, kept and preserved as a deposit.

m) When the certification of the qualities of the merchandise and their valuation are carried out with merchandise that is not in deposit under the responsibility of the warehouse and in premises authorized by the Superintendency, whether these are own, leased or authorized.

n) Nonexistence or absence of permanent surveillance by the warehouse 24 hours a day.

o) When pallets are not used to stack merchandise that may suffer damage from humidity or when, in this regard, the provisions of the corresponding insurance policy are not complied with and if the policy indicates special particularities, these and their effects are not stated in the respective Deposit Certificate and Warehouse Receipt, or on a sheet attached to both securities.

p) When merchandise that may suffer damage from being outdoors is stored in yards and open areas or in warehouses that are only roofed, unless its nature and its process allow it.

q) When the corresponding authorization contract and appointment of warehouse keeper in authorized storage facilities is not signed.

r) When, in the event of merchandise shortages, the warehouse does not take, at a minimum and immediately, the necessary provisions to guarantee its interests and those of third parties and/or does not immediately notify the Superintendent of said shortage.

s) When the validity of the Superintendency's authorization and of the lease or loan-for-use agreement, as applicable, is not maintained, while there are issued and uncancelled securities whose merchandise is deposited in the corresponding premises.

t) When there is no written and documented pronouncement derived from the review and analysis process of storage requests, assessing the viability and reasonableness of substantive aspects related to merchandise storage requests.

u) When there is no written approval by the warehouse's General Management or by another instance duly authorized for this purpose, of the merchandise deposits.

v) When there is no type of inventory control.

w) The nonexistence of insurance that protects:

i. The merchandise in deposit and warehouses or the warehouse's own deposits,

ii. Real estate leased owned by third parties, unless these are insured by their owner, or the owner exempts the warehouse from all liability in case of a loss affecting them.

x) The lack of supervision and timely follow-up of the insurance endorsed in favor of the warehouse.

y) The direct contracting or endorsement of policies in which indistinct coverage of locations is established.

z) The execution of agreements, addenda or named backing clauses and/or any other instrument or legal document in which, explicitly and/or implicitly, insurance companies, national or international based in the country, evade or exempt themselves from direct liability for assuming the risks of claims and the indemnities arising from their occurrence.

aa) The insufficiency of the insured sum such that it does not cover the value of the merchandise stored and other assets that they are obliged to insure in order to avoid, where applicable, the situations of underinsurance or subinsurance and consequently, the effect derived from the application of the proportional rule or similar measures.

bb) Breaching the contractual conditions established in the insurance policies, addenda and other documents received in writing from the corresponding insurance company.

cc) Auctioning expired merchandise.

dd) When the merchandise is released and at the time delivered in full, without the return to the warehouse of the originals of the Deposit Certificate and the Pledge Bond, where applicable, and prior payment of the outstanding balances, taxes, levies, warehouse services, etc.

ee) 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 to the warehouse the sums corresponding to the outstanding debts according to the loaned value, term, rate, maturity and other conditions established in the Pledge Bond until the day of its maturity, plus the other outstanding debts for taxes, levies, warehouse services, etc.

ff) In partial deliveries of merchandise:

i. Making partial deliveries of merchandise in operations with a Deposit Certificate without a Pledge Bond, upon presentation of the original certificate, without these allowing convenient division.

ii. Making partial deliveries of merchandise in operations with a Deposit Certificate and Pledge Bond, without presenting the originals of both securities.

iii. 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 recorded in the Pledge Bond and to that of 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.

iv. When the releases are not recorded on the respective securities and/or are not endorsed by the corresponding authorized signature.

gg) Delivering merchandise without the instruction of the General Manager or the corresponding officer authorized by the Board of Directors for this purpose.

hh) Granting credits with deposit certificates and pledge bonds in contravention of the amounts, terms and maturities established in the norm that regulates the operational and financial matter of the general deposit warehouses.

ii) When the changes and/or modifications made to the securities, as well as the special conditions to which they are subject, are not recorded on 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 endorsed by the general manager or person authorized by the Board of Directors and the seal of the issuing warehouse.

jj) When in operations with non-negotiable and non-transferable Deposit Certificates and Pledge Bonds the following is breached:

i. They are issued without indicating that they are non-negotiable, not to order or with another equivalent expression and cannot be transferable in ownership nor offered as third-party collateral.

ii. They do not include the addendum of special conditions reflecting, among others, the agreements on inventory changes and the rest of the rights, obligations and attributions of the original parties, agreed between the Depositor and the Holder of the Pledge Bond and/or this is not signed by the interested parties and endorsed and sealed by the issuing warehouse, and/or attached to said securities.

iii. That the addendum of special conditions does not state that the last inventory listing found in the warehouse's files shall be valid for all legal purposes.

iv. That the initial inventory serving as the basis for the issuance of the securities is not signed by the issuing warehouse and/or attached to the original securities.

v. That the relationship between the value of the merchandise covered by the Deposit Certificate and the balance of the credit recorded in the Pledge Bond is less than that originally reflected.

vi. That the inventory listings subsequent to the original listing are not filed in the single file of the security and signed by the issuing warehouse.

kk) That the Certificates and Bonds are not issued simultaneously in original and a minimum of two copies, and/or do not have a preprinted and successive order number, which will be the same for the respective Certificate and Bond, and/or that the copies do not bear the printed legend "NON-NEGOTIABLE COPY".

ll) That when the deposit certificate is issued without a pledge bond, the latter is not invalidated with a cancelled stamp and/or it is not indicated on the corresponding Certificate that it has been issued without a Pledge Bond.

mm) That the value of the merchandise that the Warehouses must indicate on the securities they issue is not the one approved by the General Management or by an officer authorized for this purpose.

nn) That Deposit Certificates with or without a Pledge Bond in force are split without the original securities being returned to issue new ones.

oo) When goods are acquired that are not destined for the offices or activities proper to their corporate purpose, excepting those from recoveries

pp) When precious metals, precious stones or jewels, or explosive merchandise or others that for their nature produce harmful effects on health and the environment or other products prohibited by special laws or regulations, without complying with the special conditions required in each case by the regulations governing the operational and financial matters of general warehouses of depósito.

qq) When the funds derived from total or partial withdrawals of merchandise or goods are not delivered without the presentation of the Pledge Bond, by auction or sale of merchandise, insurance indemnity, or by any other concept whose beneficiary is a person other than the warehouse, within the terms, requirements and corresponding conditions established in the regulations governing the operational and financial matters of general deposit warehouses.

rr) When depositors and endorsees of the securities, or their representatives, are prevented, upon request and under the supervision of warehouse personnel, from examining the merchandise covered by the respective titles, and/or withdraw samples from them when their nature permits, in the manner and terms customary in commerce.

ss) When insurance companies are prevented from carrying out inspection of the deposited goods, with prior notice to the depositor, an action that will be carried out in the presence of its authorized representative, as well as with the assistance of a warehouse official.

tt) Any other infractions of equal or similar seriousness committed against legal provisions, regulations and others applicable to them, as well as instructions of the Superintendent.

For this type of infraction the Superintendent shall apply a sanction of 3,001 to 5,500 fine units.”

SECOND: This norm shall enter into force upon its notification, without prejudice to its publication in La Gaceta, Diario Oficial. (f) A. Rosales B. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) F. Reyes B. (f) Illegible (Silvio Moisés Casco Marenco) (f) U. Cerna B.

URIEL CERNA BARQUERO
Secretary Board of Directors SIBOIF