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Superintendency Resolution Adjunta SMV No. 013-2024-SMV/11

Lima, 12 March 2024

Summary: To sanction FOSSAL S.A.A. with nine (9) warnings for having committed nine (9) minor infractions classified in subsection 3.1, item 3 of Annex I of the Sanctions Regulations.

Regulated entity : FOSSAL S.A.A.
Subject
:
Two-instance administrative sanctioning procedure administrative Main Type : Subsection 3.1. of item 3 of Annex I of the Sanctions Regulations MINOR INFRACTIONS Case No. : 2023034958

The Acting Deputy Superintendent of
Market Conduct

SEEN:

Administrative Case No. 2023034958 containing the administrative sanctioning procedure initiated by the General Directorate of Conduct Compliance of the Superintendency of the Securities Market – SMV (hereinafter, the IGCC), against FOSSAL S.A.A. (hereinafter, the Issuer); as well as Report No. 25-2024-SMV/11.2 of 22 February 2024 (hereinafter, the Report), issued by said IGCC;

CONSIDERING:

I. FUNCTION AND COMPETENCE OF THE SASCM

1. That the IGCC —the investigating body of the administrative sanctioning procedures (hereinafter, the PAS) referred to in this case— has brought to the attention of the Superintendency Adjunta de Supervisión de Conductas de Mercados of the SMV (hereinafter, SASCM) the PAS of Administrative Case No. 2023034958 in order for it to issue a decision as the

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sanctioning body of sole instance in said PAS. In this way, the SASCM assumes competence in observance of the exercise of the supervisory function and the sanctioning power of the Superintendency of the Securities Market – SMV established in the Consolidated Text of its Organic Law, Decree-Law No. 26126 (hereinafter, LOSMV), and the Single Ordered Text of the Securities Market Law, Legislative Decree No. 861, approved by Supreme Decree No. 020-2023-EF-1 1 (hereinafter, TUO LMV); as well as by the provisions of the Sanctions Regulations, approved by SMV Resolution No. 035-2018-SMV/01 (hereinafter, Sanctions Regulations); and, in articles 42 and 43 of the Regulations on Organization and Functions of the Superintendency of the Securities Market – SMV, approved by Supreme Decree No. 216-2011-EF (hereinafter, ROF-SMV), in the sense that it is a specific function of the SASCM to impose sanctions in sole administrative instance for the commission of infractions whose compliance control, according to its competences, corresponds to said Superintendency Adjunta;

II. FACTS, CHARGES AND DEFENSES OF THE ISSUER

2.1 Facts

2. That it was evaluated whether the Issuer complied with timely reporting of material facts to the SMV;

2.2 Charges

3. That, as a result of said evaluation, by means of Letter No. 3767-2023-SMV/11.2 of 06 September 2023 (hereinafter, the Letter of Charges), charges were brought against the Issuer because it would not have complied with submitting, within the established period, the following information:

Charge ONE

The material fact referred to the monthly information of ADR holders greater than 1% as of the close of August 2021, which should have been reported by a deadline of 10 September 2021; however, it was submitted on 13 September 2021 (Case No. 2021035004).

Charge TWO

The material fact referred to the monthly information of ADR holders greater than 1% as of the close of March 2022, which should have been submitted by a deadline of 11 April 2022; however, it was submitted on 12 April 2022 (Case No. 2022015641).

Charge THREE

The material fact referred to the monthly information of ADR holders greater than 1% as of the close of November 2022, which should have been submitted by a deadline of 12 December 2022; however, it was submitted on 21 December 2022 (Case No. 2022050644).

Charge FOUR

[1] By Supreme Decree No. 020-2023-EF, published on 10 February 2023 in the Official Gazette El Peruano, the Single Ordered Text of the Securities Market Law, Legislative Decree No. 861, was approved.

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The material fact referred to the communication of ADR transactions as of the close of the fourth quarter of 2020, which should have been submitted by a deadline of 10 January 2021; however, it was submitted on 19 January 2021 (Case No. 2021002086).

Charge FIVE

The material fact referred to the communication of ADR transactions as of the close of the first quarter of 2021, which should have been submitted by a deadline of 10 April 2021; however, it was submitted on 19 April 2021 (Case No. 2021014999).

Charge SIX

The material fact referred to the communication of ADR transactions as of the close of the third quarter of 2021, which should have been submitted by a deadline of 10 October 2021; however, it was submitted on 12 October 2021 (Case No. 2021038274).

Charge SEVEN

The material fact referred to the communication of ADR transactions at the close of the fourth quarter of 2021, which should have been submitted by the deadline of 10 January 2022; however, it was submitted on 11 January 2022 (File No. 2022001102).

Charge EIGHT

The material fact referred to the communication of ADR transactions at the close of the first quarter of 2022, which should have been submitted by the deadline of 11 April 2022; however, it was submitted on 12 April 2022 (File No. 2022015655).

Charge NINE

The material fact referred to the communication of changes in shareholding greater than 10%, which occurred on 31 August 2021, which should have been submitted on the same day; however, it was submitted on 01 September 2021 (File No. 2021033583).

Charge TEN

The material fact referred to the communication of changes in shareholding greater than 10%, which occurred on 07 September 2021, which should have been submitted on the same day; however, it was submitted on 08 September 2021 (File No. 2021034349).

Charge ELEVEN

The material fact referred to the communication of changes in shareholding greater than 10%, which occurred on 01 December 2021, which should have been submitted on the same day; however, it was submitted on 02 December 2021 (File No. 2021045792).

Charge TWELVE

The material fact referred to the communication of changes in shareholding greater than 10%, which occurred on 02 December 2021, which should have been

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submitted on the same day; however, it was submitted on 03 December 2021 (File No. 2021045957).

4. That, these breaches are classified in subsection 3.1 of item 3 of Annex I of the Sanctions Regulations;

2.3 Defenses

5. That, by means of a document submitted on 20 September 2023, the Issuer submitted its defenses organized into groups, taking into consideration the relationship between the breaches, indicating the following:

Regarding the material facts referred to the information on ADR holders

Charges ONE, TWO and THREE

The Issuer states that the submission of material facts with the monthly information on ADR holders is carried out on the basis of the information provided previously by the company JPMORGAN CHASE BANK N.A. FBO HOLDERS OF ADR'S (hereinafter, JPMORGAN), and therefore, it complied with submitting as a material fact the information corresponding to the close of August 2021, March 2022 and November 2022, on the next business day following receipt of the information.

On the other hand, the Issuer requests that consideration be given to the fact that the elements indicated in article 24 of the Regulations on Sanctions are present, so that the IGCC refrain from initiating an administrative sanctioning procedure because “i) at the time of the imputation of charges it had already submitted the omitted information, ii) it is a fact of little significance, iii) it is a minor infraction; and iv) there are no concrete harms to investors.”

Likewise, it indicates that there has not been nor will there be harm to any investor given that the Issuer’s ADRs practically have no movement in the market, so if it is considered that a sanction is applicable, in accordance with the principle of reasonableness, it should be a warning.

Regarding the material facts referring to ADR transactions

Charge FOUR

The Issuer states that the delay in the communication of the material fact referring to ADR transactions at the close of the fourth quarter of 2020 was due to the administrative overload generated by the events suffered at the end of 2020, as a result of the Covid-19 pandemic, and indicates that in said period “there was no regular access to the systems due to the impossibility of attending the offices.” Therefore, they request that subsection a) of article 27 of the Regulations on Sanctions be applied, “(…) as it is an exceptional situation comparable to fortuitous event or force majeure and therefore be considered as an exemption from liability”.

Charge FIVE

The Issuer argues that the delay in the communication of the material fact referring to ADR transactions at the close of the first quarter of 2021 was due to the increase in Covid-19 infections during the months of March and April 2021, which directly affected the company personnel in charge of sending information. Therefore, they request that subsection a) of article 27 of the Regulations on Sanctions be applied, “(…)

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as it is an exceptional situation comparable to fortuitous event or force majeure and therefore be considered as an exemption from liability”.

Charge SIX

The Issuer states that the delay in the communication of the material fact referring to ADR transactions at the close of the third quarter of 2021 was due to the increase in administrative burden. Likewise, the Issuer requests that consideration be given to the fact that the elements indicated in article 24 of the Regulations on Sanctions are present, so that the IGCC refrain from initiating an administrative sanctioning procedure because “i) at the time of the imputation of charges it had already submitted the omitted information, ii) it is a fact of little significance, iii) it is a minor infraction; and iv) there are no concrete harms to investors.”

Charges SEVEN and EIGHT

The Issuer states that the delay in communicating the material events related to the ADR transactions at the close of the fourth quarter of 2021 and first quarter of 2022 was due to the increase in administrative burden.

On the other hand, the Issuer requests that it be taken into account that the elements indicated in article 24 of the Sanctions Regulation concur, so that the IGCC refrains from initiating an administrative sanctioning procedure because “i) at the time of the imputation of charges it had already sent the omitted information, ii) it is a fact of little significance, iii) it is a minor infraction; and iv) there are no concrete damages to investors.”

Likewise, it indicates that there has not been nor will there be any harm to any investor given that the Issuer's ADRs practically have no movement in the market, so if it is considered that a sanction is applicable, in accordance with the principle of reasonableness, it should be a warning.

Regarding the material events related to changes in shareholding

Charge NINE

The Issuer voluntarily acknowledges the commission of the infraction for the delay in communicating the material event related to the communication of changes in shareholding greater than 10% that occurred on 31 August 2021, and requests that the mitigating circumstance of responsibility established in literal a) numeral 1 of article 26 of the Sanctions Regulation be applied.

Charges TEN, ELEVEN and TWELVE

The Issuer states that changes in shareholding greater than 10% are reported after receiving the information from Cavali and, in this case, the reports on share movements were made outside the Issuer's working hours, for which reason it sent the information on the next business day after receipt.

6. That, the Single Ordered Text of the General Administrative Procedure Law, approved by Supreme Decree No. 004-2019-JUS (hereinafter, TUO of the LPAG) contains common rules for the actions of the administrative function of the State and regulates all administrative procedures developed in the entities, including special procedures. Likewise, numeral 3) of article 248 of the TUO of the LPAG indicates the criteria regarding the graduation of the sanction: (a) The illicit benefit resulting from the commission of the infraction, (b) The probability of detection of the infraction, (c) The severity of the damage to

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public interest and/or protected legal good, (d) The economic damage caused, (e) Recidivism, for the commission of the same infraction within the term of one (1) year from when the resolution that sanctioned the first infraction became final, (f) The circumstances of the commission of the infraction; and, (g) The existence or not of intentionality in the conduct of the offender;

7. That, the charges formulated, the defenses presented, and the criteria regarding the graduation of the sanction have been subject to evaluation in the Report, which has been brought to the attention of the SASCM;

8. That, in observance of the provisions of numeral 5 of article 255 of the TUO of the LPAG, by means of Official Letter No. 726-2024-SMV/11 of 23 February 2024, the Report was sent to the Issuer, so that it may submit its arguments within the term of five (5) business days from notification;

9. That, the Issuer on 4 March 2023 stated the following as arguments:

(i) They state that once the Report was reviewed and a new evaluation of their internal procedures was carried out, they have found opportunities for improvement in them in order not to incur again in any regulatory non-compliance, for which reason they decided to submit to the scope and terms of the aforementioned Report. Therefore, they decline their right to present additional defenses and await the final resolution of the present PAS.

(ii) Finally, they indicate that they reiterate their commitment to full and timely compliance with the obligations incumbent upon them as issuer, undertaking to take all necessary measures not to incur again in any kind of non-compliance.

III. ISSUES TO BE DETERMINED

10. That, in the present PAS it corresponds to determine the following:

(i) Whether or not the Issuer incurred in the infractions indicated in the Charge Letter and Report;

(ii) Whether or not it corresponds to impose a sanction on the Issuer;

IV. ANALYSIS

4.1 Applicable regulations

Financial information

11. That, article 30 of the TUO LMV establishes: “The registration of a certain security or issuance program entails for its issuer the obligation to inform the SMV and, where appropriate, the respective stock exchange or entity responsible for the conduct of the centralized mechanism, of the material events, including ongoing negotiations, about itself, the security and the offer made of it, as well as to disclose such events in a truthful, sufficient and timely manner. The information must be provided to said institutions and disclosed as soon as the event occurs or the issuer becomes aware of the

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same, as the case may be”. (Highlight added);

12. That, in that same sense, article 3 of the Regulation of Material Facts and Reserved Information, approved by SMV Resolution No. 005-2014-SMV/01 (hereinafter, Regulation of Material Facts), defines as a material fact: “(…) any act, decision, agreement, fact, negotiation in progress or information referring to the Issuer, its securities or its businesses that have the capacity to significantly influence: 3.1. The decision of a prudent investor to buy, sell or hold a security; or, 3.2. The liquidity, price or quotation of the issued securities.”;

13. That, it is appropriate to indicate that article 34 of the TUO of the LMV establishes that: “(…), issuers must inform the aforementioned institutions about transfers of capital shares registered in the Registry, made by persons who directly or indirectly hold ten percent (10%) or more of the issuer's capital or by those who as a result of an acquisition or disposal come to have or cease to hold said percentage.”;

14. That, accordingly, numeral 6 of Annex 1 of the Regulation of Material Facts establishes that the following constitutes a material fact: “6. Transfers of shares representing the share capital made by persons who directly or indirectly hold ten percent (10%) or more of the issuer's capital or by those who as a result of an acquisition or disposal come to have or cease to hold said percentage.”;

15. That, in accordance with numeral 9.1 of article 9 of the Regulation of Material Facts, “The Issuer must report its material fact as soon as such fact occurs or the Issuer becomes aware of it, and in no case beyond the day on which it has occurred or has been known (…).”;

16. That, likewise, regarding the timeliness of presenting information on ADRs, subsection c) of Article 7 of the Rules on Information regarding Programs called American or Global Depositary Receipts, approved by CONASEV Resolution No. 358-93-EF/94.10.0 of 22 December 1993 and amendments (hereinafter, Rules on Programs called American Depositary Receipts) states: “c) Monthly information of the holders of ADRs and GDRs who hold 1% or more of the company's share capital, indicating their respective trends at the close of each month, as well as quarterly information on transactions carried out with said instruments, within ten (10) days after the expiration of the indicated periods”;

17. That, failures to timely present material facts are typified in subsection 3.1 of numeral 3 of Annex I of the Regulation of Sanctions, which states that the following constitutes a minor infraction: “Presenting outside the established period, or doing so incompletely, or, without observing the technical specifications approved by the SMV or without communicating the approval by the corresponding corporate body, to the SMV, to the Exchange, to the entity in charge of the centralized negotiation mechanism or to any other entity or subject of the securities market, the audited individual or consolidated financial information, the individual or consolidated interim financial statements, management report, special audit report, material facts and annual reports.” (Highlight added);

18. That, in accordance with article 35 of the Regulation

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of Sanctions, said infractions are punishable with a warning or a fine of no less than one (1) UIT and up to twenty-five (25) UIT;

4.2 Evaluation of the case

19. That, in administrative file No. 2023034958, which contains the documentation of this PAS, it is observed that Memorandum No. 1960-2022-SMV/11.1 of 26 May 2022 (File No. 2022020825), Memorandum No. 3184-2022-SMV/11.1 of 20 July 2022 (File No. 2022029865) and Memorandum No. 298-2023-SMV/11.1 of 17 January 2023 (File No. 2023002557), the General Superintendence of Conduct Supervision (hereinafter, IGSC) —an organ of the Superintendence of the Securities Market – SMV which has among its functions and powers, the supervision of compliance with the rules applicable to issuers with securities registered in the Public Registry of the Securities Market - RPMV, evaluating indications of possible infractions, and forwards, for its consideration, the respective reports of indications of infraction, to the IGCC—, forwarded to the IGCC, the result of its evaluation, and specifically what refers to the present case;

20. That, it must be kept in mind that the procedures and legal forms with which the IGSC conducts its inspection and/or supervision activity and upon concluding it with a report of indications of infraction, determine that its pronouncement or opinion on a specific supervision matter —which may even contain a decision, such as, for example, the adoption of corrective measures—, is an opinion on the merits of the matter; it being necessary to specify that said opinion and the report of indications of infraction of the IGSC are not binding for the IGCC, as established in the second paragraph of article 9 of the Regulation of Sanctions23 ;

21. That, in this way it is held that in the evaluation of the facts related to this PAS, two (2) other administrative organs of the Superintendence of the Securities Market – SMV, functionally independent from each other and from this Office, have intervened and participated prior to the issuance of this Resolution; first the IGSC which in due course reported the indications of

[2] In article 245 of the TUO of the LPAG, the following are indicated as the forms or modes in which the inspection activity could be concluded: 1) Record of conformity of the activity carried out by the administered party; 2) Recommendation of improvements or corrections to the activity carried out by the administered party; 3) The warning of the existence of non-compliances that are not likely to warrant the determination of administrative responsibilities; 4) The recommendation to initiate a procedure in order to determine the corresponding administrative responsibilities; 5) The adoption of corrective measures and 6) Other forms as established by special laws.

[3] «Article 9.- PRELIMINARY INQUIRIES AS A CONSEQUENCE OF SUPERVISION ACTIONS (…) When said bodies conclude that there is sufficient evidence of possible administrative infractions, they refer the corresponding reports to the General Intendancies of Compliance, which determine whether or not to initiate an administrative sanctioning procedure. If applicable, the General Intendancies of Compliance may carry out additional inspections or investigations of the reported evidence. In the case of possible infractions in the scope of the Regulation of the Financial Participatory Financing Activity and its Managing Companies, the preliminary inquiries are carried out by the General Intendancy of Research and Innovation, a dependency that, if there is sufficient evidence of possible administrative infractions, will determine whether or not to initiate an administrative sanctioning procedure. (…)».

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infraction and then the IGCC which, as a result of its evaluation, formulated the Statement of Charges and the Report; and at this point of the PAS, it corresponds to the Office of the SASCM to issue a pronouncement containing its decision regarding the aforementioned charges, it being necessary to indicate that by its nature, as previously stated, it will be a decision of a single administrative instance;

22. That, prior to the corresponding analysis, it must be noted that the formulation of the charges was based on the fact that the Issuer did not communicate the material facts detailed in the Statement of Charges, within the period established by the regulations;

23. That, compliance with the obligation regarding the timely submission of periodic and occasional information by the issuers of securities registered in the RPMV is necessary for the transparency and proper functioning of the securities market. In that sense, non-compliance with said obligation harms the transparency of information;

24. That, from the review of the information recorded in the Integrated Registry and Supervision System (hereinafter, SIRYS) of the SMV, the Issuer registered its securities in the main market through General Intendancy Resolution No. 128-2016-SMV/11.1 of 13 December 2016. Likewise, from the information obtained from the 2022 Annual Report, it is indicated that, as of 31 December 2022, its registered share capital is S/ 5’155,939 and the share capital pending registration in the Public Registries of SUNARP is S/ 3, 827,856, both fully subscribed and paid.

25. That, as of 31 December 2022, with registered participation greater than 5% of the Share Capital and investment shares considering the registered shares, the Issuer registers as majority shareholder:

Source: 2022 Annual Report, Fossal S.A.A.

26. That, complementary to this, the 2022 Annual Report indicates that the shareholding structure is composed as follows:

Common shares with voting rights
Investment shares

Source: 2022 Annual Report, Fossal S.A.A.

27. That, in relation to the non-compliances detailed

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in the Statement of Charges, the defenses submitted by the Issuer are proceeded to be evaluated below:

On the material facts referring to the information of ADR holders

In relation to Charges ONE, TWO and THREE

In the three (3) charges, the Issuer alleges in its defenses that it complied with submitting its information on the business day following its receipt from JPMORGAN CHASE BANK N.A. FBO HOLDERS OF ADR’S, the company in charge of the custody of the ADRs; that is, the delay in the submission would have been caused by the delay in the communication from the custodian company.

However, from the Issuer's statement it is possible to establish its acknowledgment of having submitted the information one business day after having been made aware of the report by JP MORGAN. Furthermore, as noted from the email submitted as evidence in its defense for CHARGE THREE, it is observed that it became aware of the information on 20 December 2022 at 16:26 p.m.; however, despite the delay of the custodian depositary, it submitted the information on 21 December at 18:20 p.m., as can be verified from the receipt of file No. 2022050644. Likewise, it should be noted that there is no data in the file regarding the date and time on which it became aware of the information related to the first and second charges, beyond the Issuer's own acknowledgment.

With regard to your request to take into account that the three (3) charges comply with the elements established in article 24 of the Sanctions Regulation referring to abstention, it is important to clarify that said power of the IGCC refers to the abstention from initiating an administrative sanctioning procedure. This means that this decision is made during the evidence evaluation stage prior to the initiation of an administrative sanctioning procedure, which begins with the corresponding notification of the statement of charges to the alleged offender. Therefore, this provision is not applicable to the present case, since the submission of defenses is at the instruction stage.

Consequently, the conduct constituting the three (3) infractions contained in Charges ONE, TWO and THREE is established and the administrative responsibility of the Issuer is determined, by reason of which it is appropriate to analyze the proposed sanction in accordance with the provisions of the principle of reasonableness and the sanction criteria.

Finally, with regard to the Issuer's request to consider the warning as a proportional sanction, it will be evaluated at the time of determining the sanction to be imposed.

On the material facts related to ADR transactions

With regard to Charges FOUR and FIVE

Both charges correspond to the Issuer's failure to timely submit its information related to ADR transactions, as provided in article 7 of the Rules on Programs called American Depositary Receipts.

In its defenses, the Issuer alleges that the delay in submitting the information was caused by the administrative overload and the increase in infections, as a consequence of the Covid-19 pandemic, which caused them to not have regular access to

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the systems as well as the affectation of the health of its personnel in charge of sending the information, requesting the application of subsection a) of article 27 of the Sanctions Regulation, considering that it is an exceptional situation comparable to fortuitous event or force majeure.

In that sense, the Issuer considers as justification for the breaches incurred, that during the year 2021, due to the health crisis caused by Covid-19, various activities in the company were affected, such as by the increase in infections of its workers. In this regard, it is appropriate to evaluate whether at the time of the commission of the infractions (10 January 2021 and 10 April 2021), the State of Emergency declared due to Covid-19 qualified as a case of force majeure, considering the circumstances of the specific case.

With regard to the exemptions from liability, it is appropriate to note that these are set forth in article 27 of the Sanctions Regulation in accordance with numeral 1 of article 257 of the TUO of the LPAG, among which force majeure is mentioned. Because the administrative regulation has not given content to force majeure as an exemption from liability, it is considered that recourse should be made to the sources of the administrative procedure, such as laws and provisions of equivalent hierarchy, in accordance with subsection 2.3 of numeral 2 of Article V of the Preliminary Title of the TUO of the LPAG. In that sense, article 1315 of the Civil Code establishes that "Fortuitous event or force majeure is the non-imputable cause, consisting of an extraordinary, unforeseeable and irresistible event, that prevents the execution of the obligation or determines its partial, late or defective fulfillment."

An extraordinary event is one outside the ordinary; an unforeseeable event is one that reasonably cannot be anticipated, that it is impossible to prevent its occurrence through acts of foresight; an irresistible event is one that it is not possible to avoid or prevent. Likewise, doctrine holds that "(…) a distinction must be made between the impossibility of fulfillment and the difficulty in fulfillment, since there will be no fortuitous event or force majeure when the obstacle, without preventing fulfillment, makes it more difficult or onerous than initially foreseen."4

With regard to the health crisis caused by Covid-19, it should be noted that by Supreme Decree No. 044-2020-PCM, published in the Official Gazette El Peruano on 15 March 2020, the National State of Emergency was declared due to the serious circumstances affecting the life of the nation as a consequence of the Covid-19 outbreak, which was extended by its amendments until 31 October 2022. Finally, by Supreme Decree No. 130-2022-PCM, published in the Official Gazette El Peruano on 27 October 2022, the National State of Emergency ended.

In accordance with the foregoing, although the National State of Emergency was in force at the time of the commission of the infractions, this situation did not prevent the Issuer from complying with the obligation to timely submit the material facts subject to charges, because the MVNet System was enabled for securities issuers to submit their material facts.

[4] DEL RISCO, Luis. Fortuitous Event and Force Majeure in Pecuniary and Generic Obligations: Journal of Specialized Jurisprudence Analysis, Volume 40, 2011, p. 41 – 45.

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In this regard, it is appropriate to specify that the twenty-first recital of Superintendency Resolution No. 033-2020-SMV/02, published in the Official Gazette El Peruano on 21 March 20205, stated the following:

“That (…) considering the operation of the stock exchange and the adequate formation of prices, issuers must continue to report their material events through the MVNET System (…)”.

Likewise, the first paragraph of Article 6 of Superintendency Resolution No. 033-2020-SMV/02 stated the following:

“Article 6.- Reports and information required to be submitted through the MVNet System. The obligated companies must continue to send their material events through the MVNET System. (…)”.

According to the foregoing, in the specific case, at the time of the commission of the infractions (10 January 2021 and 10 April 2021), the National State of Emergency declared due to Covid–19 did not meet the requirements of being an extraordinary, unforeseeable and irresistible event. In that sense, a case of force majeure would not have been configured, so the Issuer is not exempt from liability for the infractions referred to in this PAS.

Consequently, the conduct constituting the two (2) aforementioned infractions is proven, given that the Issuer did not adopt due diligence for the timely submission of its information, which is grounds for the determination of administrative liability, and therefore, it is appropriate to analyze the proposed sanction in accordance with the provisions of the principle of reasonableness and the sanction criteria.

In relation to Charges SIX, SEVEN and EIGHT

Once the late submission of the information related to the report of its ADR transactions at the close of the third quarter of 2021 (Charge SIX), the fourth quarter of 2021 (Charge SEVEN) and the first quarter of 2022 (Charge EIGHT), respectively, was verified in the internal control systems and the Institutional Page of the SMV on the Single Digital Platform of the Peruvian State for Citizen Orientation (hereinafter, Institutional Page of the SMV), incurring three (3) breaches, in accordance with the provisions of Article 7 of the Rules on Programs called American Depositary Receipts, charges were initiated against the Issuer.

In this regard, through its brief of defenses, the Issuer voluntarily acknowledges the commission of the three (3) infractions and requests the application of the mitigating circumstance of liability established in subsection a) of numeral 1 of Article 26 of the Sanctions Regulations.

[5] Superintendency Resolution No. 033-2020-SMV/02 established provisions applicable to issuing companies with securities registered in the Public Registry of the Securities Market (RPMV), legal entities registered in the RPMV and collective fund management companies, as well as the autonomous estates they manage, due to the declaration of the National State of Emergency, through Supreme Decree No. 044-2020- PCM.

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In relation to your request to take into account that the three (3) charges meet the elements indicated in Article 26 of the Sanctions Regulations, the aforementioned on the matter is reiterated.

Consequently, the conduct constituting the three (3) aforementioned infractions is proven and the administrative liability of the Issuer is determined, and therefore, it is appropriate to analyze the proposed sanction in accordance with the provisions of the principle of reasonableness, the sanction criteria, as well as the provisions applicable to the acknowledgment of the infraction, by virtue of the provisions of subsection a), numeral 1) of Article 26 of the Sanctions Regulations, which specifies that the express and written acknowledgment of liability by the offender constitutes a mitigating condition of liability. The application of this mitigating circumstance will be made at the time of determining the corresponding sanction.

On material events related to changes in shareholding

In relation to Charge NINE

After the verifications carried out, it was identified that the Issuer communicated late its information related to changes in shareholding greater than 10%, in accordance with the provisions of Article 34 of the TUO of the LMV, numeral 6 of Annex 1 and numeral 9.1 of Article 9 of the Material Events Regulations, an event that occurred on 31 August 2021, being submitted on 01 September 2021 (File No. 2021033583).

In this regard, in its brief of defenses, the Issuer voluntarily acknowledges the commission of the infraction and requests the application of the mitigating circumstance of liability established in subsection a) of numeral 1 of Article 26 of the Sanctions Regulations.

Consequently, the conduct constituting the aforementioned infraction is proven and the administrative liability of the Issuer is determined, and therefore, it is appropriate to analyze the proposed sanction in accordance with the provisions of the principle of reasonableness, the Sanction Criteria, as well as the provisions applicable to the acknowledgment of the infraction, by virtue of the provisions of subsection a), numeral 1) of Article 26 of the Sanctions Regulations, which specifies that the express and written acknowledgment of liability by the offender constitutes a mitigating condition of liability. The application of this mitigating circumstance will be made at the time of determining the corresponding sanction.

In relation to Charges TEN, ELEVEN and TWELVE

After the review carried out on the information presented by the Issuer as material facts, it has been verified that, in accordance with the provisions of article 34 of the TUO of the LMV, item 6 of Annex 1 and item 9.1 of article 9 of the Regulation on Material Facts, it incurred the following three (3) breaches:

• Extemporaneous communication of its information related to changes in shareholding greater than 10%, which occurred on 7 September 2021, submitted on 8 September 2021 (Charge TEN).

• Extemporaneous communication of its information related to changes in shareholding greater than 10%, which occurred on 1 December 2021, submitted on 2 December 2021 (Charge ELEVEN).

• Extemporaneous communication of its information related to changes in shareholding greater than 10%, which occurred on 2 December 2021, submitted on 3 December 2021 (Charge TWELVE).

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However, in its defenses, the Issuer states that this information related to changes in its shareholding is presented to the SMV once it has been provided by CAVALI and that, for the specific case of these three (3) material facts, the report issued by CAVALI with the share movements, although they were sent to the Issuer on the same day they occurred, were sent at 21:51 p.m., 22:33 p.m. and 21:38 p.m., respectively, attaching the securities transfer report for each case.

In that sense, in observance of the principle of presumption of veracity established in item 1.7 of Article IV of the Preliminary Title of the TUO of the LPAG, by which it is presumed that the documents and declarations made by the administered respond to the truth of the facts they affirm, it can be concluded that, insofar as it is reasonable to perceive that the information was received outside regular office working hours, the Issuer communicated the information related to the transfers of its shares on the day it became aware of such facts.

Thus, in accordance with the provisions of item 9.1 of article 9 of the Regulation on Material Facts, the Issuer complied with communicating its information as a material fact within the established deadline.

Consequently, it is considered that, since the commission of punishable infractions attributable to the Issuer is not configured, in application of literal e) of article 17 of the Regulation on Sanctions6, in accordance with item 6) of article 255 of the TUO of the LPAG7, the non-existence of administrative infractions must be declared and the charges on the material facts referred to the extemporaneous communication of its information related to changes in shareholding greater than 10%, which occurred on 7 September 2021 (Charge TEN), changes in shareholding greater than 10%, which occurred on 1 December 2021 (Charge ELEVEN) and changes in shareholding greater than 10%, which occurred on 2 December 2021 (Charge TWELVE) must be archived

28. That, according to the arguments presented by the Issuer, it agrees with the evaluation carried out in the IGCC Report, submitting to what was recommended by said body, so it is not appropriate for this Deputy Superintendence to carry out any evaluation;

29. That, in accordance with all that has been expressed, having verified that the Issuer has incurred nine (9) conducts constituting an infraction, by not having presented the material facts subject to charges in a timely manner; the sanction that would be applicable shall be determined, for which purpose

[6] “Article 17.- Sanctioning phase (…) e) The final resolution must rule on the commission of the infraction, the application of a sanction or the decision to archive the procedure. Likewise, it may impose precautionary, provisional or corrective measures. The Deputy Superintendent may order the execution of the guarantees granted by the legal entities under the competence of the SMV.”

[7] “Article 255.- Sanctioning procedure The entities in the exercise of their sanctioning power adhere to the following provisions: (…) 6. The resolution that applies the sanction or the decision to archive the procedure shall be notified both to the administered and to the body or entity that formulated the request or to whoever denounced the infraction, if applicable.”

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effect, the principle of reasonableness and the sanction criteria contained in article 344 of the TUO of the LMV, in article 25 of the Regulation on Sanctions and the provisions of item 3 of article 248 of the TUO of the LPAG shall be taken into consideration, which will be developed in the following section.

V. DETERMINATION OF THE SANCTION

30. That, it is appropriate to specify that the breaches regarding the untimely communication of material events are typified in subsection 3.1 of numeral 3 of Annex I of the Sanctions Regulation, which establishes that it constitutes a serious infraction: “To present outside the established deadline, or to do so incompletely, or, without observing the technical specifications approved by the SMV or without communicating the approval by the corresponding corporate body, to the SMV, to the Exchange, to the entity in charge of the centralized negotiation mechanism or to any other entity or subject of the securities market, the audited individual or consolidated financial information, the individual or consolidated interim financial statements, management report, special audit report, material events and annual reports.” (Underline added).

31. That, in relation to sanctions, in accordance with article 35 of the Sanctions Regulation, minor infractions are punishable with a warning or a fine of no less than one (1) UIT and up to twenty-five (25) UIT;

32. That, having determined the commission of the imputed infractions, it is appropriate to determine the sanction considering the provisions of article 25 of the Sanctions Regulation, in accordance with the provisions of numeral 3) of article 248 of the TUO of the LPAG and article 344 of the TUO LMV. In this sense, the following are analyzed: (i) the sanction history of the Issuer; (ii) recidivism, for the commission of the same infraction within one (1) year from when the resolution that sanctioned the first infraction became final; (iii) the circumstances of the commission of the infraction; (iv) the economic harm caused and its impact on the market; (v) the illicit benefit resulting from the commission of the infraction; (vi) the probability of detection of the infraction; (vii) the severity of the damage to the public interest and/or protected legal interest; and, (viii) the existence or not of intentionality in the conduct of the offender;

SANCTION CRITERIA

33. That, in order to analyze the corresponding sanction for this type of breach, the Criteria applicable to the administrative sanctioning procedure for breach of the rules regulating the submission of periodic or occasional information, approved by SMV Resolution No. 006-2012-SMV/01, in force at the time of the commission of the infractions (hereinafter, Special Sanction Criteria), must be taken into account;

34. That, it must be indicated that by article 1 of SMV Resolution No. 007-2023-SMV/01 of 04 September 2023, the Graduality Regime of Sanctions for late submission of financial information, annual report and material events (hereinafter, New Graduality Regime of Sanctions) was approved, whose article 4 provided for its entry into force as of 01 January 2024; and in article 2 of the referred Resolution the Special Sanction Criteria are repealed;

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35. That, in view of the foregoing and considering that the regulations have been modified during the processing of this PAS, it is appropriate to analyze whether in the present case the provisions of the New Graduality Regime of Sanctions should be applied by virtue of the Principle of Favorable Retroactivity, established in numeral 5 of article 230 of the TUO of the LPAG, which states that: “(…) the sanctioning provisions in force at the time the administered party incurs the conduct to be sanctioned are applicable, unless the subsequent ones are more favorable to it”;

36. That, in this sense, for the purposes of the sanction the aforementioned rules are in accordance with the provisions of numeral 3) of article 2488 of the TUO of the LPAG and article 3449 of the TUO of the LMV, which develop the criteria for graduation of the sanction: (i) the sanction history of the issuer, (ii) recidivism, (iii) the circumstances of the commission of the infraction, (iv) the economic harm caused and its impact on the market, (v) the illicit benefit resulting from the commission of the infraction, (vi) the probability of detection of the infraction, (vii) the severity of the damage to the public interest and/or protected legal interest and (viii) the existence or not of intentionality in the conduct of the offender;

37. That, in relation to the severity of the damage to the public interest and/or protected legal interest, it must be indicated that the timely submission of periodic or occasional information by the issuers of securities registered in the RPMV constitutes a fundamental obligation in the transparency of the securities market, by guaranteeing that all market participants make their investment decisions adequately informed. Consequently, although a severity of the damage to the public interest is not evidenced, the breach of the obligation to inform the market within the deadlines by the issuers affects the transparency of the market, which is considered a protected legal interest;

38. That, regarding the sanction history, literal a) of article 25 of the Sanctions Regulation literal a) of article 25 of the Sanctions Regulation establishes that they are the final sanctions imposed by the SMV within the term of four (4) years prior to the commission of the infraction to be sanctioned. In application of said criterion, it has been verified that the Issuer does not record sanction history for each of the infractions;

39. That, in relation to recidivism for the commission of the same infraction, literal b) of article 25 of the Sanctions Regulation establishes that the final sanction imposed by the Superintendency of the Securities Market – SMV within one (01) year prior to the commission of the infraction to be sanctioned is taken into account, it is verified that there is no

[8] “Article 248.- Principles of the administrative sanctioning power (…) 3. Reasonableness. - The authorities must foresee that the commission of the sanctionable conduct is not more advantageous for the offender than complying with the infringed norms or assuming the sanction. However, the sanctions to be applied must be proportional to the non-compliance qualified as an infraction, observing the following criteria indicated for their gradation (…).”

[9] “Article 344.- Criteria to Consider. - The administrative sanctions imposed must take into account the offender's antecedents, the circumstances of the commission of the infraction, the harm caused and its impact on the market, being classified according to the aforementioned criteria as very serious, serious or minor.”

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recidivism on the part of the Issuer;

40. That, in relation to the circumstances of the infraction, it should be noted that it has been verified in the facts of the present case as well as the historical information hosted in the SMV control systems that the Issuer the following:

Charge ONE

The monthly information of ADR holders greater than 1% at the close of August 2021 was communicated with three (3) calendar days of delay.

Charge TWO

The monthly information of ADR holders greater than 1% at the close of March 2022 was communicated with one (1) calendar day of delay.

Charge THREE

The monthly information of ADR holders greater than 1% at the close of November 2022 was communicated with nine (9) calendar days of delay.

Charge FOUR

The communication of ADR transactions at the close of the fourth quarter of 2020 was given with nine (9) calendar days of delay.

Charge FIVE

The communication of ADR transactions at the close of the first quarter of 2021 was given with nine (9) calendar days of delay.

Charge SIX

The communication of ADR transactions at the close of the third quarter of 2021 was given with two (2) calendar days of delay.

Charge SEVEN

The communication of ADR transactions at the close of the fourth quarter of 2021 was given with one (1) calendar day of delay.

Charge EIGHT

The communication of ADR transactions at the close of the first quarter of 2022 was given with one (1) calendar day of delay.

Charge NINE

The communication of changes in shareholding greater than 10% that occurred on 31 August 2021 was given with (1) calendar day of delay.

41. That, with respect to the economic harm caused and its impact on the market, it should be noted that it has not been evidenced that the non-compliances have produced a quantifiable harm, understood as an economic damage caused to one or several investors. Although a delay in the presentation of information is noted, which could be understood as an affectation to market transparency, this would be minimal to the extent that the Issuer's ADRs practically have no movement in the market, therefore, it could not be established that a concrete harm was caused to investors;

42. That, as regards the illicit benefit resulting from the commission of the infraction, it can be stated that there are not sufficient elements to indicate that the Issuer obtained an illegal benefit as a consequence of the commission of the infractions under evaluation;

43. That, on the other hand, regarding the probability of detection of the infraction, it should be noted that the detection of non-compliances in the timely presentation of periodic and/or eventual information, such as the one dealt with in the present PAS, is verified through internal control systems, therefore, for this type of non-compliance, the probability of detection is high;

44. That, regarding the existence or not of intentionality in the offender's conduct, it can be stated that there are not sufficient elements to indicate that the Issuer acted with intent in the commission of the infractions. However, it should be noted that although there is no evidence to indicate that the Issuer acted with intentionality, it can be affirmed that the Issuer's conduct was negligent, by not having acted with the required diligence before obligations already known to the Issuer;

45. That, in addition to the foregoing, it should be noted that in the present PAS it has been verified that no exempting or mitigating circumstances of liability established in article 257 of the TUO of the LPAG10, in accordance with articles 2611 and 2712 of the Sanctions Regulation, have been presented;

[10] “Article 257.- Exemptions and mitigating circumstances of liability for infractions 1.- The following constitute conditions exempting liability for infractions: a) Duly proven fortuitous event or force majeure. b) Acting in compliance with a legal duty or the legitimate exercise of the right of defense. c) Mental incapacity duly proven by the competent authority, provided that it affects the aptitude to understand the infraction. d) The mandatory order of a competent authority, issued in the exercise of its functions. e) The error induced by the Administration or by a confusing or illegal administrative provision. f) The voluntary correction by the possible sanctioned party of the act or omission imputed as constituting an administrative infraction, prior to the notification of the imputation of charges referred to in subsection 3) of article 235. 2.- The following constitute mitigating conditions of liability for infractions: a) If, once an administrative sanctioning procedure has been initiated, the offender acknowledges its responsibility expressly and in writing. In cases where the applicable sanction is a fine, it is reduced to an amount not less than half of its amount. b) Others established by special rule.”

[11] “Article 26.- MITIGATING CIRCUMSTANCES OF LIABILITY FOR INFRACTIONS The following constitute mitigating conditions of liability for infractions: a) Acknowledgment of responsibility by the offender expressly and in writing, once the administrative sanctioning procedure has been initiated. When the applicable sanction is a fine, it is reduced, taking into account the following: (…) 3. If the acknowledgment is submitted after the expiration of the term granted to submit allegations to the instruction report and up to before the issuance of the sanction resolution, the reduction amount shall be ten percent (10%)”.

[12] “Article 27.- EXEMPTIONS FROM LIABILITY FOR INFRACTIONS The following constitute conditions exempting liability for infractions: a) Fortuitous event, force majeure or another exceptional situation that, in the opinion of the SMV, is comparable to duly proven fortuitous event or force majeure. b) Acting in compliance with a legal duty or the legitimate exercise of a right of defense.

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On the application of the sanction of admonition

46. That, in relation to the sanctions to be proposed, it is noted that subsection (ii) of numeral 4.2 of the Special Sanction Criteria details as a guideline for the application of the sanction of admonition, the concurrence of the following assumptions: “(i) the affectation to transparency in the market is minimal; ii) the infraction committed has not caused a concrete detriment to investors or associates; (iii) the offending subject has no antecedents or, having them, they are infractions classified as minor offenses imposed in the four (4) years prior to the commission of the infraction being evaluated; (iv) the offending subject has not obtained a benefit from its illegal conduct; and (v) it has not been proven that the offender acted with intent in the commission of the infraction.”;

47. That, furthermore, it should be specified that these guidelines for the application of the sanction of admonition are also set forth in subsection 6.1 of article 6 of the New Regime of Gradualness of Sanctions under the same terms, except for what refers to the antecedents and recidivism of the offender set forth in the new rule as follows: “a. When the affectation to transparency in the market is minimal. This statement is linked to the criterion of the severity of the damage to the public interest and/or protected legal good; b. The infraction committed has not caused a concrete detriment to investors or associates; c. The offending subject has no antecedents or, having them, they are sanctions corresponding to minor infractions imposed by the SMV that have become final in the four (4) years prior to the commission of the infraction being evaluated; d. The offending subject is not a recidivist; e. The offender has not obtained benefits from its administrative infraction; and, f. It has not been proven that the offender acted with intentionality in the commission of the infraction.”;

48. That, considering the foregoing and taking into account the regulatory modifications that occurred during the processing of this PAS, in accordance with the Principle of Favorable Retroactivity, and as mentioned above, it is appropriate to apply the sanctioning provisions in force at the time the administered party incurred the conduct subject to sanction, insofar as the subsequent provisions are not more favorable;

49. That, consequently, regarding the breaches by the Issuer, it must be indicated that only Charges TWO, SEVEN, EIGHT and NINE concurrently meet the conditions established in subsection (ii) of numeral 4.2 of the Special Sanction Criteria, insofar as the infractions have not caused a quantifiable harm to investors or associates, there is no impact on the market, the Issuer has no prior sanction record, they have not obtained an illicit benefit, intent in the commission of the infraction has not been proven, and the information was submitted only one (1) day late; unlike Charges ONE, THREE, FOUR, FIVE and SIX where the breaches occurred three (3), nine (9) and two (2) days late, as has

c) Mental incapacity duly proven by the competent authority, provided that it affects the ability to understand the infraction.

d) The binding order of a competent authority, issued in the exercise of its functions.

e) The error induced by the Administration or by a confusing or illegal administrative provision.

f) The voluntary correction by the possible sanctioned party of the act or omission imputed as constituting an administrative infraction, prior to the notification of the imputation of charges referred to in subsection 3) of article 253 of the LPAG and provided that no communication demanding compliance with the obligation had been sent".

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has been indicated in the criterion on the circumstances of the commission of the infractions;

50. That, notwithstanding the indication that not all charges concurrently meet the guidelines for the application of the warning sanction, in application of the principle of reasonableness, established in numeral 3 of article 248 of the TUO of the LPAG, it is considered that the Issuer must be imposed one (1) warning for each infraction committed;

Regarding the Acknowledgment of Responsibility

51. That, the Issuer, by letter of 20 September 2023, during the period granted to submit defenses, expressly acknowledged responsibility for the breaches detailed in Charges SIX, SEVEN and EIGHT. However, the mitigating circumstance of responsibility for acknowledgment of responsibility by the offender regarding these breaches is not applicable, in accordance with numeral 1 of subsection a) of article 26 of the Sanctions Regulations, insofar as the proposed sanction for these infractions is a warning;

52. That, in that sense, it must be indicated that this Deputy Superintendency agrees with the analysis carried out by the IGCC in the Report, regarding the determination of responsibility and of the sanction for the imputed infractions;

53. That, in accordance with the Sanction Criteria and the evaluation carried out by this Deputy Superintendency, the Issuer must be imposed as a sanction nine (9) warnings for having incurred the infractions detailed in the Letter of Charges (Charges ONE, TWO, THREE, FOUR, FIVE, SIX, SEVEN, EIGHT and NINE);

54. That, the Issuer is reminded that final resolutions of sanctions imposed by the competent authorities must be reported as a material event, within the framework of the provisions of article 5 of the Material Events Regulation, and;

In accordance with the provisions of numerals 14 and 36 of article 43 of the Regulation of Organization and Functions of the Superintendency of the Securities Market, approved by Supreme Decree No. 216-2011-EF;

RESOLVES:

Article 1.- Declare that FOSSAL S.A.A. has incurred nine (9) infractions of a minor nature typified in subsection 3.1 of numeral 3 of Annex I of the Sanctions Regulations, approved by SMV Resolution No. 035-2018-SMV/01, for belatedly communicating the material events referring to the monthly information of ADR holders greater than 1% at the close of August 2021 (Charge ONE); the monthly information of ADR holders greater than 1% at the close of March 2022 (Charge TWO); the monthly information of ADR holders greater than 1% at the close of November 2022 (Charge THREE); the ADR transactions at the close of the fourth quarter of 2020 (Charge FOUR); the ADR transactions at the close of the first quarter of 2021 (Charge FIVE); the ADR transactions at the close of the third quarter of 2021 (Charge SIX); the ADR transactions at the close of the fourth quarter of 2021 (Charge SEVEN); the ADR transactions at the close of the first quarter of 2022 (Charge EIGHT); and, the

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changes in shareholding greater than 10%, which occurred on 31 August 2021 (Charge NINE).

Article 2.- Sanction FOSSAL S.A.A. with nine (9) warnings, for the provisions of article 1 of this Resolution.

Article 3.- Declare the non-existence of administrative infractions and archive the charges regarding the material events referring to the belated communication of its information related to changes in shareholding greater than 10%, which occurred on 7 September 2021 (Charge TEN), the changes in shareholding greater than 10%, which occurred on 1 December 2021 (Charge ELEVEN) and the changes in shareholding greater than 10%, which occurred on 2 December 2021 (Charge TWELVE).

Article 4.- This Resolution does not exhaust the administrative remedy, and it may be challenged before this Deputy Superintendency for Market Conduct Supervision by filing a motion for reconsideration, an administrative remedy recognized in Article 218 of the Single Ordered Text of Law No. 27444, Law on General Administrative Procedure, approved by Supreme Decree No. 004-2019-JUS, within a period of fifteen (15) business days counted from the day following its notification, as it is a single-instance procedure.

Article 5.- If this Resolution is not challenged, it must be published on the "SMV Institutional Page on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv)", in compliance with the provisions of numeral 1 of Article 7 of the "Policy on the dissemination of regulatory projects, general legal norms, early agenda and other administrative acts of the SMV", approved by SMV Resolution No. 014-2014-SMV/01, and by the provisions of the last paragraph of Article 14 of the Sanctions Regulation, approved by SMV Resolution No. 035-2018-SMV/01.

Article 6.- Transcribe this Resolution to FOSSAL S.A.A.

Register, communicate and publish.

Signed by: RIVERO ZEVALLOS Carlos Fabian FAU 20131365494 hard

Carlos Rivero Zevallos
Deputy Superintendent (e)
Deputy Superintendency for Market Conduct Supervision

Signed by: MENESES CAMARGO Carlos Enrique FAU 20131365494 hard