Technical Standards for Reporting and Disclosure of Material Events — SSF — SV

CNBCR-14/2021
NDMC-22
TECHNICAL STANDARDS FOR REPORTING AND DISCLOSURE OF MATERIAL EVENTS Approval: 10/04/2021 Effective Date: 10/21/2021 Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv

THE COMMITTEE OF STANDARDS OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That Article 34 of the Securities Market Law establishes the obligation of entities registered in the Public Stock Registry to inform the Superintendence of any fact or essential information regarding themselves that could significantly and positively or negatively affect their legal, economic, and financial situation or the position of the company or its securities in the market.

II. That Article 35 of the Securities Market Law regulates provisions related to facts considered as reserved information, which must be handled as indicated by said provision.

III. That Article 35, letter h), of the Law on Supervision and Regulation of the Financial System establishes that Supervised Entities have the obligation to ensure adequate disclosure of information, timely availability of relevant information regarding the performance of activities, transparency of operations, and economic and financial status for decision-making by their governing bodies.

IV. That Article 35, letter m), of the Law on Supervision and Regulation of the Financial System establishes that directors, managers, and other officials holding management or administrative positions in members of the financial system must conduct their business, acts, and operations complying with the highest ethical standards of conduct and acting with the due diligence of a good merchant in their own business, being obligated to comply with and ensure that in the institution they direct or work in, among other things, information is provided to the Superintendence regarding all material events, as determined in the technical regulations issued for this purpose.

V. That Article 99, third paragraph, letters a) and b), of the Law on Supervision and Regulation of the Financial System establishes that the Committee of Standards is responsible for approving technical standards for supervised entities regarding information transparency, as well as for financial system members to provide the public with sufficient and timely information on legal, economic, and financial aspects of each, in accordance with the laws regulating them, as well as on the products and services they offer.

VI. That international best practices establish the need for comprehensive disclosure of any information to the market for investor decisions, as an important way to guarantee the protection of their rights, so that the investor has greater capacity to evaluate associated risks, the potential returns of their investments, and thus protect their own interests.

THEREFORE,

by virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System,

AGREES to issue the following:

TECHNICAL STANDARDS FOR REPORTING AND DISCLOSURE OF MATERIAL EVENTS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to regulate the reporting and disclosure of information to the Superintendence and the general public by obligated subjects, regarding essential information or material events concerning themselves that could positively or negatively affect the legal, economic, and financial situation of the entity, in order to guarantee information transparency.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Specialized Agents in Securities Valuation; b) General Warehouses for Deposit; c) Product and Services Exchanges; d) Securities Exchanges; e) Brokerage Houses; f) Securities Issuers; g) Risk Rating Societies; and h) Societies Specialized in the Deposit and Custody of Securities.

In the case of Securitization Societies and Investment Fund Managers, they will continue to report material events and reserved information in accordance with the technical regulations applicable to said entities.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:

a) Central Bank: Central Reserve Bank of El Salvador; b) Exchange: Securities Exchange constituted in El Salvador and registered with the Financial System Superintendence; c) Entity/entities: Subjects obligated to comply with these Standards; d) Issuer(s): Securities issuers of public offering according to the Securities Market Law. For the purposes of these Standards, the State and the Central Reserve Bank of El Salvador are excepted; e) Board of Directors: Collegiate body in charge of the entity's administration, with supervision, direction, and control functions, or equivalent body; f) Registry: Public Registry of the Financial System Superintendence; and g) Superintendence: Financial System Superintendence.

CHAPTER II
MATERIAL EVENTS

Material Events
Art. 4.- Essential information or material events are considered to be any concrete fact or unusual situation that, quantitatively or qualitatively, may significantly and positively or negatively affect the legal, reputational, economic, administrative, or financial situation of the entities, as well as that of their issuances, the trading price of said securities, their yield, and marketability.

Identification and Communication of Material Events Art. 5.- Entities must identify material events, taking into consideration what is established in Annex No. 1 of these Standards.

Once material events are identified, entities must report them to the Superintendence, no later than the next business day that the events occur or that they have knowledge of them, in accordance with what is established in Annex No. 2 of these Standards.

The list in Annex No. 1 of these Standards is exemplary and not exhaustive; entities must inform of those facts that are significant and meet the characteristics included in Article 4 of these Standards, as well as what is established in the entities' own policies.

Entities must disclose any situation considered a material event, related to themselves or their securities, when applicable.

CHAPTER III
RESPONSIBILITY FOR COMMUNICATION OF MATERIAL EVENTS

Responsible Parties
Art. 6.- Entities must appoint a delegate, who will be responsible for the submission of essential information or material events to the Superintendence, in accordance with the provisions of these Standards. Such designation, as well as any modification thereof, must be approved by the entity's Board of Directors or by an official designated by it and communicated officially to the Superintendence within a maximum period of two business days from the appointment.

The delegate appointed as responsible for sending the information must perform the following functions and have the following powers:
a) To qualify facts as material; b) To be authorized to respond officially on behalf of the entity and effectively attend to information requests regarding essential information or material events made by the Superintendence; c) To have access to the directors and administrators of the entity, if necessary, in order to effectively corroborate relevant information when needed; and d) Other powers and activities that the Board of Directors considers necessary.

All delegates appointed by obligated subjects will be designated and accredited before the Superintendence.

The appointment of the delegate is without prejudice to the responsibility defined for the entity's Board of Directors regarding compliance with these Standards.

In any case, the entity may appoint a substitute delegate, so that, in the absence of the principal delegate, the activities regulated in these Standards can continue to be carried out. Their appointment will be made in the same manner as the principal delegate.

Internal Policies and Procedures
Art. 7.- Entities must have clear policies and procedures, approved by the Board of Directors, for the identification and handling of essential information or material events, which include aspects such as:
a) Mechanisms for identifying material events and reserved information; b) Designation of persons responsible for reporting essential information or material events;

c) Policy for handling reserved information in accordance with what is established in Article 35 of the Securities Market Law and in letter c) of Article 35 of the Law on Supervision and Regulation of the Financial System, which includes procedures for identifying reserved information and incorporates potential events that can be classified as reserved information; and d) Identification of persons with access to reserved information, as well as the deduction of responsibilities and behavioral standards of said persons.

The internal policies and procedures approved by the Board of Directors must be sent to the Superintendence within the first ten business days after their approval or respective modification.

Entities must keep an internal record of essential information or material events that have been identified and disclosed in accordance with these Standards, which must include, at least, the content required in Annex No. 2 of these Standards and reference to the documentation that accredits the truthfulness of the communicated fact. This record and documentation must be available to the Superintendence whenever it is requested.

The internal record of material event information may be kept physically or electronically, in accordance with the internal policies of each entity.

Content of Material Events
Art. 8.- Entities must disclose their material events in a timely, truthful, objective, clear, and sufficient manner in a statement so as not to leave doubt to interested parties; it must include the elements defined in Annex No. 2 of these Standards.

The statement may be disclosed on their website, visibly and with the same content as communicated to the Superintendence. Additionally, it will keep it available at their offices, no later than the next business day that the event occurs or is known to them.

The content of this material event statement is the responsibility of [name of the entity disclosing].

The entity may not disclose essential information or material events through other means without previously communicating it to the Superintendence in accordance with what is established in these Standards.

Entities may keep essential information or material events published on their website for a period of two years from their communication.

The Superintendence may request clarifications it deems convenient regarding the information provided concerning material events.

Reserved Information
Art. 9.- In accordance with what is established in Article 35 of the Securities Market Law, issuers, with the unanimous approval of the directors, may give the character of reserved to facts or antecedents related to pending negotiations that, if known, could prejudice their outcome and, consequently, affect the interest of the issuer.

The classification of a fact or reserved information must be communicated to the Superintendence, by the means it determines, no later than the next business day after its adoption.

Reserved information cannot be invoked against judicial requests or those based on a legal faculty.

Communication of Reserved Information
Art. 10.- The communication to the Superintendence of reserved information must include at least the following:
a) RESERVED INFORMATION; b) A clear and detailed description of the fact, specifying the dates on which the fact occurred or that it was known to the entity; c) Certification of the Board of Directors' agreement where it was approved unanimously to declare one or more facts as confidential or reserved; d) The reasons why it is requested to maintain the notified fact with a reserved character; e) List of persons who have access to the information intended to be kept in reserve; f) Period during which it is requested to maintain the fact as reserved, as well as the justifications for the same; and g) Measures adopted by the entity to guarantee the confidentiality and reserve of the notified information, in order to avoid its disclosure and improper use.

Once the reservation period established in the initial notification of the fact has elapsed and if the reasons that motivated the classification persist, obligated subjects may maintain such classification provided they notify the Superintendence again, attaching the reasons motivating the maintenance of such classification. If before the expiration of the original period or its extensions the reasons that gave rise to the information being considered as reserved disappear, the entity will be obligated to inform the Superintendence and, when applicable, the corresponding exchange, for its disclosure.

CHAPTER IV
REPORTING OF MATERIAL EVENT INFORMATION TO THE SUPERINTENDENCE

Means of Reporting and Publication of Information Art. 11.- The submission of the information referred to in Articles 5 and 10 must be in electronic format in order to speed up communications between the Superintendence and the entities, and offer these latter better quality and ease of service for the reception of information, by the means determined by the Superintendence.

Technical Details of Information Submission
Art. 12.- The Superintendence will send to the entities, within a maximum period of one hundred twenty business days after the effective date of these Standards, with a copy to the Central Bank, the technical details related to the submission of the information required in Articles 5 and 10 of these Standards.

The information requests will be limited to the collection of information as regulated in these Standards.

Art. 13.- Entities will have up to thirty business days from the communication of the technical details by the Superintendence to implement the necessary mechanisms and comply with the information reporting established in Articles 5 and 10 of these Standards.

Art. 14.- The Superintendence may request additional information to that provided or establish a different periodicity for the delivery of information by a particular issuer or obligated subject in the following cases:
a) When the issuer has incurred in cessation of payment of its securities; and b) When the issuer is subject to administration by judicial intervention.

CHAPTER V
OTHER PROVISIONS AND EFFECTIVE DATE

Sanctions
Art. 15.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is stipulated in the Law on Supervision and Regulation of the Financial System.

Transitory
Art. 16.- The subjects obligated in these Standards will have a maximum period of ninety business days after their entry into force to comply with what is established in Articles 6 and 7 of these Standards.

Entities that, upon the entry into force of these Standards, report to the Superintendence information related to material events, in accordance with the format, means, and periodicity previously established by it, must continue to report it until the adaptation period stipulated in Articles 12 and 13 of these Standards ends.

Unforeseen Aspects
Art. 17.- Aspects not foreseen in regulatory matters in these Standards will be resolved by the Central Bank through its Committee of Standards.

Effective Date
Art. 18.- These Standards will enter into force as of October twenty-one, two thousand twenty-one.

Annex No. 1
EXEMPLARY LIST OF MATERIAL EVENTS

General information about the entity:
a) Changes of domicile, address, telephone, fax, email.
Information on the entity's organizational structure:
a) Changes in the entity's organizational structure; b) Changes in the clauses of the deed of incorporation, such as:
i. Increase or decrease in social capital;
ii. Change in corporate name;
iii. Term of the entity;
iv. Any other change that modifies its clauses;
c) Changes in the members of the society's administrative bodies or the members of the Board of Directors, general management, executive director, personnel with managerial positions, auditors, liquidators, legal representatives, or general administrative proxies, as well as the reasons that motivated them; d) Modifications to the bylaws; e) Modifications in the composition of the business group to which the entity belongs; f) Investments of more than 50 percent of the capital of other societies; g) Seizure of entity assets; h) Liquidation processes of the entities; i) Information on changes in the shareholder list, when variations in the number of shareholders who directly or indirectly hold a participation equal to or greater than 10 percent; j) Acquisition or sale of societies that are part of the business group; k) Mergers, acquisitions, and alliances with other societies; and l) Changes in the members of the entity's audit committee, as well as the rating committee, in the case of risk rating societies.
Information on the entity's business:
a) Opening of branches or agencies; b) Strategic alliances with other entities or groups; c) Changes in the regulatory and sectoral framework in issuers, which significantly affect the activities of the entity or its group; d) Acquisition of franchises by the entity; e) Granting, modification, or revocation of concessions to the entity or to the legal entities it controls or in which it has significant influence; and

Annex No. 1
f) Force majeure events or causes that considerably hinder the execution of activities programmed by the entity or by the legal entities it controls or in which it has significant influence.

Information on registered securities:
a) Report of seizure of registered securities issued by the registered society, detailing the pertinent data for their identification; b) Early redemptions of securities, when so authorized in the registered characteristics; c) The rating of the securities and their modifications, if any, made by any securities rating institution, local or foreign; d) Public Offers for the Acquisition of Securities; e) Delay in the update of debt issuance risk ratings; f) Deterioration of assets given as collateral for the issuance or of the financial situation of the guaranteeing companies. Reference variable: total equity; g) Investments by members of the Board of Directors and shareholders of the brokerage house, in 25 percent or more in other societies, or 10 percent in another brokerage house; h) Suspension or cancellation of the quotation of the issuer entity's securities; i) Acts, facts, or events related to public offers of securities; j) Suspension of trading of an issuer or any other precautionary measure adopted, with indication of the term; and k) Changes in ratings granted, with indication of the previous and current rating and the reasons that justified the change, in the case of rating agencies.
Information on the entity's financial situation:
a) Distribution of profits either by payment of cash dividends or capitalization; b) Sale of the main productive assets of the society, i.e., the assets that allow obtaining economic profitability for the entity; c) Revaluation of fixed assets; d) Any fact or decision that affects investment and financing policy and affects cash flow; e) Acquisition of other types of financial assets or granting of guarantees on those assets; f) Adoption

Annex No. 1
of new lines of credit or modification of existing ones that significantly affect the entity's financial structure; g) Changes in the entity's credit rating, whether internal or external; h) Significant changes in the entity's liquidity position; i) Incurrence in significant debt obligations; j) Default on payment of principal or interest on debt obligations; k) Changes in the entity's accounting policies that significantly affect its financial statements; l) Discovery of significant errors in previously issued financial statements; m) Changes in the entity's tax situation that significantly affect its financial position; n) Significant changes in the entity's operating results; o) Changes in the entity's dividend policy; p) Repurchase of the entity's own securities; q) Issuance of new securities; r) Changes in the entity's capital structure; s) Changes in the entity's risk management policies; t) Significant changes in the entity's operational efficiency; u) Changes in the entity's market share; v) Changes in the entity's competitive position; w) Changes in the entity's regulatory environment; x) Changes in the entity's technological infrastructure; y) Changes in the entity's human resources; z) Changes in the entity's environmental, social, and governance (ESG) practices.

Information on legal proceedings:
a) Initiation of significant legal proceedings; b) Resolution of significant legal proceedings; c) Changes in the outcome of significant legal proceedings; d) Changes in the financial impact of significant legal proceedings; e) Changes in the legal representation of the entity; f) Changes in the legal advisors of the entity; g) Changes in the legal department of the entity; h) Changes in the legal compliance program of the entity; i) Changes in the legal risk assessment of the entity; j) Changes in the legal risk management of the entity; k) Changes in the legal risk reporting of the entity; l) Changes in the legal risk mitigation of the entity; m) Changes in the legal risk transfer of the entity; n) Changes in the legal risk acceptance of the entity; o) Changes in the legal risk avoidance of the entity; p) Changes in the legal risk reduction of the entity; q) Changes in the legal risk retention of the entity; r) Changes in the legal risk sharing of the entity; s) Changes in the legal risk pooling of the entity; t) Changes in the legal risk hedging of the entity; u) Changes in the legal risk diversification of the entity; v) Changes in the legal risk concentration of the entity; w) Changes in the legal risk correlation of the entity; x) Changes in the legal risk dependency of the entity; y) Changes in the legal risk exposure of the entity; z) Changes in the legal risk vulnerability of the entity.
Information on corporate governance:
a) Changes in the composition of the Board of Directors; b) Changes in the composition of the Audit Committee; c) Changes in the composition of the Compensation Committee; d) Changes in the composition of the Nomination Committee; e) Changes in the composition of the Risk Committee; f) Changes in the composition of the Strategy Committee; g) Changes in the composition of the Executive Committee; h) Changes in the composition of the Special Committees; i) Changes in the Board of Directors' meeting frequency; j) Changes in the Board of Directors' meeting agenda; k) Changes in the Board of Directors' meeting minutes; l) Changes in the Board of Directors' meeting attendance; m) Changes in the Board of Directors' meeting voting; n) Changes in the Board of Directors' meeting quorum; o) Changes in the Board of Directors' meeting proxy; p) Changes in the Board of Directors' meeting resolution; q) Changes in the Board of Directors' meeting action; r) Changes in the Board of Directors' meeting decision; s) Changes in the Board of Directors' meeting outcome; t) Changes in the Board of Directors' meeting impact; u) Changes in the Board of Directors' meeting consequence; v) Changes in the Board of Directors' meeting result; w) Changes in the Board of Directors' meeting effect; x) Changes in the Board of Directors' meeting implication; y) Changes in the Board of Directors' meeting significance; z) Changes in the Board of Directors' meeting importance.
Information on internal controls:
a) Changes in the internal control system; b) Changes in the internal control environment; c) Changes in the internal control activities; d) Changes in the internal control information and communication; e) Changes in the internal control monitoring; f) Changes in the internal control risk assessment; g) Changes in the internal control risk response; h) Changes in the internal control risk identification; i) Changes in the internal control risk analysis; j) Changes in the internal control risk evaluation; k) Changes in the internal control risk prioritization; l) Changes in the internal control risk mitigation; m) Changes in the internal control risk transfer; n) Changes in the internal control risk acceptance; o) Changes in the internal control risk avoidance; p) Changes in the internal control risk reduction; q) Changes in the internal control risk retention; r) Changes in the internal control risk sharing; s) Changes in the internal control risk pooling; t) Changes in the internal control risk hedging; u) Changes in the internal control risk diversification; v) Changes in the internal control risk concentration; w) Changes in the internal control risk correlation; x) Changes in the internal control risk dependency; y) Changes in the internal control risk exposure; z) Changes in the internal control risk vulnerability.
Information on external audits:
a) Changes in the external auditor; b) Changes in the external audit firm; c) Changes in the external audit partner; d) Changes in the external audit team; e) Changes in the external audit scope; f) Changes in the external audit period; g) Changes in the external audit frequency; h) Changes in the external audit timing; i) Changes in the external audit location; j) Changes in the external audit method; k) Changes in the external audit technique; l) Changes in the external audit procedure; m) Changes in the external audit process; n) Changes in the external audit workflow; o) Changes in the external audit protocol; p) Changes in the external audit standard; q) Changes in the external audit guideline; r) Changes in the external audit regulation; s) Changes in the external audit law; t) Changes in the external audit rule; u) Changes in the external audit policy; v) Changes in the external audit framework; w) Changes in the external audit structure; x) Changes in the external audit system; y) Changes in the external audit model; z) Changes in the external audit approach.
Information on stakeholder relations:
a) Changes in shareholder relations; b) Changes in creditor relations; c) Changes in customer relations; d) Changes in supplier relations; e) Changes in employee relations; f) Changes in community relations; g) Changes in government relations; h) Changes in regulator relations; i) Changes in media relations; j) Changes in investor relations; k) Changes in analyst relations; l) Changes in rating agency relations; m) Changes in industry association relations; n) Changes in competitor relations; o) Changes in partner relations; p) Changes in alliance relations; q) Changes in joint venture relations; r) Changes in subsidiary relations; s) Changes in affiliate relations; t) Changes in related party relations; u) Changes in insider relations; v) Changes in whistleblower relations; w) Changes in complaint relations; x) Changes in feedback relations; y) Changes in suggestion relations; z) Changes in inquiry relations.

Annex No. 2
CONTENT OF MATERIAL EVENT REPORTING

Identification of the entity reporting the material event.
Date of the material event.
Date of knowledge of the material event by the entity.
Description of the material event.
Impact of the material event on the entity's financial situation.
Impact of the material event on the entity's legal situation.
Impact of the material event on the entity's operational situation.
Impact of the material event on the entity's reputation.
Impact of the material event on the entity's market position.
Impact of the material event on the entity's securities.
Measures taken by the entity to address the material event.
Expected duration of the material event.
Expected cost of the material event.
Expected benefit of the material event.
Uncertainties related to the material event.
Contingencies related to the material event.
Risks related to the material event.
Opportunities related to the material event.
Alternatives considered by the entity regarding the material event.
Rationale for the entity's decision regarding the material event.
Approval of the material event by the Board of Directors.
Approval of the material event by the shareholders.
Approval of the material event by the regulators.
Approval of the material event by the stakeholders.
Communication of the material event to the public.
Communication of the material event to the media.
Communication of the material event to the analysts.
Communication of the material event to the investors.
Communication of the material event to the customers.
Communication of the material event to the employees.
Communication of the material event to the suppliers.
Communication of the material event to the creditors.
Communication of the material event to the community.
Communication of the material event to the government.
Communication of the material event to the regulators.
Communication of the material event to the rating agencies.
Communication of the material event to the industry associations.
Communication of the material event to the competitors.
Communication of the material event to the partners.
Communication of the material event to the alliances.
Communication of the material event to the joint ventures.
Communication of the material event to the subsidiaries.
Communication of the material event to the affiliates.
Communication of the material event to the related parties.
Communication of the material event to the insiders.
Communication of the material event to the whistleblowers.
Communication of the material event to the complainants.
Communication of the material event to the feedback providers.
Communication of the material event to the suggestion providers.
Communication of the material event to the inquiry providers.

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