Technical Standards for Specialized Agents in Securities Valuation

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016

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

CONSIDERING:
I. That Article 6, fourth clause, literal j) of the Securities Market Law, establishes as one of the Special Registers of the Public Stock Register maintained by the Superintendence of the Financial System, the register of Specialized Agents in Securities Valuation.
II. That Article 95-G of the Securities Market Law establishes that the provision of the service of calculation, determination, and provision or supply of information on prices for the valuation of securities of the entities of the financial system and those they administer on behalf of third parties, Pension Funds and their Administrators, Banks, Non-Bank Financial Intermediaries, Insurance Companies, Stockbrokerage Firms, Securitization Companies, Securitization Funds, when these are integrated by negotiable securities in an organized market, may be carried out by entities authorized by the Superintendence of the Financial System, in accordance with what is established in said Law.
III. That Article 95-H of the Securities Market Law establishes that companies constituted as Specialized Agents in Securities Valuation must request authorization to begin operations from the Superintendence of the Financial System, which will be granted once it has been verified that such companies comply with the corresponding legal requirements.
IV. That Article 95-I of the Securities Market Law establishes that other entities located in the Public Stock Register, supervised by the Superintendence of the Financial System, and whose activity does not oppose their main business, and whose habitual activity is not the intermediation of securities, may also provide the service indicated in Article 95-G, provided they comply with what is prescribed in literal c) of Article 95-H of the Securities Market Law and are authorized by the Superintendence of the Financial System to provide that service.
V. That Article 95-J of the Securities Market Law establishes that the Superintendence of the Financial System is empowered to supervise and inspect the entities it authorizes to provide this service.
VI. That Article 102 of the Investment Funds Law establishes that in the process of valuation of investments in securities carried out by Funds, the prices provided by a Specialized Agent in Securities Valuation must be considered, in the case of financial instruments of local or foreign issuers.
VII. That Article 3 of the Law on Supervision and Regulation of the Financial System establishes that the Superintendence of the Financial System is the body responsible for supervising the individual and consolidated activity of the members of the financial system and other persons, operations, or entities mandated by the laws.
VIII. That Article 7, literal f) of the Law on Supervision and Regulation of the Financial System establishes that the supervision of Specialized Agents in Securities Valuation corresponds to the Superintendence of the Financial System.
IX. That Article 35 of the Law on Supervision and Regulation of the Financial System establishes that members of the financial system must adopt in matters of risk management and code of conduct, policies and mechanisms consistent with international best practices.
X. That the efficient functioning of the securities market requires the generation of prices that reflect the real conditions of the market, in a transparent, timely, and reliable manner, which contributes directly to the strengthening and transparency of the financial system.

THEREFORE, by virtue of the normative powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System, AGREES to issue the following:

TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- The object of these Standards is to establish the minimum requirements that legal entities must meet to provide the service of calculation, determination, and provision or supply of information on prices for the valuation of securities of the entities of the financial system, regarding constitution and start of operations, authorization for the provision of the service, contracting of related services, methodological guidelines, and other operational requirements to be fulfilled to provide such services.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are: (1) a) Legal entities that intend to be constituted and act as Specialized Agents in Securities Valuation; b) Members of the financial system located in the Public Stock Register, supervised by the Superintendence of the Financial System, and who intend to obtain authorization to provide the service of calculation, determination, and provision or supply of information on prices for the valuation of securities of the entities of the financial system; and c) Specialized Agents in Securities Valuation authorized by the Superintendence of the Financial System, to provide the services of calculation, determination, and provision or supply of information on prices for the valuation of securities of the entities of the financial system.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: (1) a) Administrator: Executive Presidents, Managers, or those who exercise their management and administration functions; b) Central Bank: Central Bank of Reserve of El Salvador; c) Director: Member of the Board of Directors; d) Authorized Entities: Those that provide the service of calculation, determination, and provision or supply of information on prices for the valuation of securities. They may be those constituted for such effect called Specialized Agents in Securities Valuation and those others authorized by the Superintendence of the Financial System located in the Public Stock Register, provided that this activity does not oppose their main business and their habitual activity is not the intermediation of securities; e) Financial Instrument: Any contract that gives rise to a financial asset, a financial liability, or an equity instrument in an entity; f) Law: Securities Market Law; g) Methodology: Valuation model that incorporates technical and statistical criteria, considering economic variables provided by official sources specialized in this matter, which provides for each of the assets, according to its nature, a price vector for its valuation; h) Price Provision: Service of calculation, determination, and provision or supply of information on prices for the valuation of securities; i) Register: Public Stock Register of the Superintendence of the Financial System; j) Value or Security: Any financial instrument, contract, or financial title that is part of the investments of the entities of the financial system, according to what is established in the International Financial Reporting Standards; k) Fair Value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, informed individuals who participate freely and independently, on the measurement date; l) Price Vector: Unique daily report with prices for securities or titles, established under a technical procedure and a methodology previously authorized by the Superintendence of the Financial System; and m) Superintendence: Superintendence of the Financial System.

CHAPTER II
CONSTITUTION OF SPECIALIZED AGENTS IN SECURITIES VALUATION

Corporate Name
Art. 4.- Any legal entity that intends to be constituted as a Specialized Agent in Securities Valuation must comply with what is established in the Law and in this Chapter.

Social Capital
Art. 5.- Any legal entity interested in being authorized to be constituted as a Specialized Agent in Securities Valuation must always have a minimum subscribed and paid social capital according to what is established in Article 95-H, literal b) and 98 of the Law. If the social capital is paid in cash, it must be accredited by depositing the corresponding sum in a bank authorized by the Superintendence and domiciled in El Salvador. The aforementioned deposit must be accredited by means of a certified check, cashier's check, or management check, as provided in Article 195 of the Commercial Code.

Requirements to be a director or administrator of a Specialized Agent in Securities Valuation Art. 6.- Any legal entity that intends to be constituted as a Specialized Agent in Securities Valuation must be administered by a Board of Directors and always have a representative of the company domiciled in El Salvador. The members of the Board of Directors, managers, and administrators must meet the requirements established in the Commercial Code as well as the following:
a) Be over twenty-five years of age; b) Be of recognized honorability and financial competence; c) Not serve as directors, officials, or employees of other authorized entities; d) Not have been judicially qualified as responsible for a culpable or fraudulent bankruptcy; e) Not have been administratively or judicially sanctioned for their participation in a serious violation of laws and regulations of a financial nature in the national jurisdiction or abroad; f) Not have been convicted by a final judgment in the country or abroad for having committed or participated fraudulently in the commission of any crime; and g) That their participation in activities related to drug trafficking and related crimes, terrorism financing, money laundering, and asset laundering has not been judicially proven, both in the national jurisdiction and abroad.

Art. 7.- Legal entities that intend to be constituted as Specialized Agents in Securities Valuation must previously and in writing request such authorization from the Superintendence.
The aforementioned request must contain at least the following information:
a) Detail of potential shareholders, containing full name, age, nationality, profession or occupation, domicile, expression of the type and number of personal identification document, Tax Identification Number, if applicable, percentage of shareholding that each potential shareholder intends to possess, and Register of Taxpayers Number, in case they are registered as such in the corresponding register. In any case, the request must be signed by the potential shareholder who projects the highest percentage of shareholding, and the full name, age, nationality, profession or occupation, type, and number of identity document must be stated. If the potential shareholder is a legal entity, the legal representative must attach a copy of the current legal personality with which they act. Likewise, include the indication, if applicable, of the business group or financial conglomerate to which the future shareholders belong; b) In case the request is not presented by the signing persons, the signatures contained therein must be authenticated by a Notary; c) The amount of the subscribed and paid social capital of the company to be constituted, indicating the shareholding of each partner (number of shares and percentage); d) The expression of the corporate name with which the Specialized Agent in Securities Valuation intends to operate, complying with what is established in Article 95-H literal a) of the Law; e) Full name, age, nationality, profession or occupation, domicile, expression of the type and number of personal identity document, of each of the potential directors and administrators; and f) The place to receive any kind of notifications and the designations of the persons commissioned for such effect.

Documents that must be attached to the request Art. 8.- The request for authorization to be constituted as a Specialized Agent in Securities Valuation must be presented attaching the following documentation:
a) Draft of the social constitution deed, which must include the statutes, complying with all the requirements for such effect indicated by the applicable legislation; b) Copy of the Tax Identification Number or its Graphic Representation and a notarized copy of the personal identity documents and the Register of Taxpayers (if registered as such in the respective register) of the potential directors and administrators, including, in addition, the Curriculum Vitae of each of them; (2) c) A profile summarizing the operational and business model for the provision of price services, including the detail of the services it will contract; and d) In case one or more of the potential shareholders is a legal entity, the following documents must also be attached, insofar as applicable:
i. Notarized copy of its current Social Pact and the last credential of election of its administration body;
ii. Certification of the list of shareholders, such certification must be signed by the attorney-in-fact or the legal representative of the company and must be authenticated by a Notary; and
iii. Certified copy of the authorization of the corresponding Administration Body to be a Shareholder.
The request and documentation may be presented through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of Article 9 of these Standards will begin to run from the next business day after the request has been submitted. (1)

Authorization Procedure to be constituted as a Specialized Agent in Securities Valuation (1) Art. 9.- Upon receiving the request for authorization to be constituted as a Specialized Agent in Securities Valuation, in accordance with what is established in Articles 7 and 8 of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Securities Market Law and these Standards, having up to twenty business days for the authorization or denial to be constituted as a Specialized Agent in Securities Valuation. (1) If the request is not accompanied by the complete and duly formatted information detailed in Articles 7 and 8 of these Standards, the Superintendence, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the applicants, when there are reasons justifying such extension. (1)

The Superintendence in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, leaving them free to submit a new request. (1) If after the analysis of the documentation presented in accordance with Articles 7 and 8 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will notify the applicants once to remedy the deficiencies communicated or present additional documentation or information requested. (1) The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information requested by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires. (1)

Extension Period (1)
Art. 9-A.- Applicants may submit to the Superintendence a request for extension of the period indicated in the fifth paragraph of Article 9 of these Standards, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the relevant proof. (1) The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period. (1)

Suspension of Period (1)
Art. 9-B.- The twenty-day period indicated in the first paragraph of Article 9 of these Standards, will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said Article, until the interested parties remedy the observations required by the Superintendence. (1) Once the complete and duly formatted documentation is submitted, the Superintendence will proceed to notify the resolution in which it authorizes or denies the request for authorization to be constituted as a Specialized Agent in Securities Valuation, within a maximum period of three business days from the date the resolution is issued. (1)

Art. 10.- Upon receiving the communication of authorization for constitution, the interested parties must proceed to grant the constitutive deed within a period of sixty days counted from the date of notification of the resolution of the Board of Directors of the Superintendence, after which period, the authorization agreement will become void.

Review of Testimony
Art. 11.- Once the corresponding deed is granted, the interested parties must submit it to the Superintendence within a period of fifteen business days, for it to verify that it has been granted in accordance with the previously authorized project, with the Superintendence having a period of ten business days for such verification.

Art. 12.- If there are differences between the public constitution deed and the authorized project of the same, the Superintendence must communicate this to the applicant within a maximum period of ten business days according to what is established in Article 11 of these Standards, so that the authorizing Notary proceeds to make the respective adjustments, which must be submitted again to the Superintendence within a period of twenty business days from the date of communication of the inconsistencies or differences for verification. Art. 13.- If it is determined that there are no inconsistencies between the public constitution deed and the reviewed draft of the deed, or in the case that the inconsistencies communicated according to what is established in the previous article have been overcome, the Superintendence will proceed within a period of five business days counted from the receipt of the duly remedied documentation, to place a reason signed by the Superintendent of the Financial System, in which the favorable qualification of said deed is stated, so that it can be presented in the Commercial Register for the corresponding inscription and without which it cannot be inscribed in said Register.

Procedure in case the Commercial Register makes observations on the Testimony of the public constitution deed or denies its inscription Art. 14.- When the Commercial Register notifies the authorizing Notary or any other interested party, the denial of the testimony of the public constitution deed of an authorized entity, that party or person must, in turn, notify such circumstance to the Superintendence in writing and no later than the next business day after receiving the respective notification. In case the remediation of observations is notified, it will be notified in the manner and period indicated above, only those observations that affect the purpose or object and the nature of the authorized entity being constituted. If for the inscription of the instrument in question, it is necessary to modify the conditions under which the Superintendence ordered its favorable qualification, it may, at the request of potential shareholders or their attorneys, proceed to issue a new reason in the terms established in Article 13 of these Standards. (1)

CHAPTER III
AUTHORIZATION OF THE START OF OPERATIONS OF THE SPECIALIZED AGENT IN SECURITIES VALUATION AND OF THE AUTHORIZATION FOR THE PROVISION OF PRICE SERVICES

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From the Start of Operations of the Specialized Agent in Securities Valuation Art. 15.- For the authorization of the start of operations and registration of a Specialized Agent in Securities Valuation, the legal representative must submit the corresponding request to the Superintendence, accompanied by the following documentation:
a) Notarially certified copy of the Public Deed of incorporation of the Specialized Agent in Securities Valuation, duly registered in the Commerce Registry; b) Certification of the Minutes Point by virtue of which the appointment of the general manager or executive director has been made, in case such appointment has not been made in the Social Pact; c) Notarially certified copy of the Agreement appointing the External Auditor, who must be registered in the Special Registry of External Auditors maintained by the Superintendence; d) Copy of the Tax Identification Number or its Graphic Representation and notarially certified copy of the Taxpayer Registry Number of the Specialized Agent; (2) e) Organizational chart of the Specialized Agent in Securities Valuation indicating the names of administrators and directors, with expression of their positions and support units; f) Detail of the functioning of the operational and business model for the provision of price supply services, including the detail of the services it will contract; g) Detail and description of the systems that will be used for the accounting recording of operations and of the information systems that will be used; h) Description of policies and means that will be used to provide or supply security prices; i) Internal operating regulations, including internal control standards, where the functions and responsibilities inherent to the provision of services as a Specialized Agent in Securities Valuation are defined, including a description of the procedures that will be used to periodically monitor the application of the valuation methodology and the respective segregation of functions; j) Internal manuals defining the methodology in accordance with these Standards, which must contain, at minimum, the following:
i. The description of the methodology and of the valuation models of the securities;
ii. The criteria that will be used to choose the securities or similar instruments, as well as the corresponding procedures for the calculation of interest rates, discount rates, reference rates, margins or other equivalents;
iii. The procedures that the Specialized Agent must put into practice to resolve methodological inconveniences that could hinder the valuation of a security, which, otherwise, would make it impossible to determine the price of said security on a specific date; and
iv. Primary and alternative information sources, establishing the mechanism by which it will be sought that such information be timely, reliable and representative of the market. Likewise, the manner in which it will be determined which securities trading system, whether within or outside a stock exchange, will be considered to take price information must be included, indicating the coding that will be used for the identification of the different securities.
k) Policies to be adopted in accordance with article 35 of the Supervision and Regulation Law on Technical Standards for the Integral Management of Risks of Entities in the Markets -11), approved by the Standards Committee of the Central Bank.
With regard to policies referred to the management of conflicts of interest, they must include the detail of conflicts identified at the start of operations stage, as well as the mechanisms for mitigation and disclosure of the same; l) Copy of the service provision contract with its clients, which must contain measures that guarantee that the service will be provided to the client at all times; m) User manual of the computer system that will be used to execute the methodology and demonstration of its application to the Superintendence; n) Description of policies and procedures for the attention of controversies or disagreements regarding price vectors generated with users or with third parties; and o) Description of the technological equipment and systems that will be used for the application of the securities valuation methodology (valuation system), as well as information security and fault tolerance policies duly documented, such as the following:
i. Policies for periodic backups of information;
ii. Physical security and access policy to computer systems;
iii. Business continuity plan that must consider, among other aspects, the security and contingency of systems for the price supply service and failures in technological infrastructure.
The Superintendence will verify that the authorized entity's computer systems have their applications and processes duly documented, including records of changes in them, maintenance policies, licenses and authorizations, backup mechanisms and recovery procedures.

Additionally, in the case that the support and processing of information is carried out abroad, the Specialized Agent in Securities Valuation must guarantee the replication of prices and rates of the price vector through a redundant site within the territory of El Salvador, which must replicate daily and online, the applications of the critical business processes of the entity. The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of article 15-A of these Norms will begin to run from the next business day after the request has been presented. (1) Authorization Procedure for the Start of Operations of the Specialized Agent in Securities Valuation (1) Art. 15-A.- Upon receipt of the request for authorization of the start of operations of the Specialized Agent in Securities Valuation, in accordance with what is established in article 15 of these Norms, the Superintendence will proceed to verify compliance with the requirements defined in the Securities Market Law and these Norms, having up to fifteen business days for the authorization or denial of the start of operations of the Specialized Agent in Securities Valuation. (1) If the request is not accompanied by the complete and properly formatted information detailed in article 15 of these Norms, the Superintendence, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the applicants, when there are reasons justifying it. (1) The Superintendence in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, reserving their right to present a new request. (1) If after the analysis of the documentation presented in accordance with article 15 of these Norms, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information sought to be accredited; the Superintendence will notify the applicants once to remedy the deficiencies communicated to them or present documentation or additional information required. (1) The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information required by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days the period indicated in the previous paragraph, when the nature of the observations or notified deficiencies so require. (1)

Extension Period (1)
Art. 15-B.- Applicants may submit a request for extension of the period indicated in the fifth paragraph of article 15-A of these Norms to the Superintendence, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the relevant proof. (1) The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period. (1) Suspension of the Period (1) Art. 15-C.- The fifteen-day period indicated in the first paragraph of article 15-A of these Norms, will be suspended for the days that elapse between the notification of the requirement to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties remedy the observations required by the Superintendence. (1) Once the complete and properly formatted documentation is presented, the Superintendence will proceed to notify the resolution in which it authorizes or denies the request for authorization of the start of operations of the Specialized Agent in Securities Valuation, within a maximum period of three business days from the date the resolution is issued. (1) Of the Authorization for the Provision of Price Supply Services Art. 16.- For the authorization of the provision of price supply services to the members of the financial system contemplated in article 95-I of the Law, the legal representative of the interested party must submit the corresponding request to the Superintendence, accompanied by the following documentation:
a) Draft modification of the deed of incorporation of the company when necessary; b) Organizational chart of the member of the financial system indicating the names of administrators and directors, with expression of their positions and support units, clearly specifying the units that will be involved in the provision of the price supply service; c) Detail of the functioning of the operational and business model for the provision of price supply services, including the detail of the services it will contract; d) Detail and description of the adaptation of accounting systems to provide the price supply service; e) Detail and description of the adaptation of information systems to provide the price supply service; f) Update for incorporation of the price supply service of the policies required in article 35 of the Supervision and Regulation Law on Technical Standards for the Integral Management of Risks of Entities -11), approved by the Standards Committee of the Central Bank, when applicable. With regard to policies referred to the management of conflicts of interest, they must include the detail of conflicts identified at the start of operations stage, as well as the mechanisms for mitigation and disclosure of the same; g) Description of policies and means that will be used to provide or supply security prices; h) Internal operating regulations, including internal control standards, where the functions and responsibilities inherent to the provision of price supply services are defined, including a description of the procedures that will be used to periodically monitor the application of the valuation methodology; and the respective segregation of functions; i) Internal manuals defining the methodology in accordance with these Norms, which must contain, at minimum, the following:
i. The description of the methodology and of the valuation models of the securities;
ii. The criteria that will be used to choose the securities or similar instruments, as well as the corresponding procedures for the calculation of interest rates, discount rates, reference rates, margins or other equivalents;
iii. The procedures that must be put into practice to resolve different inconveniences that they might face in the valuation of a security, which, otherwise, would not allow them to determine the price of the securities on a specific date; and
iv. Primary and alternative information sources, establishing the mechanism by which it will be sought that such information be timely, reliable and representative of the market. Likewise, the manner in which it will be determined which securities trading system, whether within or outside a stock exchange, will be considered to take price information must be included, indicating the coding that will be used for the identification of the different securities.
j) Copy of the service provision contract with its clients, which must contain measures that guarantee that the service will be provided to the client at all times; k) User manual of the system that will be used to execute the methodology and demonstration of its application to the Superintendence; l) Description of policies and procedures for the attention of controversies or disagreements regarding price vectors generated with users or with third parties; and m) Description of the technological equipment and systems that will be used for the application of the securities valuation methodology (valuation system), as well as information security and fault tolerance policies duly documented, such as the following:
i. Policies for periodic backups of information;
ii. Physical security and access policy to computer systems; and
iii. Business continuity plan that must consider, among other aspects, the security and contingency of systems for the price supply service and failures in technological infrastructure.
Additionally, in the case that the support and processing of information is carried out abroad, the member of the financial system requesting authorization to provide the price supply service must guarantee the replication of prices and rates of the price vector through a redundant site within the territory of El Salvador, which must replicate daily and online, the applications of the critical business processes of the entity. The Superintendence will verify that the authorized entity's computer systems have their applications and processes duly documented, including records of changes in them, maintenance policies, licenses and authorizations, backup mechanisms and information recovery procedures. The request and documentation may be submitted through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in the first paragraph of article 16-A of these Norms will begin to run from the next business day after the request has been presented. (1) Authorization Procedure for the Provision of Price Supply Services (1) Art. 16-A.- Upon receipt of the request for authorization for the provision of price supply services, in accordance with what is established in article 16 of these Norms, the Superintendence will proceed to verify compliance with the requirements defined in the Securities Market Law and these Norms, having up to fifteen business days for the authorization or denial for the provision of price supply services. (1) If the request is not accompanied by the complete and properly formatted information detailed in article 16 of these Norms, the Superintendence, due to the lack of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the applicants, when there are reasons justifying it. (1) The Superintendence in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, reserving their right to present a new request. (1) If after the analysis of the documentation presented in accordance with article 16 of these Norms, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information sought to be accredited; the Superintendence will notify the applicants once to remedy the deficiencies communicated to them or present documentation or additional information required. (1) The applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information required by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days the period indicated in the previous paragraph, when the
nature of the observations or notified deficiencies so require. (1) Extension Period (1) Art. 16-B.- Applicants may submit a request for extension of the period indicated in the fifth paragraph of article 16-A of these Norms to the Superintendence, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the relevant proof. (1) The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period. (1) Suspension of the Period (1) Art. 16-C.- The fifteen-day period indicated in the first paragraph of article 16-A of these Norms, will be suspended for the days that elapse between the notification of the requirement to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties remedy the observations required by the Superintendence. (1) Once the complete and properly formatted documentation is presented, the Superintendence will proceed to notify the resolution in which it authorizes or denies the request for authorization for the provision of price supply services, within a maximum period of three business days from the date the resolution is issued. (1) Of general application for the start of operations and authorization to provide price supply services for authorized entities Art. 17.- The authorized entity must guarantee that, for the provision of the price supply service, the personnel directly involved have the necessary technical capacity to properly handle the methodology determined for the calculation of the price vector, providing the necessary training for this purpose. Art. 17-A.- The Specialized Agent in Securities Valuation, for compliance with what is established in article 17 of these Norms, will be responsible for implementing training plans that ensure the knowledge and training necessary for the adequate development of its personnel's functions. This plan must be reported to the Superintendence within the first thirty business days of each year. (1) The aforementioned plan may be reviewed every six months, in order to make pertinent updates, to respond to the needs of the entity, availability of topics to be developed and the amount of personnel to be trained. In the case of having made updates, these must be made known to the Superintendence within a maximum period of thirty business days after the adjustments are made. (1)

Art. 18.- Once the requirements demanded in this Chapter are met, the Superintendence will issue the agreement of authorization for the start of operations of the Specialized Agent in Securities Valuation or, in its defect, the authorization for the provision of the service as an authorized entity, according to the period established in the first paragraph of article 15-A or in the first paragraph of article 16-A, as applicable, ordering in that same act the Registry Entry or the marginalization of the same in the corresponding Registry, as the case may be. (1)

Art. 19.- Authorized entities must inform in writing to the Superintendence when changes occur in the information presented for their authorization and registration.
The foregoing will also apply when there are changes related to the contracting of price supply services.

CHAPTER IV
OF THE CONTRACTING OF SERVICES RELATING TO THE CALCULATION, DETERMINATION AND PROVISION OR SUPPLY OF INFORMATION ON PRICES

Art. 20.- The authorized entity may contract services relating to the elaboration of the methodology, price supply service for securities valuation, with a specialized provider in the supply of price vectors.
The methodology elaborated by the contracted subject or used by it must be approved by the responsible authority of the authorized entity prior to being approved by the Superintendence.
The authorized entity must ensure that the services it contracts cannot be assigned partially or totally.

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016

In any case, the contracting of services of any kind does not imply delegation of responsibility to the contractor.

Art. 21.- The authorized entity that contracts the price supply service for securities valuation must verify that the legal regime or corporate purpose of the contractor does not prevent it from providing the service object of the contract.

Likewise, the specialized provider of price vectors to be contracted must be supervised by a foreign body homologous to the Superintendencia, with the authorized entity being responsible for verifying that it has the necessary resources to provide the service satisfactorily.

Art. 22.- The authorized entity interested in obtaining authorization to contract the price supply service for securities valuation must submit to the Superintendencia the following documentation regarding the company to be contracted:
a) Certified copy by a Notary of its current Social Agreement and of the latest credential of the election of its administration body, both duly registered; b) Authorization to operate as a price provider for securities valuation by the competent authority that supervises this type of company in its country of origin; c) Model of service provision contract for price supply for securities valuation, which must consider as a minimum what is regulated in article 23 of these Standards; and d) Agreement of the Board of Directors of the Authorized Entity for the contracting of the expert valuation provider and evidence of the verification required in articles 21 and 24 of these Standards.

Additionally, authorized entities must submit a training plan for their employees responsible for replicating the calculation and determination of the price vector for the valuation of securities by the potential company to be contracted.

The application and documentation may be submitted through the means made available by the Superintendencia, which may be electronic. In any case, the deadline referred to in the first paragraph of article 22-A of these Standards will begin to run from the next business day after the application has been submitted. (1)

Authorization procedure for contracting the price supply service for securities valuation (1)

Art. 22-A.- Upon receipt of the authorization application for contracting the price supply service for securities valuation, in accordance with what is established in article 22 of these Standards, the Superintendencia will proceed to verify compliance with the requirements defined in the Securities Market Law and these Standards, having up to fifteen business days to authorize or deny the contracting of the price supply service for securities valuation. (1)

If the application is not accompanied by the complete and duly formatted information detailed in article 22 of these Standards, the Superintendencia, in the absence of necessary requirements, may require the applicants to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the applicants, when there are reasons justifying such extension. (1)

The Superintendencia in the same notice will indicate to the applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, leaving them free to submit a new application. (1)

If after the analysis of the documentation presented in accordance with article 22 of these Standards, the Superintendencia has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendencia will notify the applicants once to rectify the deficiencies communicated or present additional documentation or information requested. (1)

Applicants will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the information requested by the Superintendencia. (1)

The Superintendencia may, through a reasoned resolution, extend by up to another ten business days the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires. (1)

Extension period (1)

Art. 22-B.- Applicants may submit to the Superintendencia an application for extension of the period indicated in the fifth paragraph of article 22-A of these Standards, before the expiration of said period, stating the grounds for the request and proposing, if applicable, the relevant evidence. (1)

The extension period may not exceed ten business days and will start from the next business day following the expiration date of the original period. (1)

Suspension of the period (1)

Art. 22-C.- The fifteen-day period indicated in the first paragraph of article 22-A of these Standards, will be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties rectify the observations required by the Superintendencia. (1)

Once the complete and duly formatted documentation is submitted, the Superintendencia will proceed to notify the resolution authorizing or denying the authorization application for contracting the price supply service for securities valuation, within a maximum period of three business days from the date the resolution is issued. (1)

Art. 23.- The service provision contract for price supply for securities valuation must contain, as a minimum, the following:
a) The conditions of service provision established by the parties; b) The obligations of the contractor to deliver the required information with the indicated periodicity, as well as to maintain confidentiality regarding the information to which it has access for the estimation, calculation, and determination of the price vector; c) Clause obligating the contractor to provide the service according to the requirements of the authorized entity, and the procedure to follow in case such obligation is not fulfilled; d) Contract term; e) Special clause stating that the responsibility for the price supply service for securities valuation lies with the contracting authorized entity; f) Prohibition of contracting a third party that performs the services object of the contract; g) Suspension and termination clauses, as well as their legal consequences; and h) Special clause where the contractor accepts to always have a specialist available to answer inquiries from the Disputes Committee of the authorized entity.

Additionally, clauses facilitating adequate review of the procedure for price supply by the Superintendencia and the authorized entity must be included.

Art. 24.- In case the authorized entity contracts a third party, it must verify the technical and operational capacity to handle the operations and services for which it will be contracted, prior to signing a contract with said legal entity.

The authorized entity must show the Superintendencia, at the moment it requests, the result of the analysis on the operational capacity and viability of the potential contractor, on which the signing of said contract was based.

CHAPTER V
ON THE PROVISION OF THE PRICE SUPPLY SERVICE

Art. 25.- In accordance with these Standards, the fair value will be determined as follows:

a) From representative market transactions that have been carried out in modules or transactional systems administered by the Central Bank or by entities supervised or authorized by the Superintendencia; b) From the observation of representative transactions in international financial information systems; c) By the use of Internal Rates of Return (IRR), or reference rates and margins calculated from representative market transactions, which may be added by categories when considered necessary, that have been carried out in modules or transactional systems administered by the Central Bank or by entities supervised or recognized by the Superintendencia; and d) By other financial valuation methods for calculating fair value, such as value indices or Discounted Future Flows Method, due to the absence of a fair value that can be established through any of the provisions treating the preceding letters.

Art. 26.- For the valuation of investments quoted in international financial markets and information available in international financial information systems, the systems to be considered will be those recognized by the Superintendencia that meet the aspects considered in the specific provisions contained in the technical standards related to the trading of foreign securities that the Central Bank issues for this effect through its Standards Committee.

Art. 27.- Authorized entities will provide prices to value the investments of the portfolios or funds of the financial system entities, whether these are own or administered on behalf of third parties, and must send the corresponding price vector to the clients for the respective financial instruments according to the procedures, schedules, and deadlines established in their valuation methodology.

Likewise, the determined price vector must contain, in applicable cases and according to the nature of the security, as a minimum, the following:
a) Price without accrued interest or included dividends; b) Price with accrued interest and included dividends; c) Internal Rate of Return (IRR); d) Market quotes; e) Family of titles; and f) Other information requested by the client of the price vector according to the terms of the contract.

Art. 28.- The services contracted by the financial system entities with authorized entities must be made through the signing of the corresponding service provision contract.

The authorized entity must perform, prior to signing the service provision contract, an evaluation of possible conflicts of interest with the potential client, including the relationship of economic independence with its clients, and if applicable, reveal them according to its policy.

Valuation Methodologies

Art. 29.- The authorized entity must verify at all times that the methodology used to determine the price vector is accurate and capable of reflecting the fair value, using all available information that is applicable to various securities investments.

Art. 30.- The valuation model must contemplate, at least and where applicable, the following variables: markets in which the instrument is traded, credit quality, estimation of future flows, interest rates, discount rates and equivalents, exchange rates, present value, liquidity, and volatility, and must comply with the following principles:
a) Efficiency: estimates must adequately reflect the market realization value of financial instruments; b) Independence: in the development of valuation functions, appropriate mechanisms must be established to minimize the possible emergence of conflicts of interest, for which adequate internal control standards must be established that guarantee the segregation of functions; c) Responsibility: the estimation of the value of instruments must be clearly recorded; d) Timeliness: the update of the value of financial instruments must be carried out at reasonable intervals to reduce the probability that the price for the valuation of instruments lags behind its market value. Such update must be performed at least daily, regardless of the degree of liquidity of the same; e) Objectivity: the determination and assignment of the fair value of a security or title must be carried out based on technical and professional criteria, which recognize the effects derived from changes in the behavior of variables that may affect said price; f) Transparency: the fair value of a security must be determined and assigned with the purpose of revealing a certain, neutral, verifiable, and representative economic result of the rights incorporated in the respective security; g) Permanent evaluation and analysis: the fair value attributed to a security must be based on the permanent evaluation and analysis of market conditions, issuers, and the respective issuance. Variations in these conditions must be reflected in changes to the previously assigned value or price, with the periodicity established for the valuation of investments determined in these Standards; and h) Professionalism: the determination of the fair value of a security must be based on the conclusions resulting from the analysis and study that a prudent and diligent expert would carry out, aimed at the search, obtaining, knowledge, and evaluation of all relevant available information, in such a way that the determined price vector reflects the amounts that would reasonably be received for its sale.

The methodologies established must be authorized by the competent administrative body of the authorized entity, prior to presentation to the Superintendencia, which will verify compliance with the requirements of these Standards. Such methodologies must be published on the website of the authorized entity.

Art. 31.- Market price valuation must collect sufficient information from transactions carried out in the corresponding negotiation system or any other international financial information system recognized by the Superintendencia, such that upon obtaining the price of the security, it reflects its fair value.

Art. 32.- Any methodology used must take as a basis for the valuation of different securities, price observations from negotiation systems or other international financial information systems recognized by the Superintendencia.

Likewise, the authorized entity will observe the following guidelines:
a) In the case that a security does not have a market price or relatively small volumes of the corresponding security are contracted, techniques must be used to estimate the fair value, among which are:
i. References to the current market value for other securities that are identical or similar to the one being valued;
ii. Cash flow analysis, for which one or more discount rates will be used, which, when considered necessary, may be equal to the yield rate given in the market, for securities that essentially have the same conditions and characteristics, among which the credit classification of the debtor, the remaining term on which the interest rate of the contract is fixed, the term existing to repay the principal, and the foreign currency in which such payments will be made will be taken into account;
iii. Yield curves obtained through the use of parametric models that allow constructing the spot rate curve from the estimation of a set of parameters replicating the functional form of the yield curve, from a sample of prices; and
iv. Other financial valuation methods for calculating fair value, such as the discounted future flows method, among others.
b) For the valuation of securities and other financial assets quoted in international markets, international financial information systems recognized by the Superintendencia will be used, which meet the requirements considered in the specific provisions contained in the technical standards related to the trading of foreign securities that the Central Bank issues for this effect through its Standards Committee. Likewise, if the financial instruments in the local market present greater negotiability, it will be possible to use the information generated locally. In any case, authorized entities must adequately substantiate the reasons explaining which market is relevant for the determination of the price of said financial instruments.

Art. 33.- The descriptive documents of the methodologies must contain as a minimum the following, provided that the nature of the financial instrument allows it:
a) A description of the price calculation model for securities; b) Variables that the methodology will use, such as: estimation of future flows, interest rates, discount rates and equivalent rates, exchange rates, present value, yield curves, margins, and other variables defined; c) The source of information from which observations for price calculation will be obtained. The transactions to be used in the calculation of the vector must come exclusively from transactions carried out in an organized negotiation system; additionally, purchase positions may be considered if necessary, under previously established criteria; d) Details to estimate the prices of securities, for which there are no transactions in the market; e) For fixed income instruments, the price calculation model must be capable of providing prices without accrued interest and brokerage commissions, as well as prices with accrued interest, in accordance with the valuation regulations to which financial system entities and investment funds are subject; f) A detailed explanation differentiating the calculation methodology of: prices of securities according to their nature, public and private sector instruments, and instruments traded locally and instruments traded in other markets, considering factors such as ease of access to information, the amount traded in each market, market liquidity, among others; g) Criteria to determine a relevant market, among them:
i. The criteria to apply to determine valid transactions for valuation purposes; and
ii. The criterion to use if the security is quoted in multiple markets, taking into account elements such as the relevance of each, its situation relative to the supervised entity, the registration of the security, the ease of access to information, whether such securities are quoted in one or more countries; as well as the parameters to determine if the local market is of little relevance or inefficient for valuation, or possibly including transactions verified in the local and foreign markets.
h) In cases where information sources are international information systems with continuous operation, they must indicate the entities from which they have obtained the prices used, the hours in which they import the data, and the origin of the information. Only when important amounts of instruments are traded whose information source is international systems will it be valid to obtain prices from them, as established in the methodology; and i) A detail of the procedure for generating prices until their delivery to clients of the information. This detail must include the delivery schedules of updated prices to perform valuation and their modifications to users, as well as the mechanisms for resolving disputes that users formulate in writing regarding updated prices. The latter must be processed on the same day that the prices were published.

Art. 34.- Authorized entities must not provide to one or more of their clients, prices related to the same security, that differ from those delivered to another or other clients on the same date, including their modifications.

Art. 35.- Under duly justified and reasoned circumstances by the authorized entity, the Superintendencia may authorize modifications to approved methodologies, in which case it must expose the implications derived from the requested modifications.

When modifications are approved by the Superintendencia, the authorized entity must notify its clients of the modifications and their effects on the price vector, as well as the period from which they will be implemented.

Approved changes to methodologies cannot be applied prior to communication to their clients and will not affect price vectors granted prior to approval by the Superintendencia.

Art. 36.- For the case of structured financial products, when authorized entities offer this service, they must submit a specific methodology for determining their price, which must comply with the guidelines established in the preceding articles of these Standards.

Structured financial products are understood as those instruments composed of a fixed income, risk-free component, and a variable income component, whose objective is to maximize returns in said product and for which the return is associated with the evolution of a specific index, interest rate, currency, stock, or commodity.

Transfer of information, publication and disclosure of information Art. 37.- The authorized entity shall be obligated to send electronically to the Superintendence the file with the prices corresponding to the securities in question, on a daily basis, including weekends and holidays.
Additionally, for the entities in the financial system that provide said service to them, it must deliver valuation prices daily to these entities through the distribution mechanisms previously contemplated in the signed contract.
All calculations for the determination of the price vector shall be made based on the calculation convention established for each instrument documented in the methodology published on the website of each authorized entity.
Art. 38.- For the calculation of the price vector, at least seventeen decimals shall be considered. The numerical information required by written and electronic means shall be presented with eight decimals, without rounding. For example:
a) 0.46231887835675941=0.46231887; b) 0.13563217276385164=0.13563217; or c) 14.5832172739572949=14.58321727.

Art. 39.- Authorized entities shall preserve the documentation of their methodologies and the results of their application and other data or documents related to the activities they carry out, in physical and electronic form, in accordance with what is established in the Code of Commerce.
Non-compliance with the delivery of information Art. 40.- In the event that the authorized entity, whether due to fortuitous event or force majeure, is unable to send the required information in the form and periodicity established in these Standards, it may use other electronic means of transmitting information, in accordance with its contingency plans and business continuity plans, and must, in any case, preserve the structure of the described files. Notwithstanding the foregoing, on the next business day, it must explain in writing to the Superintendence the reasons why it was not possible to send the information in the required form and periodicity, attaching or sending the evidentiary means it deems appropriate. The Superintendence may accept or reject the arguments presented by the authorized entity; if such arguments are rejected, the possibility of initiating the corresponding administrative sanctioning procedure shall be available. Appeals Committee Art. 41.- The authorized entity shall constitute an Appeals Committee, which

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 shall be composed of no fewer than three people, who must maintain total independence from the Board of Directors of the authorized entity, from the clients of the vector, as well as from any other institution related or linked to it, or to the securities subject to the appeal. This Appeals Committee shall be responsible for receiving and resolving appeals or disagreements presented by any client regarding the price vector, determining their validity for their respective consideration by the authorized entity, on the same day they are presented. Art. 42.- Appeals or disagreements regarding the price vector must be presented officially, either in writing or electronically, to the Appeals Committee of the authorized entity in question, and registered by it in a computer application for control of received appeals, which allows for the verification of receipt and attention to them; likewise, each appeal must be reported to the Superintendence on the day it is received, including the identification of the client who filed it, the explanation justifying it, and the manner in which it was resolved by the Appeals Committee. Art. 43.- Every appeal shall be resolved on the same day it is received. The resolution regarding the admissibility or not of the appeal filed shall be published on the website of the authorized entity, and said resolution must be notified to the person who filed the appeal at the same time. Furthermore, in the event that the appeal is admissible and the result is the modification of prices, the authorized entity must incorporate the change in the respective price vector and notify each of its clients through the means agreed with each of them.
CHAPTER VI
OTHER PROVISIONS, SANCTIONS, REPEAL AND VALIDITY

Documentation
Art. 44.- Authorized entities shall keep at the disposal of the Superintendence all information that it requires for the execution of its supervision and oversight work, including the complete and updated information of the society contracted to provide the price supply service for the valuation of securities and of the contracts entered into with them, providing all necessary collaboration in its supervision work. Confidentiality of information Art. 45.- Authorized entities are responsible for the confidentiality of the information used to provide the price supply service for the valuation of securities, as well as for information subject to confidentiality according to applicable laws.

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Art. 46.- Stock exchanges must keep at the disposal of authorized entities the information on the operations that take place, as well as the bid and ask quotes, where at least the instrument, amounts and prices, type of transaction and the date and time of the event are identified, as well as the settlement date, as established in Article 95-J of the Law.

Sanctions
Art. 47.- Non-compliance with the provisions contained in these Standards shall be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.
Unforeseen aspects
Art. 48.- Aspects not provided for in the matter of regulation in these Standards shall be resolved by the Central Bank through its Standards Committee. (1) Repeal Art. 49.- Specialized Agents in -8/2010), approved in Session CD-6/2010 on March 25, 2010, by the Board of Directors of the Securities Superintendence, whose Organic Law was repealed by Legislative Decree number 592 which contains the Law on Supervision and Regulation of the Financial System, published in Official Gazette number 23 Volume 390 dated February 2, 2011. Validity Art. 50.- These Standards shall enter into force as of October 3, two thousand sixteen. MODIFICATIONS:
(1) Modifications to articles 2, 3, 8, 9, 14, 15, 16, 18, 22, 48 and incorporation of articles 9-A, 9-B, 15-A, 15-B, 15-C, 16-A, 16-B, 16-C, 17-A, 22-A, 22-B and 22-C approved by the Central Bank through its Standards Committee, in Session CN-14/2021, dated October 4, two thousand twenty-one, with validity as of October 21, two thousand twenty-one. (2) Modifications to articles 8 and 15 approved by the Central Bank through its Standards Committee, in Session No. CN-02/2022, dated February 21, two thousand twenty-two, due to reforms contained in Legislative Decree No. 203 to the Law on Special Registration and Control of Taxpayers to the Treasury, with validity as of March 8, two thousand twenty-two.