Technical Standards for Specialized Agents in Securities Valuation

THE COMMITTEE OF STANDARDS OF THE CENTRAL RESERVE BANK 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 kept by the Superintendency of the Financial System, that 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 supply or provision 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, the 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 Superintendency 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 Superintendency of the Financial System, which will be granted once it has been verified that such companies meet the corresponding legal requirements.
IV. That Article 95-I of the Securities Market Law establishes that other entities located in the Public Stock Register, that are supervised by the Superintendency of the Financial System, and that such activity does not oppose their main business, and that their habitual activity is not the intermediation of securities, that comply with what is prescribed in literal c) of Article 95-H of the Securities Market Law and that are authorized by the Superintendency of the Financial System to provide that service, may also provide the service indicated in Article 95-G.
V. That Article 95-J of the Securities Market Law establishes that the Superintendency 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, in the case of financial instruments of local or foreign issuers, the prices provided by a Specialized Agent in Securities Valuation must be considered.
VII. That Article 3 of the Law on Supervision and Regulation of the Financial System establishes that the Superintendency 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 Superintendency 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 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 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 persons intending to provide the service of calculation, determination, and supply or provision of information on prices for the valuation of securities of the entities of the financial system must comply with, 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 met to provide such services.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are: (1) a) Legal persons intending to be constituted and act as Specialized Agents in Securities Valuation; b) Members of the financial system located in the Public Stock Register, that are supervised by the Superintendency of the Financial System, and that intend to obtain authorization to provide the service of calculation, determination, and supply or provision 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 Superintendency of the Financial System, to provide the services of calculation, determination, and supply or provision 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 Reserve Bank of El Salvador; c) Director: Member of the Board of Directors; d) Authorized Entities: Those that provide the service of calculation, determination, and supply or provision 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 Superintendency of the Financial System that are located in the Public Stock Register, 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 Supply: Service of calculation, determination, and supply or provision of information on prices for the valuation of securities; i) Register: Public Stock Register of the Superintendency of the Financial System; j) Security or Security Title: 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: 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 security titles, established under a technical procedure and a methodology previously authorized by the Superintendency of the Financial System; and m) Superintendency: Superintendency of the Financial System.

CHAPTER II
CONSTITUTION OF SPECIALIZED AGENTS IN SECURITIES VALUATION

Corporate Name
Art. 4.- Any legal person intending 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 person interested in being authorized to be constituted as a Specialized Agent in Securities Valuation must have at all times, 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 through the deposit of the corresponding sum in a bank authorized by the Superintendency and domiciled in El Salvador. The said deposit must be accredited in turn by means of a certified check, cashier's check or management check, as provided in Article 195 of the Code of Commerce.

Requirements to be a director or administrator of a Specialized Agent in Securities Valuation Art. 6.- Any legal person intending to be constituted as a Specialized Agent in Securities Valuation must be administered by a Board of Directors and have at all times a representative of the society domiciled in El Salvador. The members of the Board of Directors, managers and administrators must meet the requirements established in the Code of Commerce 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 negligent or fraudulent bankruptcy; e) Not have been administratively or judicially sanctioned for their participation in a serious infringement of laws and norms of a financial nature in national jurisdiction as well as 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 persons intending to be constituted as Specialized Agents in Securities Valuation must previously and in writing request such authorization from the Superintendency.
The said request must contain at least the following information:
a) Detail of potential shareholders, which must contain 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 Taxpayer Registration Number, in the case that 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 person, 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 the case that the request is not presented by the signatories, the signatures appearing in it must be authenticated by a Notary; c) The amount of the subscribed and paid social capital of the society they intend to constitute, 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 comprise 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 notarized copy of the personal identity documents and the Taxpayer Registration Number (if registered as such in the respective register) of the potential directors and administrators, including additionally, the Curriculum Vitae of each of them; (2) c) A profile summarizing the operational and business model for the provision of price supply service, including the detail of the services it will contract; and d) In the case that one or more of the potential shareholders is a legal person, the following documents must also be attached, insofar as applicable:
i. Notarized copy of their current Social Pact and the last credential of election of their 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 society and must be authenticated by a Notary; and
iii. Certified copy of the authorization of the Administration Body corresponding to be a Shareholder.
The request and documentation may be presented through the means made available by the Superintendency, 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 presented. (1)

Authorization procedure to be constituted as a Specialized Agent in Securities Valuation (1) Art. 9.- Upon receipt of 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 Superintendency will proceed to verify compliance with the requirements defined in the Securities Market Law and these Standards, having up to twenty business days for 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 detailed information, as detailed in Articles 7 and 8 of these Standards, the Superintendency, 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 Superintendency in the same warning 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 present a new request. (1) If after the analysis of the documentation presented in accordance with Articles 7 and 8 of these Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendency will warn 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 Superintendency. (1) The Superintendency may, through a reasoned resolution, extend by another ten business days the period indicated in the previous paragraph, when the nature of the observations or deficiencies warned requires it. (1)

Extension Period (1)
Art. 9-A.- Applicants may present to the Superintendency 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 pertinent 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. 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 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 Superintendency. (1) Once the complete and duly formatted documentation is presented, the Superintendency 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 receipt of the communication of authorization of 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 Superintendency, after which period, the authorization agreement will become void.

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

Art. 12.- If there are differences between the public deed of constitution and the project of the same authorized by the Superintendency, it must communicate this to the applicant within a maximum period of ten business days in accordance with what is established in Article 11 of these Standards, so that the authorizing Notary proceeds to make the respective adjustments, which must be presented again before the Superintendency 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 deed of constitution and the reviewed deed project, or in the case that the inconsistencies communicated in accordance with what is established in the previous article have been overcome, the Superintendency 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 recorded, 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 Registry makes observations on the Testimony of the Public Deed of Social Constitution or Denies its Registration

Art. 14.- When the Commercial Registry notifies the Authorizing Notary or any other interested party of the denial of the testimony of the public deed of constitution of an authorized entity, that party must in turn notify such circumstance to the Superintendency in writing and no later than the next business day after receiving the respective notification. In the case that the correction of observations is notified, only those observations that affect the purpose or object and the nature of the authorized entity being constituted will be notified in the manner and timeframe previously indicated.

If it is necessary to modify the conditions under which the Superintendency ordered its favorable qualification for the registration of the instrument in question, it may, at the request of the potential shareholders or their representatives, proceed to issue a new opinion in the terms established in Article 13 of these Standards. (1)

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

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

Regarding the commencement of operations of the Specialized Agent in Securities Valuation

Art. 15.- For the authorization of the commencement of operations and registration of a Specialized Agent in Securities Valuation, the legal representative of this entity must submit the corresponding request to the Superintendency, accompanied by the following documentation:
a) Certified copy by Notary of the Public Deed of constitution of the Specialized Agent in Securities Valuation, duly registered in the Commercial Registry; b) Certification of the Minutes Point pursuant to 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) Certified copy by Notary of the Agreement for the appointment of the External Auditor, who must be registered in the Special Registry of External Auditors maintained by the Superintendency; d) Copy of the Tax Identification Number or its Graphic Representation and certified copy by Notary of the Taxpayer Registration Number of the Specialized Agent; (2) e) Organizational chart of the Specialized Agent in Securities Valuation indicating the names of the 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 the price supply service, 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 the information systems that will be used; h) Description of policies and means that will be used to provide or supply prices of securities; i) Internal operating regulations, including internal control norms, 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 for the definition of 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. The primary and alternative information sources, establishing the mechanism by which it will be ensured that such information is timely, reliable and representative of the market. Likewise, the manner in which it will be determined which trading system of the securities, whether within or outside a stock exchange, will be considered to take price information, 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 Technical Standards for the Integral Management of Risks of the Entities of the Markets -11), approved by the Standards Committee of the Central Bank.
In relation to the policies referred to the handling of conflicts of interest, they must include the detail of the conflicts identified in the stage of commencement of operations, as well as the mechanisms for mitigation and disclosure of the same; l) Copy of the contract for the provision of services 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 application of this to the Superintendency; n) Description of policies and procedures for the attention of controversies or non-conformities regarding the 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 valuation methodology of securities (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 the systems for the price supply service and failures in the technological infrastructure.
The Superintendency 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.

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

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 presented through the means made available by the Superintendency, which may be electronic. In any case, the timeframe referred to in the first paragraph of Article 15-A of these Standards will begin to run from the next business day after the request has been presented. (1)

Procedure for authorization of the commencement of operations of the Specialized Agent in Securities Valuation (1)

Art. 15-A.- Upon receipt of the request for authorization of the commencement of operations of the Specialized Agent in Securities Valuation, in accordance with what is established in Article 15 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined in the Securities Market Law and these Standards, having up to fifteen business days for the authorization or denial of the commencement of operations of the Specialized Agent in Securities Valuation. (1) If the request is not accompanied by the complete and duly formatted information detailed in Article 15 of these Standards, the Superintendency, 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 Superintendency in the same warning 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 Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendency will warn the applicants once to correct the deficiencies communicated to them or present additional documentation or information required by the Superintendency. (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 Superintendency. (1)

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

The Superintendency 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 warned deficiencies so requires. (1)

Extension Period (1)

Art. 15-B.- The applicants may present to the Superintendency a request for extension of the period indicated in the fifth paragraph of Article 15-A of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent 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 Standards, 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 correct the observations required by the Superintendency. (1) Once the complete and duly formatted documentation is presented, the Superintendency will proceed to notify the resolution in which it authorizes or denies the request for authorization of the commencement 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)

Regarding the authorization for the provision of the price supply service

Art. 16.- For the authorization of the provision of the price supply service 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 Superintendency, accompanied by the following documentation:
a) Draft modification of the deed of constitution of the society when necessary; b) Organizational chart of the member of the financial system indicating the names of the 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 the price supply service, including the detail of the services it will contract; d) Detail and description of the adaptation of the accounting systems to provide the price supply service; e) Detail and description of the adaptation of the information systems to provide the price supply service;

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

f) Update for incorporation of the price supply service of the policies required in Article 35 of the Supervision and Regulation Law Technical Standards for the Integral Management of Risks of the Entities -11), approved by the Standards Committee of the Central Bank, when applicable. In relation to the policies referred to the handling of conflicts of interest, they must include the detail of the conflicts identified at the stage of commencement of operations, 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 prices of securities; h) Internal operating regulations, including internal control norms, 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 for the definition of 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 they must 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. The primary and alternative information sources, establishing the mechanism by which it will be ensured that such information is timely, reliable and representative of the market. Likewise, the manner in which it will be determined which trading system of the securities, whether within or outside a stock exchange, will be considered to take price information, indicating the coding that will be used for the identification of the different securities.
j) Copy of the contract for the provision of services 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 application of this to the Superintendency; l) Description of policies and procedures for the attention of controversies or non-conformities regarding the 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 valuation methodology of securities (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 the systems for the price supply service and failures in the 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 Superintendency 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 presented through the means made available by the Superintendency, which may be electronic. In any case, the timeframe referred to in the first paragraph of Article 16-A of these Standards will begin to run from the next business day after the request has been presented. (1)

Procedure for authorization for the provision of the price supply service (1)

Art. 16-A.- Upon receipt of the request for authorization for the provision of the price supply service, in accordance with what is established in Article 16 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined in the Securities Market Law and these Standards, having up to fifteen business days for the authorization or denial for the provision of the price supply service. (1) If the request is not accompanied by the complete and duly formatted information detailed in Article 16 of these Standards, the Superintendency, 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)

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED AGENTS IN SECURITIES VALUATION Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

The Superintendency in the same warning 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 Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendency will warn the applicants once to correct the deficiencies communicated to them or present additional documentation or information required by the Superintendency. (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 Superintendency. (1) The Superintendency 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 warned deficiencies so requires. (1)

Extension Period (1)

Art. 16-B.- The applicants may present to the Superintendency a request for extension of the period indicated in the fifth paragraph of Article 16-A of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent 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 Standards, 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 correct the observations required by the Superintendency. (1) Once the complete and duly formatted documentation is presented, the Superintendency will proceed to notify the resolution in which it authorizes or denies the request for authorization for the provision of the price supply service, within a maximum period of three business days from the date the resolution is issued. (1)

Regarding general application for the commencement of operations and authorization to provide the price supply service for authorized entities

Art. 17.- The authorized entity must guarantee, that for the provision of the service of

CNBCR- 08/2016
NDMC-09
TECHNICAL STANDARDS FOR SPECIALIZED SECURITIES VALUATION AGENTS Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

price supply, the personnel directly involved must 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 Securities Valuation Agent, for the fulfillment of what is established in article 17 of these Standards, will be responsible for implementing training plans that ensure the necessary knowledge and training for the adequate development of their 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 the pertinent updates, to respond to the needs of the entity, availability of topics to be developed, and the number of personnel to be trained. In the event that updates have been made, 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 Securities Valuation Agent or, in its defect, the authorization for the provision of the service as an authorized entity, according to the term established in the first clause of article 15-A or in the first clause of article 16-A, as applicable, ordering in that same act the Registry Entry or the margining of the same in the corresponding Registry, as the case may be. (1)

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

CHAPTER IV
ON THE CONTRACTING OF SERVICES RELATING TO THE CALCULATION, DETERMINATION AND SUPPLY OR PROVISION 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 the one used by this same one, 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 contracted cannot be assigned partially or totally.

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TECHNICAL STANDARDS FOR SPECIALIZED SECURITIES VALUATION AGENTS Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

In any case, the contracting of services of any type 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 object of the contracted party does not prevent it from providing the service object of the contracting.
Likewise, the specialized provider in the supply of price vectors to be contracted must be supervised by a foreign body homologous to the Superintendence, being the authorized entity 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 present to the Superintendence the following documentation regarding the society that is intended to be contracted:
a) Notarially certified copy of its current Social Pact 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 companies in its country of origin; c) Model of contract for the provision of price supply services 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 provider in securities valuation and evidence of the verification required in articles 21 and 24 of these Standards.

Additionally, authorized entities must present 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 presented through the means made available by the Superintendence, which may be electronic. In any case, the term referred to in the first clause of article 22-A of these Standards will begin to run from the next business day after the application has been presented. (1)

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

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

If the application does not come accompanied by the complete and duly formatted information, detailed in article 22 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 term that may be extended at the request of the applicants, when there are reasons justifying it. (1)

The Superintendence in the same warning 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 present a new application. (1)

If after the analysis of the documentation presented according to article 22 of these Standards, the Superintendence has observations or when the documentation or information presented does not result sufficient to establish the facts or information intended to be accredited; the Superintendence will warn the applicants once to remedy the deficiencies communicated or present additional documentation or 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 another ten business days the term indicated in the previous clause, when the nature of the observations or deficiencies warned requires it. (1)

Extension term (1)

Art. 22-B.- The applicants may present to the Superintendence an application for extension of the term indicated in the fifth clause of article 22-A of these Standards, before the expiration of said term, must express the grounds on which it is based and propose, if applicable, the pertinent proof. (1) The extension term cannot exceed ten business days and will start from the next business day following the expiration date of the original term. (1)

Suspension of the term (1)

Art. 22-C.- The fifteen-day term indicated in the first clause of article 22-A of these Standards, will be suspended for the days that pass between the notification of the requirement to complete information or documentation referred to in the second and fifth clauses of said article, until the interested parties remedy the observations required by the Superintendence. (1)

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TECHNICAL STANDARDS FOR SPECIALIZED SECURITIES VALUATION AGENTS Approval: 02/09/2016 Validity: 03/10/2016 Tel. (503) 2281-8000 www.bcr.gob.sv

Once the complete and duly formatted documentation is presented, the Superintendence will proceed to notify the resolution in which it authorizes or denies the application for authorization to contract 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 contract for the provision of price supply services 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 reserve and confidentiality on the information to which it has access for the estimations, calculation and determination of the price vector; c) Clause of obligation of the contractor to provide the service according to the requirements of the authorized entity, and the manner of proceeding in case such obligation is not fulfilled; d) Term of the contract; e) Special clause where it is stated that the responsibility for the price supply service for securities valuation rests on the contracting authorized entity; f) Prohibition of contracting a third party to perform the services object of the contract; g) The clauses of suspension and termination, as well as their legal consequences; and h) Special clause where the contractor accepts to always have a specialist available to attend inquiries by the Disputations Committee of the authorized entity.

Additionally, clauses must be included that facilitate an adequate review of the procedure for carrying out price supply by the Superintendence and the authorized entity.

Art. 24.- In case the authorized entity contracts a third party, it must verify the technical and operational capacity to attend the operations and services for which it will be contracted, prior to signing a contract with said legal person.
The authorized entity must show to the Superintendence at the moment it requires it, the result of the analysis on the operational capacity and viability of the potential contractor, on which it based the signing of said contract.

CHAPTER V
ON THE PROVISION OF THE PRICE SUPPLY SERVICE

Art. 25.- In accordance with these Standards, the fair value will be determined in the following manner:

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a) From operations representative of the market that have been carried out in modules or transactional systems administered by the Central Bank or by entities supervised or authorized by the Superintendence; b) From the observation of representative operations in international financial information systems; c) By the use of Internal Rates of Return (IRR), or reference rates and margins calculated from representative market operations, 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 Superintendence; and d) By other financial valuation methods for the calculation of fair value, such as value indices or Discounted Future Flows Method, due to the non-existence of a fair value that can be established through any of the provisions treated in the previous letters.

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

Art. 27.- The authorized entities will provide prices to value the investments of the portfolios or funds of the entities of the financial system, whether these are own or administered on behalf of third parties, must remit to the clients the corresponding price vector for the respective financial instruments according to the procedures, schedules and terms 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 accumulated interests nor dividends included; b) Price with accumulated interests and dividends included; c) Internal Rate of Return (IRR); d) Market quotations; 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 that the entities of the financial system contract with the authorized entities, must be made through the signing of the corresponding service provision contract.

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The authorized entity must perform, prior to the signing of the service provision contract, an evaluation on 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 the various investments in securities.

Art. 30.- The valuation model must contemplate, at least and insofar as applicable, the following variables: markets where the instrument is traded, credit quality, estimation of future flows, interest rates, discount rates and equivalents, exchange rates, present value, liquidity and volatility, must comply with the following principles:
a) Efficiency: the estimations must adequately reflect the realization value in the market of the 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 the instruments must be clearly recorded; d) Timeliness: the updating of the value of the financial instruments must be carried out at reasonable intervals that allow reducing the probability that the price for the valuation of the instruments presents lags with respect to its market value. Such updating must be carried out 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 the 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 the conditions of the market, the issuers and the respective issuance. Variations in said conditions must be reflected in changes of the value or price previously assigned, with the periodicity established for the valuation of the investments determined in these Standards; and h) Professionalism: the determination of the fair value of a security must be based on

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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 price vector determined 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 Superintendence, 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 gather sufficient information from the transactions carried out in the corresponding negotiation system or from any other international financial information system recognized by the Superintendence, in such a way 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 the different securities, the price observations coming from negotiation systems or other international financial information systems recognized by the Superintendence.
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 a rate or rates of discount will be used, which may, when considered necessary, be equal to the yield rate given in the market, for securities that possess, essentially, the same conditions and characteristics, among which the credit classification of the debtor, the residual term on which the interest rate of the contract is fixed, the term existing to repay the principal and the foreign currency in which said 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 the calculation of fair value, such as the discounted future flows method, among others.
b) For the valuation of securities and other financial assets quoted in markets

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internationally, recognized international financial information systems by the Superintendence shall 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 purpose through its Standards Committee. Likewise, if financial instruments in the local market present greater negotiability, it will be possible to use the information generated locally. In all cases, 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 at least the following, provided that the nature of the financial instrument allows it:
a) A description of the price calculation model for the securities; b) Variables that the methodology will use, such as: the estimation of future cash flows, interest rates, discount rates and equivalent rates, exchange rates, present value, yield curves, margins and other variables that are defined; c) The source of information from which the observations for the price calculation will be obtained. The operations to be used in the calculation of the vector must come exclusively from transactions carried out in an organized trading system; additionally, buy 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 the entities of the financial system and administered investment portfolios are subject; f) A detailed explanation where the differentiation of the calculation methodology is made of: price 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) The 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 value trades in several markets, taking into consideration elements such as the relevance of each of them, its situation in relation to the supervised entity, the registration of the value, the ease of access to information, if such values trade in one or more

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Tel. (503) 2281-8000 www.bcr.gob.sv countries; as well as the parameters to determine if the local market is of little relevance or inefficient for valuation or also including the transactions that take place in the local and foreign markets. h) In those cases where the sources of information 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 significant amounts of instruments whose source of information are international systems are traded, it will be valid to obtain prices from them, as established in the methodology; and i) A detail of the procedure for the generation of prices until their delivery to the information clients. This detail must include the delivery schedules of updated prices to carry out the valuation and their modifications to users, as well as the mechanisms for resolving appeals that users file in writing regarding the updated prices. The latter must be processed on the same day that the prices were published.

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

Art. 35.- Under duly justified and reasoned circumstances by the authorized entity, the Superintendence may authorize modifications to the approved methodologies, in which case it must expose the implications derived from the requested modifications.
When the modifications are approved by the Superintendence, the authorized entity must notify its clients of the modifications and their effects on the price vector, as well as the deadline from which they will be implemented.
Changes approved to the methodologies cannot be applied prior to communication to their clients and will not affect the price vectors granted prior to approval by the Superintendence.

Art. 36.- For the case of structured financial products, when authorized entities offer this service, they must present a specific methodology for the determination of 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 certain

Transfer of information, publication and dissemination of information Art. 37.- The authorized entity is obliged to send electronically to the Superintendence the file with the prices corresponding to the securities in question, on a daily frequency, including weekends and holidays. Additionally, for the entities of the financial system to whom it provides said service, it must deliver the valuation prices daily to these through the distribution mechanisms previously contemplated in the signed contract. All calculations for the determination of the price vector will 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 will be considered. The numerical information required by written and electronic means must be presented with eight decimals, without approximations. For example:
a) 0.46231887835675941=0.46231887; b) 0.13563217276385164=0.13563217; or c) 14.5832172739572949=14.58321727.

Art. 39.- Authorized entities must conserve the documentation of their methodologies and the results of their application and other data or documents related to the activities they carry out, physically and electronically, in accordance with what is established in the Commercial Code.

Non-compliance in the delivery of information
Art. 40.- In the event that the authorized entity, whether due to force majeure or fortuitous event, is unable to send the required information in the form and periodicity established in these Standards, it may use other electronic means of information transmission, in accordance with its contingency plans and business continuity plans, must, in any case, conserve the structure of the described files. Notwithstanding the foregoing, on the next business day, it must expose in writing before the Superintendence the reasons why it was not possible to send the information in the form and periodicity required, attaching or sending the probative means it deems appropriate. The Superintendence may estimate or dismiss the arguments exposed by the authorized entity; if said arguments are dismissed, the possibility of initiating the corresponding administrative sanctioning procedure will be available.

Appeals Committee
Art. 41.- The authorized entity must constitute an Appeals Committee, which

Art. 42.- Appeals or disagreements with the price vector must be presented officially, either in writing or electronically, to the Appeals Committee of the authorized entity in question, and be registered by it in a computer application for control of the received appeals, which allows the verification of receipt and attention to them; likewise, each appeal must be informed to the Superintendence on the day it is received, including the identification of the client who filed it, the explanation that justifies it and the way in which it was resolved by the Appeals Committee.

Art. 43.- Every appeal will be resolved on the same day it is received. The resolution on the admissibility or not of the appeal filed will be published on the website of the authorized entity, notifying said resolution to the person who filed the appeal at the same time. Additionally, in case 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 by the means agreed with each of them.

CHAPTER VI
OTHER PROVISIONS, SANCTIONS, REPEAL AND VALIDITY

Documentation
Art. 44.- Authorized entities will keep at the disposal of the Superintendence all the information that it requires for the execution of its surveillance and supervision work, including the complete and updated information of the contracted society for the provision of the price supply service for the valuation of securities and of the contracts celebrated with them, providing all the necessary collaboration in its supervision work.

Confidentiality of information
Art. 45.- Authorized entities are responsible for the confidentiality of the information used for the provision of the price supply service for the valuation of securities, as well as for the information subject to reserve according to the applicable laws.

Sanctions
Art. 47.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

Unforeseen Aspects
Art. 48.- The aspects not provided for in regulatory matters in these Standards will 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 containing the Law of Supervision and Regulation of the Financial System, published in Official Diary number 23 Volume 390 of date February 2, 2011.

Validity
Art. 50.- These Standards will enter into force from 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, of date October 4, two thousand twenty-one, with validity from 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, of date February 21, two thousand twenty-two, by reforms contained in Legislative Decree No. 203 to the Law of Special Registration and Control of Taxpayers to the Treasury, with validity from March 8, two thousand twenty-two.

Technical Standards for Specialized Agents in Securities Valuation

Lineage: In force

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