Technical Standards for Submission and Disclosure of Material Events

CNBCR-14/2021
NDMC-22
TECHNICAL STANDARDS FOR SUBMISSION AND DISCLOSURE OF MATERIAL EVENTS Approval: 10/04/2021 Validity: 10/21/2021

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

CONSIDERING:

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

II. That Article 35 of the Securities Market Law regulates provisions regarding facts considered as reserved information, which must be handled as stated in said provision.

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

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

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

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

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR SUBMISSION AND DISCLOSURE OF MATERIAL EVENTS

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

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

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

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

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

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

CHAPTER II
MATERIAL EVENTS

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

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

Once material events are identified, entities must submit them to the Superintendency, no later than the next business day after the events occur or they become aware of them, in accordance with what is established in Annex No. 2 of these Standards.

The list in Annex No. 1 of these Standards is exemplary and non-exhaustive; entities must inform of those facts that are significant and meet the characteristics included in Article 4 of these Standards, as well as what is established in the entities' own policies.

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

CHAPTER III
RESPONSIBILITY FOR COMMUNICATION OF MATERIAL EVENTS

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

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

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

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

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

Internal Policies and Procedures
Art. 7.- Entities must have clear policies and procedures, approved by the Board of Directors, for the identification and handling of essential information or material events, which include aspects such as:
a) Mechanisms for identifying material events and reserved information; b) Designation of persons responsible for reporting essential information or material events; c) Policy for handling reserved information in accordance with what is established in Article 35 of the Securities Market Law and in subsection c) of Article 35 of the Law on Supervision and Regulation of the Financial System, which includes procedures for identifying reserved information and incorporates potential events that may be classified as reserved information; and d) Identification of persons with access to reserved information, as well as the deduction of responsibilities and behavioral standards of said persons.

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

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

The internal register of material event information may be kept physically or electronically, according to the internal policies of each entity.

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

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

The responsibility for this material event statement lies with [name of the entity disclosing].

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

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

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

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

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

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

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

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

CHAPTER IV
SUBMISSION OF MATERIAL EVENT INFORMATION TO THE SUPERINTENDENCY

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

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

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

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

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

CHAPTER V
OTHER PROVISIONS AND VALIDITY

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

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

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

Unforeseen Aspects
Art. 17.- Aspects not provided for in the regulation in these Standards will be resolved by the Central Bank through its Committee of Standards.

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

Annex No. 1
EXEMPLARY LIST OF MATERIAL EVENTS

1. General information about the entity:
   a) Changes of domicile, address, telephone, fax, email.

2. Information about the entity's organizational structure:
   a) Changes in the entity's organizational structure; b) Changes in the clauses of the deed of incorporation, such as:
   i. Increase or decrease in social capital;
   ii. Change in corporate name;
   iii. Term of the entity;
   iv. Any other change that modifies its clauses;
   c) Changes in the members of the society's administrative bodies or the members of the Board of Directors, general management, chief executive officer, personnel with managerial positions, auditors, liquidators, legal representatives, or general administrative attorneys, as well as the reasons that motivated them; d) Modifications to the bylaws; e) Modifications in the composition of the business group to which the entity belongs; f) Investments of more than 50 percent of the capital of other societies; g) Seizure of entity assets; h) Liquidation processes of the entities; i) Information on changes in the list of shareholders, when variations in the number of shareholders who directly or indirectly have a participation equal to or greater than 10 percent; j) Acquisition or sale of societies that are part of the business group; k) Mergers, acquisitions, and alliances with other societies; and l) Changes in the members of the entity's audit committee, as well as the rating committee, in the case of risk rating companies.

3. Information about the entity's business:
   a) Opening of branches or agencies; b) Strategic alliances with other entities or groups; c) Changes in the regulatory and sectoral framework in issuers, which significantly affect the activities of the entity or its group; d) Acquisition of franchises by the entity; e) Granting, modification, or revocation of concessions to the entity or to the legal entities it controls or in which it has significant influence; and

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

4. Information about registered securities:
   a) Report of seizure of registered securities issued by the registered society, detailing the pertinent data for their identification; b) Early redemptions of securities, when so authorized in the registered characteristics; c) The rating of the securities and their modifications, if any, carried out by any securities rating institution, local or foreign; d) Public Offers to Acquire Securities; e) Delay in updating the risk ratings of debt issuances; f) Deterioration of assets given as collateral for the issuance or of the financial situation of guaranteeing companies. Reference variable: total equity; g) Investments by members of the board of directors and shareholders of the brokerage house, in 25 percent or more in other societies, or 10 percent in another brokerage house; h) Suspension or cancellation of the quotation of the issuer entity's securities; i) Acts, facts, or events related to public offers of securities; j) Suspension of trading of an issuer or any other precautionary measure adopted, with indication of the term; and k) Changes in the ratings granted, with indication of the previous and current rating and the reasons that justified the change, in the case of risk rating companies.

5. Information on the entity's financial situation:
   a) Distribution of profits either by payment of cash dividends or capitalization; b) Sale of the main productive assets of the society, that is, the assets that allow obtaining economic profitability for the entity; c) Revaluation of fixed assets; d) Any fact or decision that affects investment and financing policy and that affects cash flow; e) Acquisition of other types of financial assets or granting of guarantees on those assets; f) Adoption of decisions and execution of investment plans; g) Variations in the company's financial projections, presented in the prospectus, in the financial statements, in a material event statement, or in information disseminated by any communication medium; h) Losses incurred that are not considered as part of normal business, with indication of the main causes of the loss and the measures the company has taken to normalize the situation;

Annex No. 1
i) Changes in the valuation of assets and liabilities; j) Debt operations or warrants convertible or exchangeable into capital; and k) Creditors' bankruptcy or bankruptcy of the entity or of the legal entities it controls or of those in which it has significant influence.

6. Other events, such as:
   a) Convocation of General Shareholders' Meetings, as well as the agreements adopted in them; b) Filing of judicial lawsuits against the entity, its administrators for activities developed in the exercise of their duties or its business group, as well as their resolution; c) Final sentences issued by regulatory or supervisory authorities against supervised entities; and d) Liabilities derived from environmental impacts.

CNBCR-14/2021
NDMC-22
TECHNICAL STANDARDS FOR SUBMISSION AND DISCLOSURE OF RELEVANT EVENTS Approval: 04/10/2021 Validity: 21/10/2021
Annex No. 2

INFORMATION ON RELEVANT EVENTS

No. Name Description
1 Entity Name Corresponds to the name of the Entity.
2 Date of file submission of information Corresponds to the date on which the Entity submits the information to the Superintendence.
3 Date of information on the relevant event Indicate the date or dates on which the event, occurrence, or decision-making occurred.
4 Title
5 Relevant Event Indicate the relevant event in accordance with what is established in Article 5 and Annex No. 1 of these Standards.
6 Description The information must be communicated clearly and completely, indicating antecedents, circumstances, or subjects that gave rise to it; as well as specifying whether the relevant event requires any subsequent ratification or legalization procedure, for the purposes of its official concretization. 7 Value Indicate the amount of the transaction or operation when applicable, noting the effect that the event or information might produce on the Entity.