Technical Standards for the Authorization, Registration, and Operation of Voluntary Pension Savings Funds

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 49 CNBCR-11/2022 NSP-59 TECHNICAL STANDARDS FOR THE AUTHORIZATION, REGISTRATION, AND OPERATION OF VOLUNTARY PENSION SAVINGS FUNDS Approval: 30/12/2022 Validity: 30/12/2022

THE COMMITTEE OF THE CENTRAL BANK OF EL SALVADOR,

CONSIDERING: I. That by Legislative Decree No. 614, dated December 20, 2022, published in Official Diary No. 241 Volume No. 437, of the 21st of the same month and year, the Comprehensive Law of the Pension System was issued. II. That Article 133 of the Comprehensive Law of the Pension System establishes that Voluntary Pension Savings Funds will be offered by Pension Fund Administrators, Banks, Cooperative Banks, Fund Managers, and Savings and Credit Societies, in accordance with the regulations applicable to them, and will be governed by the provisions of Chapter I of Title II of said Law and, where applicable, by the Investment Funds Law. III. That Article 135 of the Comprehensive Law of the Pension System establishes that Voluntary Pension Savings Funds must be recorded in the Public Registry of the Superintendence of the Financial System and that institutions administering said Funds must submit to the approval of the Superintendence of the Financial System the various plans offered to natural persons and employers. IV. That Article 140 of the Comprehensive Law of the Pension System authorizes the institution that administers the Voluntary Pension Savings Funds to charge commissions for their administration, which may be differentiated according to the Plan selected by the natural person or the employer.

V. That Article 141 of the Comprehensive Law of the Pension System establishes that the Central Bank of El Salvador will issue the necessary Technical Standards that allow for the development of Voluntary Pension Savings Funds.

VI. That Article 159 of the Comprehensive Law of the Pension System establishes that the Central Bank of El Salvador will issue the necessary Technical Standards that allow for the development of what is established in the referred Law. VII. That Article 3 letter h) of the Law of Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendence of the Financial System to authorize the registrations, registry entries, modifications, and cancellations of persons, institutions, and operations that are subject to said requirement, in accordance with the laws on the matter.

VIII. That according to Article 35 of the Law of Supervision and Regulation of the Financial System, it corresponds to the members of the financial system: the adoption and updating of policies on ethical standards of conduct, management of conflicts of interest, use of insider information, prevention of behaviors that could imply manipulation or abuse of the market, as well as compliance with principles, rules, or standards in the management of business that establish to achieve their corporate objectives. IX. That the figure of Voluntary Pension Savings Funds is a savings mechanism that makes it possible to increase the mass of savings of individuals, which will complement the resources that affiliates accumulate through mandatory pension savings. X. That Article 9 second paragraph number 10 of the Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction regulates that obligated subjects must establish internal audit mechanisms, using the principle of risk-based administration, to verify compliance with what is prescribed in said Law. (1) XI. That Article 15 first paragraph of the Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction establishes that obligated subjects to achieve identifying their clients and users, including the controller, recipient, or final beneficiary, managing the risks associated with them and obtaining appropriate information about the commercial relationships entered into or their continuity, must take reasonable measures to carry out due diligence procedures. (1)

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

AGREES to issue the following: TECHNICAL STANDARDS FOR THE AUTHORIZATION, REGISTRATION, AND OPERATION OF VOLUNTARY PENSION SAVINGS FUNDS

CHAPTER I OBJECT, SUBJECTS, AND TERMS

Object Art. 1.- These Standards have as their object to regulate the requirements and procedures for the registration and operation of Voluntary Pension Savings Funds, minimum requirements and provisions that financial institutions administering Voluntary Pension Savings Funds must attend to, as well as other provisions applicable to the administration of said Funds.

Subjects Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the Financial Institutions interested in requesting the registry entry of one or more Voluntary Pension Savings Funds in the Public Registry of the Superintendence of the Financial System. The financial institutions that can request the authorization of a Voluntary Pension Savings Fund are the following: a) Banks regulated by the Banks Law; b) Cooperative Banks regulated by the Law of Cooperative Banks and Savings and Credit Societies; c) Investment Fund Managers regulated by the Investment Funds Law and authorized by the Superintendence of the Financial System; d) Pension Fund Administrators, regulated by the Comprehensive Law of the Pension System; and e) Savings and Credit Societies regulated by the Law of Cooperative Banks and Savings and Credit Societies.

Terms Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) AFP: Pension Fund Administrators authorized by the Superintendence of the Financial System; b) Contributions: Resources or sum of money that are delivered to an Institution Administrator of Voluntary Pension Savings Funds by a natural person or by the employer to the individual voluntary savings account of the participant; c) Central Bank: Central Bank of El Salvador; d) Financial Conglomerate: In accordance with Article 113 of the Banks Law, it is a set of companies characterized by the fact that more than fifty percent of their respective share capitals are owned by a controlling company, which is also a member of the Conglomerate. The controlling company of the Conglomerate may be a company of exclusive purpose or a bank constituted in the country; e) Individual Account: Individual voluntary pension savings account in the name of a natural person, which contains the data of contributions, transfers, and withdrawals made by natural persons or by the employer if applicable, and the returns generated by said contributions; f) Custodian: Company specialized in the deposit and custody of securities registered in the Public Registry of the Superintendence of the Financial System;

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 2 of 49 CNBCR-11/2022 NSP-59 TECHNICAL STANDARDS FOR THE AUTHORIZATION, REGISTRATION, AND OPERATION OF VOLUNTARY PENSION SAVINGS FUNDS Approval: 30/12/2022 Validity: 30/12/2022 g) Employer: Natural or legal person who agrees by means of a contract or institutional plan, to make contributions to the individual account of a natural person with whom they maintain a labor relationship; h) Commercial Entity: Stockbrokerage houses, as well as any other legal person authorized by the Superintendence of the Financial System, that has signed a mandate contract with an Administrator Institution for the commercialization of Voluntary Pension Savings Funds; i) Fund or Voluntary Fund: Voluntary Pension Savings Funds; j) Business Group: In accordance with Article 5 letter n) of the Securities Market Law, it is that in which a company or set of companies have a common controller, who acting directly or indirectly participates with fifty percent as minimum in the share capital of each of them or that have common shareholders who, directly or indirectly, are holders of fifty percent as minimum of the capital of another company, which allows to presume that the economic and financial performance is determined by common interests or subordinate to the group; k) Administrator Institution: Financial institution that offers Voluntary Funds which are registered in the Public Registry of the Superintendence of the Financial System. The administrator institutions that can offer Voluntary Pension Savings Funds are those indicated in Article 2 of these Standards; l) Special Law for the Prevention of Money Laundering: Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction; (1) m) Funds Law: Investment Funds Law; n) Supervision Law: Law of Supervision and Regulation of the Financial System; o) SP Law: Comprehensive Law of the Pension System; p) Significant Amount: Those that, when withdrawn on a given day, require the liquidation of a significant part of the Fund's investment portfolio, under conditions such that it could be expected that said withdrawals, by themselves, generate a considerable decrease in the value of the Fund's assets; q) Participant: Natural person in whose name the individual voluntary pension savings account is located; r) Related or linked persons or entities: Refers to persons or entities in which another company, without controlling it, participates in its social capital, directly or through other companies. For the purposes of each of the applicable subjects of these standards, what is established in Article 204 of the Banks Law, articles 50 and 161 of the Law of Cooperative Banks and Savings and Credit Societies, Article 5 of the Securities Market Law, Article 90 of the Comprehensive Law of the Pension System, and Article 29 of the Investment Funds Law must be considered; s) Investment Policy: Corresponds to the guidelines defined in the prospectus of each Voluntary Fund and which indicates the characteristics and diversification of the securities in which the Fund invests, the minimum and maximum investment limits in each of the types of assets; t) Prospectus: Corresponds to the instrument that contains the characteristics of each Voluntary Pension Savings Fund, as well as the description of its operation; u) Registry: Public Registry of the Superintendence of the Financial System; v) Withdrawal: Corresponds to the total or partial payment of the resources from the balance of the participant's individual account; w) Superintendence: Superintendence of the Financial System; and x) Transfer: Corresponds to the total or partial sending of resources from one individual account to another or other individual accounts of the same holder in the same or other authorized Voluntary Pension Savings Funds.

CHAPTER II GENERAL PROVISIONS ON VOLUNTARY PENSION SAVINGS FUNDS

Administrators of Voluntary Pension Savings Funds Art. 4.- The entities that can request the authorization and registration of Voluntary Funds in the Superintendence will be the financial institutions indicated in Article 2 of these Standards.

Approval of the Central Bank Art. 5.- Banks that are interested in administering or commercializing Voluntary Funds must have the approval of the Central Bank, in accordance with what is established in Article 51 letter w) of the Banks Law prior to their request for Fund Registration in the Superintendence. In the case of Cooperative Banks and Savings and Credit Societies, they must have the favorable opinion of the Central Bank, in accordance with what is regulated in Articles 34 letter s) and 158 letter s) of the Law of Cooperative Banks and Savings and Credit Societies, prior to requesting the Fund Registration in the Superintendence. When a Cooperative Bank is only authorized to capture money from its partners or associates, it will only offer them the service of administering Voluntary Funds.

Regarding the Voluntary Pension Savings Fund Art. 6.- In accordance with what is established in Article 134 of the SP Law, each Fund is an independent patrimony different from the entity that administers it, which is characterized by a level of diversification of its investments according to the investment policies established in its investment prospectus. The Fund will be expressed in shares of equal amount and characteristics and will be determined daily based on the market value of the investments in accordance with what is established in Article 54 of these Standards. Art. 7.- The Administrator Institution may offer different Funds which will differ by investment policy, the terms of their investments, characteristics of entry and permanence in the Fund, and the risk profile of the participants and employers, to which the referred Funds are destined, observing for this, what is established in Chapter I of Title II of the SP Law and the provisions established in the "Technical Standards for the Investments of Voluntary Pension Savings Funds" (NSP-60), approved by the Central Bank through its Committee of Standards.

Segregation of Functions Art. 8.- The Administrator Institution must guarantee that there is adequate comprehensive risk management, with the proper segregation of functions and responsibilities, as well as the hierarchical levels of support operational areas, business areas, and control that participate in the Fund administration process, as well as the levels of dependence, in accordance with the size and nature of its operations. When the referred institution belongs to a financial conglomerate, the provisions established in Article 134 of the Banks Law must be observed. In addition, the Administrator Institution must comply with the highest ethical standards of conduct and act with due diligence in the administration of the Fund, observing for this what is established in Article 35 letter c) of the Law of Supervision and Regulation of the Financial System.

Participant and Employer Profile Art. 9.- The Administrator Institution must clearly and precisely establish in the Voluntary Savings prospectus the investment policy of the Fund. The Administrator Institution or the commercial entity must have policies and procedures to determine the risk profile of the participant or employer, in order to categorize them correctly; for this, the Administrator Institution must inform clearly, timely, and precisely about the characteristics of the Fund and the investment policy, considering additionally the knowledge and experience of these in relation to the values in which the Fund invests, objective and preference of the investments of the participant and employer, and the risk that they wish to assume. The Administrator Institution will be responsible for documenting and leaving a record of the result of the profile and of informing the participant or employer of said result. If the employer is an entity considered as an "institutional investor" in accordance with what is established in the "Technical Standards for the Process and Registration of Buy and Sell Orders of Securities of Stockbrokerage Houses" (NDMC -01), the determination of the risk profile referred to in this article will not be applicable.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 49 CNBCR-11/2022 NSP-59 TECHNICAL STANDARDS FOR THE AUTHORIZATION, REGISTRATION, AND OPERATION OF VOLUNTARY PENSION SAVINGS FUNDS Approval: 30/12/2022 Validity: 30/12/2022 Art. 10.- In the case that a future participant or employer requires the Administrator Institution or commercial entity to be part of a Fund whose risk characteristics associated with the Fund's investments and investment policy are not in accordance with their risk profile, the determined risk category must be documented and that these entities issued a warning of the main risks and characteristics of the investments in which the Fund will invest, for this the Administrator Institution will be responsible for having validation mechanisms, that evidence the acceptance and knowledge by the participant or employer of the result of their risk profile, as well as the warnings that were made to them. Art. 11.- In the case that a participant or employer expressly requests that their profile not be performed or determined, the Administrator Institution must obtain a document from them, in which prior to joining the Fund, they indicate the following: a) That they requested that the profile not be applied to them; b) That they understand and accept the characteristics and risks of the Fund in which they will invest; c) That they do not require the advice or recommendations of the Administrator Institution to invest in the Fund; and d) Specification by the Administrator Institution to the participants or employers of the characteristics of the investments that make up the Fund in which they wish to invest. When participants are linked to contracts or institutional plans, it will be the employer to whom the requirements established in this article and in articles 9, 10, and 11 of these Standards are required.

Commercialization of Funds Art. 12.- The commercialization of Funds can be carried out directly by the administrator institutions or by a commercial entity, in accordance with the requirements and procedures established in the "Technical Standards for the Commercialization of Participation Shares of Open Investment Funds" (NDMC -10), approved by the Central Bank through its Committee of Standards. For these purposes, when in NDMC-10 reference is made to Investment Fund Managers, participation shares of Salvadoran Open Investment Funds, participant, placement, redemption of participation shares, and internal regulations, it will be understood that it refers to the Administrator Institution, Voluntary Pension Savings Funds, Fund participants, contributions to the participant's individual account, withdrawals from the participant's individual account, and Fund prospectus, respectively.

Additionally, when in NDMC-10, reference is made to the "Technical Standards for the Authorization, Registration, and Operation of Investment Funds" (NDMC -06), for the purposes of Voluntary Pension Savings Funds, it will be understood that they are the provisions referred to these Standards.

Regarding commercializing agents Art. 13.- For a natural person to provide services as a commercializing agent of Funds, they must be previously authorized by the Superintendence, complying with the requirements and procedures relative to the authorization of natural persons as commercializing agents, contained in the "Technical Standards for the Commercialization of Participation Shares of Open Investment Funds" (NDMC -10), approved by the Central Bank through its Committee of Standards. Art. 14.- Commercializing agents who have been authorized by the Superintendence to commercialize participation shares of Open Investment Funds prior to the validity of these Standards and who are working for an Administrator Institution authorized to offer Voluntary Pension Savings Funds, can commercialize said Funds. For these purposes, the Administrator Institution must notify the Superintendence of said situation and communicate any change related to the information presented for the agent commercializing authorization request, at the latest within five business days following the occurrence of the change, sending the corresponding documentation within a maximum period of thirty days subsequent to said communication. Pension Fund Administrators that administer a Fund, will commercialize said Funds through pension service agents referred to in Article 70 of the SP Law, these being authorized as commercializing agents in accordance with the provisions established in the "Technical Standards for the Commercialization of Participation Shares of Open Investment Funds" (NDMC -10), approved by the Central Bank through its Committee of Standards, with the exception of the requirement established in letter b) of Article 28. In any case, pension agents at the time of requesting authorization as a commercializing agent of a Fund, must have a university degree registered or incorporated in the Ministry of Education and accredit at least one hundred twenty-five hours of training in stock and financial topics. In the case that they do not have a university degree