Technical Standards for the Management of Resources of a Securitization Fund by the Representative of Security Holders Prior to Total Integration

NDMC-31
TECHNICAL STANDARDS FOR THE MANAGEMENT OF RESOURCES OF A SECURITIZATION FUND BY THE REPRESENTATIVE OF SECURITY HOLDERS PRIOR TO TOTAL INTEGRATION Approval: 14/12/2023 Validity: 02/01/2024

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

CONSIDERING:

I. That Article 48 of the Asset Securitization Law establishes that the Securitization Company shall have fulfilled its obligation to fully integrate the constituted Securitization Fund when the certification to that effect, to be issued by the Representative of the Security Holders, is added to the entry in the Registry, stating that the assets constituting the active estate have been duly transferred, free of encumbrances, prohibitions, or seizures, and in custody where applicable; and that the other requirements determined in the Securitization Contract or in the complementary deeds have been met.

II. That Article 49 of the Asset Securitization Law establishes that the resources received by the Representative of the Security Holders pursuant to what is stipulated in Article 48 of the aforementioned law, must be maintained in bank deposits or invested in liquid, fixed-income securities with a low level of risk, and the characteristics of said securities must be established in the Securitization Contract, in accordance with the technical regulations issued for this purpose.

III. That the first paragraph of Article 83 of the Asset Securitization Law states that, in addition to banks and stock brokerage firms, other legal entities authorized by the Superintendence of the Financial System may serve as Representative of the Security Holders.

IV. That Article 7, letters q) and u) of the Law on Supervision and Regulation of the Financial System, establish that securitization companies and other operations specified by the laws are subject to the provisions of the Law on Supervision and Regulation of the Financial System and, therefore, to the supervision of the Superintendence of the Financial System.

V. That Article 99, letter e) of the Law on Supervision and Regulation of the Financial System, regulates that it is the responsibility of the Committee of Standards of the Central Bank of Reserve of El Salvador to establish technical criteria to determine acts and operations considered contrary to stock market practices or sound market practices.

THEREFORE,

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

NDMC-31
TECHNICAL STANDARDS FOR THE MANAGEMENT OF RESOURCES OF A SECURITIZATION FUND BY THE REPRESENTATIVE OF SECURITY HOLDERS PRIOR TO TOTAL INTEGRATION Approval: 14/12/2023 Validity: 02/01/2024

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE MANAGEMENT OF RESOURCES OF A SECURITIZATION FUND BY THE REPRESENTATIVE OF SECURITY HOLDERS PRIOR TO TOTAL INTEGRATION

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the criteria to which the Representative of the Security Holders must adhere regarding the investments made with the resources of the Securitization Funds prior to their total integration.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the Representatives of the Security Holders, in accordance with what is established in the Asset Securitization Law.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Bank of Reserve of El Salvador; b) Fund(s): Securitization Funds; c) Securitization Law: Asset Securitization Law; d) Representative of the Security Holders: Legal entity responsible for representing the owners of the securities of each Fund according to what is established in the Law; e) Superintendence: Superintendence of the Financial System; and, f) Securitization Company: Securitization society registered with the Superintendence of the Financial System.

CHAPTER II
MANAGEMENT OF RESOURCES

Object of Investments
Art. 4.- The investments made with resources from the Funds shall aim to obtain profitability, based on the characteristics and requirements defined in the Securitization Contract, in accordance with these Standards, and must in all cases preserve the value of the capital.

NDMC-31
TECHNICAL STANDARDS FOR THE MANAGEMENT OF RESOURCES OF A SECURITIZATION FUND BY THE REPRESENTATIVE OF SECURITY HOLDERS PRIOR TO TOTAL INTEGRATION Approval: 14/12/2023 Validity: 02/01/2024

Art. 5.- The resources received by the Representative of the Security Holders pursuant to what is stipulated in Article 49 of the Securitization Law, must be maintained in:
a) Bank deposits; or b) Investments in securities.

Art. 6.- Decisions regarding the percentage of the investment amount in a specific type of instrument shall be the exclusive responsibility of the Representative of the Security Holders, within the framework of the investment policy established for the Fund.

Art. 7.- The investment policies for the resources, with the detail of types of instruments, must be defined in the Securitization Contract. Such policy shall stipulate at least the permitted assets, the investment objective, as well as the maximum permitted investment limits.

On Bank Deposits
Art. 8.- Resources may be maintained in Savings Deposits and Time Deposits; the term of the latter must be shorter than the estimated period for the issuance of the certification by the Representative of the Security Holders regarding the constitution of the Fund, as referred to in Article 48 of the Securitization Law. The bank deposits referred to in the preceding paragraph must be maintained in banks authorized to operate in the jurisdictions in which they are domiciled, in accordance with what is established in the Securitization Contract.

On Securities
Art. 9.- The resources received by the Representative of the Security Holders must be invested in public offering securities, in accordance with the provisions of the Securities Market Law and, in accordance with Article 49 of the Securitization Law, meet the following characteristics:
a) That they be Fixed-Income securities; b) That they be liquid securities. Understood as those that are easily realizable and have high marketability; and c) That, at the time of making the investment, they be securities with a risk classification of -1), in accordance with Article 95-B of the Securities Market Law, by two Risk Rating Agencies. It is understood that, in all cases, the maturity date of the aforementioned securities must be shorter than the estimated period for the issuance of the certification by the Representative of the Security Holders regarding the constitution of the Fund, as referred to in Article 48 of the Securitization Law.

NDMC-31
TECHNICAL STANDARDS FOR THE MANAGEMENT OF RESOURCES OF A SECURITIZATION FUND BY THE REPRESENTATIVE OF SECURITY HOLDERS PRIOR TO TOTAL INTEGRATION Approval: 14/12/2023 Validity: 02/01/2024

Investment of Resources
Art. 10.- The Fixed-Income securities in which the resources received by the Representative of the Security Holders are invested must be any of the following:
a) Securities issued by the State of El Salvador and the Central Bank or guaranteed by them; b) Securities issued by issuers authorized by the Superintendence representing individual participation in a collective credit; and c) Foreign securities authorized by the Superintendence for trading in accordance with Article 10 of the Securities Market Law, with the exception of those issued by societies, corporations, or any type of private legal entities of any foreign country.

Art. 11.- The Representative of the Security Holders may not invest the resources referred to in these Standards in securities issued by another Fund that it represents or that the Securitization Company administers. Nor may it lend or borrow money from the Fund's resources, or grant guarantees to it and vice versa. Likewise, the Representative of the Security Holders may not incur expenses associated with the assets that will be integrated into the Fund before this occurs. This last point is excepted for the payment of the valuation appraisal referred to in Article 51 of the Securitization Law, as well as the payment for the acquisition of said assets.

Art. 12.- Resources may not be invested in deposits or securities issued or guaranteed by entities of the same financial conglomerate or business group as the Representative of the Security Holders, the Securitization Company, or the custodian, understood in accordance with what is defined in the Banks Law and the Securities Market Law, respectively.

Art. 13.- The securities, including time deposit certificates, in which the Representative of the Security Holders invests or maintains the resources it administers, must, according to their nature, be deposited for custody in a bank, or in a Specialized Society for the Deposit and Custody of Securities authorized to provide this service.

Art. 14.- While the Representative of the Security Holders has not added the certificate referred to in Article 48 of the Securitization Law, it shall be responsible for collecting and receiving payment for the securities issued by the Fund, and must deposit these resources into the respective Fund. For these purposes, no later than one business day after the date of granting the Securitization Contract, the Representative of the Security Holders must proceed to open, in the name of the respective Fund, a deposit in a bank authorized by the Superintendence to conduct passive operations in the country, with the purpose of crediting to it the amounts of money that must be delivered as a result of the placement and settlement of the securities issued by the corresponding Fund, solely for the purpose that the Representative of the Security Holders may make the corresponding investments in accordance with what is established in these Standards. Having added the certification referred to in Article 48 of the Securitization Law to the Registry, the Representative of the Security Holders must immediately transfer to the bank account that has been opened by the Securitization Company in the name of the respective Fund, the amounts of money or, in its case, transfer the securities, that correspond to the respective Fund. Once the aforementioned certification has been added to the Registry, it shall be the responsibility of the Securitization Company to collect and receive payment for the securities that have been issued by the respective Fund.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

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

Repeal
Art. 16.- These Standards repeal the Standard for the Management of Resources of a Securitization Fund by the Representative of Security Holders Prior to Total Integration (CTG-9/2008) approved by the Board of Directors of the Superintendence of Securities in Session No. CD-22/2008 of June 10, 2008, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Gazette No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 17.- Aspects not foreseen in terms of 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 January 2, 2024.