Technical Standards for the Registration and Commercialization of Participation Quotas of Foreign Investment Funds

NDMC-14
TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS Approval: 10/25/2017 Validity: 11/15/2017

THE COMMITTEE OF STANDARDS OF THE CENTRAL RESERVE BANK OF EL SALVADOR, CONSIDERING:
I. That Article 111 of the Investment Funds Law establishes that to carry out the commercialization of participation quotas of Foreign Investment Funds in El Salvador, they must be previously registered with the Financial System Superintendence.
II. That Article 112 of the Investment Funds Law establishes that Investment Fund Managers constituted in accordance with the Investment Funds Law that wish to commercialize participation quotas of Foreign Investment Funds must obtain authorization from the Financial System Superintendence.
III. That Article 116 of the Investment Funds Law establishes that the commercialization of participation quotas of Open Foreign Investment Funds may be carried out by the Manager, through Stockbrokerage Houses, or by legal entities authorized by the Board of Directors of the Financial System Superintendence, in accordance with the requirements established by technical norms issued by the Central Reserve Bank of El Salvador.
IV. That Article 118 of the Investment Funds Law establishes that the Central Reserve Bank of El Salvador will issue technical norms regarding the authorization, registration, and commercialization of participation quotas of Foreign Investment Funds.
V. That Article 6, letters o), p), and q) of the Securities Market Law, establishes that the Public Stock Registry will have a Registry of participation quotas of Open and Closed Foreign Investment Funds and of entities authorized to commercialize participation quotas of Foreign Investment Funds.
VI. That Article 3, letter h) of the Law on Supervision and Regulation of the Financial System, establishes that it is the competence of the Financial System Superintendence to authorize the registrations, registry entries, modifications, and cancellations thereof, of the persons, institutions, and operations subject to such requirement, in accordance with the laws on the matter.

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

NDMC-14
TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS Approval: 10/25/2017 Validity: 11/15/2017

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the requirements and procedures to register participation quotas of Foreign Investment Funds in the Public Stock Registry of the Financial System Superintendence for their respective commercialization in El Salvador, as well as the minimum requirements and provisions that legal entities interested in commercializing said participation quotas and other applicable provisions regarding the provision of commercialization services must attend to.

Subjects
Art. 2.- The subjects obliged to comply with these Standards are:
a) Investment Fund Managers authorized by the Financial System Superintendence; b) Stockbrokerage Houses interested in commercializing participation quotas of Foreign Investment Funds; c) Other legal entities interested in being authorized by the Financial System Superintendence to commercialize participation quotas of Open Foreign Investment Funds; and d) Stockbrokerage Houses, as well as other legal entities, authorized to commercialize participation quotas of Open Foreign Investment Funds.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Foreign Fund Administrator: Management or administrative company of the Foreign Investment Fund; b) Commercialization Agent: Natural person who works for a Manager or an agent to provide specialized advice and carry out the promotion, placement, and purchase or sale of participation quotas of Foreign Investment Funds; c) Central Bank: Central Reserve Bank of El Salvador; d) House: Stockbrokerage House authorized and registered in the Financial System Superintendence;

NDMC-14
TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS Approval: 10/25/2017 Validity: 11/15/2017 e) Commercialization of Foreign Investment Funds: Promotion, placement, purchase, or sale of participation quotas of Investment Funds authorized in other countries; f) Agent company for commercialization or agent: Stockbrokerage House, or another legal entity authorized by the Financial System Superintendence, that has signed an agency contract with a Manager for the commercialization of participation quotas of Open Foreign Investment Funds; g) Foreign Funds: Investment Funds constituted and authorized in other countries. Includes Open Foreign Investment Funds and Closed Foreign Investment Funds; h) Open Foreign Funds: Open Investment Funds constituted and authorized in other countries; i) Closed Foreign Funds: Closed Investment Funds constituted and authorized in other countries; j) Manager: Investment Fund Management Company authorized and registered in the Financial System Superintendence; k) Member of the financial system: Subject defined as such according to Article 7 of the Law on Supervision and Regulation of the Financial System; l) Investor: Natural or legal person interested in acquiring participation quotas of a Foreign Investment Fund; m) Funds Law: Investment Funds Law; n) Participant: Investor in an Investment Fund; o) Registry: Public Stock Registry of the Financial System Superintendence; and p) Superintendence: Financial System Superintendence.

CHAPTER II
AUTHORIZATION AND REGISTRATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS IN THE PUBLIC REGISTRY OF THE FINANCIAL SYSTEM SUPERINTENDENCE

Content of the authorization and registration request Art. 4.- Managers interested in commercializing participation quotas of Foreign Funds must submit to the Superintendence a request, signed by their legal representative or attorney-in-fact, which must contain at least the following information:
a) General information about the Foreign Fund of which they are interested in commercializing the participation quotas, considering as a minimum, the name of the Fund, date of authorization, years of operation, and country of origin. In the case of Closed Foreign Funds, the term of the Fund and its expiration date must also be included, as appropriate to the characteristics of the Fund; (1) b) General information about the administrator of the Foreign Fund of which they are interested in commercializing the participation quotas, considering as a minimum the name, date of constitution, years of experience, and amounts managed; and c) Indication of compliance by the Manager with the conditions established in Article 113 of the Funds Law.

Documents attached to the request for the registration of quotas Art. 5.- The Manager, for the purpose of requesting the entry of Foreign Fund quotas in the Registry, must attach to the authorization and registration request the following documentation:
a) Documentation that allows corroborating that said Foreign Funds meet the conditions established in Article 113 of the Funds Law, according to the classification of the Fund; b) Copy of the document issued by the corresponding authority of the country where the Foreign Fund was originally authorized, accrediting its constitution and authorization, according to the applicable legislation; c) Copy of the document issued by the corresponding authority of the country of origin, proving that the administrator of the Foreign Fund is registered and constituted according to the applicable legislation in the country of origin; d) Current risk classification of the Foreign Fund, which must be issued by a foreign risk rating agency recognized by the Securities and Exchange Commission (SEC) of the United States of America, or that has been granted by foreign risk rating agencies registered with the securities market regulatory body of their respective country of origin. In the event that the Foreign Fund does not have a risk classification because it is not required in its country of origin, the documentation detailed in Article 9 of these Standards must be attached to this request; e) Copy of the Internal Regulations of the Foreign Fund, offering circular, or similar document, in accordance with the applicable regulations of the country of origin. Additionally, relevant information about the Foreign Fund must be presented, as a minimum: the name of the Fund, date of authorization, country of origin, composition of the Fund's investments by type of investment, and general information about the managing company of the Fund, such as the name of the society, experience, capital, and amounts managed. In the case of Open Foreign Funds, the number of quotas placed as of the date of the registration request must also be identified, and in the case of Closed Foreign Funds, the term of the Fund and its expiration date, as appropriate to the characteristics of the Fund; (1)

NDMC-14
TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS Approval: 10/25/2017 Validity: 11/15/2017 f) Copy of the last annual report and the last periodic report of the Foreign Fund, or similar documents, to which investors in the country of origin have access. In the event that these reports are available through the website of the administrator of the Foreign Fund, the access path to them must additionally be indicated; g) Audited annual financial statements of the Fund, corresponding to the last two years, in accordance with the legal requirements established in its jurisdiction, including the respective auditor's report, provided that it is required in its country of origin. In the event that the Fund does not have this time of constitution, a financial statement of the last period, duly audited, must be presented, provided that it is required in its country of origin; h) Detail of commissions and charges to which the participation quotas will be subject in the country of origin of the Fund and that will be borne by the Fund and participant, as well as other obligations and legal provisions that regulate the Fund in the country of origin; i) Summary of essential information or relevant events of the Foreign Fund occurred during the last six months, reported as such in the Fund's market of origin.

Additionally, the Manager must send to the Superintendence a Sworn Declaration signed by its legal representative or attorney-in-fact with the respective notarial authentication, in which it is indicated that the information accompanying the request is complete, according to what is established in this article. The Manager will request from the administrator of the Foreign Fund all the necessary information that allows it to make a valuation of the convenience of starting said contractual relationship, taking into consideration the current legal framework. (1) The instruments or information that by virtue of this article must be presented before the Superintendence or delivered to the participants must be in the Spanish language. The instruments or information that must be accompanied by their corresponding translation according to the Law on Notarial Exercise of Voluntary Jurisdiction and other Diligences and international treaties or conventions, when they are in a language other than Spanish, are those established in letters b) and c) of this article. (1)

Documents for the commercialization authorization attached to the request Art. 6.- The Manager, for the purpose of requesting authorization for the commercialization of quotas of Foreign Funds, must attach to the authorization and registration request, in addition to the information established in the previous article, the following documentation:
a) Certification of the agreement of the Board of Directors of the Manager in which the commercialization of participation quotas of Foreign Funds was agreed upon, indicating that it has evaluated the risks of the Fund, as well as the name of the Fund from which the quotas will be commercialized; b) Contract or document in which the express authorization of the administrator of the Foreign Fund is recorded for the Manager to exercise commercialization in the country; c) Detail of the personnel that will participate in the commercialization of quotas of Foreign Funds, which includes the name, age, profession, and domicile, as well as a copy of the documentation accrediting compliance with what is established in Article 39 of these Standards; d) Procedures manual for the commercialization of participation quotas of Foreign Funds, in accordance with what is established in Article 46 of these Standards; e) Description of the computer platform for the control of the commercialization of participation quotas of Foreign Funds; f) Policies and procedures approved by the Board of Directors of the Manager for the determination of the investor profile, which must include as a minimum what is established in Article 117 of the Funds Law and the "Technical Standards for the Authorization, Registration, and Operation of Investment Funds" (NDMC-06), approved by the Central Bank through its Committee of Standards; (1) g) Copies of the informational supplement for Salvadoran investors, which will be delivered to those interested in becoming participants of the Foreign Fund, which must consider as a minimum the information of the Foreign Fund being commercialized, managing company of the Fund in the country of origin, costs to be incurred by the participant in the acquisition and redemption of participation quotas, as well as the description of the manner in which the placement and redemption of participation quotas are carried out in accordance with what is established in Annexes No. 1 and No. 2 of these Standards, as appropriate; and h) Policy of information to participants, in accordance with what is established in Article 41 of these Standards.

For the authorization of the commercialization of quotas of Closed Foreign Funds, the Manager must present the documentation referred to in letters a), e), g), and h) of this article. In the case of compliance with letter e), what is established in Article 110 of the Funds Law will be observed. (1)

Art. 7.- The Manager, for the purpose of requesting authorization for the commercialization of quotas of Open Foreign Funds, in addition to the information established in Articles 4, 5, and 6 of these Standards, must attach information regarding the payment agent and the institutions in charge of the custody, liquidation, and compensation of the participation quotas issued by the Open Foreign Fund, detailing the functions or services they perform.

Additionally, the Manager must attach a summary of the evolution of the value of the participation quota, corresponding to the twelve months prior to the registration request. The above information must be presented in accordance with the periodicity established for valuation in the applicable legislation of the country of origin of the Fund.

The Manager must inform about the procedures, formalities, and timeframes in which the subscriptions or redemptions of the participation quotas or the transfer thereof will be effective, when applicable.

Art. 8.- The Manager, for the purpose of requesting authorization for the commercialization of participation quotas of Closed Foreign Funds, in addition to the information established in Articles 4, 5, and the letters indicated in the last paragraph of Article 6 of these Standards, must attach the following information: (1) a) Certificate in which the existence of an agreement signed between a specialized Salvadoran securities deposit and custody company and a foreign one is declared, which facilitates and provides security for the custody and immobilization of the participation quotas subject to negotiation. Such certificate must be issued by the Salvadoran Depositary and it must state that in said agreement, the method of liquidation of the operations has been established; and (1) b) Summary of the volumes traded and average monthly prices corresponding to the twelve months prior to the registration request.

Funds that do not have a risk classification
Art. 9.- In the case of Foreign Funds that do not have a risk classification because it is not required in their country of origin, the Manager, in addition to what is established in Articles 4, 5, 6, 7, and 8 of these Standards, must present the following documentation, as appropriate:
a) Document issued by the Manager of the country of origin of the Fund, accrediting or proving the following:
i) That the Fund has at least one year of operation; ii) Significant number of participants of at least 250 participants or at least 50 participants if among them there is at least one institutional investor for the case of Open Foreign Funds; iii) Significant number of participants of at least 50 participants or at least 10 participants if among them there is at least one institutional investor for the case of Closed Foreign Funds; iv) That the assets of the Fund are at least US$30 million dollars; v) Experience of the foreign administrator of the Fund in portfolio management of at least 3 years; and vi) Amounts managed by the foreign administrator of at least US$60 million dollars. b) Risk classification of the foreign administrator of the Fund, if it has one; c) Repealed; and (1) d) Fund risk management report or similar document, which includes the evaluation of the assets that make up the Fund and the risks associated with it.

The instruments or information that by virtue of this article must be presented before the Superintendence or delivered to the participants must be in the Spanish language. (1)

Procedure for authorization of registration of participation quotas of Foreign Funds and of the Manager as a commercializer (1) Art. 10.- Upon receipt of the authorization and registration request, in accordance with what is established in Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence will proceed to verify compliance with the requirements defined in the Funds Law and in these Standards, within a maximum period of fifteen business days. (1) If the request is not accompanied by the complete and duly formatted information detailed in Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence, due to the lack of necessary requirements, may require the Manager 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 said entity when there are reasons justifying it. (1) The Superintendence in the same notice will indicate to the Manager that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, leaving it free to present a new request. (1) If after the analysis of the documentation presented in accordance with Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will warn the respective Manager once to remedy the deficiencies communicated or present additional documentation or information requested by the Superintendence. (1) The Manager will have a maximum period of ten business days counted from the day following the notification, to remedy the observations or present the additional information requested by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or deficiencies warned requires it. (1) Once the information is received in complete form and the observations are remedied

NDMC-14
TECHNICAL STANDARDS FOR THE REGISTRATION AND COMMERCIALIZATION OF PARTICIPATION QUOTAS OF FOREIGN INVESTMENT FUNDS Approval: 10/25/2017 Validity: 11/15/2017 f) Copy of the last annual report and the last periodic report of the Foreign Fund, or similar documents, to which investors in the country of origin have access. In the event that these reports are available through the website of the administrator of the Foreign Fund, the access path to them must additionally be indicated; g) Audited annual financial statements of the Fund, corresponding to the last two years, in accordance with the legal requirements established in its jurisdiction, including the respective auditor's report, provided that it is required in its country of origin. In the event that the Fund does not have this time of constitution, a financial statement of the last period, duly audited, must be presented, provided that it is required in its country of origin; h) Detail of commissions and charges to which the participation quotas will be subject in the country of origin of the Fund and that will be borne by the Fund and participant, as well as other obligations and legal provisions that regulate the Fund in the country of origin; i) Summary of essential information or relevant events of the Foreign Fund occurred during the last six months, reported as such in the Fund's market of origin.

Additionally, the Manager must send to the Superintendence a Sworn Declaration signed by its legal representative or attorney-in-fact with the respective notarial authentication, in which it is indicated that the information accompanying the request is complete, according to what is established in this article. The Manager will request from the administrator of the Foreign Fund all the necessary information that allows it to make a valuation of the convenience of starting said contractual relationship, taking into consideration the current legal framework. (1) The instruments or information that by virtue of this article must be presented before the Superintendence or delivered to the participants must be in the Spanish language. The instruments or information that must be accompanied by their corresponding translation according to the Law on Notarial Exercise of Voluntary Jurisdiction and other Diligences and international treaties or conventions, when they are in a language other than Spanish, are those established in letters b) and c) of this article. (1)

Documents for the commercialization authorization attached to the request Art. 6.- The Manager, for the purpose of requesting authorization for the commercialization of quotas of Foreign Funds, must attach to the authorization and registration request, in addition to the information established in the previous article, the following documentation:
a) Certification of the agreement of the Board of Directors of the Manager in which the commercialization of participation quotas of Foreign Funds was agreed upon, indicating that it has evaluated the risks of the Fund, as well as the name of the Fund from which the quotas will be commercialized; b) Contract or document in which the express authorization of the administrator of the Foreign Fund is recorded for the Manager to exercise commercialization in the country; c) Detail of the personnel that will participate in the commercialization of quotas of Foreign Funds, which includes the name, age, profession, and domicile, as well as a copy of the documentation accrediting compliance with what is established in Article 39 of these Standards; d) Procedures manual for the commercialization of participation quotas of Foreign Funds, in accordance with what is established in Article 46 of these Standards; e) Description of the computer platform for the control of the commercialization of participation quotas of Foreign Funds; f) Policies and procedures approved by the Board of Directors of the Manager for the determination of the investor profile, which must include as a minimum what is established in Article 117 of the Funds Law and the "Technical Standards for the Authorization, Registration, and Operation of Investment Funds" (NDMC-06), approved by the Central Bank through its Committee of Standards; (1) g) Copies of the informational supplement for Salvadoran investors, which will be delivered to those interested in becoming participants of the Foreign Fund, which must consider as a minimum the information of the Foreign Fund being commercialized, managing company of the Fund in the country of origin, costs to be incurred by the participant in the acquisition and redemption of participation quotas, as well as the description of the manner in which the placement and redemption of participation quotas are carried out in accordance with what is established in Annexes No. 1 and No. 2 of these Standards, as appropriate; and h) Policy of information to participants, in accordance with what is established in Article 41 of these Standards.

For the authorization of the commercialization of quotas of Closed Foreign Funds, the Manager must present the documentation referred to in letters a), e), g), and h) of this article. In the case of compliance with letter e), what is established in Article 110 of the Funds Law will be observed. (1)

Art. 7.- The Manager, for the purpose of requesting authorization for the commercialization of quotas of Open Foreign Funds, in addition to the information established in Articles 4, 5, and 6 of these Standards, must attach information regarding the payment agent and the institutions in charge of the custody, liquidation, and compensation of the participation quotas issued by the Open Foreign Fund, detailing the functions or services they perform.

Additionally, the Manager must attach a summary of the evolution of the value of the participation quota, corresponding to the twelve months prior to the registration request. The above information must be presented in accordance with the periodicity established for valuation in the applicable legislation of the country of origin of the Fund.

The Manager must inform about the procedures, formalities, and timeframes in which the subscriptions or redemptions of the participation quotas or the transfer thereof will be effective, when applicable.

Art. 8.- The Manager, for the purpose of requesting authorization for the commercialization of participation quotas of Closed Foreign Funds, in addition to the information established in Articles 4, 5, and the letters indicated in the last paragraph of Article 6 of these Standards, must attach the following information: (1) a) Certificate in which the existence of an agreement signed between a specialized Salvadoran securities deposit and custody company and a foreign one is declared, which facilitates and provides security for the custody and immobilization of the participation quotas subject to negotiation. Such certificate must be issued by the Salvadoran Depositary and it must state that in said agreement, the method of liquidation of the operations has been established; and (1) b) Summary of the volumes traded and average monthly prices corresponding to the twelve months prior to the registration request.

Funds that do not have a risk classification
Art. 9.- In the case of Foreign Funds that do not have a risk classification because it is not required in their country of origin, the Manager, in addition to what is established in Articles 4, 5, 6, 7, and 8 of these Standards, must present the following documentation, as appropriate:
a) Document issued by the Manager of the country of origin of the Fund, accrediting or proving the following:
i) That the Fund has at least one year of operation; ii) Significant number of participants of at least 250 participants or at least 50 participants if among them there is at least one institutional investor for the case of Open Foreign Funds; iii) Significant number of participants of at least 50 participants or at least 10 participants if among them there is at least one institutional investor for the case of Closed Foreign Funds; iv) That the assets of the Fund are at least US$30 million dollars; v) Experience of the foreign administrator of the Fund in portfolio management of at least 3 years; and vi) Amounts managed by the foreign administrator of at least US$60 million dollars. b) Risk classification of the foreign administrator of the Fund, if it has one; c) Repealed; and (1) d) Fund risk management report or similar document, which includes the evaluation of the assets that make up the Fund and the risks associated with it.

The instruments or information that by virtue of this article must be presented before the Superintendence or delivered to the participants must be in the Spanish language. (1)

Procedure for authorization of registration of participation quotas of Foreign Funds and of the Manager as a commercializer (1) Art. 10.- Upon receipt of the authorization and registration request, in accordance with what is established in Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence will proceed to verify compliance with the requirements defined in the Funds Law and in these Standards, within a maximum period of fifteen business days. (1) If the request is not accompanied by the complete and duly formatted information detailed in Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence, due to the lack of necessary requirements, may require the Manager 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 said entity when there are reasons justifying it. (1) The Superintendence in the same notice will indicate to the Manager that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the request, leaving it free to present a new request. (1) If after the analysis of the documentation presented in accordance with Articles 4, 5, 6, 7, 8, and 9 of these Standards, as appropriate, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited; the Superintendence will warn the respective Manager once to remedy the deficiencies communicated or present additional documentation or information requested by the Superintendence. (1) The Manager will have a maximum period of ten business days counted from the day following the notification, to remedy the observations or present the additional information requested by the Superintendence. (1) The Superintendence may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or deficiencies warned requires it. (1) Once the information is received in complete form and the observations are remedied