Technical Standards on Client Registration and Intermediation Contracts Used in the Securities Market by Brokerage Houses

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

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

CONSIDERING:

I. That Article 2 of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System aims to ensure the efficiency and transparency of the financial system, as well as the adoption of the highest standards of conduct in the development of its business.

II. That Article 35, subsection g) of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the members of the financial system to ensure the efficient functioning of systems for the registration, processing, storage, transmission, production, security, and control of information flows.

III. That Article 67 of the Securities Market Law establishes that Brokerage Houses are responsible for the identity and legal capacity of the persons who contract through their intermediation.

IV. That Article 45 of the Regulation of the Securities Market Law establishes that Brokerage Houses must have a registry that allows identifying each client, indicating their name, date of birth, nationality, address, profession or occupation, signature, Tax Identification Number (NIT), and phone number, as well as those of their legal representative, if applicable, economic activity, beneficiary when applicable, type of service, amount of the transaction, place, time, and date of the transaction, persons authorized to give trading orders, as well as any other data that contributes to properly identifying them.

V. That Article 1, subsection a) of the Electronic Signature Law establishes that the object of this Law is to equate simple electronic signature and certified electronic signature with handwritten signature.

VI. That Article 7 of the Electronic Signature Law establishes that acts and contracts granted or celebrated by natural or legal persons, subscribed by means of electronic signature, shall be valid in the same manner and produce the same effects as those celebrated in writing and on paper support.

VII. That the Consumer Protection Law establishes the rights of consumers, as well as the special obligations that providers of financial services, including those of securities services, must comply with.

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

VIII. 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 ultimate beneficiary, managing the risks associated with them and obtaining appropriate information about commercial relationships entered into or their continuity, must take reasonable measures to carry out due diligence procedures. (1)

THEREFORE,

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

AGREES to issue the following:

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to regulate the controls and provisions that Brokerage Houses must attend to in the registration of their clients, as well as the minimum content that must be considered in the preparation of the contracts they will use for linking with them.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the Brokerage Houses authorized by the Superintendence of the Financial System to perform securities intermediation in accordance with the Securities Market 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) House(s): Brokerage Houses, authorized and registered in the Superintendence of the Financial System;

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

c) Electronic Means: Mechanism, installation, application, equipment, or system that allows producing, storing, processing, or transmitting data or information; including any open or restricted communication networks such as Internet, fixed and mobile telephony, or others; d) Registry: Registry that Brokerage Houses must maintain to ensure the identity and legal capacity of clients who contract their services; and e) Superintendence: Superintendence of the Financial System.

CHAPTER II
CLIENT REGISTRATION AND INTERMEDIATION CONTRACTS

Client Registration
Art. 4.- Houses shall be responsible for ensuring the identity and legal capacity of clients who contract their services, for which they must prepare and maintain a Registry, physical or electronic, for each client, whether natural or legal persons. It must contain at minimum the following characteristics and information:
a) Place and Date; b) Code or number assigned to the client; c) Name, denomination, or trade name, nationality, address; d) Date of birth, profession or occupation, in the case of a natural person; e) Type and number of identity document; f) Tax Identification Number (NIT), which shall be required in cases defined by the Tax Administration; g) Taxpayer Registry Number, when applicable; h) Address, email, and phone number for residence, mobile, and office; i) Profession or occupation and place of work; j) Nature or business of the entity, list of shareholders, legal representative with their identification documents, when it is a legal person; k) Persons authorized to order transactions on their behalf, specifying their general information (Full name, NIT, DUI, among others); l) Method to settle transactions in favor of the client: account credit, electronic transfer (specify Bank Account No.), check issuance; m) Method to settle transactions in favor of the Houses: account credit, electronic transfer (specify Bank Account No.), check issuance; n) Medium (physical or electronic) indicated by the client, for the receipt of the following information: account statements, information related to transactions carried out on behalf of the client, when applicable, information relative to securities, among others; o) Other data deemed convenient; and

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

p) Signature of the client or their legal representative or attorney-in-fact with sufficient powers, as well as by the responsible executive and the legal representative of the House or attorney-in-fact with sufficient powers.
The House must attach to the Registry, physical or electronic support of all documentation detailed therein, as well as the deed of incorporation of the legal person and its modifications, documents that accredit the legal representative or attorney-in-fact, and all that information that in the judgment of the Houses should form part of the Registry and client file.

Prevention and Control of Money Laundering and Due Diligence (1) Art. 5.- The House must have policies and procedures to perform due diligence for the identification and knowledge of its clients, as well as the origin of funds and their economic activity, all in accordance with what is established in the laws, instructions, and regulations currently in force related to the prevention, detection, and control of money laundering, terrorism financing, and financing of the proliferation of weapons of mass destruction. (1)

Art. 6.- The Registries and other documents supporting the contracting of services must be signed by the client, their legal representative or attorney-in-fact with sufficient powers, by the responsible executive, and the legal representative of the House or attorney-in-fact with sufficient powers.

Art. 7.- Houses must have a physical or electronic control of the transactions their clients have carried out, which must be linked to the Registry of each of them, in such a way that the transactions they have carried out can be identified. The aforementioned control must contain at minimum the amount, transaction carried out, characteristics of the securities traded, as well as the place, time, and date of the transaction.

On Electronic Registration
Art. 8.- In the case that Houses maintain an electronic control of the Registry and of their clients' transactions, as well as the client's linking documents electronically, they must observe the following minimum characteristics:
a) That it allows effective and precise segregation of client identification; b) That it possesses information security controls, guaranteeing the availability and integrity of the information, including the use of unique and individual user accounts and access codes; c) That it allows the automatic generation of the client's transaction or operation history; d) That it has periodic mechanisms for backup and recovery of information in case of fortuitous events or force majeure;

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

e) That it has policies, rules, mechanisms, and control measures that guarantee the security of the information, which must be in accordance with their operations and business model; f) That it includes an audit log that allows identifying modifications made to the client's Registries; and g) That it allows the generation and printing of reports and export of information to files in spreadsheet and PDF formats.

In addition to what is specified in the aforementioned subsections, Houses must have a business continuity plan and an information security management system, which must comply with what is established in the "Technical Standards for Information Security Management" (NRP-23) and the "Technical Standards for Business Continuity Management System" (NRP-24).

On Contract Models
Art. 9.- For the purposes of establishing the conditions that will govern the relationship with the client, Houses must prepare a contract, which they will sign with each client who contracts their services.
The aforementioned contract must contain at minimum the following information:
a) Identification of the parties:
i. Name, address, age, profession or occupation, Tax Identification Number (NIT), which shall be required in cases defined by the Tax Administration, identity document of the legal representative or the person with sufficient legal standing to appear on behalf of the House, if applicable (it must refer to the Notarial Deed of Incorporation of the House, the current social pact, and the power granted to the person appearing to sign the contract); and
ii. Name, address, age, profession or occupation, identity document or social denomination of the client, Tax Identification Number (NIT), which shall be required in cases defined by the Tax Administration. When the client is a Legal Person, it must refer to the Notarial Deed of Incorporation of the society and its modifications, when applicable, and to the power granted to the person appearing to sign the contract.
b) Denomination of the House; c) Object of the Contract; d) Responsibility and obligations of the House with the client, in accordance with the Securities Market Law, Consumer Protection Law, and applicable regulations; e) Rights of the client and information to be provided to them, indicating the means through which it will be provided and its frequency;

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

f) Obligations of the client; g) Clause related to the forms by which the client can issue instructions or buy and sell orders for securities to the House; h) Current commissions, including respective taxes when applicable, specifying the concepts of the commission, its calculation method, and payment method; i) In case of establishing annexes to the contract, it must declare that these are an integral part of the contract; j) Complaint procedures; k) Indication of the domicile to which the parties will submit in case of controversies; l) Contract termination clauses; m) Signature and name of the client or the person acting on their behalf; n) Signature and name of the person authorized by the House to sign the contract (Legal Representative or Attorney-in-fact with sufficient powers); and o) Place, date, and time.

Houses must make the contract available to the client prior to its signing, so that they may know its content, facilitating its obtaining through technological, printed, or other means. Once signed, a copy of the document must be provided to the client by the means they request, leaving evidence of said delivery.

Furthermore, the contract may include other clauses or provisions that the House incorporates considering the applicable legal framework. The contract formats to be used must comply with the specifications of adhesion contracts indicated by the Consumer Protection Law and be deposited with the Superintendence.

Model of Mandate Contract
Art. 10.- In addition to what is established in Article 9 of these Standards, for the case of the Mandate Contract for deposit operations in administration, a section for the designation of beneficiaries must be incorporated so that the client designates them, if they deem it convenient. Likewise, the powers that the client confers to the House with respect to the Deposit Account for Securities in a Society Specialized in Securities Custody will be included, as well as that the House must maintain control of the delivery and withdrawal of securities from its clients, the obligations and rights of the Houses derived from the Law on Electronic Annotations of Securities in Account, in securities administration operations.

Art. 11.- The signing of a contract with a House does not imply that this has the exclusivity of the operations that clients carry out in the securities market.
Art. 12.- The operations that Houses carry out with their clients must be performed prior to the signing of the necessary documents to establish the contractual relationship, being at minimum the Client Registry and service contracts.

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

Use of Means and Mechanisms of Authentication
Art. 13.- Houses may use electronic or digital means for linking, contracting, and any communication they carry out with their clients, being able to prepare and maintain the Registry of their clients as well as subscribe the contracts referred to in Articles 9 and 10 of these Standards, provided that such means allow the issuance of a certificate, support, or record considering guarantees of authenticity, confidentiality, integrity, availability, and conservation of information.

Houses may use any of the authentication mechanisms or electronic signature, for the purpose of validating the client's identity when the processes referred to in these Standards are carried out through electronic means.

Art. 14.- Houses are obligated to guarantee that acts of communication and acceptance have been received by the natural or legal persons interested in the services they provide, and in cases where consent is required, that the manifestation of will comes from them, complying with the principles and requirements established in the Laws applicable to the electronic or digital means used as service channels.

To safeguard the legal security of natural or legal persons interested in the services provided by Houses, documents issued in these operations or procedures must consider among their characteristics authenticity, integrity, and conservation of information, and comply with the requirements established in the laws for such effect. In addition to considering the probative value that the legislation grants to means of reproduction of sound, voice, data, or image and data and information storage resources.

On Client Documents
Art. 15.- For the fulfillment of aspects related to the knowledge and linking of the client, as well as the provision of services, the House must have at minimum the following documents:
a) Client Registration Form for Natural or Legal Persons, must comply at minimum with the aspects established in Article 4 of these Standards; b) Commission Contract for operations carried out in a stock exchange, considering at minimum what is established in Article 9 of these Standards; c) Mandate Contract to carry out deposit operations of securities in administration, considering at minimum what is established in Articles 9 and 10 of these Standards; and d) Other information that in the judgment of the House must be requested from the client.

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

Art. 16.- The contracts that are deposited in accordance with Articles 9 and 10 of these Standards must be used in the case of signing contracts with new clients and updating information of inactive client files that again request the services of a House. Furthermore, Houses must proceed to the substitution of signed contracts, once they have been deposited with the Superintendence, when the client so requests or the House requests it from the client. In any case, the provisions of the Consumer Protection Law are applicable to all contracts in force on the date, and clauses, conditions, and stipulations that contradict the Consumer Protection Law shall be deemed unwritten.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Information Retention Time
Art. 17.- The Registry, whether physical or electronic, of operations and transactions carried out by clients must be preserved in accordance with the term established in the Special Law for the Prevention, Control, and Sanction of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction. (1)

Sanctions
Art. 18.- 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. 19.- These Standards repeal the Resolution "Client Registry and Intermediation Contracts used in the Securities Market by Brokerage Houses" (RSTG-1/2006), approved on July 25, 2006, by the Superintendent of the Superintendence of Securities, 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 Diary No. 23, Volume No. 390, dated February 2, 2011.

Transitory
Art. 20.- Contracts presented in accordance with what is established in the Resolution on the "Client Registry and Intermediation Contracts used in the Securities Market by Brokerage Houses" (RSTG-1/2006), that were in process at the moment these Standards enter into force, will continue and conclude in accordance with the regulation with which they began.

Unforeseen Aspects
Art. 21.- Aspects not provided for in regulatory matters in these Standards will be resolved by the Central Bank through its Standards Committee.

NDMC-23

Approval: 07/25/2022
Validity: 08/12/2022

Validity
Art. 22.- These Standards will enter into force as of the twelfth of August of two thousand twenty-two.

MODIFICATIONS:
(1) Modifications in Consideration VIII and in Articles 5 and 17 approved by the Central Bank through its Standards Committee, in Session No. CN-02/2026, of February 26 of two thousand twenty-six, with validity starting from March 13 of two thousand twenty-six.