Third Resolution of the National Securities Market Council Approving the Regulation of Price-Providing Companies

Securities Market Superintendence of the Dominican Republic CERTIFICATION

The undersigned, Mr. Ervin Novas Bello, manager of the Central Bank of the Dominican Republic (hereinafter "Central Bank"), representing the Governor of the Central Bank, ex officio member and President of the National Securities Market Council (hereinafter "Council"); and Mrs. Fabel María Sandoval Ventura, Secretary of the Council, CERTIFY that the text below constitutes an exact and complete copy transcribed in accordance with the original of the Third Resolution, R-CNMV-2023-03-MV, adopted by the Council in the meeting held on the seventh (07) day of February in the year two thousand twenty-three (2023), which rests in the archives of this Secretariat, namely:

"THIRD RESOLUTION OF THE NATIONAL SECURITIES MARKET COUNCIL OF THE DATE SEVENTH (07) OF FEBRUARY OF THE YEAR TWO THOUSAND TWENTY-THREE (2023).
R-CNMV-2023-03-MV.
REFERENCE: Approval of the Regulation of Price-Providing Companies.

WHEREAS:

That on the eighteenth (18) day of January in the year two thousand twenty-three (2023), the Superintendent of the Securities Market (hereinafter "Superintendent") submitted to the knowledge and consideration of the National Securities Market Council (hereinafter "Council") the draft Regulation of Price-Providing Companies (hereinafter "Draft Regulation").

That pursuant to the powers granted by Law No. 249-17, on the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00, of the eighth (8) day of May in the year two thousand (2000), promulgated on the nineteenth (19) day of December in two thousand seventeen (2017), and its modification (hereinafter "Law No. 249-17"), and the Internal Regulation of the Council, adopted by this collegiate body through the First Resolution, R-CNMV-2018-06-MV, issued on the twenty-ninth (29) day of November in the year two thousand eighteen (2018) (hereinafter "Internal Regulation of the Council"); the Council, validly convened, deems it appropriate to state the following:

CONSIDERING:

1. That, in accordance with Article 10 of Law No. 249-17, the Securities Market Superintendence (hereinafter "Superintendence") is integrated by a collegiate body, the Council, and an executive official, the Superintendent.

2. That the aforementioned law, in the main part of Article 13, establishes that the Council is the superior body of the Superintendence, with essentially normative, supervisory, and control functions.

3. That, in addition to the foregoing, numeral 5 of the cited Article 13 grants the Council the attribution to "[i]ssue, upon the proposal of the Superintendent, the regulations for the application of this law."

4. That, likewise, Article 25 of Law No. 249-17 reiterates that "[t]he Council is the competent body to establish regulations regarding the activities of the securities market indicated in this law."

5. That paragraph 1 of said article adds that "[i]n the exercise of regulatory power, the Council and the Superintendence will observe the principles of legality and the rules of public consultation, participation, and transparency contained in the Constitution of the Republic and the laws in force."

6. That Article 4 of the aforementioned Law No. 249-17 establishes that the securities market will be governed with strict adherence to the Constitution of the Republic, what is prescribed in said law and in the regulations and resolutions issued by the Council and the Superintendence, within their respective competencies; being applicable subsidiarily, in matters not specifically provided for in the aforementioned norms, the general provisions of administrative law, corporate, commercial, monetary and financial legislation, trust law, common law, and commercial usages, in the order cited.

7. That it is worth highlighting that Article 2 of Law No. 249-17 reveals that the provisions contained in said statute apply to all natural and legal persons who carry out activities, operations, and transactions in the securities market of the Dominican Republic, with public offer securities that are offered or negotiated in the national territory.

8. That, parallel to this, in the paragraph of the aforementioned article it is established that "[n]atural and legal persons who carry out any of the activities or services provided for in this law, will be subject to the regulation, supervision, and oversight of the Securities Market Superintendence, regarding the exercise of those mentioned activities or services."

9. That pursuant to Article 3, numeral 33, of the aforementioned Law No. 249-17, a market participant "[i]s the natural or legal person, registered in the Securities Market Register and regulated by the Securities Market Superintendence."

10. That, in this regard, Article 36 of the aforementioned law establishes that "[t]he Superintendence will have a Register available to the public, which may be electronic, and in it will be registered the natural and legal persons who participate in the securities market, as well as public information regarding the securities registered in the Register and the market participants regulated by this law."

11. That Law No. 249-17 establishes, in its Article 196, that price-providing companies "have as their object the provision of the service of calculating, determining the prices and valuation rates of securities."

12. That, in turn, Article 198 of the same piece establishes the following functions for price-providing companies, namely: "1) Provide the service of index calculation and risk metrics and training related to the valuation of securities. 2) Determine the yield rates of equity instruments, and 3) Others that are determined by regulation."

13. That, for its part, Article 197 of Law No. 249-17 establishes that, prior to its operation, price-providing companies must request their registration in the Register and comply with the requirements established by regulation.

14. That, in addition to the foregoing, Article 198, paragraph, of Law No. 249-17, indicates that "[n]o transmission exclusive or dissemination of any type of prices regarding securities or indices, by electronic, telecommunications, or printed means, carried out by natural or legal persons who are not price-providing companies registered in the Register, will be considered as price supply."

15. That, likewise, from the reading of Articles 199, 200, and 201 of Law No. 249-17, it is understood that, by regulation, guidelines for the implementation of valuation methodologies, as well as guidelines for the formation of the valuation committee, and the determination of other values to be valued, would have to be established.

16. That, in this sense, the existence of a regulation that disposes the applicable provisions for the operation of price-providing companies is fundamental.

17. That by communication received in the Council's Secretariat on the eighteenth (18) day of January in the year two thousand twenty-three (2023), the Superintendent submitted to the knowledge and approval of this collegiate body the draft Regulation.

18. That the aforementioned letter states that, in compliance with the applicable legal framework, the draft Regulation was submitted to public consultation from the eighth (8) day of August to the fourteenth (14) day of September in the year two thousand twenty-two (2022), inclusive.

19. That from the documents accompanying the Superintendent's communication, it is highlighted that, as a result of the aforementioned consultative process, comments were received from: the Dominican Association of Investment Fund Administrators, Inc. (ADOSAFI), the Dominican Association of Stock Exchanges, Inc. (APB), RDVAL - Price Provider, S.A., CEVALDOM - Centralized Securities Depository S.A., as well as Stock and Securities Markets of the Dominican Republic, S.A. (BVRD).

20. That from the pieces composing the file, a matrix is highlighted that collects the observations presented, analyzed, and responded to by the technical team of the Superintendence; subsequently, as part of the administrative procedure and in attention to the principles of transparency and participation, virtual working tables were held with interested sectors on the seventeenth (17) and eighteenth (18) days of November in the year two thousand twenty-two (2022).

21. That, likewise, in the documents presented to the Council, there is a list of relevant data, in which it is established that the object of the draft Regulation is "[t]o develop the provisions relating to the principles, criteria, and requirements that will govern the authorization and registration process in the Securities Market Register of price-providing companies; as well as, their operation and the contracting and provision of their services."

22. That, among the relevant data exposed, it is explained that the draft Regulation contemplated the following improvements from the consultation process, namely:

• The wording of Investment Portfolio is adapted.
• It is eliminated that the evaluation must be carried out in good faith.
• All obligation on market participants to perform due diligence on the services that price-providing companies would offer is eliminated.
• A deadline is established to respond to the request for modification of the corporate statutes before the Superintendence.
• Minimum content of contracts is established, within which are:
  a. Alternate mechanisms to obtain/receive services in case of unavailability of the main platform. b. Process for communicating the change in valuation methodology.
  c. Client rights.
  d. Liability incurred by the entity in case of breach of contract. e. Obligation on the part of the company to communicate the rectification of information (whether as a result of an appeal or other causes. E.g., an incident that has affected the integrity of the information delivered).
• A deadline for information retention is established.
• An approach in self-evaluation and client opinion as a factor to be considered within said mechanism is established.
• The requirement within the profile of the members of the valuation committee regarding the citizenship or legal residence in the Dominican Republic of the members is eliminated.
• The minimum quorum to convene the valuation committee is reviewed.
• It is recommended that the dismantling of inherent outsourced processes have a special adaptation deadline."

23. That, in attention to everything previously stated, observing the favorable opinion of the Superintendent, along with the reports and documentation submitted by the technical area of the Superintendence, this collegiate body is of the opinion that the draft Regulation can be favorably accepted.

SEEN:

a. The Constitution of the Dominican Republic, voted and proclaimed by the National Assembly on the thirteenth (13) day of the month of June in the year two thousand fifteen (2015), published on the tenth (10) day of July in two thousand fifteen (2015).

b. Law No. 249-17, on the Securities Market of the Dominican Republic, which repeals and substitutes Law No. 19-00, of the eighth (8) day of May in the year two thousand (2000), promulgated on the nineteenth (19) day of December in two thousand seventeen (2017), and its modification.

c. Law No. 107-13, on the Rights of Persons in their Relations with the Administration and Administrative Procedure, of the sixth (6) day of August in the year two thousand thirteen (2013).

d. Law No. 200-04, General Law on Free Access to Public Information, of the twenty-eighth (28) day of July in the year two thousand four (2004).

e. The Regulation of the General Law on Free Access to Public Information, approved through Decree No. 130-05, of the twenty-fifth (25) day of February in the year two thousand five (2005).

f. The Internal Regulation of the National Securities Market Council, issued through the First Resolution, R-CNMV-2018-06-MV, of the twenty-ninth (29) day of November in the year two thousand eighteen (2018).

g. The Regulation of the General Law on Free Access to Public Information, approved through Decree No. 130-05, of the twenty-fifth (25) day of February in the year two thousand five (2005).

h. The communication received in the Council's Secretariat on the eighteenth (18) day of January in the year two thousand twenty-three (2023), signed by the Superintendent, and annexes cited.

i. The other documents that make up the file.

THEREFORE:

After having studied and deliberated on the matter, the Council, in the exercise of the powers conferred upon it by Law No. 249-17, by unanimous vote of its members, attending to the motives exposed,

RESOLVES:

FIRST: APPROVE the definitive version of the draft Regulation of Price-Providing Companies; whose text is transcribed below, in accordance with the document submitted by the technical area of the Superintendence:

"DRAFT REGULATION OF PRICE-PROVIDING COMPANIES"

TITLE I
GENERAL PROVISIONS

CHAPTER I
OBJECT AND SCOPE

Article 1. Object. To develop the provisions relating to the principles, criteria, and requirements that will govern the authorization and registration process in the Securities Market Register (hereinafter, the "Register") of price-providing companies, as well as their operation and the contracting and provision of their services.

Article 2. Scope. This Regulation will be mandatory for companies wishing to operate as price providers.

Paragraph. Likewise, it will apply to market participants and autonomous estates registered in the Register that carry out valuation of their Investment Portfolios, in the corresponding aspects.

CHAPTER II
DEFINITIONS

Article 3. Definitions. In addition to the terms defined by Law No. 249-17 of the Securities Market of the Dominican Republic of the nineteenth (19) day of December in two thousand seventeen (2017), which repeals and substitutes Law No. 19-00 of the eighth (8) day of May in the year two thousand (2000) (hereinafter, the "Law"), for the purposes of this Regulation, the terms and concepts detailed below will have the following meaning:

1) Senior Management. It is composed of a part of Key Management Personnel and, specifically, the general manager or principal executive and the persons who report directly to him. The members of Senior Management are responsible for planning, directing, and controlling the strategies and operations of the company that have been previously approved by the board of directors or management board, as applicable.

2) Official Channel. It refers to the website, FTP, or any other medium, through which the Price Vector or Vectors are published by price-providing companies.

3) Clients. They are natural or legal persons, regardless of their nationality, who contract the services offered by a price-providing company.

4) Valuation Committee. It is the technical support body to the board of directors or management board, as applicable, whose main function is to propose and approve draft valuation methodologies and their updates, prior to their issuance by said board, as well as the other functions established in this Regulation.

5) FTP. Stands for File Transfer Protocol, used as an Official Channel.

6) Corporate Governance. Set of minimum principles and norms that govern the design, integration, and interaction between the board of directors or management board, Senior Management, shareholders, employees, related parties, and other stakeholder groups that seek to manage conflicts, mitigate management risks, and achieve adequate strengthening of administration; improving transparency, remuneration policies of price-providing companies, and the way in which the company's objectives are established and achieved.

7) Objection Period. It is the period established in the valuation methodologies for Clients to formulate objections to the published information.

8) Objection. The right enjoyed by Clients to object to the price levels and rates that price-providing companies communicate through the Price Vector or Vectors.

9) Financial Instrument. They are the instruments that are offered and negotiated in the financial market, composed of financial assets, instruments representing financial liabilities or equity, and derivative instruments.

10) Valuation Methodologies Manual. Document that the price-providing company must issue with the compendium of valuation methodologies and their modifications, which forms part of their disclosure.

11) IFRS. Stands for International Financial Reporting Standard issued by the International Accounting Standards Board (IASB, in English) and its modifications.

12) IFRS 13. Stands for International Financial Reporting Standard issued by the International Accounting Standards Board (IASB, in English) and its modifications; information to be disclosed regarding such measurements, whose objective is the definition of Fair Value, establishing a framework for its measurement, and defining the

13) Key Management Personnel. They are those persons who have authority and responsibility to plan, direct, and control the activities of the entity, either directly or indirectly.

14) Investment Portfolio. Set of securities, goods, and other Financial Instruments, financial or non-financial, of diverse nature and origin, permitted for acquisition by market participants and autonomous estates.

15) Closing Point. Reference data of a security before closing the session and used for the determination of the Price Vector or Vectors. It occurs in a time interval prior to the closing of transactions and is selected randomly on a daily basis by the price-providing company.

16) Virtual Session. It is that meeting that is carried out using any of the information and communication technologies associated with the internet network that guarantee the possibility of simultaneous communication between attendees and their expression through documentation or electronic files, including the sending of images, sounds, and data.

17) Fair Value. It is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the securities market on the measurement date.

18) Price Vector or Price Vectors. It is the series of theoretical values that allow, through effective rates and reference prices, a market price valuation of each of the Financial Instruments in circulation in a financial market. It is considered preliminary before the Objection Period expires and will be definitive when that time has passed and all possible Objections have been resolved.

CHAPTER III
GENERAL PRINCIPLES

Article 4. Investment Portfolios subject to valuation. Investment Portfolios subject to valuation may be valued applying prices obtained from a price-providing company authorized by the Securities Market Superintendence (hereinafter, the "Superintendence").

Article 5. Securities subject to valuation. In accordance with what is indicated in Article 201 of the Law, the following may be valued:

a) Securities registered in the Register;

b) Public offer securities from abroad suitable for negotiation in secondary markets of a jurisdiction recognized by the Superintendence; and,

c) Any other securities that form part of the Investment Portfolio.

Article 6. General valuation rules. Investment Portfolios subject to valuation must establish comprehensive and documented policies and procedures for the valuation of their assets, as follows:

a) Valuation obligates carrying out the daily estimation of the valuation price of Financial Instruments subject to valuation;

b) Assets held or employed by entities must be valued consistently, in accordance with their policies and procedures;

c) Seek to detect, prevent, and correct price errors;

d) Identify the methodologies that will be used to value each type of asset held by the entity, whether own or third-party;

e) Seek to prevent conflicts of interest.

Paragraph I. Investment Portfolios subject to valuation must periodically review valuation policies and procedures to try to guarantee their continuous adequacy and effective application.

Paragraph II. Internal and external auditors of market participants and autonomous estates with Investment Portfolios subject to valuation must review the valuation process, at least, annually.