Title I: Fundamental Norms

Chapter II:  Public Securities Database

Creation of the Public Securities Database

Sect. 6.- It is created the Public securities Database, from now on denominated the Database that will be kept by the Superintendence. The Database will be in San Salvador and will have authority in the whole Republic.

The Database has as purpose to ensure that the requirements of information in this Law have been fulfilled.

The Database will have the following special records:

1. Of Issuers of securities;
2. Of issues of securities referred to by Sect. 68 of this Law;
3. Of stock exchanges;
4. Of securities Depositories;
5. Of Brokerage Houses;
6. Of external auditors of people subject to this Law;
7. Of classifiers of risks; and
8. Of administrators of the entities subject to registration in the Database.

In the case of corporations and persons mentioned in this Section, their registration will enable them to participate in the securities market.

The registration of issues of securities serves the purpose of making them object of public offering. In the case of issues of securities that represent the individual participation of their holders in a collective credit, or that represent equity participation, their registration will grant them also legal effectiveness against third parties.

The entries in the special records that form the Database may be of registration or of transcription, in conformity with the subjects or deeds that must be registered in them.

Sect. 7.- The organization and operation of the Database will be developed in the regulation of this Law, considering the nature of the securities market, the registration principles and the respective requirements of registration specified in this Law.

Certifications of the information received from the registered subjects may be granted by automated means, in conformity with what in this respect specifies the Superintendence. ⁽²⁾

Sect. 8.- The Superintendent will be able to suspend or cancel a database entry when a stock exchange requests it or when the superintendent considers it proceeding in conformity with this Law.

While a database entry of a security remains suspended or since the day that a stock exchange communicates its cancellation to the Database, it won't be possible a public offering of them.

People registered in the Superintendence whose entries have been suspended or canceled won't be able to carry out the activities that the entry in the database enables them.

The subjects and acts whose entries have been canceled won't be able to be registered again, even when afterwards they fulfill the requirements.

Registration of Issuers and Securities

Sect. 9.- The Superintendence, upon request from a stock exchange will be able to register in the Database the issuing entities and their issues of securities, within a term of up to fifteen business days, when receiving the certification of the resolution of its board of directors approving the registration of the issuer or of the issue in the stock exchange, together with the following information:

1. Copies of the articles of Incorporation of the issuer and its properly registered modifications, or in its case, creation laws and reformations;
2. Name of partners or shareholders with their participation in the equity of the entities, administrators and administrative holders of powers of attorney, with the pertinent data of their documents of identity;
3. The financial statements of the last three exercises, properly audited by external auditors registered in the Superintendence. In the case of entities that have less than three years of existence, they will present the audited financial statements that they have to the date of the application;
4. In case the issuer belongs to a corporate group it will provide: names of the corporations of the group; the financial statements of the controlling corporation of the issuing corporation; names of the shareholders that possess more than ten percent of the stock and of the corresponding directors, also the consolidated financial statements of the issuer with the corporations with which it possesses a participation of more than fifty percent of the stock, as well as the names of the directors and of the shareholders that possess more than ten percent of their shares. The accounts that register operations between the corporations of the group will be indicated. In case the issues of securities are endorsed by a corporation that is neither a bank nor a financial company, it will provide, when it is the case, the information indicated above. The Superintendence may request the consolidated financial statements of the corporate group to which the issuing corporation belongs, whenever any of the corporations of the group has commercial or financial relations with the issuer and that this corporation has made reserves for bad debts of ten percent or more in some of the financial institutions of the system;
5. In case corporate relationships exist, the names of the related corporations must be provided;
6. Agreement of the competent authority authorizing the issue;
7. Type of Security to register and its characteristics, with the copy of the authorization for the issue of tradable obligations issued in series, and in case of shares, the copy of the authorization of capital increase or the certification of the increase in the registration book of the issuer, if it were corporations of variable capital. The series of the issues will be determined after the material entry and before the placement of the securities that constitute it, which will be communicated to the Superintendence through the respective Stock exchange, remitting also the resolution of the issuer.
8. Prospectus signed by authorized person, which will contain audited financial statements, consolidated when it is the case, auditor's statement and all pertinent information on guarantees of the issue, rights and duties of the issuer. It should also contain complete opinions of the respective classifiers of risk. In case the issuer belongs to a corporate group, it will include the names of the corporations of the group;
9. When the issue is guaranteed with goods or properties, the documents that confirm their existence must be presented, the appraisal and the document of the guarantee;
10. Analysis that supported the stock exchange's action to register the issuer or the issues of securities;
11. The classification of risk of the securities to register, issued by a classifier of risk. In case of shares, the classification of the issuer will be accepted. The Superintendence may request another classification when it is presumed that the classifier has applied improperly the classification methodology, it has contravened the law when classifying or the information has been manipulated. ⁽³⁾
12. Once the previous information from a stock exchange has been received completely and compliance with the requirements that establishes this Law and the Regulations of the respective stock exchange has been verified, the superintendence will resolve in a reasoned manner on the viability of the registration within the indicated term.

In case the information is not presented in complete form, the Superintendence will request from the stock exchange the information that is lacking. Once the information is received, it will be resolved on the registration within the indicated term.

The entry in the Registration doesn't imply certification about the quality of the Security or the solvency of the issuer. This disclaim will figure in the documents of the public offering of securities, and must say, paragraphly, the following: "The securities object of this offering are registered in the Public securities Database of the Superintendence." Their registration doesn't imply certification about the quality of the Security or the solvency of the issuer. In any event, this mention will figure in the prospectus, securities and in the publicity of the issuer regarding its issues.

In the documents mentioned above there will be a text that paragraphly says: "The registration of the issue in the stock exchange doesn't imply certification about the quality of the Security or the solvency of the issuer."

In case the issuer offers a bank or financial guarantee, he/she will be exempted of fulfilling the requirements pointed out in points b), c), d) and e) of the present Section to register as such and to register its issue, as well as of including in the bulletin the information regarding groups and corporate relationships.

The issue of securities in foreign currency will be subject to the resolutions of the Superintendence who will determine the ranges within which must remain the rates between assets and liabilities in foreign currency of the issuing entities, in order to limit its currency exchange risk. ^{(1) (2)}

Incorporation by public subscription

Sect.9-A. - When a corporation seeks to be constituted by public underwriting, and the promoters want that the process of sale of the underwriting be carried out in a stock exchange, then will apply the norms contained in the Code of Trade and the regulations that the Superintendence and the respective stock exchange dictate in this respect. When in the Code of Trade allusion is made to the office that exercises the surveillance of the State, it will be understood that it is the Superintendence.

In any event, the promoters must contribute, at least with fifty percent of the capital. This contribution will be made in cash. For purposes of analysis, the promoters will present to the respective stock exchange the feasibility of the project, indicating clearly the destination of the resources. This destination won't be able to be modified.

Starting from the date of the physical entry, the promoters will have 180 days to complete the underwriting process; otherwise, they will restore the raised resources. The raised underwriting will stay in restricted accounts, in conformity with what in this respect resolves the Superintendence. The promoters will carry out a wide publicity about the project itself and its future administrators. ⁽²⁾

Registration of foreign securities

Sect. 10.- Only public institutions and corporations, both of Central American origin, as well as their securities, will be able to register, when these are registered in a stock exchange in their country of origin and there is reciprocity with it. This registration will be subject to the approval of a stock exchange and of the Superintendence, whenever they fulfill the requirements of this Law and in conformity with the instructions issued by the stock exchange for this purpose. In the case of States and Central Banks of the Central American countries, the Superintendence will register them as Issuers and to its issues when they present:

1. Notification of the resolution of the respective stock exchange through which the registration was authorized;
2. Trustworthy copy of the issue ordinance or agreement;
3. Prospectus, in the event of having been issued in the country of origin;
4. Worthless sample of the securities to register;
5. Certification that indicates that the securities once issued will be deposited in a stock exchange or in a securities Depository in the country of origin;
6. Copies of the contract taken place between the stock exchange and the entity that will carry out the custody of the securities in the country of origin, in which it is stated the level of responsibility of this entity for the authenticity, loss, deterioration and replacement of the deposited securities;
7. Certification of the service of the debt of the securities to be registered granted by the stock exchange of the country of origin, when the securities register for the secondary market.

The regional and international financial organisms of which the State of El Salvador or the Central Bank of Reserve of El Salvador are members, as well as the securities that they issue, may register in a stock exchange and be registered en the Database of the Superintendence, with only the previous favorable opinion of the Central Bank of Reserve of El Salvador.

It will be also possible to register and trade in a stock exchange issues of securities of foreign corporations and international financial institutions, if the funds to be raised this way are destined to finance specific projects to be developed in the country, with the previous favorable opinion of the Central Bank of Reserve of El Salvador.

The favorable previous opinion of the Central Bank of Reserve of El Salvador referred to in the present Section will be regarding the monetary and exchange policies and not as for the solvency of the issuer. The issuer will present to the respective stock exchange the application in which the characteristics of the issue and the placement program are detailed. The stock exchange will send copy of this application to the Central Bank of Reserve of El Salvador so that it issues the opinion previous to the registration during the following ten business days. If the opinion is favorable, the stock exchange will notify to the issuer indicating the requisites that it must satisfy in order to continue with the registration process.

In these cases, the financial statements of the Issuers will be audited by internationally recognized External Auditors, accepted by the Superintendence. ^{(1) (2)}

Registration of stock Exchanges and Securities Depositories

Sect.11. - The registration of stock exchanges will take place when they have been authorized to operate in conformity with the Sections 27 and 28 of this Law and the registration of securities Depositories, when authorization has been granted to begin operations according to Section 78 of this Law.

Registration of Brokerage Houses

Sect.12. - The Superintendence will proceed to the registration of Brokerage Houses when it receives from them the application together with the certification of its registration in a stock exchange, and also all the information that demonstrates the fulfillment of the following requirements:

1. Certified copy of the corporation's charter, in which it is shown that the minimum capital required in Section 56 of this Law has been entirely paid in;
2. To have provided the legally required guarantees;
3. To present attestation given by the regulating authority of the securities market in the country of origin to foreign partners in which it is indicated that there is no impediment to act as such;
4. To verify that shareholders and directors fulfill the requirements specified in this Law; and
5. To certify that shareholders and directors are not affected by the prohibitions and inabilities established in this Law.

When Brokerage Houses want to form a new stock exchange, the corresponding procedure will be carried out by the interested parties in the Superintendence, simultaneously with the presentation of the authorization application, for the incorporation that will have as purpose to organize a stock exchange.

Registration of External Auditors and Classifiers of Risk

Sect.13. - The registration of external auditors will be done according to what is prescribed in Sect. 81 of this Law, and that of classifiers of risk will be done according to what is specified in Section 89 of this Law.

Registration of Administrators

Sect.14. - The registration of administrators of entities will be done by the Superintendence with the pertinent information that each one of them presents at the moment of registering them in the Database.

For registration purposes it will be understood as administrators the following: president, directors, intervention administrators and liquidators of the corporations subject to registration in agreement with this Law. For this purpose, the registered corporations, within the term of the third business day of having made the appointment and change of an administrator will communicate the general information about them to the respective stock exchange, and this to the Superintendence within the following business day. The entries in the Registration will be considered valid for all judicial and extra judicial purposes concerning shareholders and third parties of good faith.

Update of the Registration

Sect.15. - Issuers and brokers will remit to the Superintendence information about changes in the requisites that were considered for their registration and that of their securities, no later than eight days after having happened, in order to keep updated the Database.

This information will be presented in agreement with the resolutions that the Superintendence dictates, in conformity with its Organic Law. ⁽²⁾

Suspension of Transactions of a Security

Sect.16. - The Superintendent, by means of reasoned resolution, will be able to suspend for up to for thirty days the offering or the transactions of a registered Security, when the issuing corporation:

1. Gives signals of incurring in any of the causes of breakup contemplated in the Code of Trade; or
2. Doesn't send to the respective stock exchange and the Superintendence, information in the periodic form specified in this Law.

Cancellation of the Registration of a Security

Sect.17. - The Superintendent will proceed to cancel the entry of a Security in the Database when:

1. Once elapsed the term specified in the previous Section, the circumstances that gave origin to the suspension still subsist;
2. By means of reasoned resolution, when it is so determined in the following cases:

1. If the registration of a Security were accomplished by means of false information or antecedents;
2. If during the validity of the issue and public offering, the issuer presents to the Superintendence, the stock exchanges, the Brokerage Houses or the public, false information, news or antecedents; and
3. If the Security doesn't fulfill or stops fulfilling the requisites of this Law, of the Code of Trade and of the norms established by stock exchanges.

3. When the rights incorporated in the registered Security extinguish totally.

In cases contemplated in points b) and c) of this Section, the Superintendent will be able to cancel the registration of the issuer.

Suspension or Cancellation of the Registration of Brokerage Houses

Sect.18. - The database entry of a broker may be suspended by the Superintendent up to a maximum term of one year.

The referred suspension will only proceed if the broker incurred in any of the following causal:

1. Stop fulfilling the requisites that were necessary for their registration. The Superintendent in qualified cases will be able to give to the interested party a term to correct the situation, which cannot exceed one hundred twenty days;
2. To incur in serious violations of the obligations that imposes this Law, its complementary norms or other provisions that govern them;
3. To participate in wrongful or deceitful way in acts non compatible with the healthy practices of the financial market;
4. To stop performing the function of active intermediation for more than one year;
5. To participate in public offerings or in transactions of securities not registered according to this Law or whose database entry or transaction has been suspended; and
6. Not to fulfill for reasons attributable to them the obligations originated in transactions of securities in which they have participated.

The Superintendent will be able to cancel the registration of a broker for causes of re-incidence in paragraphs b, c, e and f.

For the purposes of imposing the sanctions specified in this Law, the procedure established in chapter VIII of the Organic Law of the Superintendence of the Financial System will be applied, with the following modifications:

1. The trial will begin hearing the offender for the term of two business days starting from the day following the notification;
2. The probe term will be of three days;
3. Once the probe term is due, the Superintendent will have two days to pronounce the corresponding resolution.

The Superintendence will notify to the respective stock exchange the beginning of this trial so that it communicates it to its Brokerage Houses.

Disclosures by the Superintendence

Sect. 19.- The Superintendence based on the received information and on any other that it requests from the stock exchange when the circumstances justify it, will elaborate at least quarterly, periodic bulletins that contain detailed information of Issuers, securities and Brokerage Houses registered in the database, as well as of other participants in the securities market. ⁽¹⁾

Powers of Investigation and Inspection

Sect. 20.- The Superintendence will have, concerning the Issuers of securities, the same inspection powers that its Organic Law confers it concerning the investigated corporations, when there are presumed infractions made by these to what is contemplated in this Law.

Also, the Superintendence will watch over the work of the external auditors of corporations that issue securities, according to the provisions dictated by its Directive Council.

REFORMS:
(1) D.L. No. 254, Published in the Official Newspaper No. 35, Vol. 326, of February 20, 1995
(2) D.L. No. 925, Published in the Official Newspaper No. 25, Volume 334 of February 7, 1997.
(3) D.L. Not. 374, Published in the Official Newspaper No.149, Volume 340 of August 14, 1998.