SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) OF CHILE

SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) OF CHILE
Response to Survey on Implementation of IOSCO Objectives and Principles of
Securities Regulation
Principles Relating to The Regulator 1
Information presented is as of February 20, 2001
Contact Person
Salvador J. Seda, International Relations
Research and International Relations Division
Superintendencia de Valores y Seguros
Teatinos 120, Piso 7
Santiago
6500692
Chile
Tel (56 2) 549 5840
Fax (56 2) 549 5937
E-mail: [email protected]
1
The responses to this survey were prepared by the staff of the Research & International Relations
Division of the SVS and do not necessarily reflect the views of the SVS.
PART ONE:
Identifying the Regulator, its Responsibilities and Powers
This information will help to facilitate an assessment of your jurisdiction, particularly in
light of the differences among jurisdictions in how various regulatory functions are
allocated.
1. Please identify the responsible regulatory authorities, if any, in your jurisdiction for the
regulation of securities activities listed below. Where more than one authority is
responsible, briefly describe the division of responsibility. You should include both
statutory and non-statutory bodies.
a. Issuance of securities, including:
i. Content and use of prospectuses and disclosure documents,
ii. Tender offers, takeovers, mergers or other change of control
transactions,
iii. Shareholder rights and
iv. Corporate governance, i.e., the relationship of the enterprise, its
management and shareholders.
Under Law Nº18,045 (Securities Market Law), the Superintendencia de Valores y
Seguros of Chile (hereinafter the “SVS”) is the principal regulatory agency
responsible for the activities referred to in 1.a above. However, the General Banking
Act states that the Superintendencia de Bancos e Instituciones Financieras (“SBIF”)
is in charge of the supervision of the companies whose corporate purpose consists
in the issuance or operation of credit cards or any other similar system, provided the
said system considers that the issuer or operator ordinarily assumes monetary
obligations to the public or certain sectors or specific groups thereof (banks and
financial institutions). The Chilean Central Bank (“BCCh”) has the capacity to
promulgate norms and regulations that influence banks and financial institutions.
The issuance of securities by the BCCh and others State institutions with full state
warranty are self-regulated.
b. Brokerage or dealing activities:
i.
ii.
iii.
iv.
Licensing;
Conduct of business requirements
Prudential requirements
Custodianship of customer funds and assets.
Under the Securities Market Law (Law Nº18,045), the SVS is the only regulatory
agency responsible for the activities referred to in 1.b above, even for subsidiaries of
banks and financial institutions that perform brokerage activities.
c. Fund or portfolio management;
Both, DL Nº1,328 of 1976 and DS de Hda. Nº249 of 1982, give the tools to the SVS
to authorize the existence and to supervise mutual funds and its fund managers.
d. Collective investment schemes;
CIS and their fund managers are under the supervision of the SVS. These include
venture capital funds, private funds and foreign investment funds. The laws that
regulate these entities are Law Nº18,657, Law Nº18.815 and D.S. de Hda. Nº864.
e. Accounting and auditing standards;
The Auditing Board of the Chilean School of Accountants ("CCCh", their Spanish
abbreviation by initials) is a SRO not subject to governmental control, created under Law
Nº13.011, allowed to establish auditing norms. External auditors must be chosen among
the ones that are registered at the SVS, who they are under SVS supervision. External
auditors will be liable for any damage due to their actions, reports or omissions. The SVS
has the power to apply censure sanctions (warnings), fine and revocation of authorization
of existence. Finally, the SVS has authority to establish accounting and auditing standards
for financial statements.
f.
Markets:
i. Designation or approval, if relevant, of market, both domestic and
foreign;
ii. Admission to listing of securities and derivative contracts,
iii. Trading and execution,
iv. Clearing and settlement and
v. Depositories and/or registrar and transfer agents.
Under the Securities Market Law, the SVS is the main regulatory authority for all the
activities referred in question 1.f except those conducted by bank transfer. The BCCh's
Constitutional Act establishes as another of the Bank's objectives, that of safeguarding
the normal functioning of domestic payments. The term "system of domestic payments"
means all the institutions and instruments which facilitate carrying out transactions in the
economy. Generally the main components of this include money in circulation and sight
or checking deposits in banks. These are the instruments which are most used in
transactions carried out by different economic agents, for which reason if they ceased to
operate normally, serious damage would be caused to the economy as a whole.
Current -account deposits represent the part of the payments system that is directly
linked to the financial system.
2. Please indicate whether market intermediaries, other than securities firms, e.g., banking
or credit institutions; insurance providers; retirement, pension and superannuation
funds, engage in securities activities listed above. For each type of intermediary, identify
whether the responsible authority, if any, is different from the authority in question 1.
Where more than one authority is responsible, briefly describe the division of
responsibility.
No.
PART TWO:
Principles Relating to Regulators
Where your response to Part One indicates that responsibilities for securities
regulation are shared by more than one regulator and there are differences
among regulators, please provide answers to the following questions for each
regulator.
Principle 1: The responsibilities of the regulator should be clear and objectively
stated.
1.1 Are the regulator’s responsibilities set out by statute, regulation, or in some other
way?
The SVS responsibilities are set by law. The most important laws in this respect are DL
Nº3,538 (SVS Basic Law) and Law Nº18,045 (Securities Market Law).
1. How are modifications to the regulator’s responsibilities implemented?
By amending the law, which have to be ratify by the Chilean Congress and Senate.
2.
Does the regulator have discretion to interpret its authority under its mandate?
Yes.
1.2
Are procedures for appointment, terms of office and general criteria for removal of
the head and members of the governing body of the regulator specified by statute,
regulation, or in some other way? If so, please explain.
Article 7 of DL Nº3,538 states that an official with the title of Chairman of Securities and
Insurance is the director of the SVS and has the legal, judicial and extra-judicial
representation of the SVS. The President of the Republic will name the Chairman. He
will be replaced, in the event of vacancy, absence or impediment, by the Deputy
Chairman or “Intendente de Valores” (Securities) and, if said individual is unable, by the
“Intendente de Seguros” (Insurance).
1.3 Referring to your answers to Part 1, question 1, are there procedures in place to
ensure that any division of responsibility among regulatory authorities avoids gaps
or inequities in regulation? If so, please describe?
Yes. There is a committee form by the three regulators of the financial sector (bank and
financial institutions, pensions and securities and insurance) so to regulate financial
conglomerates and to coordinate responsibility among regulators.
1.4 Please describe the arrangements for cooperation and communication of
information between responsible authorities in your jurisdiction. In particular:
1.4.1 Do responsible authorities cooperate and communicate directly, and are
they required to cooperate and communicate in areas of shared responsibility?
See above response to question 1.3
1.4.2 Are there limits on cooperation and communication between responsible
authorities?
The few limits are circumvented to restricted or confidential information. However,
even in those cases the authorities can share information through official document
request. The Chairman of the SVS through Law Nº19,653 (Law on Probity) has the
discretionary powers to share confidential and restricted information.
On the other hand, Article 23 of DL Nº3,538 states that employees or persons that
under any title lend services to the SVS will be bound to confidentiality regarding the
documents and information of persons or entities subject to the SVS’ supervision
when said documents or information are not public. The breaking of this obligation
will be sanctioned in the manner established in the first point of article 247 of the
Penal Code. However, the stipulations of the previous point will not prevent the
Chairman from publishing or making public through the persons or means he deems
appropriate, information or documentation regarding supervised subjects in order to
protect the public trust and the interests of shareholders and investors.
1.4.3 Is the authority to cooperate or communicate set out by statute or
regulation, or are there other ways this authority is made public?
Both through statute and regulation.
Principle 2: The regulator should be operationally independent and accountable
in the exercise of its functions and powers.
2.1 Does legislation or regulation address the independence and accountability of each
of the regulators identified in answer to Part 1, question 1?
Yes, the SVS through Article 1 of DL Nº3,538. For other regulators, the independence
and accountability are set in their statutory laws.
2.1.1 If yes to question 2.1, what legal structures or procedures are in place to
assure the independence of regulators and their staff acting in the bona fide
discharge of their functions and powers from political or commercial interference?
The SVS is created as an autonomous and legal institution with its own resources, only
interacting with the Government through the Ministry of Finance to avoid political
interfere nce.
The independence of the staff from commercial interference is established in the DL
Nº3,538. If there is a violation of any of those decrees, a staff of the SVS could even go
to jail. Also, Article 58 of Law Nº19,653 states a prohibition of six months for an officer
of a regulatory agency to work in a supervised entity.
2.2 Is consultation with another government agency, minister or other authority required
with respect to particular regulatory decisions, e.g., to adopt a rule or to take an
administrative action?
No.
If yes to question 2.2:
1. Is the consultation process established by law?
2. Please describe the consultation process.
3. Is the regulator accountable to any other person or body, for example, the
legislature? If so, to whom?
2.3 Please describe the system of accountability for the regulator’s use of its powers and
resources and, in particular:
2.3.1 Are the regulator’s activities and decisions overseen by a third party?
2.3.2 If so, who has oversight responsibility and over what types of actions?
There is no system of day-to-day oversight. However, the SVS is accountable to the
Ministry of Finance. From the point of view of budget, accounting and auditing, the
SVS is oversight by the General Comptroller of the Republic.
The SVS ha s a Internal Comptroller Unit that supervise its staff, which has to comply
with all rules and regulations related to administrative matters and any other disposition
that emanates from the Chairman.
2.3.3 Is the regulator required to report on its activities and, if so, under what
circumstances?
2.3.4 Is any report made public?
No.
2.3.5 Are there legal safeguards to protect against the inappropriate use or
disclosure of information in the possession of the regulator that is confidential or
of a commercially sensitive nature? If so, describe the applicable legal
provisions, including any sanctions that apply to the mishandling of such
information.
In particular for the staff of the SVS, the Decree Law Nº3,538 (SVS Basic Law) says in
its article 23 in relation to confidentiality:
“Article 23.- The employees or persons that under any title lend services to the
SVS will be bound to confidentiality regarding the documents and information of
persons or entities subject to the SVS’ supervision when said documents or information
are not public. The breaking of this obligation will be sanctioned in the manner
established in the first point of article 247 of the Penal Code.
SVS personnel may not lend professional services to the persons or entities
subjected to the SVS’ supervision.”
2.4 Is there a system permitting review of the regulator’s decisions with regard to, e.g.,
licensing, rulemaking and adjudication? If yes to question 2.4:
2.4.1 Please describe the nature of the review, including the nature of the body
carrying out the review, e.g., whether it is a judicial body, a statutory tribunal or
some other type of body, and whether the review includes a review of the merits
of the decision.
The persons or entities that consider the SVS’ administrative actions or omissions do
not adhere to the law, regulations or rules that it is competent to apply, may challenge
said actions. Appeals may be made before the SVS when a SVS administrative act
resolves a petition as long as the appeal presents new information that was not
considered at the time the resolution in question was issued. The petition must be made
in writing and clearly and concisely present the facts and laws upon which are based.
The time limit for lodging an appeal will be five working days from the notification of the
respective decision and the SVS will have five more working days to make a decision.
The persons who believe that a SVS general rule, instruction, communication,
resolution or omission is illegal and prejudices them may make an appeal before the
Santiago Appellate Court. The Court will first decide if the appeal is admissible, for
which purpose the interested party must precisely indicate in writing the stipulation that
has allegedly been transgressed, the way in which the infraction took place and the
reasons why it is prejudicial. The court will reject the appeal outright if the presentation
does not comply with the conditions indicated in the preceding point. Appeals must be
made within 10 working days from the notification of the action being appealed or from
the time the interested party became aware of the omission.
2.4.2 Are any types of decision excluded from that review process?
No.
2.4.3 Must the regulator provide written reasons for its decisions?
Yes.
Principle 3: The regulator should have adequate powers, proper resources and
the capacity to perform its functions and exercise its powers.
3.1 Identify each of the regulators in answer to Part 1, question 1 that have the following
powers:
a. Direct surveillance of:
i. Markets and
ii. Financial institutions subject to regulation.
The SVS with respect to stock broker and securities broker/dealers, stock
exchanges, clearing agencies and funds and its managers. However, banks and
financial institutions that issue securities and bonds are under the SBIF and BCCh
supervision.
b. Ability to obtain information about:
i. Markets,
ii. Institutions,
iii. Financial products,
iv. Customers and
v. Parties involved in securities transactions.
The SVS can obtain information about the five point mentioned above. However,
the SBIF and BCCh can obtain the same information from banks and financial
institutions under their supervision.
c. Communication with other responsible authorities;
d. Investigation;
e. Enforcement:
i. Sanctions and
ii. Market intervention; and
The SVS, SBIF and BCCh can communicate with each other at will. With
relation to investigation and enforcement, their respective realms of action are
those entities defined in their respective laws.
f.
Information sharing:
i. Intersectoral, i.e., among domestic regulatory authorities and
ii. International
The three supervisory authorities identified here (SVS, SBIF and BCCh) can
share information at will. On the other hand, those three authorities have
discretionary powers to refuse sharing information if an investigation is going on
or if there are other sensitive reasons to withhold information sharing such as
confidentiality concerns. In the international arena, the SVS shares information
when a “Requesting Authority” has already signed a Memorandum of
Understanding (MoU), subject to confidentiality concerns.
3.2 In respect to each of the regulators identified in answer to Part 1, question 1, state how
the regulator is funded to enable it to perform its functions and exercise its powers, and,
in particular:
3.2.1 Is the regulator funded by transaction or other fees? Please explain.
3.2.2 What is the funding process?
3.2.3 Are resources allocated by the regulator or by some other governmental
entity?
SVS: It is an autonomous legal entity with its own resources that will interact with the
Government through the Ministry of Finance. Its assets consist of the goods transferred
to it by virtue of the SVS’ statutory law, the funds that are annually allocated for such
purpose by the Budget Law, the income it receives for services provided and any other
goods it acquires at any title whatsoever. The General Budget Law establishes yearly,
in overall figures, the funds necessary for the maintaining of the SVS and for other SVS
expenses.
SBIF: The resources for the functioning of the SBIF shall be provided by the institutions
under its supervision. The quota corresponding to each institution shall be of one sixth
of one thousandth per semester computed on the average of their assets in the
semester immediately preceding, as it appears from the balance sheets and financial
statements submitted by those institutions. For the purposes of the calculation of the
quota that must be contributed by each institution, the properties and items that in the
opinion of the SBIF’s Chairman should be excluded shall not be considered as part of
their assets. The quota shall be paid within the period of ten days after been required.
The SBIF’s Chairman shall collect the funds for the maintenance of the SBIF that
must be contributed by the institutions under its supervision and shall deposit such
funds with Banco del Estado. From said account he shall draw to pay for the
expenses originated by the functioning of the SBIF.
BCCh: Article 97 of Chapter XII of the current Political Constitution of Chile confers
constitutional status on the existence of an autonomous central bank. This same
provision also defines the BCCh as an entity with its own equity capital, and as one of
technical nature whose composition, organization, functions and attributes have to be
determined by means of a constitutional charter. The BCCh enjoys autonomy from the
viewpoint of ownership, in as much as the Law endows it with its own capital, which may
be administered entirely independently from the government. As a result of the
autonomy conferred on it by law, the BCCh is not subject to inspection by the General
Comptroller of the Republic, or by the SBIF nor does it form part of state administration.
It is ruled exclusively by the regulations of its own charter, as well as certain specific
provisions of the General Banking Act, and it has the exclusive faculty for administrative
interpretation of its resolutions, rulings, orders and instructions, notwithstanding the
legal competence of judicial bodies.
3.2.4 Who oversees the use of resources?
For the SVS and the SBIF, the General Budget Law oversees the general use of
resources. In relation to the items established in their respective budgets, their
chairmen have certain discretionary powers. In the case of the BCCh, see the
above answer.
3.2.5 How does the funding process address the sufficiency of the regulator’s
resources?
Yearly, before the General Budget Law is established, the SVS and the SBIF
present their respective funding requirement for their approval. For the BCCh, see
above answer.
3.3 In respect of each of the regulators identified in answer to question 1, please explain
how adequate personnel and technical resources and appropriate expertise are
obtained.
The autonomy of the three regulators (SVS, SBIF & BCCh) also had implications for its
internal management and administration. This arises out of an implicit commitment to
society, requiring a responsible administration of the human and material resources
involved in its management, by demanding high standards in terms of efficiency and
productivity. This process has translated into a more flexible organizational structure, a
reduction in the number of hierarchical levels, the gradual decentralization of decisionmaking, the application of new management policies and the incorporation of new
technologies.
Principle 4: The regulator should adopt clear and consistent regulatory
processes.
4.1 Does the regulator have the power to make or adopt substantive and procedural
rules and re gulations?
Yes. DL Nº3,538 states that the SVS is responsible for overseeing that the persons or
institutions it inspects comply with the laws, regulations, statutes and other ordinances
that govern them. The SVS is endowed with the powers to administratively interpret, in
materials of its competence, the laws, regulations and other rules that govern
supervised persons or entities and to set rules, give instructions and issue orders for
their implementation and adherence.
4.2 Are all rules and regulations required to be available to the public? If not, why not?
Yes.
4.3 How does the regulator assure that regulation and procedures are consistently
applied, comprehensible, fair and equitable?
All ruling and procedures applied by the SVS have to be review by the Legal
Department before becoming public. Once they are public, persons or entities that
consider the SVS’ administrative actions or omissions do not adhere to the law,
regulations or rules that it is competent to apply, may challenge said actions via the
recourses of appeal. Appeals may be made before the SVS when a SVS administrative
act resolves a petition as long as the appeal presents new information that was not
considered at the time the resolution in question was issued. After that, the persons who
believe that a SVS general rule, instruction, communication, resolution or omission is
illegal and prejudices them may make an appeal before the Santiago Appellate Court.
Moreover, Article 10.b of DL Nº3,538 states that the Chairman should: “Overseeing
compliance with the rules applicable to the SVS and adopting the necessary measures
for ensuring its efficient operation”.
4.3.1 For each of the regulators named in answer to Part 1, question 1, state
whether, and in what general circumstances, the regulator is required to give
reasons for regulatory decisions or actions that affect the rights or interests of other
persons.
Yes, in practically all situations.
4.3.2 Are the actions of the regulator in applying its rules and procedures under the
procedures subject to review?
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4.3.3 Are the general criteria for granting, denying, or revoking a license made
public, and are those affected by the licensing process entitled to a hearing with
respect to the regulator’s decision to grant, deny, or revoke a license?
The general criteria for granting and denying a license are written and become
public. In relation to revoking a license, there are no written criteria but the
resolution of revoking becomes public. In all cases, the affected party is entitled to a
hearing and, specially, in a revoking case, the party is entitled to appeal before the
Santiago Appellate Court.
4.4 For each of the regulators identified in answer to Part 1, question 1, in the
formulation of policy, does the regulator:
a. Have a process for consultation with the public, or a section of the public,
including those who may be affected by the policy, e.g., publishing
proposed rules for public comment, using advisory committees or informal
contacts;
There is no a consultation process per se. However, it is common that an informal
contact with the respective market participants goes under way each time a ruling or
a policy affected them.
b. Publicly disclose and explain its policies in important operational areas,
such as through interpretations of regulatory actions, setting of standards,
or issuance of opinions stating the reasons for regulatory actions;
Yes.
c. Publicly disclose changes and reasons for changes in rules or policies;
and
Yes.
d. Play an active role in educating investors and other market participants?
Please describe your activities in the area of the education of investors.
Yes. The SVS has a Center for the Securities Market unit that handles investors
and market participants concerns through specialized officers help and through
the Internet. Some responsibilities of the unit include answering questions from
the public, facilitate resolutions of investor concerns and help market participants
in understanding new rules and regulations. The SVS has participated actively in
hemispheric education campaigns through COSRA.
4.5 Does the regulator regularly publish information about actions taken in the furtherance
of its policy objectives (including, for example, information about investigations, inquiries
and regulatory programs)?
The SVS has a monthly print publication that includes statistical information of the
Chilean securities market, the rules and regulations, new licenses and investigation
results of enforcement actions when the cases are finished.
Principle 5: The staff of the regulator should observe the highest professional
standards including appropriate standards of confidentiality.
5.1 Are the staff of the regulator required to observe legal requirements or a "Code of
Conduct" or other wr itten guidance, including:
a. The avoidance of conflicts of interest (including whether staff are
prohibited from or must observe restrictions on holding or trading in
securities or are required to comply with any requirements to disclose
financial affairs or interests);
SVS: No.
SBIF: Yes, the General Banking Act states that its personnel shall neither apply for
loans in the banking enterprises subject to the SBIF’s supervision nor acquire
properties of the said enterprises without first having secured a written authorization
from the Chairman of the SBIF.
BCCh: In the Internal Personnel Rule, there are several incompatibilities stated for
officers of the BCCh. Among those incompatibilities are performing other paid
functions (the only exception is academic work), own more than 1% in equity of
banks or financial institutions, work or advise (even without remuneration) in any
State entity or corporation where the State has participation.
b. The appropriate use of information obtained in the course of the exercise
of powers and the discharge of duty;
c. The proper observance of confidentiality and secrecy provisions and the
protection of personal data; and
Yes, the three supervisory authorities (SVS, SBIF & BCCh) have clear
observance of confidentiality and secrecy provisions for their employees and in
case on breach, there are even jail sentences consider.
d. The observance of procedural fairness? If so, please explain.
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5.2 Please describe how the regulator implements standards for its staff and enforces
adherence to such standards. Are there legal or other sanctions for failing to adhere to
these standards?
The SVS is working on that.
5.3 Is there any person or body, external to the regulator that has jurisdiction to review
allegations of failure to adhere to these standards?
Yes, the General Comptroller of the Republic.
Principles for Self-Regulation
Principle 6: The regulatory regime should make appropriate use of SelfRegulatory Organizations (SROs) that exercise some direct oversight
responsibility for their respective areas of competence, to the extent appropriate
to the size and complexity of the markets.
6.1 List any SROs in your jurisdiction and briefly explain, with respect to each SRO:
a. What functions it is required to perform;
b. What functions it is permitted to perform;
c. The source of its powers to perform those functions; and
d. What limitations, if any, exist on the scope of its powers.
In answering this question please consider the following as matters for which a SRO
may have some responsibility:
a. Issuance of securities, including:
i. Content and use of prospectuses and disclosure documents,
b.
c.
d.
e.
f.
ii. Tender offers, takeovers, mergers or other change of control
transactions,
iii. Shareholder rights and
iv. Corporate governance, i.e., the relationship of the enterprise, its
management and shareholders.
Brokerage or dealing activities:
i. Licensing;
ii. Conduct of business requirements
iii. Prudential requirements
iv. Custodianship of customer funds and assets
Fund or portfolio management;
Collective investment schemes;
Accounting and auditing standards;
Markets
i. Designation or approval, if relevant, of market, both domestic and
foreign;
ii. Admission to listing of securities and derivative contracts,
iii. Trading and execution
iv. Clearing and settlement and
v. Depositories, registrar and transfer agents
Currently 4 organizations are considered SRO, including 3 securities exchange and 1
depository agency: Santiago Stock Exchange, Electronic Stock Exchange, Valparaiso
Stock Exchange and the Central Securities Depository (DCV)
Stock exchanges regulate their exchange activities and the ones of their stockbrokers
by monitoring the strict compliance to ensure the existence of a fair, competitive, orderly,
and transparent market. Notwithstanding the SVS has the authority to provide the
exchanges and their members with the instructions and rules it deems necessary for
compliance with their objectives.
In the regulation of their own activities and the activities of their members, the stock
exchanges must include rules on matters indicated below:
a)
Rules that establish the rights and obligations of stockbrokers regarding the
operations they carry out and, especially:
I.
In cases where there is no legal rule on the matter, stockbrokers shall take
the orders they receive directly to the floor of the stock exchange, so to
guarantee matching therein, in an active market and continuous auction,
of all purchase and sale interests so that all trades are carried out in an
open market and the investor may obtain the most advantageous
execution of his/her orders;
II.
To establish the priority, parity, and precedence of orders, to guarantee fair
and orderly markets and adequate fulfillment of all the orders received;
III. To establish the cases where stockbrokers may trade on their own behalf, to
ensure the stock exchange functions as an open and informed market to
the benefit of investors in general;
IV. To establish exchange and transfer procedures for trades in a rapid and
orderly fashion, both of current and future operating volumes.
V. To establish stockbrokers’ obligations to their clients, including the obligations
resulting from investment recommendations made by stockbrokers, and
VI. To establish the internal administrative organization of their members
necessary to ensure the purposes set forth herein.
b)
Rules designed to promote just and fair principles in trading on exchanges and to
protect investors from fraud and other illegal practices.
c)
Fair and uniform rules and procedures by which the members of a stock
exchange and their partners and employees may be penalized, suspended or
expelled therefrom should they violate this law and its complementary rules or
the statues or internal rules thereof.
d)
Rules establishing that a registration system shall be maintained for complaints
filed against stockbrokers, and the measures taken and penalties applied by the
exchange against its members, when appropriate.
e)
Rules establishing general and uniform requirements for the registration and
trading of securities on the exchange, and for their suspension, cancellation and
withdrawal.
f)
Rules that clearly establish the rights and obligations of issuers of securities
registered or traded on the exchange, particularly, regarding information they
shall provide to the market about their legal, economic and financial situation,
and other facts that may be relevant in the trading of their securities.
g)
Rules that regulate securities trading systems in order to determine accurately
whether trades carried out by stockbrokers correspond to operations on their own
account or on behalf of third parties. This information shall be public. The
respective exchange shall also establish similar systems for operations or trading
that is done by stockbrokers on behalf of the fund manager or for the funds they
administer. The source and the holder of the respective order shall be
considered confidential information by the stockbroker and the respective stock
exchange.
The DCV must regulate their own activities and the activities of their depositors
regarding the operations that they accomplish through an internal code. As well, the
DCV must contemplate in the internal code fair and uniform rules and procedures by
which the depositors system may be penalized, suspended or expelled therefrom
should they violate the Law Nº18,876 (Law on the Deposit and Custody of Securities) and
its complementary rules or the statues or internal rules.
All internal rules adopted by SROs about their operations as such they must be
approved in advance by the SVS before going into use. Any modification or
elimination must be authorized by the SVS. When the SROs do not execute their
functions, they could be by the SVS.
Principle 7: SROs should be subject to the oversight of the regulator and should
observe standards of fairness and confidentiality when exercising powers and
delegated responsibilities.
7.1 Does the regulator require a SRO to meet specified standards before allowing the
organization to exercise its authority? Briefly describe any standards and the process by
which an organization may obtain authorization to become a SRO.
See above response.
7.2 As a condition of ongoing authorization, is the SRO required to:
a. Have the capacity to carry out the purposes of governing laws, regulations
and SRO rules and to enforce compliance by its members and associated
persons with those laws, regulations and rules;
b. Treat all members of the SRO and applicants for membership in a fair and
consistent manner;
c. Develop rules that are designed to set standards of behavior for its
members and to promote investor protection;
d. Submit to the regulator its rules for review and/or approval, as the
regulator deems appropriate, in order to ensure that the rules of the SRO
are consistent with the public policy directives established by the
regulator;
e. Cooperate with the regulator and other SROs to investigate and enforce
applicable laws and regulations;
f. Enforce its own rules and impose appropriate sanctions for noncompliance;
g. Assure fair and representative governance;
h. Assure that its rules do not unnecessarily restrict competition and prevent
the SRO role from allowing any market participant unfairly to gain
advantage in the market?
For each matter under a – h, indicate whether it is required by legislation or through some
other means and briefly explain the means by which a SRO may satisfy the condition.
What are the consequences of a failure to meet one or more conditions for
authorization?
See answer to question 6.1.
7.3 Has the regulator established a SRO oversight program and, if so, how is the
program administered?
No.
7.3.1 Does the oversight program include inspection of the SRO, recordkeeping
and reporting requirements, and approval and revocation of SRO governing
instruments and rules?
There are regular inspection, recordkeeping and reporting requirements for SRO
in the same way that any other supervised entity but there is no a special
oversight program.
7.3.2 Is regulatory oversight of the SRO ongoing?
See above answer.
7.3.3 Once the SRO is operating, does the regulator assure itself that the
exercise of the SRO’s power is in the public interest and results in fair and
consistent enforcement of applicable securities laws, regulations and appropriate
SRO rules? If so, how?
Yes, see answer to question 6.1.
7.3.4 Does the regulator have the power to require the SRO to take a particular
course of action or to enforce its rules?
Yes.
7.4 Are there standards to which SRO staff must adhere and what are the consequences of
failing to adhere to these standards? Does the law or regulator require the SRO to
follow standards of behavior on conduct matters including:
a. The avoidance of conflicts of interest (including whether staff are
prohibited from or must observe restrictions on holding or trading in
securities or are required to comply with financial reporting or other
obligations or restrictions);
b. The appropriate use of information obtained in the course of the exercise
of powers and the discharge of duty;
c. The proper observance of confidentiality and secrecy provisions and the
protection of personal data pursuant to law or regulations; and
d. The observance of procedural fairness?
Yes, all securities rules and regulations on conflict of interest, the appropriate use
of information, confidentiality and secrecy provisions and procedural fairness
apply to a SRO as well as any other supervised entity.
7.5 Does the regulator retain the direct authority to inquire into matters affecting
investors or the market with respect to functions that may be shared by a SRO?
Yes.
Principles for the Enforcement of Securities Regulation
Principle 8: The regulator should have comprehensive inspection, investigation
and surveillance powers.
8.1 For each regulator in Part 1, question 1 with inspection authority, does the regulator
carry out inspections of business operations on a routine periodic basis or based upon a
risk or complaint associated with an inspected entity?
Yes, there exist both inspections, on a routine basis and upon complaints.
8.1.1 If yes to question 8.1: is inspection subject to any notice provisions or other
limitations?
No, the SVS can resolve inquiries and petitions and investigate charges or complaints
formulated by shareholders, investors or other legitimate parties, in areas of its
competence, determining any requirements or conditions that must be fulfilled prior to
examination. It can examine all of the transactions, goods, books, accounts, archives
and documents of supervised subjects or activities and demand of them or their
administrators, advisors or personnel the information and explanations that it deems
necessary for its information.
8.1.2 Can the regulator delegate inspection authority to third parties? If so, are these
third parties subject to disclosure and confidentiality requirements that are no less
stringent than those applicable to the regulator?
The SVS can audit, using their own employees or external auditors, the persons or
entities subject to its supervision. By designate external auditors for entities or persons
subject to supervision to conduct the tasks it specifically assigns them, the SVS can
endow them with the powers it deems necessary. The external auditors assigned by
the SVS will be bound by the requisite of confidentiality established and sanctioned in
article 23 of DL Nº3,538.
8.2 For each regulator identified in Part 1, question 1 with access to books and records,
can the regulator access books and records and request data or information on a
routine basis and on an exceptional basis without judicial action?
Yes, in their respective statutory law or constitutional act the regulator has ample
enforcement powers to access books, records and request data or information from its
supervised entities whenever it considers appropriate.
8.3 For each regulator identified in Part 1, question 1, does the regulator, or another
authori ty, have the power necessary to enforce relevant regulations to obtain data,
information, documents, statements and records from persons subject to supervision? If
not, please explain.
Yes, see above answer.
8.3.1 If the persons are not licensed or registered, must the regulator cooperate
with judicial authorities or other responsible authorities within its jurisdiction?
No, but whenever the cooperation will help the overall functioning of the Chilean
securities market, the SVS is going to be eager to help.
8.4 For each regulator identified in Part 1, question 1, does the regulator supervise the
conduct of market intermediaries through surveillance?
Yes.
8.4.1 If yes to question 8.4: Are surveillance powers subject to any limitations?
The surveilla nce powers are those defined by law. For example, the SVS cannot tape
phones, intercept communication or perform undercover surveillance.
8.4.2 Does the regulator cooperate with other regulators within its jurisdiction?
Yes.
Principle 9: The regulator should have comprehensive enforcement powers.
9.1 Identify the regulator or other competent government authority within your
jurisdiction that has the power to enforce compliance with the laws and regulations
relating to securities activities listed in Part 1, question 1?
The SVS can summon representatives, administrators, advisors and employees of
supervised entities or persons, or any other person that may have conducted or
celebrated any kind of acts or conventions with them, to make declarations to provide
information the SVS deems necessary for the fulfillment of its duties related to securities
activities.
9.2 Identify each regulator or other authority with securities compliance responsibility
under question 9.1 that has the following powers:
a. Power to seek orders and/or to take other action to ensure compliance
with regulatory, administrative and investigation powers;
The SVS and the SBIF
b. Power to impose administrative sanctions and/or to seek orders from
courts or tribunals;
c. Power to initiate or to refer matters for criminal prosecution;
The SVS and the SBIF
d. Power to order the suspension of trading in securities or to take other
appropriate action, including the imposition of trading restrictions or
requirements on individual market participants, e.g., position limits,
reporting requirements, liquidation-only trading, or special margin
requirements; and
The SVS and with some limitation, the Santiago Stock Exchange.
e. If applicable, where enforcement action is able to be taken, power to enter
into settlements or to accept undertakings.
The SVS and the SBIF
9.3 What kinds of sanctions can be imposed for securities violations, e.g., fines, revocation
of authority to do business, restitution?
DL Nº3,538 says in the following articles:
Article 27.- The corporations subject to enforcement by the SVS that commit
infractions of the laws, regulations, statutes or other rules that govern them, or do not
comply with the instructions and orders given to them by the SVS, may be subjected by
the SVS to one or more of the following sanctions (without prejudice to penalties
specifically established in other legal or regulatory bodies):
1)
Censure;
2)
Fines to be paid to the treasury up to overall sums per corporation equivalent to
1,000 U.F. 2 In the event of repeated infractions of the same nature, a fine of up to
five times the above amount may be applied; and
3)
Cancellation of the corporation’s operating authorization, when appropriate.
The sanctions indicated in numbers 1) and 2) may be applied to the corporation,
directors, managers, employees or account inspectors or liquidators as is deemed
appropriate by the SVS.
2
U.F. stands for Unidad de Fomento, a monetary index used in Chile for business purposes. Its worth is
tied to the value of a basket of leading prices. At February of 2001, 1 U.F. equals approx. $15,831.57
Chilean pesos or US$28.
When the sanctions included in numbers 1) and 2) of this article are applied, the
SVS may inform stockholders meetings of the infractions, acts of non-compliance or
acts which directors, managers, account inspectors or liquidators have committed so
that they may remove said persons from their positions if it is deemed appropriate,
without prejudice to carrying out the legal actions the SVS deems pertinent. The board
of directors must make the convocation of stockholders meetings within a period of time
set by the SVS, with the SVS being able to make said convocation if it is deems it
necessary.
Article 28.- Persons or entities other than those referred to in the first point of
the previous article but subject to the SVS’ enforcement or supervision that transgress
the laws, regulations, statutes or other rules that govern them or do not comply with the
instructions and orders given to them by the SVS may be subjected by the SVS to one
or more of the following sanctions (without detriment to sanctions specifically
established in other legal or regulatory bodies):
1)
Censure;
2)
Fines to be paid to the treasury up to overall sums per entity or person equivalent
to 1,000 U.F. In the event of repeated infractions of the same nature, a fine of up
to five times the above amount may be applied; and
3)
In the event the persons in question have been named or authorized by the SVS
to carry out certain ta sks or actions, the SVS may also apply the following
sanctions:
a) The suspension of their post for up to one year, and
b) In serious cases, the cancellation of their authorization or assignment.
The sanctions established in this article may be applied to corporations,
companies, entities, individual and corporate entities, administrators and
representatives as the SVS deems fit.
Article 29.- Without detriment to the stipulations of articles 27 and 28, when applying
fines the SVS, at its discretion, may set fines in accordance with the limits established in
said articles or up to 30% of the value of the issue or irregular operation.
9.4 What legislation is in place to address the risks of money laundering?
The SVS may reject the registration of a foreign security in exceptional and serious
cases regarding acts related to Law Nº19,366 (Money Laundering) or circumstances it
is ill advised to disclose to the public because of their nature, and the grounds may be
omitted in the respective resolution. In such case, the Minister of Finance and the State
Defense Council, when appropriate, shall be confidentially informed of the omitted
grounds.
9.4.1 Does the regulator require that market intermediaries have in place policies
and procedures designed to minimize the risk of the use of an intermediary’s
business as a vehicle for money laundering?
No.
9.4.2 Does the regulator’s jurisdiction permit the collection of information on
ownership and control of accounts?
Yes.
9.5 Can private persons bring actions directly under the securities laws?
xxxxxxx
Principle 10: The regulatory system should ensure an effective and credible use
of inspection, investigation, surveillance and enforcement powers and
implementation of an effective compliance program.22
10.1 Please describe how the regulator uses its inspection and surveillance powers with
respect to issuers, markets, sponsors of trading systems, licensees, registrants or
others. For example:
1. Does the regulator conduct periodic, routine inspections and inspections
for cause?
Most of the SVS inspections are done when there are complaints or other causes
(for example, problem in the financial statements).
2. Does the regulator provide advance notice of inspections or are they
conducted unannounced?
Most are conducted unannounced.
10.1.3 Does the regulator establish inspection priorities and, if so, are these priorities
based upon risks or complaints associated with inspected entities?
Inspections are based mostly by complains. A few upon risks.
10.1.4 Does the regulator maintain records of inspection results?
Yes.
10.1.5 What action can the regulator take based on inspection results?
Any of the sanctions described in question 9.3.
10.2 In connection with its supervision of markets or intermediaries does the regulator
identified in Part 1, question 1 receive routine financial reports? If so, from whom does
the regulator receive reports? Please explain.
The SVS receives periodically financial reports (some monthly, most quarterly). All
quarterly and annual financial reports have to be audited by external auditors.
Principles for Cooperation in Regulation
Principle 11: The regulator should have authority to share both public and nonpublic information with domestic and foreign counterparts.
11.1 For each of the regulators identified in answer to Part 1, question 1, does the
regulator have authority to obtain and share with other domestic regulators and
authorities identified in answer to question 9.1 information on:
a. Matters of investigation and enforcement;
b. Making determinations in connection with authorization, licensing or
approvals;
c. Surveillance; and
d. Market conditions and events 23
e. Client identification?
In each case, is the authority granted by legislation? Are there any differences in the
scope of authority or in the procedures for exercising the authority? In particular,
indicate any differences in the scope of authority between regulators and authorities
identified in answer to question 9.1.
Under the influence of the Ministry of Finance, on January 2001, a Financial Sector
Coordination Committee was formed with the head all Chilean financial sector
regulators (securities, insurance, banks, pension funds). The idea of this committee is
to coordinate and cooperate in the supervision of financial conglomerates. The
regulatory heads meet once a month and they set policies of cooperation, sharing
information and assisting each other towards setting supervisory standards.
11.2 For each of the regulators identified in answer to Part 1, question 1, does the
regulator have the authority, consistent with applicable domestic laws, to share
information with other jurisdictions with respect to the matters listed in question 11.1? If
yes to question 11.2:
11.2.1 Indicate the source of this authority.
Under DL Nº3,538 (Organic Law), the SVS has the power to resolve inquiries and
petitions and investigate charges or complaints formulated by shareholders, investors or
other legitimate parties, in areas of its competence, determining any requirements or
conditions that must be fulfilled prior to examination. That “other legitimate parties”
could be a foreign authority. However, the SVS will share information (subject to
confidentiality concerns) only with foreign authorities that have signed a reciprocal
MOU.
11.2.2 Are there any preconditions for such cross-border information sharing,
such as the ability to ensure confidentiality, restrictions on the use of information,
or the provision of information solely to other regulatory authorities?
Yes.
11.2.3 Is the regulator subject to any "dual illegality" conditions to information
sharing and regulatory cooperation?
No.
11.2.4 Are there any categories of information which are not permitted to be
shared?
No.
Principle 12: Regulators should establish information-sharing mechanisms that
set out when and how they will share both public and non-public information with
their domestic and foreign counterparts.
12.1 For each of the regulators identified in answer to Part 1, question 1, has the
regulator developed cooperative mechanisms to:
a. Facilitate the detection and deterrence of cross-border misconduct; and
b. Assist in the discharge of licensing and supervisory responsibilities?
Yes.
12.2 Please list the cooperative mechanisms that are in place, including names of
counterparties and a general description of the nature of each such mechanism, e.g., a
memorandum of understanding (MOU), regulation made under legislation, or agreement
reached at an intergovernmental level. Also, indicate whether informal cooperation is
possible.
The SVS has entered into MOUs with:
Entity
1 Comisión Nacional Bancaria y de Valores
2 Comisión Nacional Supervisora de Empresas y
Valores
3 Comisión Nacional de Valores
4 Comisión Nacional de Valores
5 Superintendencia de Valores
6 U.S. Securities & Exchange Commission
7 Comisión Nacional de Valores
Country
Date
Mexico
Peru
31-III-91
30-I-92
Argentina
Costa Rica
Colombia
USA
Paraguay
28-IV-92
24-IX-92
2-II-93
3-III-93
13-VII-93
8
9
10
11
12
13
14
15
16
17
18
19
Comisión Nacional del Mercado de Valores
Superintendencia de Compañías
Securities & Exchange Commission
Comissao de Valores Mobiliários
Commission des valeurs mobilieres du Québec
Spain
Ecuador
Thailand
Brazil
Canada/Quebec
(Securities and Investment Board) - Financial Services Authority
United Kingdom
Superintendencia de Valores
Securities Commission
Financial Services Board
Securities & Futures Commission
Commission des Opérations de Bourse
Superintendencia de Pensiones, Valores y Seguros
El Salvador
Malaysia
South Africa
Taiwan
France
Bolivia
25-X-93
28-VII-95
6-XI-95
21-VI-96
18-IX-96
15-X-96
27-VI-97
26-V-98
26-V-98
26-V-98
27-V-98
4-VI-98
Principle 13: The regulatory system should allow for assistance to be provided to
foreign regulators who need to make inquiries in the discharge of their functions
and exercise of their powers.
13.1 When enforcement action is necessary, is the regulator able to offer:
a. Assistance in obtaining public or non-public information about:
i. A license holder,
ii. A listed company and
iii. A shareholder, beneficial owner or a person exercising control over
a license holder or listed company;
Yes.
b. Assistance in obtaining:
i. Banking,
Only the SBIF has the ability to obtain banking information subject to the banking
secrecy law.
ii. Brokerage and
iii. Other records;
Yes.
c. Assistance in obtaining voluntary cooperation from those who may have
information about the subject of an inquiry;
d. Assistance in obtaining information under compulsion:
i. Production of documents and
ii. Statements or alternatively oral testimony;
e. Assistance in providing information on the regulatory processes in a
jurisdiction; and
f.
If permitted, assistance in obtaining court orders, e.g., urgent injunctions?
Yes.
13.2 Describe any legal or practical obstacles to providing assistance.