Board of Directors PRESIDENT Gonzalo Rojas Ramos VICEPRESIDENTS Iñaki de Abiega Pons Gabriel E. Kuri Labarthe Moisés Tiktin Nickin EXAMINER Juan C. Salles Manuel SECRETARY Ángela Balmori Iglesias SECRETARY PRO TEM Erik García Tapia MEMBERS Héctor Aguirre Cobo Mauricio López Velasco Aguirre Jorge Eduardo Alonso Olivares Rafael Mac Gregor Anciola Francisco Javier Artigas Alarcón Diego Ramos González De Castilla Carlos Bremen Gutiérrez Clemente Reyes Retana Valdés Edgardo Mauricio Cantú Delgado Sergio Sánchez García Luis Cervantes Coste Patricio Tamayo Gómez Francisco Javier De Frutos Arroyo Javier Valadez Benítez Alejandro Finkler Kudler Eduardo Valdés Acra Raúl Garduño Vergara Roberto Valdés Acra Carlos Gutiérrez Andreassen Alejandro Valenzuela Del Rio Carlos Ibáñez Estens Felipe Vila González Edgar Legaspi Sauter Antonio Villa Ávila Carlos Levy Covarrubias ALTERNATE MEMBERS Arturo Julio Arce Taracena Bernardo Llerenas Bracho Andrés Borrego y Marrón Héctor Madero Rivero Humberto Cabral González Luis Martínez Arizmendi Juan Luis Cevallos Almada José Méndez Fabre Almada Víctor Chávez Longyear Gerardo Minjares Calderón Javier Cortina Azcárraga Alejandro Molina Tinoco José Miguel Díaz Goñi Luis Murillo Peñaloza Luis Enrique Estrada Rivero Mauricio Naranjo González Jorge Espinosa de los Reyes Dávila Jorge Plácido Evangelista Jorge Fernández García Travesí Guillermo Robles Gil Orvañanos Álvaro García Pimentel Caraza Juan Carlos Rosales Hernández Ignacio González Cossio José Antonio Salazar Guevara Adolfo Herrera Pinto Gustavo Salazar Salinas Christian Knudsen Ramos Arturo Tlapanco Martínez Juan Llanos Reynoso • 1 • Executive Commision PRESIDENT Gonzalo Rojas Ramos Iñaki de Abiega Pons Francisco Javier Artigas Alarcón Luis Cervantes Coste Francisco Javier De Frutos Arroyo Adolfo Herrera Pinto Gabriel E. Kuri Labarthe Clemente Reyes Retana Valdés Moisés Tiktin Nickin GUESTS Efrén Del Rosal Calzada Alejandro Gorches Guerrero Guillermo Prieto Treviño Pedro Zorrilla Velasco • 3 • Message to our Members All of the efforts made by the Mexican Securities Industry Association last year, as an expression of the financial industry’s commitment to the Mexican market’s complete integration into global financial circuits, as well as the active participation by representatives of our affiliates in the committees of this Association, working in close cooperation with the authorities, culminated on December 30, 2005, with the publication of a new Securities Market Act in the Official Gazette of the Federation. Since the passage of the first Securities market Act in 1975, thirty years of institutional legal tradition have transpired--a tradition encouraged, preserved, and led by the securities industry. Our trade association has been present as such for the last twenty-five years. Founded as the Mexican Association of Brokerage Firms on May 16, 1980, it assumed a new name and structure on July 20, 1993, to incorporate new categories of brokerage included in amendments to the Securities Market Act and the formation of what are called financial groups. Of course, the securities trade had been involved in regulatory matters for a long time before that-since the founding of the National Exchange in 1894, participants were aware that the development of securities brokerage required clear rules to win the confidence of companies and investors. In the preparation of the 1975 Act, the former National Securities Commission charged the Stock Exchange and the Mexican Securities Market Association with gathering background data and proposals that would shape the new body of law. This Association, created in 1966 by the National Securities Agents’ Association, whose predecessor was the Securities Club of 1964, took an active part in drafting the text that was presented to the Executive Branch in April 1970. This historic reference is important because it shows how this same vision, renewed in 2005, has inspired AMIB and the companies it represents to present proposals and recommendations to the authorities. Having reviewed four preliminary drafts, the National Banking and Securities Commission analyzed and incorporated most of the observations presented by AMIB, in representation of its sixty-seven associates and affiliates. Thus, through a quarter century of participation in the institutional and legal development of the securities market, AMIB collaborated closely with the authorities in perfecting the legal framework through successive reforms to these and other complementary laws. The Association was a pioneer in the climate of collaboration that exists today, and has since its founding sought out agreements and solutions through discussion, negotiation, and a call for all interested sectors to participate in resolving the matters crucial to the financing and investment process, which are inherent to public securities markets. In this joint effort, the objectives of the securities industry have been: • 5 • To increase the number of investors, while placing a priority on the quality of the services provided in the area of equity consulting. To increase the number of companies listed on the Mexican Exchange, while placing a priority on maintaining a fair market, with the transparency and professionalism that issuers must demonstrated to sustain public confidence. To improve the legal framework by making it more effective and less burdensome. In the past decade, we have also thought to strengthen and deepen self-regulation, as a complementary instrument to current regulations. First, we need to continue encouraging widespread participation by the public. Today, with banks, mutual funds and retirement funds increasingly active in the market, the scope of market-related financial services has expanded significantly. Still, the Mexican population with the potential for generating domestic savings is even greater, and it requires that we set ambitious goals for future growth. One of our most difficult challenges has been increasing the number of companies that issue securities. There are a number of reasons for this, and we think these had considerable weight in the preparation of the new Securities Market Act, in the modernization of the corporate structure of listed companies, the protection of minority shareholders, and the conditions necessary to attract venture capital through investment promotion companies and their options for joining the securities market. Third, our efforts to improve the regulatory framework to make it more effective and less burdensome, are closely related to the legal security of issuers and investors, and the unavoidable need to align local practices with international competitive standards. Mexico is an increasingly globalized market, and hence exposed to the scrutiny of investors both at home and abroad. With regard to self-regulation, the progress made inspires new efforts to build a more modern, efficient, reliable and ethical market, with clear roles and shared agreements among all the participants. Thus, the Mexican Securities Industry has worked tirelessly to promote a transparent, solid and efficient market, the kind of market a country as great as Mexico requires. Today, our industry operates in the context of a stable economy and a pluralistic, democratic regime, with solid institutions and a wide variety of instruments and trading types available to issuers and investors. It has not always been this way, however: this institution came out of a very different political and economic climate. The 1980s were a problematic decade, when Mexico’s banks were taken over by the government, devaluation and inflation were rampant, and we lived with the specter of crisis in all areas of the country’s social and economic life. In those times, the country isolated itself, and the idea of a free trade agreement was unthinkable. Imports were heavily taxed and subject to restrictive permits, while oil accounted for three-quarters of the country’s exports. Throughout it all, over the past twenty-five years, AMIB has always been alert to the prospects for change, for technological progress and • 6 • the opening to international markets. Because of this open disposition, in close collaboration with the authorities, the Mexican Stock Exchange, the securities depository (S.D. Indeval) and the Mexican Derivatives Market, we have passed some major milestones. These include the automation process, the international opening of the market, the emergence and growth of mutual funds, the creation of a futures and options market, credit risk ratings, the incorporation of increasingly sophisticated types of trading, in line with international practices, and the emergence of a culture of self-regulation, including a Code of Ethics for the securities community and the application of best corporate practice in the sphere of governance for companies that seek to finance themselves by issuing securities among the greater investing public. that is good for business and for economic development. It can do so through programs that strengthen human capital and fight poverty, and by seeking out financing formulas that do not place so much of a burden on future generations, so the nation can achieve a sustainable pace of growth. The 25th anniversary of this Association was marked by a grand event, in which the guest of honor was Mexican president Vicente Fox, Secretaries of State, and leading personalities from the worlds of finance and business. As an Association, we have responded to the challenges of competitiveness imposed by globalization and we have been able to wisely take advantage of the possibilities offered by technological change. This has allowed the Mexican market entry into internationally renowned securities market institutions. In his message, President Fox looked back on the country’s economic progress, recognizing that “the financial industry has been a powerful engine of economic growth, and is up to the challenges of the 21st century.” He also noted that the markets’ solidity encourages long-term financing for companies of all types, even local governments, strengthening the mixed publicprivate investment formula and thus reaching record levels of investment in both energy and housing. Other distinguished speakers agreed that the government can now focus primarily on essential priority tasks, although it also participates in the economic sphere by promoting a climate The communications revolution now allows us to conduct tens of thousands of transactions each day, and both issuers and investors can have almost instant access to market data. This has opened new possibilities for the development of our activities as brokers, and for the role of the securities market in promoting Mexico’s economic growth, responding to the challenge of sustainable social development over the long term. Over the past years, sweeping changes have been made in our professional sphere, such as the 1989 changes to the Foreign Investment Law, or the 2001 changes to a set of financial laws that incorporated both the securities market and mutual funds. These changes now allow funds to buy foreign securities, and strengthened self-regulatory activities under the precepts of integrity and transparency. In addition, “Unified Bulletins” on regulatory matters were drafted following intensive efforts to compile existing regulations into more concise documents; the first, for issuers, came out in 2002, and the second, for brokerage firms, in 2004. • 7 • For all these reasons, we are proud to say that 2005 was, for the Mexican Securities Industry Association and for the market as a whole, the culmination of an entire cycle of efforts and aspirations, and it opens the door to a future of brighter expectations, a future Mexico fully deserves. Sincerely, Gonzalo Rojas Ramos Chairman Gonzalo Rojas Ramos Chairman • 8 • Iñaki de Abiega Pons Gabriel E. Kuri Labarthe Vicechairman Vicechairman Moisés Tiktin Nickin Vicechairman • 9 • Message of the Chief Executive Officer I am pleased to report that 2005 was once again a good year for the Mexican economy, and for the stock market as a whole. First, it must be said that the stability and confidence sustained by the federal government allowed for significant progress toward developing a more efficient, competitive, secure and profitable market. It was also a key factor in the solid advance of the Mexican Stock Exchange’s Price and Quotations Index in 2005. The vigor of the Mexican market’s prime indicator since 2002 can be illustrated by looking at its trend: from a low of 5,534 points on August 5, 2002, it closed the year 2004 at 12,918 points, and ended 2005 at 17,803 points. This is a steady advance of 222% in that period, outpacing most of its international peers by far in the same period, a clear recognition of the solid condition of our economy. Mexico, 6.4 times more than at the start of this six-year presidential administration (only 17.91 billion in 2000). At the same time, 6.85 billion pesos in equity securities were placed through the stock market by five new issuers. This situation brought an additional benefit: Mexican companies are returning in increasing numbers to the stock market in search of financing. This should provide solid support for the market as it catches up on its lag against the rest of the world in terms of the number of listed issuers. Expectations on this front are high, with the entry into effect of the New Securities market Act as of June 2006, exactly six months after it was passed by the legislature on December 30, 2005. The achievement is particularly encouraging considering the extraordinary effort this new legal framework required in terms of design, investigation, and almost two years of lobbying, until a broad consensus on its approval was finally reached. In recent years, AMIB has been pursuing its mission of encouraging an effective link between regulation and self-regulation, gradually strengthening the self-regulatory capacities of the securities industry. We also set ourselves the task of promoting a greater awareness of the securities industry, and above all, we have strengthened our vocation as a forum in which major industrywide projects are discussed. We are continually working to identify the actions and efforts necessary to bring better business practices to the market, as well as the trading forms and financial instruments appropriate for financing the expansion and increasing competitiveness of Mexican companies and state governments. At the same time, we have worked to give Mexican and foreign investors a broader number of options for placing their resources. In the year covered by this report, a total of 132.51 billion pesos in private medium- and long-term fixed-income debt was issued in Along these general lines, I would like to comment on the most significant achievements of the past year: • 10 • In terms of self-regulation, September 2005 marked the end of the first three-year certification period that began in 2002, a period in which 21,985 individuals were certified and 16,823 authorizations from the CNBV were obtained by the various professional categories that require a license to work in promoting or trading securities. At the close of the year, we already were already applying exams for 18 different categories subject to certification, in the related professional fields, not just in the securities and derivatives product markets, but also in mortgage promotion, business promotion, and FIRA credit analysis, as well as executives and compliance officers of CONSAR retirement funds and retirement fund managers. I am also pleased to note that phase two has begun on time, which will involve the ongoing renewal of licenses; revalidation can be obtained by other a points system, or by taking an exam. Rules were issued on Customer Profiling, the minimum content of the Compliance Officers’ Manual of Duties was revised, adjustments were made on rules like the Reserve Fund rule, and AMIB participated actively with the Business Coordinating Council (CCE) in going over the Best Corporate Practices Code. In our efforts to raise awareness of various aspects of the securities market, we gave 35,766 manhours of courses on ethics and other topics, like market simulations and various events in conjunction with educational institutions. We continued to publish our bulletin “Values for the Strength of Mexico”, along with agreements to participate in radio programs and business publications. We were particularly proud of the success of our big 25th anniversary celebration in the month of April. In addition, the fifth annual Tech Day was held in November. In the area of business representation, we closed the year with a membership base of 67 institutions: 29 brokerage firms, 35 mutual fund managers and 3 fixed-income market brokerage houses. Representatives of AMIB members took part in various technical committees, providing us, as always, with the elements necessary to promote a wide variety of projects, among them: First and foremost, AMIB was actively involved in the procedures necessary to pass a new Securities Market Act for Mexico, offering ongoing support to the authorities responsible for getting the bill through the legislature. Important work has begun on amendments to the Mutual Funds Law and the Unified Mutual Funds Bulletin, and work is continuing on a set of instructions for preparing prospectuses, and a regulatory framework for risk management and investment in derivative product funds. In 2005, we worked on various revisions of specific aspects in the Unified Brokerage Firm Bulletin that was issued in 2004, and in adjustments to rules on money-laundering, brokerage contracts, trading in coined metals, trust activity, rules on trust operations in pension and retirement funds, and global accounts for derivatives. Changes were also made to improve efficiency in a number of aspects: settlement through the Central Securities Counterparty (CSC), the procedure for securities lending, repo transactions, • 11 • either in the form of collateralization--including major participants like retirement fund managers-optimizing of trading hours, host-to-host communication with Indeval, promotion of new communication interfaces for order routing, release of new versions of Sentra Capitales and the Order Administrator, and the design of operating elements that will make up future editions of these systems. Finally, we helped implement important measures for increasing trading capacity. There is now also a specific regulation in place for opinions issued by market analysts. Thus, AMIB completes another year of work, closing the cycle of our first twenty-five years of existence as a trade representation organization. Throughout these years, we have always remained at the forefront of industry trends, helping to improve the performance of the Mexican economy. As a trade, we have been a positive force in Mexico’s ability to meet challenge of social development and economic growth, and to become increasingly competitive in global markets. Sincerely, Facilities were created for the reporting of information required by the tax and legal authorities, and for the Council for the Defense of Financial Efrén del Rosal Calzada Service Users (CONDUSEF). Chief Executive Officer Numerous tax aspects were processed, which occupy a separate chapter of this report, as do accounting aspects. In both cases, these are addressed for both brokerage firms and for mutual fund managers. Our traditional salary and benefits survey was updated once again. Thanks to the initiative and support of Banco de Mexico, a High-Value Payments System was started up, allowing for a more direct participation by non-bank brokers. New standardized derivatives contracts for trading on MexDer appeared, like euro futures and options on the NASDAQ 100-index, tracking stock QQQ and the iShares S&P 500 index IVV. Among the aspects on which considerable progress was made but more still needs to done in the near future were Margin Accounts. • 12 • Efrén del Rosal Calzada Chief Executive Officer • 13 • Twenty-five years since the date of its founding on May 16, 1980, the Mexican Securities Industry Association has become a vitally important venue for the discussion, promotion, self-regulation, certification and support of work in the Securities Trade, both on the domestic and international markets. The activities reported here are the fruit of our work with securities market authorities and institutions, as well as the active and fertile participation of representatives of associates and members of our Association, through the respective committees. The activities, studies, proposals and initiatives pursued in 2005 are divided into the following sections: • • • • Regulation Promotion Brokerage Certification In general, we are proud to say that the strategic program we laid out for the year was completed satisfactorily, although because of the very nature of our activities, some points remain to be addressed, and we must also stay ahead of the new challenges of intense international competition and our own prospects for development. • 15 • I. Regulation New Securities Market Act The newly amended Securities Market Act, published on December 30, 2005, involved intensive work on our part, analyzing and bringing together the comments and proposals from the securities trade in Mexico. Four preliminary drafts of the Act were reviewed in 2005, and proposals for modification, inclusion or suppression of portions that we considered appropriate were delivered to the National Banking and Securities Commission (CNBV) and Federal Regulatory Improvement Commission (COFEMER). The final text of the law, submitted by the Executive Branch to the Congress, largely reflected our viewpoints. In the areas of supervision and oversight, a section on corrective measures was included, containing regulations on partial suspension of operations, management intervention, revocation and liquidation. Some of the main aspects incorporated into the final text were: Among the proposals the authorities accepted from the securities trade were the following: • The existing precept that brokerage firms should be the only institutions authorized to trade on the Exchange was preserved, with the exception that the new law allows banks as well to trade in the International Quotations System. To increase the number of offenses (from 5 to 13) necessary for an breach of the rules to be classified as a specific violation. The securities industry was concerned about excessively harsh penalties, while accepting that all the sentences for these violations could be commuted to a fine except those that might be included in article 194 of the Federal Code of Penal Procedures. The CNBV specifically noted that the new Law would not be used as grounds to expand the current list of three violations classified as serious. • Earlier drafts proposed allowing non-brokerage firms and banks to trade in the money market, but this possibility was ultimately eliminated. • Some of the faculties that had been conferred upon the CNBV were transferred to the Ministry of Finance and Public Credit (SHCP). • Companies formerly known as off-the-market funds are now to be called investment promotion corporations. The new law eliminates trading modes for brokerage firms that were mentioned in earlier drafts, but allowed their application in accordance with general provisions issued by the CNBV. To establish obligations exclusive to brokerage firms with regard to certifying intervention managers, members of consultancy boards, liquidators, conciliators and syndicates (the law specifies that the new posts may be designated by means of various procedures). • 17 • With regard to the certification of brokers, traders, and trust delegates, the order receipt and transaction system, and customer profiling, provisions which the trade believed applied exclusively to brokerage firms, the new law clarifies that article 406 also applies to banks, though not to other intermediaries. • Brokerage firms will not be responsible for filling instructions drafted by investment consultants. The CNBV was given the authority to remove board members and directors of self-regulatory organizations (SROs), though only for serious and reiterated violations. New definitions were added: material directors, financial entities, groups of parties, significant influence, material information, derivative financial instruments, directive authority, and securities. Further clarification was added to the topics of information disclosure, accounting, the duties of audit committees and corporate practices, and rules on offering and brokerage of domestic and international securities. In the new law, the element of self-correction is not considered an exclusion of liability, merely an attenuating factor. On February 16, the authorities, in conjunction with the Mexican Stock Exchange and AMIB, began the work of lobbying the finance committees of the upper and lower houses of Congress, and a decision was made to pursue a joint strategy, coordinated by the SHCP. As a result of various comments from the professions and individuals to whom the Law is directed, as well as from COFEMER, in a meeting with the Under Secretary of Finance and the Chairman of the CNBV, other modifications were made, including: • Liability was established for brokers who employ unfair practices, and clients that order transactions that they know are prohibited. • A reference was inserted to allow brokerage firms to act as distributors of mutual fund shares and to engage in international trading and arbitrage. • Investment advisors must have a notarized power of attorney or be authorized in a signed contract. Two new topics were included: a chapter on notification to the authorities, and a violation referred to as fraudulent management. The legal presumption of liability, in the absence of proof, was eliminated, meaning whoever files a complaint will bear the burden of proof. Also eliminated was the ability of minority shareholders to revoke the appointment of their board members outside of shareholders’ meetings. Financial institutions were allowed to establish antitakeover clauses called “poison pills”, and the percentage of capital necessary for company shareholders to approve them was modified (in extraordinary meetings, with 95% of the capital represented). In addition, the following aspects were included: • The ability to designate alternate board members was expressly established. • If the Commission wishes to object to the independent status of certain board members, its Board of Governors must pass the resolution. • 18 • • The law specifies that the oversight of publicly traded companies must be handled by the committees and independent auditor. • The faculties of the SCHP and CNBV were realigned, cutting down on red tape; at the same time, Banco de Mexico will no longer take part in a number of rulings and provisions. • The responsibility of board members of publicly traded companies who have a significant influence in other corporations shall only apply when those board members contribute to decisions that benefit themselves or a third party. The concept of “significant influence” was adjusted to refer to 20% of the ownership of the company’s capital. • Board members who vote to avoid the exercise of liability suits are freed from further responsibility. • Shareholders who do not have voting rights may no longer be heard at shareholders’ meetings. Public disclosure of transactions made by shareholders, board members and directors may only be made when the CNBV establishes it in general provisions. Legal counsel is no longer obliged to report irregularities to the authorities. Auditors, legal counsel and other experts who issue opinions or rulings shall only be liable in the event of inexcusable negligence, or when they fraudulently omit information. Offering prospectuses no longer need to include the composition and structure of the capital stock of the business consortium of which the issuing company is a part. The Secretary of the Board of Directors can serve as an external (independent) legal counsel. Brokers, price vendors and securities rating agencies no longer need to obtain authorization for analogous or complementary services, and these are allowed to conduct the activities referred to in their bylaws. Rating agencies may only disclose to the public the ratings they have made on securities that are listed in or pending listing in the Registry. On March 20, the bill for the new law was formally submitted to the Mexican Senate, and on April 5 if was turned over to the Finance Commission of the upper house for its discussion and ruling. On April 2, the joint commissions on Finance and Public Credit and Legislative Studies of the Senate issued their ruling on the bill, which was received by the Association on the same date. There were 23 proposed modifications to the ruling, but many of them were questions of form, not substance. The changes proposed there were quite reasonable, as they made the text more specific and more legally secure. On April 27, the bill was approved by the Senate with 77 votes in favor and only one against, and was then turned over to the Chamber of Deputies for approval. The AMIB formally expressed its support for the bill in a number of forums: before the financial authorities, the COFEMER, the Finance Committees of the upper and lower houses of Congress, the Business Coordinating Council, and • 19 • the news agencies and publications that asked our opinion. The AMIB applied for inclusion of the Securities Market Act bill on the agenda for the extraordinary period of sessions with various high-level representatives to which it had access, and held several meetings with the Chairman of the Finance Committee.The Presidency of AMIB, together with the Chairman of the Business Coordinating Council and representatives of various trade organizations, interviewed political leaders to request their support in passing the bill. Finally, the Securities Market Act was approved on Tuesday, December 6, in a plenary session of the Chamber of Deputies by an absolute majority (395 in favor, zero against and zero abstentions), but with two modifications that had been processed in the days leading up to approval, which were: By incorporating the category of Investment Promotion Corporation, the new regulations open up access to the securities market for midsized companies, specifically to venture capital, and brings the trading and practical reality of the securities market more into line with how issuing companies are organized and managed. The creation of a new sub-category of company called Market Investment Promotion Company will allow mid-sized companies to place part of their capital stock on the condition that they voluntarily and gradually adopt better corporate governance practices, guidelines for minority shareholder protection, comply with material information disclosure regulations and other standards that apply to companies on the open market, in addition to some rules exempting them from certain provisions of the General Mercantile Societies Law. • Section VII, Article 2: The definition of “material events” according to the CNBV’s nonexclusive list of examples This new Securities Market Act responds to one of the objectives contained in Mexico’s National Development Plan for 2001-2006: encouraging effective regulatory and supervisory systems for the securities market, with the following goals: • Article 359: the mechanism for publicly announcing investigations into infractions against the Securities Market Act. • To allow mid-sized companies greater access to the securities market, in its broadest sense, so that those companies may voluntarily adopt good corporate government practices and appropriately protect minority shareholders’ rights. • To strengthen the rules that apply to publicly traded corporations, encouraging them to improve their organization and functional aspects by modernizing their corporate structures and their system of responsibilities, making them more consistent with current practices. On Thursday, December 8, the bill was passed by the Senate and on December 30, the new Securities Market Act was published in the Official Gazette of the Federation. On the same date, the text of the Act was sent to the Committees of this Association. The Law will take effect one hundred and eight days after its publication in the Official Gazette, which is June 28, except where otherwise stipulated in two articles. • 20 • • Update and improve the flexibility of the regulatory framework that applies to brokerage firms and financial institutions that participate in the industry, like stock exchanges, securities depositories, central counterparties, companies that administer systems that facilitate securities trading, price vendors, and rating agencies, among others. • To modernize the rules on violations and sanctions. • To redefine the functions and powers of the financial authorities in order to avoid duplicating efforts in areas like authorization, regulation and oversight of market participants, thus lowering regulatory costs. Jaime Torres Argüelles President of Legal Committe Finally, in the first half of 2006, we will be working together with the authorities to review the general provisions--known as the Unified Issuers Bulletin--particularly the requirements for listing and maintenance that will apply to the Market Investment Promotion Companies, and aspects of corporate governance. The Mutual Funds Law. During a number of meetings with the CNBV, AMIB presented some key issues for the securities trade, which the authorities will analyze to determine their viability and may present to Congress without further obstacles. After analyzing the points, the following topics were suggested: • • • Strengthen the content of the law to prevent unfair competition Allow custody services to be supplied by Global Custodians. Incorporate trust activity into mutual fund managers • 21 • • Calculation of parameters using the “General Basis for Calculation through general provisions issued by the CNBV” instead of total assets. The CNBV announced that it had concluded an newly-edited internal version, which it was analyzing with the Chairman of the CNBV. In the same meeting, a number of additional topics were mentioned, to be included in the draft of the Law: • the regulations applicable to mutual funds, their managers and distributors, as well as mutual fund valuation agencies. The document was distributed to members of the trade for review and commentary. An analysis of the draft revealed various discrepancies with current regulations, which were presented to the CNBV for adjustment, because the draft was not intended to make any changes to current provisions. Vehicle for venture capital investment. • Specifications regarding integrated distributors. • Standardization of administrative aspects with the Securities Market Act (terms, etc.) • Specifications Prospectus. • Specification that minor changes to prospectus do not require CNBV authorization • Mandatory identification of distributor clients. • Publish information on mergers and spinoffs of mutual funds regarding Simplified The complete draft of amendments to the Mutual Funds Law is planned to be ready by the first quarter of 2006. Pre-draft of the Unified Mutual Funds Bulletin At the end of October, the CNBV sent AMIB a preliminary draft of “General provisions applicable to Mutual Funds and to the Parties that Supply Services to them,” which contains all At a later date, Attachments regarding accounting criteria for mutual funds, their managers and distributors were distributed to the trade, and in 2006 we will work on Attachments that deal with classification categories for mutual funds, the characteristics and requirements that must be established in the prospectuses, and regulatory reports, which the authorities have indicated will not suffer material modifications. Instructions for preparing mutual fund information prospectuses During the year we went over a number of proposed drafts on this topic, out of which several documents were prepared, with the respective comments and observations, which were then submitted to the authorities. Among the most important aspects of these proposals were the automation of the authorization process, which would imply the issuance of a single official document, and a change in the rules so that many sections would no longer be subject to authorization, but instead only supervised. We also had the CNBV specify that if the general purpose of the fund is changed during the process of updating a prospectus, the investment regime or repurchase regime would have to be • 22 • re-authorized; if not, it would mean mutual fund managers could make those changes without sending them for review. In analysis meetings on the issue, the authorities also clarified that the CNBV would review updated prospectuses by random supervision, as well as the standard on international markets. If it has any remarks, they will be succinctly communicated to the mutual fund manager. On the issue of communicating with fund managers on the review of a fund, the authorities said they would not be formally notified, and that funds would only be reviewed when modifications are requested. In addition, mutual fund managers must report the distribution and administration commissions they charge, and need only publish them when they exceed a certain percentage to be determined by the authorities. Regarding the inclusion of the names of majority shareholders (51%), it was specified that the fund manager must disclose when one shareholder owns a controlling stake in the fund, and whether the shareholder has any other relationship with the fund manager. The project adds a new way of classifying mutual funds. The CNBV has indicated that the classification will cover all the current funds, while specialized funds must develop their own definition. The authorities also said that the classification proposal does not entail inflexible limits, that is not restrictive or rigid, and that it will reveal more about each type of fund. Committee members questioned some of the points in the proposal and made note of their objections to the rating of Equity Mutual Funds. The CNBV is still working internally on the project, primarily on the risk management aspects. It also began working with Banco de Mexico to define the markets and derivative products in which mutual funds may invest. According to information from the authorities, we expect to have a draft of the bulletin that will regulate derivatives investment regimes by the first quarter of 2006. As for the Bulletin on Risk Management, its implications are still being studied, but it is expected to be less weighty than its counterpart for brokerage firms and banks, given the nature and size of the mutual fund managers. Unified Brokerage Firm Bulletin Bulletins on Risk Management and Derivatives. On July 13, the Derivatives Committee received a note containing “Relevant aspects regarding derivatives, risk management, classification and investment regime of Mutual Funds,” issued by the CNBV General Department on Mutual Funds. That document mentions a number of aspects to be included in the investment rules on derivatives and risk management for mutual funds. Observations and remarks on this note were sent to the CNBV. Following a review of the way order trading is addressed in the Unified Brokerage Firm Bulletin, particularly in equity market brokerage, some changes to that provision were drafted and published on March 9. These included: • Allowing brokerage firms to make self-entry trades on any equity security, including warrants. • Brokerage firms may count contributions to the Reserve Fund in calculating their liquidity. • 23 • • In capitalization levels for repo trades, issuer risk and counterparty risk are separated out. • Authorizing brokerage firms that are part of a financial group to publish their financial statements through the web page of the financial group to which they belong. Also during the year, a number of other proposed modifications to the Unified Brokerage Firm Bulletin were reviewed and should be published in the first quarter of 2006. These included: • Lowering capitalization requirements because the Bulletin expands the rating of what can be considered High Investment Grade and Investment Grade, as well as the rating category assigned for international purposes. • Allowing equal trades of opposite nature to be cleared in the amount that one covers the other. • Allowing trades in futures listed on standardized markets to be cleared against trades in forward contracts executed on over-thecounter markets. • Allowing asset and liability positions to have the same term for clearing purposes. • Expanding investment bands and terms (to 10,1 5, 20 and more than 20 years). • Lowering market risk charge ratios. Alejandro Gorches Guerrero President of Mutual Funds Committe Bringing greater certainty to the market by including a measurement of market risk in OTC and MexDer trading; describing how liability and asset positions in a Swap are calculated; it • 24 • also discusses the calculation of “paired” contracts, and introduces the calculation coefficient for add-on rates. Counting small and mid-cap stocks as part of the capital requirement for liquidity risk; and including these when determining the weighted beta coefficient on the total long and total short positions. Reducing the deferred tax parameter in calculating the basic part of capital stock. Modifying liquidity parameters in order to include high and medium-liquidity stocks, to which a haircut of 20 and 25%, respectively, can be applied to their market value. Regulations for Analysts After various months of joint work by the CNBV and AMIB, in December an important bulletin was published, primarily to regulate and better control the information on all brokerage firm analysts who are responsible for both equities and derivative product research. Another of the key innovations in this regulation is that analysts may not communicate with other areas of their own brokerage firm. This is intended to avoid conflicts of interest and misuse of insider information, or to avoid inappropriate use of the information that must be available to all participants in the securities market. One of the articles of the new bulletin establishes that financial institutions that issue recommendations on derivative securities or instruments must have control mechanisms to prevent their analysts from issuing recommendations when they hold a job, post or commission in the issuing company or in any party that is part of the business group to which it belongs; or if they have held any such position or post within the twelve moths prior to publication of their recommendation. Money laundering Anti-money-laundering provisions On July 5, we received a notice from the CNBV’s General Department of Analysis and Development of Systems to Prevent Illegal Transactions, commenting that its Financial Intelligence Unit was considering a document that would set criteria for the replacement or correction of information and the submission of complementary information on a previouslyreported period, in order to give institutions more legal certainty in their mandatory reporting of relevant, unusual or dubious transactions. Meeting with World Bank representatives on money laundering. On March 14, a meeting was held between representatives of various segments of the financial system and the World Bank, following a request by the Financial Intelligence Unit for training in the area of money laundering and terrorism financing. This initiative by the World Bank involved meetings with authorities and other parties that would be put in charge of preparing a training course to be held in April. The visit allowed the World Bank representatives to get to know how the Mexican anti-money-laundering system works, and on this basis, to prepare a course focused on the specific needs of our country. As a result of that visit, a guide to unusual and suspicious transactions was published. • 25 • Guide to unusual and suspicious transactions On October 27, the CNBV sent us a Guide to Unusual and Suspicious Transactions, which covers the most common examples the Financial Intelligence Unit has detected in this area. The Guide offers general and specific recommendations for each segment of the industry. The purpose of the Guide is to provide examples that will support those responsible for reporting unusual or suspicious transactions, in compliance with the General Provisions published in the Official Gazette of the Federation on May 14, 2004. Compliance Committee modifies the transaction confirmation letter to foreign clients The work group of the Compliance Committee prepared modifications to the transaction confirmation letter, which were submitted to the consideration of the Legal Affairs Committee. That committee analyzed and released the proposed standard transaction confirmation letter for foreign clients. On June 30, a document was presented to the CNBV and the SHCP attaching the new version of that letter, to be included in the manual to prevent transactions with resources of illicit origin. Other provisions Transactions with coined metals Pursuant to a petition by this Association, Banco de Mexico issued Bulletin 3/2005, aimed at brokerage firms, establishing the provisions by which transactions can be carried out involving coined metals. As of May 16, 2005, a definition of “fine coined metals” was added, and the definition of “cash transactions” was modified, allowing brokerage firms to trade in coined metals. Modification of Banco de Mexico trust provisions On April 14, Banco de Mexico called financial industry representatives to a meeting in which it presented a draft of “Rules for multiple-service banks, brokerage firms, insurance institutions, bonding institutions, and non-bank banks, with regard to trust transactions.” The draft was circulated among brokerage firms and our comments were sent to the authorities on April 21. The Bulletin limits the term of a Collateral Trust to that of the primary obligation whose payment is being guaranteed; we considered this measure insufficient, since the end of that term is precisely the moment at which the primary obligation comes due, and in the event of a failure to pay, the execution procedure of the Collateral Trust is triggered. This, of course, may take several years to conclude, so we suggested not restricting the Trust term to the term of the guaranteed obligation, because it would make it impossible to execute. We also considered it unnecessary and probably detrimental to customers’ interests, that Trust Contrast specify the name of the issuers of securities that may be acquired using the trust’s equity. Both suggestions for change were adopted in the definitive version published on June 23, 2005 through Banco de Mexico Bulletin 1/2005, which is a flexible and appropriate regulation for trading this type of contract. Finally, on June 27, a document was submitted to Banco de Mexico requesting the modification of number 4.2, in order to include mutual fund managers within the institutions that may trade with trust institutions. On July 11, Banco de Mexico issued Bulletin 1/2005 Bis, reflecting that modification. • 26 • Requests for information on bank and brokerage firm client accounts On November 1, the Committees involved in this area were sent a preliminary draft of the Bulletin containing information and documentation requirements on bank and brokerage firm clients, so that brokerage firms could contribute their comments. The Committee’s proposal was to automate and thus make more efficient the procedures for notifying the various authorities who request information and documentation on transactions and services they supply to their clients (Finance Notice, Legal Notice, and Account Freezing Notice). Guillermo Camou Hernández On November 22, the observations we compiled were presented in writing to the CNBV, and on December 6, a meeting was held to analyze them. The definitive version was send by the CNBV in January 2006, and we expressed our agreement for the purposes of the Federal Regulatory Improvement Commission. Investment rules for pension and retirement funds The Legal Affairs Committee analyzed proposed changes to the rules banks must follow in pension and retirement fund management, stipulating that such funds must be created in the form of trusts. Accordingly, a survey was taken on the ways brokerage firms manage pension and retirement funds as well as seniority bonus funds, whether through a trust or a securities brokerage contract. On December 6, members of the Committee were given the last version of the note prepared by the work group on pension and retirement • 27 • President of Traders of Derivative Committe funds, concluding that they can be created through brokerage contracts, trusts, or other means. Meeting with the CONDUSEF on regular reporting In a meeting with members of the Financial Service Users Defense Council (CONDUSEF), a new version of the system for reporting by the Specialized User Attention Unit of each brokerage firm to Condusef was introduced. The system will go into effect starting in April. Self-Regulation Manuel Lasa Lasa President of Capital Market Committe Customer Profiling Rules Once again, the Compliance Officers’ Committee adopted an agreement on creating a self-regulatory rule regarding Customer Profiling. The Committee chose to review the draft already prepared to meet the requirements of Article 118 of the Unified Brokerage Firm Bulletin, which stipulates that the profiles defined under the rules issued for this purpose by self-regulatory organizations be taken into account; a Work Group was therefore put together to discuss and analyze this matter. On September 14, the Compliance Officer analyzed the Rules, approving the terms proposed, and turned it over to the Board of Directors.The most important points of the Rules are: They set minimum guidelines for defining an Investment Profile for client accounts. According to Article 118 of the Provisions, market intermediaries must apply the policies and guidelines established in the Provisions and in the Rule by December 31, 2006. • 28 • On October 3, the draft was sent to General Directors and members of the Legal Affairs and Compliance committees, requesting brief comments and editing suggestions. Thirty-three suggestions were received from 7 brokerage firms. The results of that survey were as follows: • Twenty-eight fund managers and distributors affiliated with the Committee responded; this is 80% of the Committee’s members. In its October 26 meeting, the Compliance committee analyzed these remarks, incorporating those that it believed useful, approving the Rule and agreeing to immediately begin the signing period. Once signed by all the parties involved, a notice was sent to the brokerage firms regarding its entry into effect on February 15, 2006. Finally, it is important to note that under the terms of the new Securities Market Act, brokerage firms must have their customers profiled by December 31, 2006 at the latest, a provision that coincides with the current SelfRegulatory Rule. • The choice that received the most votes was that no rule be established; this resolved the dispute that had arisen over this topic. Self-Regulatory Rule on Product Profiling for Mutual Funds During the year, a Rule was drafted to correspond with the rule developed for brokerage firms; however, as the result of some comments and concerns voiced by Committee members, it was agreed that the Rule should be re-considered in order to determine whether it would be better to issue a rule profiling the product (each fund) and based on this, to profile the account, or to profile the account directly. Submission of Compliance Officer Work Programs April 29 and May 2 marked the deadlines for brokerage firm and mutual fund manger compliance officers, respectively, to submit their annual work programs to AMIB, according to SelfRegulatory Rules I.1 and V.2. All the brokerage firms and mutual fund managers turned in their programs on time. The self-regulatory area of AMIB checked that the programs met the limits of each Rule and had no objections, notifying the Board of Directors of this fact. Accordingly, the members of this committee were sent a questionnaire so that each fund manager could express their views on the rule in writing, specifically as to whether it should be a Customer Profile or a Product Profile, or neither. Managers were also reminded that the decision taken by the majority would apply to all of them. Compliance Officers’ Manual of Responsibilities In the month of May, mutual fund manager compliance officers were given the definitive version of the Compliance Officers’ Manual of Responsibilities, which included the note regarding the functions and obligations of compliance officers with regard to money-laundering prevention. Self-Regulatory Rule on the Reserve Fund. The Board of Directors approved modifications to Self-Regulatory Rule IV.2 regarding the Reserve Fund. With that modification, a section of justifying arguments was added, specifying the conditions for brokerage firms to temporarily withdraw the funds in their reserve. • 29 • Submission of Investment Advisor lists Under the terms of Self-Regulatory Rule II.1, brokerage firms must send updated lists of the investment advisors identified by them in July and December of each year. All the brokerage firms send in these lists of individual and corporate investment advisors on time, and the general listing was prepared in according with the current rules, to be distributed to interested parties. Updating the Code of Best Corporate Practices AMIB has been an active member of the Best Corporate Practices committee headed by the Business Coordinating Council (CCE by its initials in Spanish, which issued the Code of Best Corporate Practices in 1999. This code provides recommended corporate governance practices for companies in Mexico. Considering the experience accumulated in implementing this code in recent years, and new issued that have arisen on the subject around the world, commitments with the Organization for Economic Cooperation and Development (OECD)--the leading world organization in this field--and a satisfactory dissemination of the Code, the CCE, as the institution responsible for its issuance, decided this was a good time to update it. adhering to the practices suggested, in keeping with their own specific needs. Concept of corporate governance. A new chapter was included which defines the concept in order to avoid erroneous interpretations. Shareholders’ meetings. These are given a preeminent position as the highest decision-making body of corporate governance Board of Directors. The new version includes changes in their responsibilities, adding the oversight of company operations and encouraging companies to be socially responsible and to make a declaration of ethical business principles. Auditing functions. The Code recommends that the auditing department or auditors be responsible for analyzing transactions with related parties, observing compliance with business policies and risk protection mechanisms. Evaluation and Compensation functions. The Code suggests a formal succession plan for the CEO and high-level officers of each company be announced, in an effort to ensure stable and orderly transition in a country where most of the companies are still family-owned. In the past year, the Committee stepped up its efforts to update the Code and expect the new version to go into effect in the second half of 2006. The main topics to be covered are: Explanation of motives and introduction. This section specifies that the recommendations are voluntary, and are intended to allow companies in various sectors of the Mexican economy to attain a higher degree of institutionalization, by • 30 • Julio Serrano Castro President of Financing Committe • 31 • II. Brokerage Securities market payment systems Changes to the payment systems advanced further this past year, and proof of this can be seen in the authorization by Banco de Mexico’s Board of Governors of the opening of a high-value payments system (SPAV, by its initials in Spanish) for nonbank financial intermediaries, including brokerage firms, mutual fund managers, insurance companies, lease-financing firms, exchange houses and factoring firms; through participating in the Interbank Electronic Payment System (SPEI). Now, mutual fund managers can participate in two systems that make up the SPAV--the S.D. Indeval settlement system (SIDV) and the SPEI. The benefits for the fund managers include: • • Greater operating efficiency, with reduced transfer times (20 minutes maximum) Clients from any participating institution can transfer funds to clients from any other participating institution. • No overdrafts are permitted, since credit lines are not required among participants, nor between participants and Banco de Mexico • Provides information useful for identifying payments (references). Can process thousands of payments per minute. Fourteen brokerage firms and 10 mutual fund managers expressed their interest in participating in the High-Value Payments System through the Interbank Electronic Payment System (SPEI). The work agenda set out for this project is as follows: • Banco de Mexico will supply interested brokerage firms with the technical specifications, pointing out that the interface can be performed internally by each institution, so that each of these can make the choice based on their own cost structure and level of technological independence. • A detailed analysis was conducted with executives of the Central Bank to clear up technical questions and to evaluate the technical impact of the specifications needed to set up the interface at brokerage firms, to connect to the SPEI. The system is technologically secure, because it works through digital signatures and certifications. The computer infrastructure includes redundant servers. Facilitates Straight Through Processing (STP). Some vendors made presentations of their products and interface applications. Real-time connection with SIAC and S.D. Indeval As one more option, Bursatec was asked to submit a quote on development of the interface and • 33 • the hosting cost of the transactions, in order to get an idea of the possible economies of scale if the operations were centralized. This is because Bursatec is the company that developed the SPEI interface that is working at Indeval. Conduct the necessary testing Begin operations when testing has been concluded in a satisfactory manner. Securities settlement (CSC) In 2005, further steps were taken to make securities settlement more secure and efficient. The Central Securities Counterparty (CSC) that settles equity market trades was strengthened, a process that included, among other achievements: An expansion of hours for obtaining securities loans, significantly reducing settlement default. The longer hours were accompanied by a campaign to promote the trading mechanisms and benefits of securities lending, as well as the creation of multi-lateral securities loan contract, which was signed by brokerage firms and banks. The development of a scheme of contractual penalties, based on a table of defaults by counterparty and size of transaction, meaning higher penalties for each infraction. The table was calibrated during the year to be more consistent with trading in the Mexican market. The Association also proposed improvements to the CSC system, developed jointly with S.D. Indeval. Some of these were applied in 2005 and the rest will go into effect in February-March 2006. In the area of fixed-income trading, improvements were proposed and applied to the C-Plex settlement system (an algorithm that works through a linear programming mathematical model). AMIB also worked with S.D. Indeval on an operating model to modify the Guarantee Administration System for repo transactions (SAVAR, version II). Together with S.D. Indeval, AMIB initiated the creation of a Business Continuity Plan, focused on allowing brokerage firms to continue or restore critical operations (the most important processes of their operations) during adverse situations. Securities Lending An operating procedure for proprietary securities lending was created by a work group that included the three main financial associations (ABM, AMAFORE and AMIB). A standard-form contract was also drafted and distributed to industry representatives for review. The comments offered in response were incorporated into a new version that was then distributed among the work groups. S.D. Indeval also devised a new VALPRE trading system for institutions to handle securities lending activity. In addition, it establishes that the institutions may engage in stock lending activity through VALPRE or S.D. Indeval without the need to sign the standard contracts mentioned in Bulletin on this matter. It also specifies that retirement funds can only trade with qualified institutions in accordance with provisions issued by the National Retirement Savings System Counsel (CONSAR). • 34 • The standard contract will also be unnecessary when institutions are trading with other institutions (Mexican or foreign) or with institutional investors through certain trading mechanisms that meet existing provisions (among them the signing of a multilateral contract) and the standard contract for proprietary transactions has been signed. A deadline of October 17, 2005 was set for making the necessary changes to manuals, regulations, contracts and other regulatory aspects of trading mechanisms in order to comply with the respective provisions. If the mechanisms do not meet those requirements, the institution in question may only continue securities lending activity for proprietary accounts, including through the specific trading mechanisms, provided they have signed bilateral contracts The Risk Group of the three Association also reached agreements on the operating model for making what are called margin calls, and the criteria for developing a model to calculate those margin calls. On November 10, the Securities Collateral Contract approved the Legal Group of the three Associations was sent out, and serves as a rider to the securities lending contract; it is signed bilaterally by banks, brokerage firms, and mutual fund managers. To publicize the benefits of securities lending, the various committees involved in the project agreed to make a presentation on the operating mechanism of securities lending transactions and the VALPRE FV-CORROS trading system. Members of the Administration, Fixed-Income Market, Equity Market, and Promotion Committees and committees of the ABM were invited to the presentation, which was held on November 1, 2005 at 5:00 in the auditorium of the Securities Center. A total of 140 people attended. Repo Transactions In 2005, Banco de Mexico issued Bulletins 1/2003 Bis 4 and Bis 5, which: Include the ratings of short-term securities that may be used in repo transactions; As an important part of this project, letters were sent to representative of banks and brokerage firms, inviting them to participate in the signing of the Valpre multilateral contract, as well as the listing of representatives currently accredited with S.D. Indeval. Specify the way in which insurance and bonding institutions can engage in repo transactions (incorporating the Administration and Payment Trust for Insurance and bonding companies, instead of the Administration and Guarantee Trust); and AMIB collected information on powers of attor- Extend the term for participating in repo transactions with institutional investors without having to sign the respective standard contract. To do so, the Bulletins modify the definition of “Certificates” in paragraph three of number 8.1; repeal the first Transitory Article of Bulletin 1/2003; and add a third Transitory Article setting the deadline for signing the standard contracts. ney and identifications, for the signing of a contract that would allow securities lending transactions through VALPRE FV-Corros. ON September 22, the contract was signed by 23 brokerage firms and 18 banks, after other intermediaries joined in. • 35 • With regard to SAVAR, as the result of steps taken by the Trading Group of the ABM and AMIB, S.D. Indeval agreed to develop version 2.0, which was approved by the industry. Among the requests for modification presented to S.D. Indeval were: • The possibility of incorporating forced early expiration. • A change in the way guarantees and underlying assets are valued, using the average price issued by price suppliers, which took effect on October 3, 2005. • Identification of Early Expirations. • A change in the criteria for selecting guarantee accounts by counterparty. • A change in the criteria for selecting guarantees by counterparty. • Inclusion of a Transaction Input screen. In addition, some proposals by individual participants were analyzed and it was agreed that the following would be formally submitted to Indeval: Screens to look up the position in Guarantees received during the day (debits and credits) and another lookup screen for Guarantees received in previous dates (historic detail and movements), because at present those received on the current day are combined with previous guarantees, making it difficult to identify them. Include the ticker symbol of the participant on all the lookup screens. Statements of position in repos and guarantees In July, the “haircut” table was updated to include two additional securities, which were adjustable-rate bonds with terms of 7 and 10 years, as agreed with the ABM Risk Committee Repo and securities lending transactions with retirement fund managers (AFORES). Pursuant to new provisions issued by CONSAR, on August 19 an application was made to that institution asking that financial institutions be exempted from the requirement of having two ratings by risk rating agencies, when acting as counterparties to repo and securities lending transactions with retirement funds. This request was based on the fact that the rating issued by rating agencies is for the various issuers of fixedincome securities, under the prudential principle that governs this type of regulation. Accordingly, in the document send to the Vice President for Financial Affairs at CONSAR argues that the risk inherent in repo transactions is appropriately and sufficiently addressed and regulated by Banco de Mexico, under standards that avoid delays that might jeopardize participants in these markets, concretely with regard to counterparty risk. To sum up, the requirement of a rating in order to participate in the repo and securities lending market with retirement mutual funds would not add any further regulatory security for the funds administered within the Mexican pension system. Updating the Securities Brokerage Contract During the past year, the Legal Affairs committee reviewed the Securities Brokerage Contract • 36 • to detect ways in which it could be enhanced by the experience of more than 10 years in which it has been used, and to align it with the Unified Brokerage Firm Bulletin. The topic was thoroughly discussed and resulted in a number of drafts, that last of which was released in September 2005. Indeval In meetings between representatives from the Mutual Fund Mangers Committee of the CNBV and S.D. Indeval, various aspects of market trading were discussed, among them: • New trading hours for holidays Eduardo Pérez del Villar President of Money Market Committe • Regarding the closing hour for the market on the day before a holiday, S.D. Indeval has been issuing a notice one day in advance, or on the day itself, which is not enough time to notify clients, and causes a contingency situation for trading same-day funds. Participants thus agreed to prepare an annual calendar, establishing the days on which the closing hour of the previous day will be moved up. This calendar will be submitted to Banco de Mexico for approval, and includes the following dates: • • • • • April 12 May 10 September 15 December 22 December 29 In addition, S.D. Indeval has remarked that it will apparently receive a 2006 calendar from Banco de Mexico, formally indicating the dates on which closing hours can be changed. • 37 • Submission of prospectuses to register capital increase or perform other procedures. It was agreed that a prospectus would not be necessary in the following cases: • Capital increases in series that have already been offered. The most important feature of the new H2H service is the use of message errors. Also, two fields were added for handling queuing messages, new catalog functions, and data encryption, which will create more security for the information exchanged between servers. The work plan for this project consisted of: • New H2H functionality in the first week of May 2005 • Use of digital certificates in STRIPS by April 2005 • Use of web technology and digital certificates in H2H, by December 2005 • Complete H2H services to replace the use of terminals (leaving only emergency-use terminals) by December 2006. • Changes of denomination • Redistribution of series. In fact, the only case in which it will be necessary to present a prospectus will be in the placement of new series. On this point, personnel from Indeval said that it had seen some inconsistencies between prospectuses and deeds of incorporation, since some cases mention stock series, and others mention stock classes. It will send the CNBV documentation on the cases where this has occurred. Identification of repo transactions Participants pointed out that the current information does not distinguish between a repo and a direct trade, which causes differences in account conciliation. However, representatives of Indeval said that this problem will be solved in the second half of 2006, with the implementation of the new version of C-Plex. S.D. Indeval Host to Host. For the H2H system, Indeval introduced a new functionality and optimization of its services, which allow users to stop using the old communication system, and lays the groundwork for the future use of digital certificates in transactions like STRIPS and securities lending, and, further on, the use of Web technology. Although S.D. Indeval has postponed the release date to May 23, because of problems in industry testing and in environments similar to the production environment, further corrections had to made to the interface, so it was decided that the testing was not satisfactory, and the release was put off till the month of July. Also, participants were reminded that once the new functionality and optimization of H2H services was in place, the current version would cease to function, which means all those currently using H2H services would have to update their version if they wanted to continue to trade under this mechanism. Because of problems detected in the release of the optimized H2H, the Systems Committee agreed with Indeval that the head of the systems department should be the one to accept the testing, provided the user authorizes it, because the • 38 • version includes technical, rather than functional changes. It was suggested that an industry-wide test be conducted with all the H2H users, and that contingency measures be crated to protect trading in the event of a failure. Administration and Systems Committee representatives have been meeting with representatives of Indeval to address this issue. By recommendation of the Technical Security Committee of S.D. Indeval, additional tests were programmed to fine-tune configurations of the data bases. For this reason, production of the new optimized version of H2H, which included Treasury, Fixed-Income Market and Equity Market modules, was postponed. It was also agreed that starting in the last week of September the H2H service would be eliminated from the “Store Procedure” mode. In another area, with regard to its new system, Indeval introduced a systems “Road Map” for the short and medium term, explaining the current situation, the critical elements necessary to reach its goals, and the progress made in the past six months. It also concluded the business case and is developing the process design for all the services. It was agreed that Systems Committee representatives sign off on the strategies being followed, from a technical rather than a business standpoint, and also to involve representatives from the Administration committee. To close the fiscal year, Indeval representatives presented their ideas on the development of a Request for Proposal (RFP), which contains questions about the history and experience of participating institutions, and offers details on the work that allow them to build or design an approach to the project as well as time and price estimates. It is also used to define what could be needed in a proposal to develop a specific application or develop some service. The Derivatives Market Interface for MexDer order routing Representatives of MexDer and Bursatec made a presentation on this project, the purpose of which was to supply a standardized interface for order routing in order to facilitate the incorporation of new Mexican and foreign members to MexDer. The main features of this interface are: • It should be installed using a standardized, internationally-used protocol called FIX, to facilitate communication with foreign participants. The communication can be through Internet to facilitate connection by both local and foreign participants, without having to depend on direct private lines, although these may also be used under VPN schemes, which offer greater communications security. • Each member can choose to route under the current scheme or build their own solution for routing under that scheme. The solution is slated for launch in the first half of 2006. Offering of derivative financial products and trading mechanisms Mexico saw an increase in both the supply and demand for derivatives products in 2005, along with a fortification of the legal and tax structure that applies to them. The market is becoming increasingly appealing to investors and companies seeking a financial hedge. In the month of October, a euro future contract was listed, with each contract consisting of ten thousand euros. The contract allows participants to invest and hedge euros without having to go • 39 • through the dollar--this is a unique advantage offered on MexDer. Also last year, MexDer signed a licensing contract with the New York Mercantile Exchange (NYMEX) which allows it use the spot price of natural gas at the Henry Hub in trading futures on that commodity that trade on MexDer. The contract has not been listed yet. On March 9, changes were published to the Unified Brokerage Firm Bulletin, as requested and applied for by AMIB in recent months. One of the changes allows brokerage firms to make self-entry trades on any equity security, including warrants. What began as a preliminary draft in 2005 finally culminated with the publication of General Provisions for the Operation, Registry and Disclosure of Trading in Derivative Instruments for bonding institutions (Bulletin F-7.3) and Mutual Insurance Companies (Bulletin S-11.4), on January 4, 2006. This leaves only the publication of the respective provisions for mutual funds, for which a preliminary draft already exists, called Rules for trading of derivative financial instruments by mutual fund managers. This may be packaged together with the new Bulletin on Classification for Mutual Funds and Prudential Provisions for Comprehensive Risk Management. Asigna Manual Prompted by the inclusion of the category of Global Accounts, in 2005 the clearinghouse, Asigna, published amendments to the Manual of Policies and Procedures of Asigna, Compensación y Liquidación. The resulting changes to the internal regulations and operating manuals of both MexDer and Asigna generated new versions of the contracts and agreements for trading with clientele, in order to take that category into account. In the area of derivatives, the Manual adds further definition to trading by incorporating the measurement of market risk in OTC and MexDer trading. For example, futures transactions on standardized contracts can be cleared against forward contracts on over-the-counter markets. It also indicates how to calculate the asset and liability positions of a swap, and how to calculate paired contracts. Trading on the Mexican Stock Exchange Introduction of version 5.0 of BMVSENTRA Capitales The Equity Market committee asked the Systems committee to review the BMV-SENTRA Capitales trading system, specifically with regard to response times. A work group was formed involving representatives of the Mexican Stock Exchange and the Administration Committee. The scope and progress of the short-term measures taken to increase the transactional capacity of SENTRA and SETRIB are as follows: Requirements and Testing Schedule for SETRIB Plus. In principle, participants agreed that the link should be optional for brokers that do not exceed a certain number of daily transactions. Additionally, the production release date was moved up because the expansion of links (from 128kpbs to 256kpbs) by Telmex would take at least 4 weeks. The estimated release date is March 14, 2005. Morning testing has been ongoing since February 14, and concluded on March 3. In addition, industry tests were conducted on March 5 and 12. • 40 • Increase in transmission speed. Although some users have been having problems reaching the proposed transmission speed, the Mexican Stock Exchange also had problems maintaining a constant velocity and transactions, and was experiencing a high consumption of its central processor and bandwidth. It therefore agreed to maintain a maximum of 45 transactions per second until the optimization of applications at the BMV and at some market participants were complete. ASK Optimization. The parameter change in the configuration of ASK was completed, and it now supports 138,000 transactions in the SENTRA Terminal (the level that triggered the failure on January 18, 2005). Synchronization of Clock. A new proposal to synchronize clocks using the Network Time Protocol was evaluated and approved. The former synchronic clock had a permanent lag due to network latency. Another project exists, called feed interconnection or integration. This is a comprehensive solution to the problem of real-time information distribution. The clock synchronization includes a series of immediate actions to maintain trading amid a rapid growth in transactions going through the SENTRA system. opening auctions and continuous auctions in the equity market. Optimize the negotiation process in cross trades, which allows for better price formation and dynamic registry in the electronic trading system (crosses within and outside of the spread). Market-on-close transactions in the after-close trading mode, which allows the market to handle transactions for a period of 5 minutes after the official close (until 3:05 p.m.) at closing prices. As the result of work meetings, a presentation was prepared to explain all the proposals for improvements to be incorporated into the BMV Sentra Capitales system, and some presentations were made to the CNBV. The salient points were: Dynamic Best Limit Bid. When bids with prices less competitive than the BLB are withdrawn, their prices would be changed by regressing on or more ticks until they once again become the best bid, without reaching an out-of-the-market price. In each price regression the bid would retain its original folio and registry time in the SENTRA Capitales system. Adjust operating procedures that apply to Best Limit Bid and Hidden Volume trades. Cross Trades. When an order is dispatched that results in a cross, and that order is for a volume lower than that available at the trading post, the difference in volume should be posted, and the cross activated for the correct volume. This would imply not eliminating the passive remainder of the order. In the opposite case, if the offering order is greater than the asking order, and at a different price, the remainder would not be shown until the cross was completed. Standardize rules for assigning bids in intraday auctions, according to the criteria defined for Auctions. Incorporate a random assignment period for intraday auctions in the following cases: BMV-SENTRA Capitales version 6.0 Together with the BMV, some changes to the functions of the BMV SENTRA Capitales system were defined, including: • 41 • • Setting of market prices • Support the implementation of this project with the CNBV, jointly with the BMV. • Beginning trading of a security in an orderly manner. • SIC “Padlocks” • Resuming trading of a security after its listing was suspended • Allowing for appropriate price formation • Modify the rule that specifies that assignment of participating bids in an auction begin randomly during the last minute of the auction. • Bids for odd lots in auctions • Allow bids to be entered for less than a round lot in the different auctions, establishing an odd-lot trading post to enter the ids, which will be assigned at the auction assignment price, at the conclusion of the period set for the auction. • Change of parameters in the Unified Brokerage Firm Bulletin, for rating orders as ordinary or extraordinary in the SIC Capitales system. • Modification of the article in the Unified Bulletin that governs trading in the global capital market (SIC Capitales), with respect to how an order is termed “Ordinary”. On this matter, the BMV has agreed to support the necessary adjustments before the authorities. In principle, the proposal is to classify orders as ordinary or extraordinary based only on their value in inflation-indexed investment units (UDIs). • Market-on-close Trades (“DC” after closing mode) Because of the need to curb trading risk resulting from human or technical order, participants requested that instrument prices be listed in line with their market of origin, converted into peso terms using the Fix dollar price published by Banco de Mexico on the preceding business day. In addition, when an order is sent to the book with a difference of +/- 5% from the abovementioned reference price, the system would call an auction under the existing criteria. Expansion of capacity in the BMV-Sentra Capitales and SETRIB systems. In March, the BMV began a project to expand the capacity of its BMV-SENTRA Capitales system, which would allow it to operate ten times more than the maximum trading volume reached on a peak day in a 10-month period. This project was expected to conclude in December 2005, targeting a capacity increase to 6 times peak volume by that time. The above is based on a unit of measurement taken from the average orders transmitted by program trading. Therefore, at the end of the project the expectation is that it will be able to process 14.5 orders per trade, on 644,000 transactions daily (experience of the Toronto Exchange). The activities plan includes the following central lines of action: • Upgrading of TANDEM equipment • Expand communications links and bandwidth. • 42 • • Upgraded version of the Common Software Architecture. • Incorporate data servers in brokerage firms for receiving and sending information. Evaluating and, when necessary, replacing the data transport medium, and maintaining a single standard for all matters pertaining to transmission and reception. By December 31, the project was 95% complete, which in general meant between 4 and 5 times the February 2005 peak. This means an increase in capacity of between 8 and 9 times the daily average in 2004. The goal of increasing transmission speed is still in progress. analyzed and evaluated the best way to maintain functionality in order routing processes. The following premises were established: acquire a pool of three new computers, paid for by participants, which they could use as necessary. Current equipment would be maintained until a failure was reported, at that time it would be taken out of service and replaced with new equipment. Technological upgrade of the AMIB Order Administrator Users of the Equity Market Committee Order Administrator and representatives of the Systems Committee decided on a technological upgrade of the Order Administrator, the most important points of which are: • Portfolio transfer between different trader codes. • New alarms to verify time elapsed and volume traded in limit orders; alerts when a cross may be executed against proprietary orders, etc. • Show volume traded and average price. • Percentage of the total order assigned. The procedure for incorporating participants into program trading-algorithmic trading is a set of tests defined and coordinated by the BMV. • Send voluntary cross trades. In collaboration with the Toronto Stock Exchange, improvements were incorporated to the trading systems and process architecture, and evaluation processes for Order Routing Platform components. Version 2.0 of the Order Administrator was released in November 2005. Because of functional problems, however, users were obliged to return to the previous version, and after a series of tests, it was decided to launch the new version in March 2006. A procedure was developed to certify participants interested in joining the Program Trading scheme, and committee members were presented with a tool called the Business Simulation and Evaluation System (SISEN), which will be used to measure “round trip” response times of transactions (the time it takes the BMV to receive, process and respond to an order routed by participants). Upgrade of SUN equipment for the order dispatcher Because the equipment available at the BMV for covering a hardware contingency in user facilities had been used up, a work group of users Include the International Quotations System (SIC) in the total volume of trades on the BMV The Equity Market Committee formally asked • 43 • the BMV to include SIC trades in the total volume of trading reported on the BMV. Change in SIC settlement times from T+2 to T+3 The BMV requested an evaluation of the impact of a change from T+2 to T+3 in settlement times for transactions through the International Quotations System (SIC), because the companies listed in that system, depending on their market of origin, may have different terms for settling trades. Accordingly, in various meetings, participants analyzed the possible impact of changing the settlement term for SIC transactions from T+2 to T+3, in order to align them with those of the market of origin. Xavier Ramos Yáñez President of System Committe Some of the arguments in favor of this change are: • Standardization of times to international levels, particularly with markets with which Mexico is more closely related (U.S., Canada) • Brazil, Mexico’s closest competitor for capital, settles in T+3. • Fewer defaults on trades due to time differences, since most are resolved in T+3 (90%). • 70% of the trades through SIC are performed with U.S. clients. • Encourages and facilitates listing of securities in the global market Savings on administrative costs relating to the resources devoted to tracking securities through the settlement process, including a sharp reduction in administrative costs. Eliminates the cost of delayed transactions (securities lending, penalties, sanctions, etc.) by align- • 44 • ing not only with the leading markets in the North American region, but also with the world standards. The Central Securities Counterparty can offer greater certainty in complying with securities delivery. � The initiative to lower settlement times to T+1 was suspended, even though it would also lower risk, and would allow markets to be more efficient through continuous net settlement, but the current time of T+2 is less of a burden for the entire Mexican market, because any less would bring in out of line with the world standard. Among the commentaries that have been voiced against the change are: • The biggest problem to resolve is exchange risk in the FX market, which trades at 48 hours, and would involve the need for a 1day forward or the incorporation of 72-hour transactions. • To conduct those transactions, Banco de Mexico demands compliance with the 31point regulation. • An information campaign would have to be developed for customers used to settling their trades in 48 hours. • Banco de Mexico does not capitalize client transactions pending settlement • Impact on broker systems (necessary conversions and adjustments) • Time differences in trading with European and Asian clients • Slows inventory turnover, which inhibits business opportunities. • A step backwards in market efficiency, increasing uncertainty and systematic risk • Inhibits development of the securities lending market. The Chicago futures and options markets settle in T+1, which will provoke trading discrepancies. Finally, a meeting was held with officials from Banco de Mexico, in which the possible incorporation of FX trading up to 72 hours was analyzed. AS a result of that meeting, Banco de Mexico agreed to review the possible implications and if appropriate, to issue the corresponding modification to its provisions for brokerage firms and banks. Also, the BMV submitted a proposal to harmonize settlement terms in the Global Capital market. Opening of credit lines in margin accounts A number of presentations were made to Banco de Mexico regarding Regulation T, which is the basis for developing the operating proposal for the margin account. This is in response to an effort by various areas (accounting, compliance, supervision and legal affairs) of Banco de Mexico to define the rules that will be included in the respective Bulletin. A proposed Credit Line Opening Contract for Margin Accounts was drafted and submitted for the consideration of the work group put together for this purpose by the Legal Affairs Committee. • 45 • In addition, the General Department of Securities Intermediaries of the CNBV provided a list of activities that intermediaries must cover, including: • Preparation of a standard Credit Line Opening Contract. • Changes to the Securities Brokerage Contract to allow for credit transaction to purchase shares, as well as the respective securities lending transactions. • Accounting records • Finally, the authorities asked AMIB to consider the proposal that, in the event of a default, brokerage firms directly handle the execution of the guarantees. Procedure for canceling trades on the BMV Due to problems that arose in the Order Administrator system and cancellations that have been necessary because of technical failure, industry representatives asked the BMV to review the regulations that apply in this area, in order to specify the Stock Exchange’s liability in the event of technical errors, and to modify, where possible, the procedures, manuals and regulations of the BMV accordingly. Disconnection of GDP equipment AMIB’s Systems Committee and the BMV agreed on the process of disconnecting the GDC equipment that served as a basis for the communications infrastructure for setting up SATO and the Money Market Voice Network. This equipment was now about 12 years old. In March 2005 the disconnection work was completed. Tax Aspects Derivative transactions in debt instruments In the month of December 2005, a decree was published by which various tax provisions were reformed, added and repealed. This included the modification of Article 199 of the income Tax Law, which provides for tax exemption of gains from derivative transactions referenced to the Interbank Equilibrium Interest Rate (TIIE) and to debt securities issued by the Federal Government, Banco de Mexico or any other agency designated by the Tax Administration Service through general rules, placed among the greater investing public, provided they are placed on recognized stock exchange or markets and the effective beneficiaries are foreign residents. This new rule is expected to encourage this type of transaction, because it is consistent with the regime that applies in other countries. Reporting to tax authorities In order for brokerage firms and mutual information to file 2005 interest and stock transfer income statements on its clients to the Mexican Tax Administration System (SAT), AMIB worked together with the SHCP and the SAT on projects such as ratifying the rules that govern the delivery of such information. In addition to observations from the securities trade on the Instructions and Manual for the delivery, receipt and handling of information generated by financial institutions, as well as the data validator / encryptor and confirmation to brokerage firms and mutual fund managers, of the account statements that could serve as proof of income and withholding, so that investors can compile the information necessary to prepare their annual income tax statements for 2005. • 46 • Tax factor for mutual funds In addition, the SHCP was asked to ratify the result hat apply to mutual funds in determining the taxable income of their individual shareholders, which was included in the Eleventh Resolution of Modifications to the Miscellaneous Tax Rules for 2005, published on February 15, 2006, which creates greater legal certainty. Amendment to the Value-Added Tax Law Changes were approved to the Value-Added Tax Law, which ratify the exclusion of non-taxable acts such as dividends and valuations from the calculation of the VAT credit.This enhances legal security for taxpayers by eliminating a concept that was imprecise and subject to the discretion of the authorities. Tax Regime for STRIPS Regarding Separate Trading of Registered Interest (STRIPS), a proposed tax regime was developed for this new trading mechanism that began on March 1, 2005. Basically, the proposal is: • Certificates issued prior to January 1, 2003, and whose original characteristics meet the grounds for exemption, remain tax exempt even when segregated (into interest and principal) or re-constituted, and the mechanism for withholding and payment of tax is defined. • We are awaiting publication of the decree by the SHCP, which will define the withholding and tax payment mechanism. The proposal was that accrued earned interest as of December 31 of each year (the virtual cutoff date) to be declared in the investors’ annual tax statement, in order to avoid tax deferral and a lack of cash flow. Return of balances due to clients Early in 2005, AMIB found that some clients were being denied tax refunds on the grounds that the brokerage firms had not filed the necessary dividend statements. The argument does not apply in these cases, however, because the party responsible for making that statement is the company that issued the dividends, which in many case do not have a direct knowledge of all their shareholders in the greater investing public. AMIB proposed a solution to the SAT, by which individuals with dividend income and tax refunds due need only file the request for a refund accompanied by the original statement of interest and dividend, in order to obtain their refund. The authorities agreed in principle, and requested a listing of AMIB members that had issued these tax or account statements, corresponding to the dividends or income paid out by companies listed on the stock exchange. Various tax benefits The SHCP issued a decree granting various tax benefits, among them a tax incentive for individuals and corporations resident in Mexico who return resources for investment in Mexico stemming from revenues, dividends or earnings from indirect investments in jurisdictions where taxes are lower or preferential, as well as revenues, dividends or income subject to preferential tax regimes generated during fiscal year 2005, as well as taxpayers that contribute real estate to trusts referred to in article 223 of the Income Tax Law (known as FIBRAS). The SHCP pointed out that contributions to personal accounts administered by comprehensive mutual fund distributors be included within the category of tax-deductible complementary • 47 • retirement fund contributions, provided they qualify. It also allowed a credit of VAT transferred to parties who acquire trust or trustee rights, and allow VAT credit balances to be offset against VAT debits in the same period that credit is generated, provided the statement of the credit balance has been filed previously. Arturo Rolón Baca President of Administration Committe Promotion of venture capital On December 28, 2005, a Decree was published for the purpose of encouraging investment and growth in small and mid-sized companies resident in Mexico and which are not publiclytraded at the time of the investment (formally called SAPIs). Now, Mexican or foreign residents can invest in those companies through a trust (investment vehicle) whose purpose is to invest in the capital stock of the companies being promoted, participate in their board of director, and grant loans to finance them. Tax rules for multi-series funds In October, a notice was set out by the SAT Central Legal Administrative Offices for Major Taxpayers, in response to an application submitted by this Association. The terms of the notice were as follows: • Confirmation that mutual funds administered by fund managers who are affiliated with the AMIB, and whose capital stock was made up of various classes and series of shares regulated under CNBV Bulletin 12-22 meet the provisions established in Title III of the Income Tax Law applicable to fixed-income and equity mutual funds. • Confirmation that for fiscal year 2005, the proposed methodology for calculating the tax on investment income of investors or stockholders, • 48 • from the series, classes and sub-classes of stock, when applicable, that make up the equity of mutual funds, shall be consistent with what is established in the Income Tax Law. • Indicates that real taxable interest for individuals should be calculated as established in the Official Document published by the Revenues Policy Unit on September 10, 2004. As for corporations, taxable interest should be calculated as specified in the Income Tax Law; and the information that corporations must supply to those parties on the nominal interest paid must be in compliance with section I of Article 105 of the Income Tax Law. Taxes paid by mutual fund managers on behalf of their investors may be credited against their provisional or definitive income tax payments. • Finally, this tax regime is subject to the condition that the association present the SAT with a list of mutual funds to which it applies (corporate name, taxpayer ID number and tax domicile), within 30 days of October 14. When new funds are created, the Association must inform the SAT of their corporate name, taxpayer ID, and tax domicile, within 30 days of their authorization. • For this reason, fund managers who will apply this tax regime must submit the information (corporate name, taxpayer ID, tax domicile) by October 31 a the latest, in order for AMIB to prepare the list of mutual fund managers to which the regime described in that Document is to apply. Accordingly, 9 fund managers and 81 mutual funds submitted information, and the letter was submitted to the SAT on November 24. Human Resources In the area of Human Relations, progress was made on the following fronts: • AMIB conducted its survey of salaries, benefits and personnel structures, which gives its members current, up-to-date information on wages and benefits in the industry based on a significant sampling of brokerage firms and mutual fund mangers, and to analyze and compare market practices with the institution’s own practices in terms of personnel structure (back office and administrative areas). The survey was conducted among 15 brokerage firms and 14 fund mangers, including 123 standard positions in 22 specialized areas of brokerage firms and 28 in fund managers. It yielded decision-making information on: • Competitiveness indexes • Benefits analysis • Organizational structure analysis • Percentage breakdown of total wages and benefits • Comparison of each firm against the market (simple and weighted average and by level) and comparison of market and administrative areas against the market by valuation levels. Increased participation by brokerage firms and fund managers in the Candidates andVacancies Exchange Group strengthened this effort to share information on job positions available and wanted, by the use of a single standardized format for participants to report the information on a consistent basis. Job postings will be systematized through AMIB’s web page, and we are currently working on the way information on candidates and vacancies can be looked up and modified. • 49 • Accounting Because of the concerted efforts of brokerage firm accountants together with the CNBV and other industry institutions like the Mexican Public Accountancy Institute, the security and solidity of the securities market system was fortified in 2005. Change were made o the Unified Brokerage Firm Bulletin, some of which were proposed by AMIB, with the following results: • Amendments to Article 28 allowing brokerage firms to engage in self-entry trades in any equity security, including warrants, which had been omitted in the past. • Amendments to Article 97 so that brokerage firms were no longer prohibited from proprietary trading in securities issued by companies in their group, merely subject to certain limitations in the proprietary account. Article 160 already included rules on capitalization levels for repo trading, but was amended to segregate issuer risk and counterparty risk. In Article 177, brokerage firms that are part of a financial group are authorized to publish their financial statements through the web page of the overall group to which they belong. An extension was obtained for financial information that is sent through Regulatory Reports and which corresponds to January-March 2005, to be presented by April 29. Independent external auditors who were previously obliged to issue an opinion on internal control within the sixty calendar days following the close of fiscal year 2004, were freed of this responsibility until fiscal year 2006, when they must comply within 120 calendar days following the close of the corresponding fiscal year, and every two years thereafter. Observations were submitted on the draft of Accounting Criteria for Brokerage Firms, which will be applied in 2006. Among the central changes to this document are: Brokerage firms shall observe the accounting guidelines established in the Financial Information Rules of the Mexican Counsel for Research and Development of Financial Information Rules (CINIF), except when the Commission believes a specific rule or accounting criteria is necessary. At the request of this Association, specific rules were defined for recording, valuation, presentation and disclosure of financial statements, as well as for proprietary repo trading and securities lending activity by brokerage firms. .Addition, specific rules were established on the treatment of securitization transactions by brokerage firms in their financial statements. The rules on brokerage firm capitalization were aligned with those that apply to banks, with regard to transactions subject to market and credit risk. Some of the benefits of these changes are: Lower capitalization requirements because of the reduction in coefficients and in the rating of investment grade classification, the extension of the investment term (to 10, 15, 20, and more than 20 years) for clearing transactions, and the measurement of “market risk” in derivatives trading on MexDer and OTC markets. The modification of Article 146 of the Unified Bulletin, which refers to liquidity parameters, in order to encompass high and medium-market- • 50 • ability stocks, to which a haircut of 20% and 25%, respectively, can be applied with respect to their market value, and to include trading in foreign currency. • Mutual funds can refer to dollars or other foreign currency in their advertising. Joint efforts with accounting industry institutions was also evident in the document presented to the CINIF containing observations, conclusions and recommendations by this Association regarding Financial Information Standards, such as A-2: Needs of users and objectives of financial information; A-4; Qualitative characteristics of the financial information, and A-5: Basic elements of financial statements. • Deposits and obligations that must be settled in foreign currency shall be option. In addition, observations by accounts working for brokerage firms affiliated with this Association regarding “Proposed Modifications to accounting criteria for banks” were sent to the Representation Committee to Financial Sector Institutions of the IMCP. The definition of accounting rules for the trading mechanism called STRIPS began on March 1, as did work on the accounting registry of cash guarantees received from clients. Accounting matters that affect mutual funds. Proposal on accounting in foreign currency for Mutual Funds. In a number of meetings with the CNBV, and in response to a proposal presented by the Traders’ Committee, in November the authorities responded that the proposal was not feasible, but offered the following points: • Notes to the Financial Statements can be included, attaching an additional statement in dollars. • Capital stock must be in pesos. • Account statements may be in pesos and dollars (including the equivalency). Based on the foregoing, AMIB sent industry representatives a draft of a self-regulatory rule in progress at the time, regarding the disclosure of clients’ investments in foreign currency, in order to evaluate the possibility of establishing a consistent mechanism for investments in foreign currency. Mutual Fund Information reported to the CNBV via SITI As of September 1, the CNBV began receiving information sent by Traders through the InterInstitutional Information Transfer System (SITI). Foreign securities not delivered on the settlement date. It has been commented that as a “market practice”, some Traders have had problems with their counterparties abroad, since, primarily because of time differences, there have been delays in the transfer of cash for the purchase of foreign securities; in addition, the securities are sometimes received only weeks later. In the case of delivery against payment, the cash was not delivered, but neither were the securities received, and the price at the time of delivery was different from the agreed-upon time. Faced with this situation, AMIB proposed to the CNBV that accounting records be adapted to reflect this type of transaction as securities and transit, or securities pend- • 51 • ing receipt or delivery. The Authorities are still reviewing this proposal. Attachments to Bulletin 12-22. During the year, AMIB worked with the authorities on modifications to the attachments ore regulatory reports they intend to implement, and we are currently awaiting a new version of these documents that include the agreed-upon changes. As the result of efforts made with the BMV, on October 31 that Exchange announced that a modification would be made to the Government Instruments Securities Type (SECURITY TYPE 90) and would be expanded to classify each security of this type. Publication of Financial Statements on the Internet In various meetings with the CNBV; we discussed the possibility of publishing financial statements of mutual fund managers and the mutual funds themselves on the BMV’s web page, instead of publishing them in newspapers. The idea is to publish the financial statements of mutual funds on Emisnet, and those of the fund manager on the web page of the Mutual Fund Manger of Financial Group to which they belong, but not the portfolios, which would be included in he next phase, as provided for under the new Law. During a meeting with the CNBV, the Mexican Stock Exchange said these publications could be made in the required time and form, and testing was agreed to be conducted in March 2006 with the financial statements of the first quarter. In addition, the transmission calendar was established for quarterly financial reports and audited financial reports, with their respective notes. Identification of Type of Security for Government Securities. The classification of types of securities by the BMV was used, because some securities are included that are not backed by the federal government. • 52 • • 53 • III. Promotion Communications In the year 2005, we continued our program of educating various segments of the public about the features, attributes and benefits of the securities market, both for investors and for companies. We took a number of actions in this direction, which are described below. 25th Anniversary Celebrations Our Association celebrated the 25th anniversary of its founding with a major event in which the guest of honor was Mexican president Vicente Fox, his secretaries of state, and important personages from the financial and business world. The opening message was delivered by Carlos Levy Covarrubias, who remarked that, throughout the past 25 years, AMIB has worked closely with the authorities and legislators in order to create a modern financial system with international standards. He also described the main challenges facing the industry in its effort to further develop the securities market, particularly the following: • Increasing the number of investors. • Increasing the number of listed companies. • Improving the regulatory framework to make it more effective and less burdensome. • Strengthen self-regulation as a complement to existing standards. In his speech, President Fox looked back on the progress Mexican has made in economic terms, noting that in the past 4 years, inflation and inter- est rates reached their lowest level in decades, while the country’s reserves and access to capital markets is also greater than ever before. Said Mr. Fox, “from the start of my administration, we have placed a priority on reforms to the financial system, working specifically to make it more solid, more stable, and give it the effective capacity to drive the economy.” He said that his administration would continue the same line of action it has pursued for the last four and a half years, during which “the financial industry has already become a powerful force in economic growth, up to the challenges of the twenty-first century.” He stressed that “this impressive achievement came about through the dedicated and professional work of agents participating in the financial market, among which the members of AMIB played an outstanding role in serving the needs of the industry.” He also said the increasingly solid situation of the markets has encouraged long-term financing for companies of all types, even local governments, allowing for a strengthening of the mixed public-private investment formula. Investments are thus at an all-time high in public works, energy, and housing. • 55 • He went on to say that in order to face the challenges of the securities industry, Congress is currently in the process of approving a new Securities Market Act, which will increase transparency and promote access to our market for new companies, as well as an increasing number of savers. Mr. Fox asserted that by joining the Mexican Stock Exchange, companies and become more modern, more competitive, and their administration more open and above-board. Concluding his remarks, he said “I am very pleased to take part in this 15th Anniversary Celebration of the Mexican Securities Industry Association.You are inarguably a pillar of Mexico’s development.” Following the opening remarks, the cycle of conferences began, involving presentations by the following individuals: • Mauricio Basila Lago, Vice President for Securities Supervision of the CNBV: “The New Securities Market Act Proposal.” • Eduardo Sojo Garza-Aldape, Chief of the Staff for Public Policy, Presidency of the Republic. “The importance of not re-inventing the country every six years”. • Alfredo Harp Helú, Chairman of the Board, Grupo Financiero Banamex. “The Process of Institutionalizing the Stock Exchange”. • José Madariaga Lomelín, Chairman of the Board, Promotora Progrupo. “The Creation of Financial Groups in Mexico”. • José Luis Barraza, Chairman of the Business Coordinating Council (CCE). “Outlook on the Economy, 2005: Entrepreneurs’ view of the Securities Industry” • Antonio del Valle Ruiz, Chairman of the Mexican Council of Businessmen “Trends and Future of the Mexican Financial Industry”. Radio We continued the agreement we began in 2004 with the “Entre Amigos” program hosted by Alicia Salgado and Ernesto Herrera. The agreement is with the radio broadcast company Nucleo Radio Mil, where we participate once a week in the show that runs FM frequency 100.1, Monday to Friday, from 8 to 9 p.m. The program deals with current topics aimed at encouraging securities-market awareness and promoting the products, services and instruments offered by our members and affiliates. Throughout the year, AMIB kept up an active presence in various news media--magazines, newspapers, radio shows, and even the CBS television network, covering financial and market-related topics. Attention was focused on the benefits of investing in he stock market (whether through mutual funds, or directly in the equity market); the outlook on the industry and the debate over authorization of the new Securities Market Act and its potential benefits. AMIB served as the liaison for a series of interviews given by the directors and spokespersons of the Association. To keep our side of these agreements and to handle the various interviews requested by the communications media that cover the information generated by the securities market, and which require the opinion of experts on every topic, we have a group of spokespersons specialized in each of the disciplines we cover--corporate • 56 • financing, money market, equity market, mutual funds, research and promotion, and others. Print Media Continuing our effort to disseminate and promote an awareness of the securities market, we continued to issue our quarterly bulletin called “Valores por la Fortaleza de Mexico”, which is widely distributed in universities, state and municipal governments, legislators, businessmen, and among directors and representatives of various business organizations that make up the Business Coordinating Council (CCE). As regards AMIB’s participation in other print media, since July we have been an active participant in the magazine Elite Empresarial, which is distributed to more than 6,000 executives of companies affiliated with the Mexican Employers Confederation, and we sent articles on financing options available in he securities market. We also contributed a number of articles to the magazine published by IMEF and for Concamin. Iñaki Bernús Negrete President of Promotion Committe Our Bulletin is published both electronically and in print, and is sent to more than 8.000 readers. It is widely distributed in the offices of the Mexican Presidency, in the upper and lower houses of the Mexican Congress, the judicial branch, state and municipal government offices, and businesses, as well as among the directors and representatives of various business organizations that make up the Business Coordinating Council, in Universities, and throughout the securities industry. Lobbying and Public Relations We met on various occasions with deputies and senators from several parliamentary factions, attended by high-level directors of the AMIB and the Mexican Stock Exchange. In those • 57 • Rita Aranda González President of Research Committe meetings, legislators expressed a keen interest in the actions that have been taken to offer greater transparency and security to participants in the securities market. • Information Lifecycle Management • Compound applications and control panels in the value chain of financial services In the 16th Annual Securities Market Convention, we set up a stand to be present as a liaison for various groups of students that attended that convention, and to promote the events of the Securities Market Education Center. • ID administration infrastructures in fraud prevention. • Passion for business in the financial sector • Best practices in risk management • Experience capital markets Fifth Annual Tech Day From November 2-6, the Fifth Annual Tech Day was held, with the participation of twenty brokerage firms and seven mutual fund managers, and a total of 52 attendees. The purpose of the event was to provide information on international trends in the area of “Mitigating technological risk in the financial industry.” Members of the Administration, Mutual Fund Mangers and Systems Committees took part in this event. Exhibitors included representatives of Microsoft, SUN, Telmex, and HP--all leaders in the field-and discussions covered a broad range of topics: • The Center also participated in Securities Market Week at the National Autonomous University of Mexico (UNAM) and the Metropolitan Autonomous University (UAM), held at the Securities Center. The value of innovation in financial services. Education As part of its duties in the area of professional certification, in 2005 AMIB gave 379 courses on ethics to 4,961 persons in 36 of Mexico’s most important cities. • Mexico: digital transformation • Administered networks and new trends • New trends in technology and the participation of telecommunications firms in this market. • Events and Conferences Together with the ITESM, Mexico State Campus, the Securities Market Education Center organized the Third Annual University Encounter with the Securities Market, in which more than 20 students from universities in Jalisco, Puebla, Querétaro, Hidalgo, Michoacan, Morelos, Nuevo Leon and elsewhere participated. Bringing the company into the new age of Utility Computing through standardizing To publicize the importance of securities markets among universities and high schools, 54 conferences were given on a variety of market topics, and 35 trading simulations were held in various forums across the country. A number of agreements were reached with the ITESM • 58 • Mexico City Campus, including the granting of an Academic Excellence Prize for the student in the Financial Administration department with the best average in the semester. We currently have outreach agreements with more than 40 Mexican universities. Special mention should be made of our agreement with ITESM that allows students who complete their studies in Financial Administration to have the option of passing the certification exam AMIB gives for Investment Strategy Advisors. This was applied in an initial phase to students at the Mexico City Campus, and in a later phase maybe applied to all the students studying for this degree on the institution’s eight Campuses nationwide where the material is taught. investment). Multiples are highly useful for making a decision to buy or sell instruments for an investment portfolio, and also to compare them against their international peers. The committee generated or updated the following multiples: • P/E: Price to earnings. • P/BV: Price to book value • P/ NICO: Price to net income from continuous operations • P/CE: Price to cash earnings • Adjusted EV/EBITDA company value to adjusted earnings before interest, taxes, depreciation and amortization. EV refers to the company’s market cap (market price of the stock times the number of shares outstanding) plus the company’s net debt. The adjusted EBITDA is operating income before interest, taxes, depreciation, and amortization, minus minority interest. Market Multiples AMIB’s Research Committee set up a work group to address the issue of differences between comparative parameters for companies listed on different international exchanges and in Mexico. The purpose was to create a conceptual framework to determine multiples that would be useful for a better analysis and valuation of the stock market, both in industry groups and in individual companies. The group set itself the goal of standardizing the parameters used in Mexico with those in use in other global markets, so that they can be used by the entire public, investors and non-investors, who look up statistical information from the Mexican Stock Exchange, and which can also be officially published by that institution. Multiples are valuation ratios that compare the prices of the shares in a company against its value (assets) and the resources it generates (return on • 59 • IV. Certification Certification process Market participants were given the latest version of the Manual of Policies and Procedures for the certification and registry process of this Association, updated on January 27. The document has the basic purpose of establishing the operating bases for the certification and registration of personnel that has obtained or is applying for authorization from the CNBV to trade or promote market securities. The new changes approved by AMIB’s Certification Committee are described briefly below. A section entitled “revalidating certification and authorization” has been added, detailing the procedure for revalidating both the certification and the authorization received from the CNBV every three years. The new version of the Manual clarifies that there are two ways to revalidate certification: either present an update exam, or earn a certain number of points b y attending or giving some conference, presentation, seminar, panel, symposium round table, convention, course, diploma, or technical, bachelor’s, master’s or doctoral degree; or pass exams given by other international certifying agencies, like the series 7, series 3, series 4, series 24, the CFA or the CIIA, among other options. It also describes the requirements and procedures for registering training institutes and their courses with the AMIB, so that the points can be accredited toward revalidation of certification, in addition to inspection, oversight and sanctions in the event of a breach of the rules once registered. Finally, a transitory article was included, recognizing the retroactive application of courses given in 2004, by institutes duly registered with the AMIB. Another new section was added entitled “application of criteria for obtaining certification”, which includes only one article: “Policy on Certification by Experience”, which exempts personnel with 25 years of experience in the financial or securities industry from having to pass the certification or revalidation exam, when they are at least 50 years old, and other requirements that can be looked up in detail in that document. AMIB Certification statistics The following tables show some statistics on AMIB’s work in the area of certification and registration. Statistics on candidate certification in first cycle (accumulative) from September 2, 2002 to September 2, 2005 • 61 • POSITION Mutual Fund Promoter Securities Promoter Investment strategy advisor Market Trader Money Market Trader Total A NA Total Passed By position 16826 2132 2872 107 48 7671 776 551 33 7 24497 2908 3423 140 55 68.69% 73.31% 83.90% 76.43% 87.27% 78.96% 9.37% 11.03% 0.45% 0.18% 21985 9038 31023 70.87% 100.00% Statistics on candidate certification in second cycle (accumulative) from September 3, 2005 to January 11, 2006 POSITION A NA Total Passed Mutual Fund Promoter Securities Promoter Investment strategy advisor Market Trader Money Market Trader 2480 313 328 5 23 296 128 36 0 2 2776 441 364 5 25 Total 3149 462 3611 By position 89.34% 70.98% 90.11% 100.00% 92.00% 76.88% 12.21% 10.08% 0.14% 0.69% 87.21% 100.00% Revalidation statistics Second cycle, certification process (accumulative), September 2, 2005-December 31, 2005 TYPE OF INSTITUTION Insurance Company Independent consultant Brokerage firm Exchange house Multiple-service bank Mutual Fund distributor Mutual fund manager Development bank TOTAL PERCENTAGE EXAM EXPERIENCE POINTS TOTAL 1 1 10 2 9 1 27 2 60 1 12 29 2 70 3 22 22 17.46% 2 1.59% • 62 • 102 80.95% 126 100% Registry of institutes and courses creditable for AMIB certification revalidation The following table lists the institutes and courses that have registered with the AMIB for points that can be credited toward revalidation of certification, as well as the events confirmed for these purposes. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Institute name. Banco Mercantil del Norte, S.A. Institución de Banca Múltiple. Banco Nacional de México, S.A. BBVA Bancomer, S.A. Bolsa Mexicana de Valores, S. A de C.V. Casa de Bolsa Banorte, S.A de C.V. Casa de Bolsa Credit Suisse First Boston México, S.A. de C.V. Cenacce, S.C. Centro Latinoamericano de Investigación y Especialización Profesional A.C. COBURFIN Centro de competencia Bursátil Financiera S. de R.L. Der & Risk, S.A. de C.V. ECO Human Resources Development. Fibur, S.A. de C.V. Finamex Casa de Bolsa, S.A. de C.V. Fundación de Investigación para el Desarrollo Profesional, S.C. (FINDES). Global Derivatives, S.C. HSBC México S.A. Institución de Banca Múltiple IDEFI, consultores, S.C. Instituto de Capacitación Especializada (ICE). Instituto Finbur, S.A. de C.V. Instituto del Mercado de Valores (IMERVAL). Instituto para Ejecutivos Bursátiles, S.C. (INBU) Instituto Santander Serfín, A.C. Instituto Nacional de Ciencias Penales (INACIPE). Instituto Tecnológico de Estudios Superiores de Monterrey Campus Estado de México TEC. Instituto Tecnológico Autónomo de México ITAM. Interesa, S.A de C.V., S.O.S.I Inversora Bursátil S.A. de C.V. IXE Banco S.A. JM Capacitación, S.C. Leading Markets S.A. de C.V. Laura Garza & Asociados. MexDer Mercado Mexicano de Derivados, S.A. de C.V. Monex, Casa de Bolsa, S.A. de C.V. Operadora de Fondos Lloyd, S.A. Proveedor de Capacitación Presencial y Virtual Bursafín S.C. Scotiabank Inverlat, S.A, Institución de Banca Múltiple, Grupo Financiero Scotibank Inverlat. Servicio de Educación Superior en Jalisco A.C. Shirebrook Commodities, S.A. de C.V. Universidad del Valle de México UVM. Universidad Iberoamericana A.C. Vector Casa de Bolsa, S.A. de C.V. Total • 63 • No. courses registered No. events confirmed 4 47 3 55 6 17 16 12 17 1 3 4 23 120 6 13 23 39 150 2 27 5 5 113 45 16 7 4 14 23 2 1 8 57 26 13 36 14 46 112 21 1 6 12 2 8 8 14 20 5 14 10 18 1 6 6 4 14 25 10 22 9 78 18 - 19 9 40 3 2 784 18 11 50 20 855 CONSAR certification process To date, a total of 300 exams have been given, and 160 certifications awarded to applicants for the position of “Retirement Fund and Retirement Fund Manager executives”, and 33 for “Compliance Officer for Retirement Funds and Retirement Fund Managers”. The percentage of applicants that pass the exam averages 64.33%. FIRA Certification Process On September 19, 2005, exams began to be given for certification to work in “Business Promotion” and “Credit Analysis”. In December 2005, grades, credentials and certification diplomas were given to FIRA personnel, with an approval percentage of 68.29% and 56 persons certified to work in “Credit Analysis.” Federal Mortgage Society Certification Process On November 28, 2005, exams began to be given for certification as Mortgage Broker. Certification of Foreign-Exchange Promoters and Traders In 2005, the Technical Council was formed to develop specifications for foreign-exchange promoters and traders. A total of 1,200 test questions were developed and are now being reviewed. In 2006, this review process will be completed, pilot tests conducted, and various versions of the exam created. Certification is expected to begin in April or May. New Guide for MexDer Certification On October 1, 2005, the new MexDer Certification Guide took effect, including two new certification categories: “Derivatives Trader” and “Derivatives Promoter”, as well as the incorporation of material on foreign-currency futures and options contracts into the requirements for “Fixed-Income Futures and Options Trader”, to create a new category, “Fixed-Income and Foreign-Currency Futures and Options Trader”. MexDer recognized AMIB’s new category of “Investment Strategy Advisor”, which besides promoting can now also trade futures contracts on that market. MexDer also recognized the category of “Money Market Trader”, so that in addition to trading fixed-income futures, these professionals can also trade in futures on foreign currency. • 64 • MexDer’s certification committee authorized the certification of foreign promoters and traders, for which a Study Manual will be used to detail the regulations that apply to the Mexican securities market, as well as how the Clearinghouse (Asigna) works, and how trading is conducted in this market. The Manual will be available in Spanish and English. It will be accompanied by a statement that must be signed in duplicate by the compliance officer of the company and the applicant, stating that the applicant is aware of the Manual’s contents and is responsible for trading under the terms and regulations that apply, as well as the sanctions that may occurred for violations of those rules; and finally, the willingness to submit to the jurisdiction of MexDer and the local authorities. Accordingly, it was agreed that until AMIB was ready to certify that category of professional, these individuals would have to obtain certification under the category of “Securities Promoter” or “Investment Strategy Advisor”, according to the needs of each institution. Finally, on January 1, 2006, the process of revalidating certification through the point system went into effect, but so far no applicant from any MexDer-authorized category has applied. If the certification is revalidated through an exam, the applicant must take the “Money market Trader” exam. New Categories and Recognition by MexDer On April 4, 2003, the General Department of Provisions and Legal Instrumentation and the General Department of Financial Institution “B” Supervision of the CNBV issued Document 601-I-DGIDL-5678/03, specifying that Money Market Traders must also obtain certification and authorization to perform their functions. The Certification Committee agreed on the following criteria for revalidating the certification of Money Market Traders who are in the situation described above: If professionals revalidate their certification via points, they will be recognized under the same certification as what they originally obtained (Securities Promoter or Investment Strategy Advisor). Additionally, on May 25, 2004, MexDer recognized AMIB’s “Money Market Trader” exam as valid certification for professionals who work as “Interest Rate Futures Trader” on that Exchange. • 65 • In the area of revalidation, it was determined that those who have earned certification in the areas of Securities and Mutual Fund Promoter, or Investment Strategy Advisor, and who work as Money Market Traders, can revalidate their certification in one of two ways: If the certification is revalidated by an exam, the applicant must take the Money Market Trader exam, or the exam for the certification they already have (Securities and Mutual Funds Promoter, or Investment Strategy Advisor). If the certification is to be revalidated by points, AMIB’s Certification Committee clarified that applicants seeking revalidation of certification as Securities and Mutual Fund Promoter or Investment Strategy Advisor, who work as Money Market Traders, will be recognized under the certification they originally obtained, i.e., Securities Promoter of Investment Strategy Advisor; but they may nonetheless continue to act as Money Market Traders. • 66 • Jose Luis Acosta Chavira Ernesto Reyes Retana Valdés Angela Balmori Iglesias Everardo Rodríguez Caro Julio Arturo Sánchez Díaz • 67 • Financial Highlights Securities in Custody Change BROKERAGE FIRM December 2004 December 2005 $ % INVERSORA 693,297.76 964,790.00 271,492.24 39.16 ACCIVAL 343,533.87 384,400.00 40,866.13 11.90 BBVA- BANCOMER 202,346.53 241,416.00 39,069.47 19.31 VALMEX 136,968.73 157,301.34 20,332.61 14.84 SANTANDER 154,604.37 152,682.00 -1,922.37 -1.24 SCOTIA 109,939.43 128,468.00 18,528.57 16.85 BANORTE 106,766.16 118,902.27 12,136.11 11.37 INVEX 39,090.50 86,934.34 47,843.84 122.39 IXE 56,708.57 64,954.71 8,246.13 14.54 G.B.M 56,143.64 53,733.00 -2,410.64 -4.29 VECTOR 35,615.71 41,422.34 5,806.63 16.30 HSBC 31,008.34 40,599.00 9,590.66 30.93 ACTINVER 23,632.83 29,940.00 6,307.17 26.69 VALUE 22,824.58 28,968.86 6,144.28 26.92 MONEX 11,393.61 18,301.00 6,907.39 60.63 INTERACCIONES 14,568.18 17,580.00 3,011.82 20.67 MULTIVALORES 13,547.00 15,835.00 2,288.00 16.89 FINAMEX 17,058.37 11,649.00 -5,409.37 -31.71 ARKA 5,740.23 8,755.00 3,014.77 52.52 ING BARING 2,991.33 4,030.00 1,038.67 34.72 PROTEGO NA 1,454.77 1,454.77 100.00 MERRILL 926.00 874.00 -52.00 -5.62 UBS 417.47 538.00 120.53 28.87 CITIBANK 0.00 0.00 0.00 0.00 ABN 0.00 0.00 0.00 0.00 BANC OF AMERICA 0.00 0.00 0.00 0.00 CREDITSUISSE 0.00 0.00 0.00 0.00 DSECURITIES 0.00 0.00 0.00 0.00 JP MORGAN 0.00 0.00 0.00 0.00 2,079,123.21 2,573,528.62 494,405.41 23.78 TOTAL Millions of $ / NA Not avaiable • 69 • Paid Capital Change BROKERAGE FIRM December 2004 December 2005 $ % ACCIVAL 371.00 800.00 429.00 115.63 INVEX 209.73 500.00 290.27 138.41 BBVA- BANCOMER 419.67 420.00 0.33 0.08 SCOTIA 559.22 386.00 -173.22 -30.97 MONEX 300.00 360.17 60.17 20.06 INVERSORA 255.50 331.00 75.50 29.55 75.61 330.14 254.53 336.64 DSECURITIES 206.75 305.00 98.25 47.52 SANTANDER 272.04 272.00 -0.04 -0.01 VECTOR 184.27 184.27 0.00 0.00 VALMEX 175.00 175.00 0.00 0.00 BANORTE 160.00 160.00 0.00 0.00 ARKA 152.60 152.60 0.00 0.00 G.B.M 150.00 150.00 0.00 0.00 FINAMEX 133.87 134.00 0.13 0.10 UBS 40.00 115.00 75.00 187.50 ACTINVER 92.47 92.00 -0.47 -0.51 IXE 92.00 92.00 0.00 0.00 MERRILL 89.00 89.00 0.00 0.00 MULTIVALORES 78.50 78.00 -0.50 -0.64 ING BARING 57.38 57.00 -0.38 -0.67 55.00 55.00 100.00 VALUE PROTEGO NA INTERACCIONES 54.00 54.00 0.00 0.00 CREDITSUISSE 45.43 45.00 -0.42 -0.94 CITIBANK 44.00 44.00 0.00 0.00 JP MORGAN 41.00 41.00 0.00 -0.01 ABN 67.46 39.00 -28.46 -42.18 HSBC 35.11 35.00 -0.11 -0.32 BANC OF AMERICA 26.00 26.00 0.00 0.00 4,387.60 5,522.18 1,134.59 25.86 TOTAL Millions of $ / NA Not avaiable • 70 • Equity Change BROKERAGE FIRM December 2004 December 2005 $ % ACCIVAL 2,488.50 2,664.31 175.81 7.06 INVERSORA 1,107.96 1,443.45 335.50 30.28 MONEX 1,098.63 1,236.31 137.68 12.53 BBVA- BANCOMER 805.23 1,155.08 349.86 43.45 INVEX 969.94 1,123.27 153.33 15.81 G.B.M 926.31 1,030.16 103.86 11.21 SCOTIA 982.93 830.00 -152.93 -15.56 VECTOR 653.88 649.16 -4.71 -0.72 VALMEX 551.75 617.95 66.21 12.00 SANTANDER 652.84 601.38 -51.46 -7.88 BANORTE 522.95 549.37 26.42 5.05 IXE 388.06 451.36 63.30 16.31 DSECURITIES 354.22 422.75 68.54 19.35 FINAMEX 310.28 405.07 94.79 30.55 VALUE 400.37 403.64 3.27 0.82 INTERACCIONES 235.17 299.36 64.19 27.29 MERRILL 205.76 276.22 70.46 34.25 MULTIVALORES 309.69 247.11 -62.58 -20.21 CITIBANK 219.46 243.95 24.49 11.16 ARKA 180.16 218.49 38.33 21.27 91.98 186.39 94.42 102.65 HSBC 130.35 150.87 20.52 15.74 ING BARING 125.18 148.11 22.93 18.32 32.88 100.94 68.06 207.01 101.90 71.61 -30.29 -29.73 CREDITSUISSE 48.31 53.12 4.81 9.96 ABN 19.02 35.17 16.15 84.89 32.88 32.88 100.00 24.03 26.42 2.39 9.96 13,937.70 15,673.92 1,736.22 12.46 ACTINVER UBS JP MORGAN PROTEGO BANC OF AMERICA TOTAL NA Millions of $ / NA Not avaiable • 71 • Number of Accounts Change BROKERAGE FIRM December 2004 December 2005 # % IXE 28,428 27,765 -663 -2.33 SANTANDER 17,724 16,726 -998 -5.63 SCOTIA 15,901 16,184 283 1.78 ACCIVAL 15,547 15,184 -363 -2.33 MONEX 10,899 12,730 1,831 16.80 VECTOR 14,207 12,240 -1,967 -13.85 BANORTE 9,610 9,237 -373 -3.88 G.B.M 7,604 8,008 404 5.31 INTERACCIONES 7,327 7,632 305 4.16 INVERSORA 5,179 5,640 461 8.90 HSBC 5,453 5,242 -211 -3.87 ACTINVER 3,247 4,188 941 28.98 VALUE 4,031 4,173 142 3.52 ARKA 4,093 4,161 68 1.66 INVEX 3,378 3,330 -48 -1.42 MULTIVALORES 3,340 3,240 -100 -2.99 VALMEX 3,059 2,898 -161 -5.26 BBVA- BANCOMER 1,246 857 -389 -31.22 ING BARING 579 512 -67 -11.57 PROTEGO NA 372 372 100.00 MERRILL 260 283 23 8.85 FINAMEX 451 265 -186 -41.24 UBS 151 232 81 53.64 CREDITSUISSE 1 2 1 100.00 ABN 0 0 0 0.00 BANC OF AMERICA 0 0 0 0.00 CITIBANK 0 0 0 0.00 DSECURITIES 0 0 0 0.00 JP MORGAN 0 0 0 0.00 161,715 161,101 -614 -0.38 TOTAL NA Not avaiable • 72 • Number of Employees Change BROKERAGE FIRM December 2004 December 2005 1,117 1,214 97 8.68 ACCIVAL 370 391 21 5.68 VECTOR 360 370 10 2.78 SCOTIA 310 306 -4 -1.29 IXE 223 224 1 0.45 INVEX 206 221 15 7.28 SANTANDER 193 199 6 3.11 INTERACCIONES 169 181 12 7.10 MULTIVALORES 177 170 -7 -3.95 VALMEX 143 146 3 2.10 BANORTE 337 140 -197 -58.46 VALUE 153 139 -14 -9.15 G.B.M 137 121 -16 -11.68 ARKA 151 110 -41 -27.15 ING BARING 23 77 54 234.78 FINAMEX 88 75 -13 -14.77 MERRILL 26 34 8 30.77 PROTEGO NA 31 31 100.00 4 13 9 225.00 UBS 11 13 2 18.18 HSBC 10 11 1 10.00 ABN 4 3 -1 -25.00 JP MORGAN 3 2 -1 -33.33 BANC OF AMERICA 1 1 0 0.00 BBVA- BANCOMER 57 1 -56 -98.25 DSECURITIES 2 1 -1 -50.00 ACTINVER 1 0 -1 -100.00 CITIBANK 1 0 -1 -100.00 INVERSORA 1 0 -1 -100.00 4,278 4,194 -84 -1.96 MONEX CREDITSUISSE TOTAL NA Not avaiable • 73 • # % Securities in Custody / Number of Employees Change BROKERAGE FIRM December 2004 December 2005 $ % 693,297.76 964,790.00 271,492.24 39.16 3,549.94 241,416.00 237,866.06 6,700.57 23,632.83 29,940.00 6,307.17 26.69 3,100.83 3,690.82 589.98 19.03 VALMEX 957.82 1,077.41 119.58 12.48 ACCIVAL 928.47 983.12 54.65 5.89 BANORTE 316.81 849.30 532.49 168.08 SANTANDER 801.06 767.25 -33.81 -4.22 G.B.M 409.81 444.07 34.27 8.36 SCOTIA 354.64 419.83 65.19 18.38 INVEX 189.76 393.37 203.61 107.30 IXE 254.30 289.98 35.68 14.03 VALUE 149.18 208.41 59.23 39.70 FINAMEX 193.85 155.32 -38.53 -19.87 VECTOR 98.93 111.95 13.02 13.16 INTERACCIONES 86.20 97.13 10.92 12.67 MULTIVALORES 76.54 93.15 16.61 21.71 ARKA 38.01 79.59 41.58 109.37 ING BARING 130.06 52.34 -77.72 -59.76 PROTEGO NA 46.93 46.93 100.00 INVERSORA BBVA- BANCOMER ACTINVER HSBC UBS 37.95 41.38 3.43 9.05 MERRILL 35.62 25.71 -9.91 -27.82 MONEX 10.20 15.07 4.87 47.79 ABN 0.00 0.00 0.00 0.00 BANC OF AMERICA 0.00 0.00 0.00 0.00 CITIBANK 0.00 0.00 0.00 0.00 CREDITSUISSE 0.00 0.00 0.00 0.00 DSECURITIES 0.00 0.00 0.00 0.00 JP MORGAN 0.00 0.00 0.00 0.00 486.00 613.62 127.62 26.26 AVERAGE Millions of $ / NA Not avaiable • 74 • Securities in Custody / Number of Accounts Change BROKERAGE FIRM December 2004 December 2005 $ % BBVA- BANCOMER 162.40 281.70 119.30 73.46 INVERSORA 133.87 171.06 37.19 27.78 VALMEX 44.78 54.28 9.50 21.22 FINAMEX 37.82 43.96 6.14 16.22 INVEX 11.57 26.11 14.53 125.60 ACCIVAL 22.10 25.32 3.22 14.57 BANORTE 11.11 12.87 1.76 15.86 SANTANDER 8.72 9.13 0.41 4.65 SCOTIA 6.91 7.94 1.02 14.81 ING BARING 5.17 7.87 2.70 52.35 HSBC 5.69 7.74 2.06 36.20 ACTINVER 7.28 7.15 -0.13 -1.78 VALUE 5.66 6.94 1.28 22.60 G.B.M 7.38 6.71 -0.67 -9.12 MULTIVALORES 4.06 4.89 0.83 20.56 3.91 3.91 100.00 PROTEGO NA VECTOR 2.51 3.38 0.88 34.99 MERRILL 3.56 3.09 -0.47 -13.29 IXE 1.99 2.34 0.34 17.28 UBS 2.76 2.32 -0.45 -16.12 INTERACCIONES 1.99 2.30 0.32 15.85 ARKA 1.40 2.10 0.70 50.03 MONEX 1.05 1.44 0.39 37.52 ABN 0.00 0.00 0.00 0.00 BANC OF AMERICA 0.00 0.00 0.00 0.00 CITIBANK 0.00 0.00 0.00 0.00 CREDITSUISSE 0.00 0.00 0.00 0.00 DSECURITIES 0.00 0.00 0.00 0.00 JP MORGAN 0.00 0.00 0.00 0.00 12.86 15.97 3.12 24.25 AVERAGE Millions of $ / NA Not avaiable • 75 • Committees and Subcommittees • 76 • Administration Committee PRESIDENT Arturo Rolón Baca VICEPRESIDENTS Hugo Austria Díaz Héctor Mejía Martínez Luis Ojeda Zamora Gustavo Rosas Prado COORDINATORS Ernesto Reyes Retana Valdés Julio Arturo Sánchez Díaz MEMBERS Alejandro Aguirre Zamora Carlos Moreno Sánchez Angélica Albarrán Luna Carlos Pacheco Romero Fernando Álvarez Santisteban Xavier Ramos Yañez Ernesto Bayón Lira Gabriel Rincón Hernández Juan Carlos González Orozco Gerardo Rocha Frangos Jaime Celorio Manjarrez Everardo Rodríguez Caro Víctor Chávez Longyear Laura Rodríguez Jiménez Francisco Díaz Bocanegra Sergio Romero Nieto Roberto Diez de Sollano José Antonio Salazar Guevara Mónica Escandón Martínez Gustavo Salazar Salinas Jorge Fernández García Travesí Carlos San Martín Abad Ángel Fresán Fernández José Juan Sánchez Tendilla Alberto Gómez Sandoval Jorge Tejeda Ugalde José González Huerta Arturo Tlapanco Martínez Ricardo González Samaniego Jaime Torres Argüelles Alfonso Henkel Hernández Jesús Velasco Rodríguez Guillermo Hernández Palacios Víctor Vergara Valderrabano Ricardo Madero Vizcaya Ricardo Zapata de la Garza Gerardo Mejía Moreno Blanca Zepeda Reyes • 77 • Research Committee PRESIDENT Rita Aranda González VICEPRESIDENTS Rodolfo Campuzano Meza Gerardo Molina Llovera Mauro Zepeda Mauleón COORDINATORS José Luis Acosta Juan José Arriola García MEMBERS José Manuel Allende Zubirí Sergio García Márquez Félix Boni Brandani Manuel Gómez Palestino Mauricio Brocado Martínez Carlos Alberto González Tavares Gerardo Camargo Robles Juan C. Mateos Durán de Huerta Gerardo Copca Sánchez Rodolfo Navarrete Vargas Antonio Esteinou Madrid Alonso E. Ríos García Víctor Hugo Flores Rivas Alberto Rodríguez Govela Rafael Gamboa González Mauro Zepeda Mauleón Certification Committee PRESIDENT Efrén del Rosal Calzada COORDINATORS Ángela Balmori Iglesias Ana Lilia Ortega Ángeles MEMBERS José Manuel Allende Zubirí Rodolfo Liaño Gabilondo Iñaki Bernús Negrete Allan Smithers Hogg Gerardo Calderón Venegas Rafael Vidal Uribe Alejandro Gorches Guerrero • 78 • Compliance Officers Committee PRESIDENT José Manuel Guillemot Cesari VICEPRESIDENT Enrique Santa Anna Echandi COORDINADORES Ángela Balmori Iglesias Erik García Tapia MEMBERS Viviana Alvarado Balderas Antonio Mendoza Andrade Miriam Álvarez del Castillo Mercado Marcela Menéses Sosa Alejandro Emilio Athié Morales Antonio Nava Tamez Alberto Castillo Pereira Carlos Neda Landazuri Guillermo Cobián Valdivia Leopoldo Ortega Carricarte Pablo Cuevas Palacios Javier Orvañanos Lascurain Jaime Daniel Del Rosal Calzada Paola Pacheco García Jorge Espinosa de los Reyes Ángel Reyes Arias Alejandro Frigolet Vázquez Vela Roberto Ríos Espinosa David Fuentes Zendejas Ricardo Rivera Aburto José Gabriel Garcés Velásquez Karla M.Valdés Posada Fermín Gerardo Gutiérrez Creado Jesús Velasco Rodríguez Federico Loaiza Montaño Jorge Eduardo Vega Camargo Gerardo Méndez Padilla Valencia Alfredo Walker Cos Ramiro Javier Mercado-Robles Aguilar • 79 • Disciplinary Committee PRESIDENT Emilio Yarto Sahagún COORDINADOR Ángela Balmori Iglesias MEMBERS Alfredo Acevedo Rivas Efrén Del Rosal Calzada Erik García Tapia Luis Murillo Peñaloza Corporate Financing Committee PRESIDENT Julio Serrano Castro VICEPRESIDENTS Ignacio Gómez-Daza Alarcón Alonso G. Nieto Carbonell COORDINATORS José Luis Acosta Chavira Bertha Guadalupe Escalona Téllez MEMBERS José Manuel Allende Zubirí Julio García Peña Arturo J. Arce Taracena Pedro Mauricio Garfias Sitges Vinicio Álvarez Acevedo Erick Hernández Gómez Humberto Cabral González Fernando Lezama Shiraishi Omar Campuzano Pieras Luis Arturo Madero Vizcaya José Miguel Díaz Goñi Luis Martínez Arizmendi Carlos Díaz Juárez Jaime Martínez-Negrete Espinosa Alberto Escofet Cedeño Arturo Monroy Ballesteros Ángel Espinosa García Fernando Prieto Martínez Zorrilla Patricia Flores Milchorena Gerardo Tietzch Rodríguez-Peña Gerardo Freire Alvarado Guillermo Vilchis Gurza Antonio García Fernández Fernando J.Vizcaya Ramos • 80 • Legal Finance Committee PRESIDENT Jaime Torres Argüelles VICEPRESIDENTS Álvaro Ayala Margain Jacobo Martínez Flores Javier Sunderland Guerrero COORDINATORS Ángela Balmori Iglesias Erik García Tapia MEMBERS Alfredo Acevedo Rivas Gustavo Maza Domínguez Maria Dolores Aello Reyes Ramón Montes Medina José Luis Alcántara Morfín Carlos Neda Landazuri Alejando Alfaro Carral Martín Olle Casals Viviana Alvarado Balderas Leopoldo Ortega Carricarte Alejandro Emilio Athié Morales Paola Pacheco García Francisco Carrillo Gamboa Leonardo Poblete Galván Alberto Castillo Pereira Bernardo Portillo Aldrett Fernando Diez Cano Carlos E. Proal Roustand Luis Enrique Estrada Rivero Clementina Ramírez de Arellano Carlos Facha Lara Roberto Ríos Espinosa Eduardo Fernández García Travesí Francisca Rodríguez Padilla José Manuel Guillemot Cesari Iñigo Ruiz Bada Juan Llanos Reynoso Héctor Vázquez Abén Bernardo Llerenas Bracho Manuel Velasco Velázquez Carolina Amalia Machado Dufau Raúl Humberto Zepeda Ruiz • 81 • Capital Market Committee PRESIDENT Manuel Lasa Lasa VICEPRESIDENTS Javier Cortina Azcárraga Juan Bernardo Goicoechea San Martín Iker Laresgoiti Hurtado COORDINATORS Ernesto Reyes Retana Valdés Everardo Rodríguez Caro MEMBERS Luis Argüelles Rabell Carlos Ibáñez Estens Jorge Bernal Gutiérrez Eduardo Navarro Martínez Alejandro Betancourt Gaona Ernesto Ortega Arellano Enrique Camacho Candiani José Antonio Orvañanos Amaro Gilberto Cantú Jiménez Jorge Plácido Evangelista Francisco Cárdenas Moreno Jose Antonio Pacheco López Roberto Cavazos Videgaray Charles Edward Pilliod Elias Manuel Cortina Manjino Jorge Martín Ramos Landero Rubén Flores Bordón Mauricio Trigueros Ramírez Álvaro García-Pimentel Caraza Alfredo Vázquez Hernández Pedro Garfias Sitges Antonio Villarruel Lagos Mauricio Giodano Varela Pedro Zorrilla Velasco • 82 • Money Market Committee PRESIDENT José Eduardo Pérez del Villar VICEPRESIDENT Marco Antonio Álvarez Castillo COORDINATORS Ernesto Reyes Retana Valdés Everardo Rodriguez Caro MEMBERS Luis Manuel Abello De Abiega José Antonio Landero Cruz Luis Javier Almora Guerrero Rodolfo Lebrija Martínez-Lavín José Luis Arteaga Mena Pablo Limón Corona Marco Antonio Arvizu Núñez Enrique Mendoza Polanco Juan Javier Belaunzarán Noriega Sandro Moctezuma Ocaña Javier Bernal Stoopen Enrique Monroy Pacheco Eric Berry Velásquez Luis Negrete Cué Juan Antonio Borbolla Sosa Martín Olvera Serrano Juan Carlos Cadena Arias Xavier Ormaechea Jaúregui Juan Antonio Carrizales Picón Gerardo Pérez Cruz Jorge Clasing De la Mora Salvador Rojas Fdez. del Castillo Manuel Cortés Azuela Diego Terán López Alberto Del Ángel Sosa Araceli Thomé Ortega Gabriel Del Valle Martínez Manuel Torres Barajas Eduardo Estrada Magallanes Marco Arturo Torres Flores Jorge Arturo García Parés Sergio Torres Morales Arturo Gil González Jorge Alberto Turón Montes Jorge Luis González Romero Arturo Valdés Rocha Eugenio Gonzalez-Luna Jorge Vargas Favero Ricardo Lacavex Villarreal Agustín Villarreal Brena • 83 • Compliance Committee PRESIDENT Efrén Del Rosal Calzada COORDINADOR Ángela Balmori Iglesias MEMBERS Iñaki Bernús Negrete Miguel Ángel Pérez Arias Erik García Tapia Clemente Reyes Retana Valdés José Manuel Guillemot Cesari Ernesto Reyes Retana Valdés Manuel Lasa Lasa Arturo Rolón Baca Mauricio López Velasco Aguirre Jaime Torres Argüelles Luis Murillo Peñaloza Mutual Funds Committee PRESIDENT Alejandro Gorches Guerrero VICEPRESIDENTS Adolfo Negrete García Miguel Ángel Pérez Arias Jorge A. Ramírez Ramírez María del Carmen Sanjurjo Concheso COORDINATORS Ernesto Reyes Retana Valdés Sonia García Almazán MEMBERS Eric H. Anderson Alfredo Loera Fernández Jorge Arboleda Ancira Héctor Madero Rivero Luis Benavides Simón Pablo Mancera De Arrigunaga David Iván Buenfil Friedman Gerardo Martín Flores Deuchler Roberto Cano Díaz René A. Márquez Lara José Antonio Castillo Cardona César A. Montemayor Zambrano Domingo Díaz Noriega Emilio Olavarri Hervella Gerardo Diez García Rafael Ortiz Markivich Pascal Duhem Reuflet Federico Rangel Durán Sergio A. García Márquez Guillermo Robles Gil Orvañanos Francisco Gutiérrez Ruiz Carlos Rodríguez Giacinti Carlos Gutiérrez Sánchez Adriana Sánchez Guzmán Carmen Guilbot Vidales Manuel Sarmiento Serrano Bulmaro Guzmán Ruiz Enrique Solórzano Palacio Alejandro Hernández Sotelo Manuel Somoza Alonso Ricardo M. Herrerías Zamacona Carlos Ignacio Soto Manzo Carlos A. Kretschmer Prado Oscar Trejo Ledezma Carolina Lima Hernández • 84 • Trade of Derivate Products Committee PRESIDENT Guillermo Camou Hernández VICEPRESIDENTS Alejandro Mayo Prida José Antonio Orvañanos Amaro COORDINATORS Ernesto Reyes Retana Valdés Julio Arturo Sánchez Díaz MEMBERS Javier Anaya Blancas Carlos Hernández González Luis Argüelles Rabel Sergio Alejandro Islas Pérez Javier Concha Mendoza Manuel Lasa Lasa José Miguel De Dios Gómez Eduardo Navarro Martínez Jorge Del Valle Hernández Fides Niño Vega Jaime Díaz Tinoco Javier Ortiz Castillo Gabriel Embriz Trejo Eduardo Romero Flores Alejandro Faesi Puente Mauricio Trigueros Ramírez Federico Flores Parkman José Vila Lorente Pedro Giral López Alfonso E.Villarreal González Manuel González Graf Sergio Zermeño Romero Carlos González Mayer Promotion Committee PRESIDENT Iñaki Bernús Negrete VICEPRESIDENTS Jaime Álvarez Meyer Guillermo Beguerise Rivera Torres COORDINATORS José Luis Acosta Chavira Juan José Arriola García MEMBERS Alberto Adib Carrera Alejandro Hernández Treviño Carlos Antillón Luken Jorge Hugues Ulacia Roberto Cavazos Videgaray Francois Jaubert Juan David Michel Laura Laris Vázquez Pablo De Abiega Pons Miguel Ángel Martínez Sierna Luis Alfredo De Urquijo Juan Manuel Muñoz Cano Macías Carlos Dodero Portilla José Antonio Ponce Hernández Isabel Galván Muñoz Carlos Solórzano Barrón Ignacio González Cosio y Cicero Carlos Ignacio Soto Manzo Miguel Trigueros Legarreta • 85 • Registration Committee PRESIDENT Ernesto Reyes Retana Valdés COORDINADOR Ángela Balmori Iglesias MEMBERS José Manuel Guillemot Cesari Miguel Ángel Pérez Arias Alejandro Halgraves Cerda Jaime Torres Argüelles Systems Committee PRESIDENT Xavier Ramos Yáñez VICEPRESIDENT Gerardo Valdés Jerez COORDINATORS Ernesto Reyes Retana Valdés Everardo Rodríguez Caro MEMBERS Guadalupe Álvarez Flores Mario López Pacheco Juan Carlos Carrillo D´Herrera Eric Mejía Rocha Carlos Elizondo Sifuentes Raúl Olivares Salazar Arturo Fabre Escudero Maritza Pérez Mota Héctor Figueroa Blando Claudia Ramírez Ricardez David Galicia Fernández Eduardo Ramos López Eduardo García Guarneros Pedro Eduardo Román Rodríguez Miguel Ángel González Zúñiga Mario Sáenz Luján Artemio Guerrero Díaz Edgar Federico Sánchez Torres Claudia Verónica Guido Ávila Jaime Villaseñor Zertuche Adalberto Guzmán Rojas • 86 • Compliance Mutual Funds Subcommittee PRESIDENT Miguel Ángel Pérez Arias COORDINATORS Ernesto Reyes Retana Valdés Sonia García Almazán MEMBERS María Eugenia Alpizar Vidal Marcela Meneses Sosa Graciela Alvarado Covarrubias Gerardo Méndez Padilla Valencia Miriam Álvarez del Castillo Mercado Antonio Mendoza Andrade Ramiro Francisco Armijo Saavedra Víctor Morales Torres Guillermo Cobián Valdivia Antonio Nava Tamez María de la Paz Cremades López Isabel Ocaña Ruiz de Velasco Pablo Cuevas Palacios Jaime Orozco Navarro Gustavo Eliud Fernández Olguín Javier Orvañanos Lascurain Sandra Ivett Fragoso Osante Armando Robles Garrido Teresa García Cruz Hilda Cristina Rodríguez Arias Arturo García Moreno Gisela Rodríguez Tajonar Francisco A. García Agraz Sánchez Erika Salgado Villanueva Rosa Leticia Gómez Paz Enrique Santa Anna Echandi José Martín González Castillo Margarita Soriano Rubio Nancy Hernández Castillo Karla Marcela Valdés Posada Carolina Lima Hernández Jorge Eduardo Vega Camargo José Federico Loaiza Montaño Alfredo Walter Cos Eduardo López Reyes • 87 • Accounting Subcommittee PRESIDENT Gustavo Adolfo Rosas Prado VICEPRESIDENTS Adrián Beltrán Alcocer Mario Bustamante Molina COORDINATOR Julio Arturo Sánchez Díaz MEMBERS Virgilio Benítez Arce Maria Elena Marín Ramírez José Martín Buzo Sánchez José Martín Hernández Ruiz Luis Ángel Canseco Rodríguez Alejandro Mendieta Berriel Lilia Cardiel Marín Víctor M. Olivares Soto Javier Castelán Canela Miguel Ángel Pérez Zamorano José Manuel Corona Cervantes Julio Pimentel Hernández Arturo Díaz Morales Ernesto Reyes Retana Valdés Jesús García García Laura Rodríguez Jiménez Gerardo García Marín Ángel Rodríguez Nualart Jorge Luis González Martínez Rojas Arturo Saavedra Ponce Alan Herrera Padilla Saúl Trujillo García Sergio León Juárez Rubén Velázquez Trujillo Juan Carlos Macedo Estrada Víctor Vergara Valderrabano Rosa María Escobar Ortiz • 88 • Fiscal Subcommittee PRESIDENT Hugo Austria Díaz VICEPRESIDENTS Guillermo Gómez-Aguado Suárez Allen Saracho Carrillo COORDINATOR Julio Arturo Sánchez Díaz MEMBERS Romualdo Acosta Aguilar José Luis Ochoa Jiménez Alejandra Álvarez García Óscar Arturo Ortiz Molina Rodolfo Ballesteros Ramírez Miguel Ortiz Aguilar Verónica Camacho Aguilar Luis Javier Patiño Alas Luis Ángel Canseco Rodríguez Miguel Ángel Pérez Zamorano Lilia Cardiel Marín Julio Pimentel Hernández Víctor Carrales Gamboa Ernesto Reyes Retana Valdés Javier Castelán Canela Laura Rodríguez Jiménez Fidel Delgado Padrón Arturo Rodríguez Rodríguez Alicia Escalona Velázquez Maria Isabel Ruiz Moreno Santiago Antonio Flores Franco Arturo Saavedra Ponce Lorena García Balderas Julia Yazmín Sánchez Vargas Francisco J. González Montañez Ignacio Sánchez de Jesús Guillermo González Galván Ramiro Soberanis Fernández Mónica Hernández Hernández Martha Torre Martínez Francisco Xavier Hoyos Hernández Clara Ernestina Valencia Padilla Francisco Moguel Gloria Cecilia Verastegui Erosa Raúl Morales Medrano • 89 • Operations Subcommittee PRESIDENT Luis Ojeda Zamora COORDINATOR Julio Arturo Sánchez Díaz MEMBERS Francisco Acosta García Fidel Nevarez Sapién Aurelio Athié Fides Niño Vega Mario Coca Méndez Raúl Octavio Olvera Melendez Armando Cruz Gutiérrez Luis Pascual Jiménez Jorge Curiel Arreguín Gilberto Pérez Jiménez Patricio De la Vega Flores Ernesto Reyes Retana Valdés Xavier Díaz Espinoza de los Monteros Gabriel Rincón Hernández Bertha Gallegos Guerra Everardo Rodríguez Caro Ricardo González Samaniego Héctor Sánchez Velez Julio Cesar González Flores María de Lourdes Saucedo Alegría Erubiel Manrique Silva José Luis Urquiza Olea Lorena Medina Carrasco José Juan Vázquez Basaldúa Pablo Mezeta Yáñez Luis Villaseñor Blanco Jesús Mondragón Osorio Blanca Zepeda Reyes Rodolfo Morales Téllez • 90 • Human Research Subcommittee PRESIDENT Héctor Mejía Martínez VICEPRESIDENT Sergio Herrera Ducker Chávez COORDINATOR Julio Arturo Sánchez Díaz MEMBERS Maria de la Luz Bravo Andrade Patricia Molina Espinosa Karla De la Mora Rueda Silvia Olivella Eseverri Jonathan Fabila Cortés Gabriela Olvera Cane Maria Eugenia Flores Michel José Mario Pérez Montañez Patricia García Gutiérrez Ernesto Reyes Retana Valdés Marco Antonio Granados Falcón Laura Rodríguez Jiménez Guny Karina Hernández Peña Julián Rosas Zúñiga José Luis Hernández Soto Jorge Rovalo Merino Marcela Izquierdo Kuntze Rangel Jairo Salazar María Dolores Jiménez Cardona Patricia Sánchez Valladares Gloria Juárez Soto Jessica Silva Smith Adriana Lemus Real Raúl Gilberto Toscano Martínez Guadalupe León Escalante Gabriela Ulloa Valdés Geli Lezama Jiménez Azucena Vázquez Barrales Gerardo López González Mariana Yánez Soto • 91 • AMIB Members • 92 • ABN AMRO Securities (México), S.A. de C.V. Banc of America Securities. Casa de Bolsa Casa de Bolsa, S.A. de C.V. Prolongación Paseo de José Antonio Villa Ávila la Reforma 600-32 CHAIRMAN OF THE BOARD Reforma 265 PH 2 Orlando Loera Santa Fe Peña Blanca AND CEO Cuauhtémoc CHAIRMAN OF THE BOARD 06500 México, D.F. Carlos Ibáñez Estens Grupo Financiero Bank of America 01210 México, D.F. Tel: 5257 78 33 Fax: 5257 78 79 CEO Tel: 5230 6368 Fax: 5230 6399 Acciones y Valores Banamex, S.A. de C.V. Casa de Bolsa Integrante del Grupo financiero Casa de Bolsa Arka, S.A. de C.V. Banamex Emilio Castelar 75 Antonio Del Valle Ruiz Paseo de la Reforma 398 Oscar Medina Mora Chapultepec Polanco CHAIRMAN OF THE BOARD 6.° Piso CHAIRMAN OF THE BOARD 11560 México, D.F. Carlos F. Villagómez C. Col. Juárez Adolfo Herrera Pinto 06600 México, D.F. CEO Tel: 5326 48 48 Fax: 1226 05 99 CEO Tel: 5625 1500 Fax: 5280 3280 5625 1520 Actinver Casa de Bolsa, S.A. de C.V. Casa de Bolsa Banorte, S.A. de C.V. Paseo de las Héctor Madero Rivero Palmas 320 CHAIRMAN OF THE BOARD Prolongación Paseo de Luis Javier Peña Kegel Lomas de Chapultepec Roberto Valdés Acra La Reforma 1230 Piso 3 CHAIRMAN OF THE BOARD 11000 México D.F. CEO Cruz Manca Santa Fe Alejandro Valenzuela del Rio Tel: 5249 8500 Fax: 5249 8578 Grupo Financiero Banorte 05348 México, D.F. Tel: 1103 4050 CEO Fax: 103 6455 Casa de Bolsa Citibank, S.A. de C.V. Casa de Bolsa BBVA Bancomer, S.A. de C.V. Grupo Financiero Citibank. Act. Roberto Humberto Cabral González Medellín 800 CHAIRMAN OF THE BOARD Monte Urales 620 Piso 1 Jaime Guardiola Romojaro Torre Norte Piso 5 AND CEO Lomas de Chapultepec CHAIRMAN OF THE BOARD Santa Fe 01210 México, D.F. 11000 México, D.F. Francisco Javier Cortina A. Tel: 2226 6871 Fax: 2226 7651 2226 6646 Grupo Financiero BBVA Bancomer CEO Tel: 5201 2901 5201 2086 • 93 • Fax: 5201 2878 Casa de Bolsa Credit Suisse First Boston (Méxi- GBM Grupo Bursátil Mexicano, S.A. de C.V. co), Casa de Bolsa S.A. de C.V. Insurgentes Sur 1605, Jorge Rojas Mota Velasco Grupo Financiero Credit Suisse First Boston Piso 31 CHAIRMAN OF THE BOARD (México), S.A. de C.V. San José Insurgentes Diego Ramos González 03900 México, D.F. de Castilla Campos Eliseos 345 Piso 9 Edgar Legaspi Sauter Chapultepec Polanco CHAIRMAN OF THE BOARD 11000 México, D.F AND CEO Tel: 5283 8900 Fax: 5283 8930 5283 8909 5283 8940 CEO Tel: 5480 5800 Fax: 5480 5801 HSBC Casa de Bolsa, S.A. de C.V. Grupo Financiero HSBC Casa de Bolsa Santander Serfín, S.A. de C.V. Paseo de la Reforma 243, Rhydian H. Cox Grupo Financiero Santander Serfín Piso 10 Torre A CHAIRMAN OF THE BOARD Prolongación Paseo de Carlos Gómez y Gómez Cuauhtémoc Felipe Vilá González La Reforma 500 CHAIRMAN OF THE BOARD 06500 México, D.F. CEO Lomas de Santa Fe Gabriel Eugenio Kuri L. Tel: 5721 5492 Fax: 5721 5058 01210 México, D.F. CEO Tel: 5287 8000 Fax: 5269 2177 5721 5493 ING (México), S.A. de C.V., casa de Bolsa Deutsche Securities, S.A. de C.V. ING Grupo Financiero Casa de Bolsa Bosques de Alisos 45-B, David Duffy Blvd. Manuel Ávila Rodrigo Pérez Mackenna Piso 4 CHAIRMAN OF THE BOARD Camacho 40, Piso 17 CHAIRMAN OF THE BOARD Bosques de las Lomas Héctor Aguirre Cobo Lomas de Chapultepec Patricio Tamayo Gómez 05120 México, D.F. CEO 11000 México, D.F. CEO Tel: 5258 2129 Fax: 5259 3218 Tel: 5287 8000 Fax: 5269 2177 Interacciones Casa de Bolsa, S.A. de C.V. Finamex Casa de Bolsa, S.A. de C.V. Grupo Financiero Interacciones Paseo de la Reforma 383, Carlos Hank Rhon Grupo Financiero Finamex Paseo de la Reforma 255 Mauricio López Velasco A. piso 4 CHAIRMAN OF THE BOARD Cuauhtémoc Raúl Garduño Vergara Cuauhtémoc AND CEO 06500 México, D.F. CEO Tel: 5326 8600 Fax: 5326 8612 06500 México, D.F Tel: 5209 2000 Piso 14 Fax: 5209 2057 • 94 • CHAIRMAN OF THE BOARD Inversora Bursátil, S.A. de C.V. Merrill Lynch México, S.A. de C.V. Grupo Financiero Inbursa Casa de Bolsa Paseo de las Palmas 736 Marco Antonio Slim Paseo de las Palmas 405, Carlos Gutiérrez Lomas de Chapultepec Domit Piso 8 Andreassen 11000 México, D.F. CHAIRMAN OF THE BOARD Lomas de Chapultepec CHAIRMAN OF THE BOARD Eduardo Valdés Acra 11000 México, D.F. AND CEO CEO Tel: 5201 3200 Fax: 5201 3222 Tel: 5625 4900 Fax: 5520 8002 5202 1122 Monex Casa de Bolsa, S.A. de C.V. Invex, Casa de Bolsa, S.A. de C.V. Monex Grupo Financiero Invex Grupo Financiero Varsovia 36, Piso 5 Héctor lagos Dondé Blvd. Manuel Ávila Juan Guichard Michel Col. Juárez CHAIRMAN OF THE BOARD Camacho 49, Piso 9 CHAIRMAN OF THE BOARD 06600 México, D.F. Moisés Tiktin Nickin Torre Esmeralda 1 Patrick Doucet Leautaud Lomas de Chapultepec CEO CEO Tel: 5231 0000 11000 México, D.F. Tel: 5350 3333 Fax: 5231 0384 5230 0200 Fax: 5359 3399 Multivalores Casa de Bolsa, S.A. de C.V. Ixe Casa de Bolsa, S.A. de C.V. Multivalores Grupo Financiero Cerrada Tecamachalco 45 Hugo S. Villa Manzo Ixe Grupo Financiero Paseo de la Reforma Enrique Castillo Sánchez Reforma Social CHAIRMAN OF THE BOARD 505, Piso 45 Mejorada 11650 México, D.F. Javier Valadez Benítez Cuauhtémoc CHAIRMAN OF THE BOARD 06500 México, D.F. Iñaki De Abiega Pons CEO Tel: 5284 6200 Fax: 5284 6306 CEO Tel: 5004 1314 Fax: 5004 1498 Protego Casa de Bolsa, S.A. de C.V. J. P.Morgan Casa de Bolsa, S.A. de C.V. Blvd. Manuel Ávila Pedro Aspe Armella J. P. Morgan Grupo Financiero Camacho 36, Piso 22 CHAIRMAN OF THE BOARD Paseo de las Palmas 405, Jorge E. Alonso Olivares Lomas de Chapultepec Sergio Sánchez García Piso 16 CHAIRMAN OF THE BOARD 11000 México, D.F. CEO Lomas de Chapultepec Arturo J. Arce Taracena Tel: 5249 4490 Fax: 5249 4498 11000 México, D.F. CEO Tel: 5540 9333 Fax: 5540 9594 • 95 • Scotia Inverlat Casa de Bolsa, S.A. de C.V. Vector Casa de Bolsa, S.A. de C.V. Grupo Financiero Scotiabank Inverlat Roble 565 Raúl G. Farias Arizpe Bosque de Ciruelos 120, Anatole Von Hahn D. Valle del Campestre CHAIRMAN OF THE BOARD Piso 12 CHAIRMAN OF THE BOARD 66265 Garza garcía, N.L. Edgardo Mauricio Cantú Bosques de las Lomas Gonzalo Rojas Ramos 11700 México, D.F. CEO Tel: 5325 3575 Fax: 5325 3667 CEO Tel: 8318 3500 UBS Casa de Bolsa, S.A. de C.V. Campos Elíseos 354, Jeremy Graham Brook Piso 19 CHAIRMAN OF THE BOARD Alarcón Polanco Francisco Javier Artigas 11560 México, D.F. CEO Tel: 5282 7749 Fax: 5282 7798 Valores Mexicanos Casa de Bolsa, S.A. de C.V. Moliere 222, PB Rafael Mac Gregor Anciola Los Morales Palmas CHAIRMAN OF THE BOARD 11540 México, D.F. Luis Manuel Murillo Peñaloza CEO Tel: 5279 1200 Fax: 5279 1212 Value S.A. de C.V., Casa de Bolsa Value Grupo Financiero Prolongación Paseo Javier Benítez Gómez de la Reforma 1015 CHAIRMAN OF THE BOARD Edificio Punta Santa Carlos Bremer Gutiérrez Torre B, Piso 10 CEO Desarrollo Santa Fe 01376 México, D.F. Tel: 5325 3575 Fax: 5325 3667 • 96 • Fax: 8318 3535 • 97 • AMIB Affiliates • 98 • Administradora Vanguardia, S.A. de C.V. Invercap, S.A. de C.V. Operadora de Sociedades de Inversión Sociedad Operadora de Sociedades de Inversión Av. Chapultepec 384 Emilio Olavarri Hervella Batallón de San Patricio César A. Montemayor Z. Roma Norte CHAIRMAN OF THE BOARD 111, Desp. 1903 CHAIRMAN OF THE BOARD 06700 México, D.F. Tel: 5229 1314 Valle Oriente Fax: 5229 1356 66269 Garza García, N.L. Tel: 8368 0068 Fax: 8368 0068 D Fondos, S.A. de C.V. Sociedad Operadora de Sociedades de Inversión Operadora de Fondos Lloyd, S.A. de C.V. Río Tiber 67, Piso 2 Gerardo Martín Flores D. Mariano Otero 1915 A Federico Rangel Durán Cuauhtémoc CHAIRMAN OF THE BOARD Residencial Victoria CHAIRMAN OF THE BOARD 06500 México, D.F. Tel: 5033 3333 44560 Guadalajara, Jal. Fax: 5062 8060 Tel: 3880 2024 Enlace INT, S.A. de C.V. Torre Esmeralda II Fax: 3880 2024 Operadora de Fondos Nafinsa, S.A. de C.V. Santiago Urquiza Luna Insurgentes Sur 1971 Jorge Arboleya Ancira M. Ávila Camacho 36-1805 CHAIRMAN OF THE BOARD Local 142 Nivel Avenida CHAIRMAN OF THE BOARD Santa Fe Guadalupe Inn AND CEO 01210 México, D.F. Tel: 5081 1000 01020 México, D.F. Fax: 5081 1001 Tel: 5325 7891 Finaccess México, S.A de C.V. Fax: 5663 2179 Operadora Mifel, S.A. de C.V. G. González Camarena Carlos Rodríguez Giacinti President Masarik Bulmaro Guzmán Ruiz 1600, Piso 7 CHAIRMAN OF THE BOARD 214, Piso 2 CHAIRMAN OF THE BOARD Santa Fe Polanco 01210 México, D.F. 11560 México, D.F. Tel: 5081 1040 Fax: 5081 1040 Tel: 5282 7970 Fax: 5282 7918 Interesa, S.A. de C.V. Principal Fondos de Inversión, S.A. de C.V. Sociedad Operadora de Sociedades de Inversión Operadora de Fondos de Inversión Insurgentes Sur Pascal Duhem Reuflet Campos Elíseos Roberto Cano Díaz 954, Piso 3 CHAIRMAN OF THE BOARD 345, Piso 12 CHAIRMAN OF THE BOARD Del Valle Chapultepec Polanco 03100 México, D.F. 11560 México, D.F. Tel: 5340 8481 Fax: 5340 8499 Tel: 5279 7936 5340 8482 • 99 • Fax: 5263 0403 Prudential Financial Skandia Operadora de Fondos, S.A. de C.V. Operadora de Sociedades de Inversión, S.A. de C.V. Sociedad Operadora de Sociedades de Inversión Ejército Nacional Manuel Somoza Alonso Bosques de Ciruelos David Iván Buenfil F. 718, Piso 3 CHAIRMAN OF THE BOARD 162, Piso 1 CHAIRMAN OF THE BOARD Reforma Polanco Bosques de las Lomas 11550 México, D.F. 11700 México, D.F. Tel: 5263 1001 Fax: 5263 1089 Tel: 5093 0207 Remate Electrónico, S.A. de C.V. Fax: 5245 1272 Standford Group Distribuidora de Fondos de Vasco de Quiroga Jaques Levy Seegall 2121, Piso 1 CHAIRMAN OF THE BOARD Inversión, S.A. de C.V. Andrés Bello Rafael Ortiz Markivich Santa Fe Peña Blanca 10, Piso 6 CHAIRMAN OF THE BOARD 01210 México, D.F. Polanco Tel: 5259 8070 11560 México, D.F. Fax: 5259 3693 Tel: 5279 8900 Fax: 5279 8900 SEI-Compass Investments, S.A. de C.V. Sociedad Operadora de Sociedades de Inversión Paseo de la Reforma Carlos Gutiérrez Sánchez 2620, Piso 12 CHAIRMAN OF THE BOARD Valores Afirme, S.A. de C.V. Sociedad Operadora de Sociedades de Inversión Hidalgo 234 Poniente Oscar Trejo Ledezma Lomas Altas No. 7-A, Piso 7 CHAIRMAN OF THE BOARD 11950 México, D.F. Centro Tel: 5257 4300 64000 Monterrey, N. L. Fax: 5570 6810 Tel: 8318 3900 SIF Garban Intercapital México, S.A. de C.V. Paseo de la Reforma Rodolfo Sánchez-Arriola L. 255, Piso 7 CHAIRMAN OF THE BOARD Cuauhtémoc 06500 México, D.F. Tel: 5128 2000 Fax: 5128 2000 • 100 • Fax: 8318 3942 • 101 • Executives • 102 • CHIEF EXECUTIVE OFFICER Efrén Del Rosal Calzada COMMITTEES TECHNICAL DIVISION SUBDIRECTOR Ernesto Reyes Retana Valdés TECHNICAL OPERATION SUBDIRECTOR Everardo Rodríguez Caro ADMINISTRATION AND DERIVATES SUBDIRECTOR Julio Arturo Sánchez Díaz MUTUAL FUNDS MANAGER Sonia García Almazán CAPITAL MARKET SPECIALYST Beatriz Pérez Robles SYSTEMS SPECIALYST Fernando Sánchez Alvarado DERIVATIVES ANALYST Fides Niño Vega MUTUAL FUND SPECIALYST Carolina Lima Hernández SYSTEMS ANALYST Alfredo Lara Morales RESEARCH AND COMUNICATION DIRECTOR José Luis Acosta Chavira RESEARCH AND PROMOTION MANAGER Juan José Arriola García CORPORATE FINANCING MANAGER Bertha Guadalupe Escalona Téllez PUBLIC RELATIONS SPECIALYST Bertha Ivette Garzón Sánchez COMMUNICATIONS SPECIALYST María del Carmen Grandini Ochoa INVESTIGATIONS SPECIALYST Israel Jesreel Fajardo González ACADEMIC COORDINATOR Serafín Ramón Sinde Riestra COMPLIANCE AND LEGAL DIRECTOR Ángela Balmori Iglesias CERTIFICATION MANAGER Ana Lilia Ortega Angeles CORPORATE LEGAL SPECIALYST Erik García Tapia LEGAL ANALYST Paola Pacheco García REVALIDATION ANALYST Jordana Highland Pinacho • 103 •