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Capital Markets Alert – October 2019

CAPITAL MARKETS NEWSLETTER

PROVISIONS OF GENERAL INTEREST

Regulations

Superintendence of Banking and Insurance (SBS) Regulations

The Regulation of Insurance Company Investments has been amended in order to enable investment in accounts receivable resulting from reverse mortgage transactions.- Through SBS Resolution N° 4838-2019 published on October 21, 2019, the Superintendence of Banking and Insurance and Private Pension Fund (“SBS”) approved the amendment of the Regulation of Insurance Company Investments, which was approved by SBS Resolution N° 1041-2016 (“Resolution of Investments”). It is worth noting that the Regulation of Reverse Mortgage was also approved through this Resolution, in accordance with the provisions of the Law governing Reverse Mortgage, Law N°30741, published on March 28, 2018 (the “Law”).

The amendment of the Regulation of Investments includes the accounts receivable resulting from reverse mortgage transactions within the type of investments that are considered eligible, and in which insurance companies can invest without having to follow the notification or authorization processes which are required for other investments.

The amendment specifies the characteristics that must be complied with by said accounts receivable so that they can be included within the abovementioned type of investment. This amendment also approves the limits of investment for this type of assets.

According to the above-mentioned resolution, a reverse mortgage is a transaction where a financial system company authorized to provide loans (in one installment of through several deposits or periodical draw-downs) in favor of one or more owners of a real estate property or the beneficiaries appointed by the owners, against a charge on the mortgage guarantee of the respective real estate property, with the reimbursement of the loan to become enforceable and the guarantee executable at the time of the death of the owner. This transaction may include the option of taking an annuity or any other income product.

Clarifications on the eligibility criteria of the certificates of participation in investment funds, which invest in shares of companies whose corporate purpose is to exclusively execute real estate or infrastructure projects.- Through Official Letter N° 39138-2019-SBS (“the “Official Letter), the SBS issues an statement, in accordance with the above-mentioned Regulation of Investment, on the treatment of investments in certificates of participation in investment funds whose underlying assets are shares of companies with the corporate purpose of executing real estate or infrastructure projects.

In this regard, the SBS considers that if the fund management company or the fund managers have powers over those companies issuing those shares so that the fund can be considered a real estate investment fund or an infrastructure fund for limit of investment purposes, they should be considered as the types of funds mentioned above.

In addition, the SBS states that those funds fall within the eligible investment type that must be notified to the SBS, provided that they comply with certain characteristics. The Official Letter also specifies the requirements to be met by the insurance companies so that they can make this type of investments.

DRAFT REGULATIONS

Superintendence of Securities Market (SMV) Drafts

The dissemination of the draft of “Scale of Sanctions due to the late submission of financial information, annual report and important facts” in the SMV portal has been approved.- Through Resolution SMV N° 024-2019-SMV/01 published on October 7, 2019, the SMV authorized the publication of the abovementioned draft.

The dissemination of the Draft that replaces the Corporate Sustainability Report that is part of the Manual for the Elaboration of Annual Reports, Quarterly Reports and other information documents in the SMV Portal has been approved.- Through Resolution SMV N° 023-2019-SMV/01 published on October 1, 2019, the SMV authorized the publication of the abovementioned draft.