THE PANAMANIAN NATIONAL SECURITIES COMMISSION

Panama City, Republic of PanamaMay 17th 2010

1) Introduction to the Panamanian Securities Market

2) The Commission’s Legal Duties

3) The Commission’s Functional Responsibilities

4) Authorization Processes at the Commission

5) Main Registration Requirements

6) Regulatory Principles applied by the Commission

7) The Securities Law Enforcement

8) Statistical Data

9) Conclusions

Agenda

DECREE LAW 1 OF 1999: THE PANAMANIAN SECURITIES LAWBy which the National Securities Commission is created and the securities market is regulated

The National Securities Commission is an autonomous agency of the federal government:

Administers its funds, which are independent from those of the central governmentPrepares and presents a proposal of its budget to Congress for approval Handles all administrative duties based on its internal code of conduct

ORGANIZATIONAL STRUCTUREThree (3) presidentially-appointed Commissioners for a five (5) year term

Chairman, legal representative and spokesmanVP CommissionerCommissioner

Five (5) DirectorsOfficials

1) Introduction

Market Participants

THE PANAMANIAN STOCK EXCHANGE(BVP), started operations in 1990

LATINCLEAR (Clearing House), started operations in 1997

THE PANAMANIAN SECURITIES COMMISSION (CNV), established in 1999

Registered Market Intermediaries:

Broker-Dealer Houses

Investment Advisors, etc.

1) Introduction

To promote market stability and strengthen market conditions for the development of the securities market

To issue, suspend, revoke and cancel registration and/or operating Licenses: stock exchanges, clearing houses, broker-dealer houses, etc.

To establish rules of good commercial standards and ethical principles that must be adopted by broker-dealer houses, investment advisors, self-regulatory organizations, mutual funds, mutual fund administrators, etc.

To determine what accounting standards and principles must be used when preparing financial statements: IASs and IFRSs

To examine and supervise the activities of any person subject to the control of the Commission

To carry out inspections, investigations and judicial proceedings

Main Legal Duties

2) Legal Duties

REGISTRATION LICENSING

Mutual Funds

Initial Public Offerings (IPO)

Mutual Fund Administrators/ Managers

Broker-Dealer Houses

Investment Advisors

Private Pension Fund Administrators

Credit Rating Agencies

Panamanian Stock Exchange

Clearing Houses

Authorization of Entities and Individuals

Principals (natural person)

3) Functional Responsibilities

Private Pension Funds

Prospectus

Prospectus

By Law, The Commission has thirty (30) calendar days to process:Registration,Licensing, andGeneral Requests

Subject to the Commission's comments and/or observations

Once all paperwork complies with the applicable legal requirements, a Resolution granting the authorization will be issued, and it will be made public in the Official Gazette (Presidential Ministry)

If the Commission considers that terms offered to investors are not fair or reasonable according to the Panamanian Securities Law and commoninternational practices, the requested authorization could be denied

Authorization Processes at the Commission

4) Authorization

The application must be submitted by a Panamanian licensed Lawyer:

Corporate name of the mutual fund and certificate of registration at the Panamanian Public Registry

If it is a foreign company, it must be registered at the Panamanian Public Registry as a foreign corporation

Legal domicile and commercial address

Identification of the appointed Mutual Fund Manager, which must be licensed by the Commission

Identification of the appointed Compliance Manager and Principal (s)

Identification of the Custodian

Copy of the signed Custodial Agreement

Initial Public Offer (IPO) details

Must comply with the minimum capital requirement for registration (USD 25,000.00)

Must present a certificate of good standing

Identification of the Board of Directors and its managerial team

Financial Annual reports

Registration Procedure for Mutual Funds

5) Registration Requirements

Copy of the Broker-Dealer Agreement

Internal Code of Conduct

Copy of advertisements intended to be distributed, including the Notice of Public Offer

Sample of the investment contract to be presented to investors

Minutes issued by the Board of Directors stating the terms and conditions for the operations of the fund

Registration Procedure for Mutual Funds (2)

5) Registration Requirements

The Prospectus must be filed as part of the registration process; its main characteristics are:

Should provide information that is true, clear and easy to understand, precise, sufficient and supported by actual facts, must not omit relevant information

Shall be presented before the Commission in Spanish, however it can be later published in a different language

Provide the name of the mutual fundIndicate the type of fund: open or close-ended fund, private fund, etc.Provide detailed information regarding the fund's investment purpose, policies and risksIndicate the subscription procedure for shares or common stockPresent the calculation procedure for the Net Asset Value (NAV) of sharesProvide information regarding management commission and other applicable fees

If the Commissions finds that fees are excessive, not necessary or not justified, it may render observations to the fund administrator and request their inclusion in the Prospectus

Provide information regarding dividend distribution policies if applicableIndicate the intend to invest in derivatives when applicable

The Prospectus

5) Registration Requirements

INVESTMENT STRATEGY (MUTUAL FUNDS)

Indicate the selection criteria for issuers and securities: fixed or variable income securities, sovereign bonds, etc.Must provide information regarding maturity dates, geographic distribution of the instruments, economic sectors (distribution min/max), currency, etc.Provide information regarding the risks relative to the fund's investmentsComply with the requirements of information concerning investments in derivates, and when applicable the fund must include warnings in the Prospectus

Real Estate Mutual Funds (REMFs)

Must reveal the type of estate in which it intends to invest: residential, commercial, etc.Must provide information regarding its risk diversification criteriaMust provide an action plan to be followed

Growing in popularity as there are many projects focused on the development of property in Panama

Investment Policies

5) Registration Requirements

Except for Banks, Broker-Dealer Houses are the only entities authorized to engage in activities to receive, process and execute orders and trades on behalf of others or on its own behalf.

AUTHORIZED ACTIVITIESProvide advisement to clients concerning investment opportunitiesManagement of custodial accounts Management of individual investment portfoliosAct as agent of payment, transfer and registrationGrant loans for the purchase of securitiesMediation in public offerings on behalf of the issuer

REGISTRATION REQUIREMENTSComply with the minimum capital requirement (USD 150,000.00)

Registration of a Broker-Dealer House

5) Registration Requirements

Regulatory Principles

The Commission is committed to the implementation of the International Organization of Securities Commission (IOSCO) standards:

Investor’s Protection

Reduction of Systemic Risk

Ensure that capital markets are fair, efficient and transparent

ON THE REGULATOR

Responsibilities should be clear and objectively stated

Should count with the required powers, proper resources and capacity to perform its functions

Regulatory processes must be clear and consistent

The staff should observe high professional and ethical standards(confidentiality)

6) Regulatory Principles

Advertisement principles are enforced so that public information is sufficient, clear and true.

No guaranteed returns on any investment

References to past returns must include a historical analysis of the fund’s performance for a five (5) year period or greater

Must describe the risks relative to the investment

Must refer potential investors to the Prospectus

Must indicate the type of authorization granted by the Commission

The information must be vast so that individuals can have a good understanding of the fund’s operations and investment policies

Advertisement Materials

6) Regulatory Principles

Regulation requirements are applicable to mutual funds based on their investment goals and characteristics of incorporation.

Mutual Funds that publicly offer shares in the Republic of PanamaAdvertisement materials are directed to potential investors nationwideThe Fund Manager is domiciled in Panama The fund’s head office is domiciled in Panamanian territory or its prospectus indicates that the fund’s main office is located in PanamaThe Custodian’s legal residence is in PanamaThe majority of the mutual fund’s Board of Directors reside in Panama

Mutual Funds that offer shares only to individuals who reside and are domiciled outside the Republic of Panama

Investment policies and requirements are more flexibleMust have an appointed representative in Panama

Keeps both administrative and financial records and information concerning the fund’s operations

Reporting requirements are more lenientDocumentation can be requested by the Commission, however its submission is not mandatory

Regulation Scope by Type of Mutual Fund

6) Regulatory Principles

Private Mutual Funds that are not registered, but are certified before the Commission as a “private mutual fund”, and which Prospectus must state that the fund is not registered at the Commission due to the following:

Maximum of fifty (50) investors, all offers must be made privately

Minimum investment amount is USD 100,000.00 per investor

Must appoint a legal representative in the Republic of Panama

Before starting operations, its legal representative must have received all documentation and relevant information certifying that the fund complieswith the requirements to be considered as a private mutual fund

Must present an annual compliance certification before the Commission

Regulation Scope by Type of Mutual Fund (2)

6) Regulatory Principles

Securities Law Enforcement

Violations to The Panamanian Securities Law may be subject to sanctions by the Commission

The Commission can apply administrative sanctions for up to USD 1,000,000.00

The Commission can apply sanctions for Confidential Information Disclosure for up to USD 100,000.00, in addition to any civil and penal sanctions

Regulation and Supervision enforcement:

Inspections

Investigations

Evidence of possible violations are obtained from market surveillance activities, investor’s complaints and media reports from other jurisdictions, etc.

7) Law Enforcement

33.22%44.74%38.72%24.86%80.89%ANNUAL GROWTH RATE

43,998,733,94733,026,534,04522,817,587,45416,449,254,23813,173,692,5057,282,773,904TOTAL

40,697,179,19429,219,813,95918,289,818,98711,746,794,9379,770,641,1494,872,335,884INTERNATIONAL

3,285,064,3213,804,189,8244,458,312,2014,505,866,0133,283,068,9802,177,104,716PANAMANIAN STOCK EXCHANGE (BVP)

16,488,4232,528,25369,454,259196,591,282119,980,372233,331,299OVER THE COUNTER (OTC)

200920082007200620052004TYPE OF TRADE TRANSACTION

Annual Performance of the Panamanian Securities Market

8) Statistical Data

BROKER-DEALER HOUSES TRANSACTIONS2004-2009

80.9%

33.2%

44.7%

38.7%

24.9%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2004 2005 2006 2007 2008 2009

(Mill

ions

of

US

D)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Over the Counter (OTC)

Panamanian Stock Exchange

International

Growth Rate

8) Statistical Data

825488218119323TOTAL

10455282112009

12072252382008

653819812007

64312112112006

986821962005

594113572004

765021502003

944145882002

145922528022001

TOTALBROKERPRINCIPAL EXECUTIVEANALIST

PRINCIPAL EXECUTIVE -

ADMINISTRATOR

INVESTMENT ADVISORYEAR

Natural Persons Authorized

8) Statistical Data

LICENSES ISSUED TO INDIVIDUALS ANNUALLY, PER TYPE

145

59

98

64 65

120

104

76

94

0

20

40

60

80

100

120

140

160

180

2001 2002 2003 2004 2005 2006 2007 2008 2009

Lice

nses

Iss

ued

INVESTMENT ADVISOR

PRINCIPAL EXECUTIVE -ADMINISTRATOR

ANALIST

PRINCIPAL EXECUTIVE

BROKER

TOTAL

8) Statistical Data

52222009

46172008

40152007

34132006

3352005

3332004

2932003

3032002

3132001

2012000

BROKER-DEALER HOUSES

INVESTMENT ADVISORSYEAR

Active Licenses for Market Intermediaries

8) Statistical Data

ACTIVE LICENSES FOR BROKER-DEALER HOUSES AND INVESTMENT ADVISORS

1

3 3 3 3

5

13

15

17

22

20

3130

33 3334

40

46

52

29

0

10

20

30

40

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Lice

nses

Iss

ued

INVESTMENT ADVISORS

BROKER-DEALER HOUSES

8) Statistical Data

3,235,018,257 794,997,663 840,259,539 1,090,483,283 509,277,772 TOTAL

557,279,509 123,251,803 116,516,099 200,148,495 117,363,112 Wall Street Securities, S.A.17

21,800,673 --19,736,933 2,063,740 Valores Cuscatlán Panamá16

9,733,013 1,002,000 4,395,500 1,570,513 2,765,000 Tower Securities Inc.15

58,117,985 5,751,848 2,807,964 49,558,173 -Portobelo Advisors14

107,635,150 55,184,938 52,450,211 --Mundial Valores, S.A.13

23,430,855 7,191,718 2,693,061 11,981,537 1,564,540 Multi Credit Securities, Inc.12

434,755,294 113,577,906 100,160,923 66,991,076 154,025,390 Mundial Asset Management11

455,019,312 168,279,717 107,205,416 155,587,522 23,946,657 MMG BANK CORP.10

22,865,864 14,211,000 4,512,000 2,666,010 1,476,854 Lafise Valores de Panamá, S.A.9

419,946,191 52,838,550 162,050,797 164,241,866 40,814,977 HSBC Securities (Panamá), S.A.8

284,928,739 97,320,233 53,896,431 103,605,982 30,106,093 Global Valores, S.A.7

67,054,370 14,139,950 32,854,936 18,954,484 1,105,000 Geneva Asset Management S.A.6

14,230,550 1,163,700 10,187,422 1,318,696 1,560,731 Credicorp Securities Inc.5

293,730,202 56,903,100 85,732,495 118,698,875 32,395,732 Citivalores, S.A.4

201,751,211 75,245,664 29,115,192 75,192,923 22,197,433 BG Investment Co. Inc.3

197,326,520 -33,671,690 99,594,161 64,060,669 Banco Nacional de Panamá2

65,412,820 8,935,537 42,009,401 636,037 13,831,845 Bac Valores (Panamá), S.A.1

TOTALIVQ09IIIQ09IIQ09IQ09B/D HOUSES REGISTERED AT

THE PANAMANIAN STOCK EXCHANGE (BVP)

No.

Quarterly Traded Volumes by Broker-Dealer Houses 2009

5,399,509,63530,750,8551,408,689,97373,244,90190,260,1931,145,624,795116,530,356811,939,159664,129,6221,058,339,780TOTAL

625,068,0358,133,429141,251,33717,445,1854,517,310192,698,06213,816,93855,082,42624,357,273167,766,075DECEMBER

1,002,812,590119,246196,775,3653,736,3851,886,040264,164,73312,126,66926,012,950464,430,86333,560,340NOVEMBER

449,704,2611,188,494122,151,6594,921,8018,291,49280,748,0006,953,841139,594,75515,021,65470,832,564OCTOBER

318,553,3581,673,58062,492,0208,208,7584,787,46922,159,0005,052,29416,415,92912,931,509184,832,799SEPTEMBER

222,003,522133,01374,541,8763,741,66517,899,02234,458,00013,689,26522,889,8637,244,58947,406,229AUGUST

444,439,33111,276,008186,605,9104,338,7065,723,75234,179,0006,711,17853,924,89541,257,539100,422,342JULY

329,080,3322,164,947135,564,23811,116,5627,144,09421,093,00013,338,94861,620,24415,033,31362,004,985JUNE

560,164,964363,023129,665,108746,8861,212,79827,942,0005,713,200231,728,88133,826,225128,966,843MAY

288,667,3131,106,88985,680,3074,315,1945,979,70233,097,0004,950,75525,043,33710,569,567117,924,563APRIL

332,456,5411,053,79559,749,29610,827,3088,359,877107,180,0006,460,79566,335,00716,616,00255,874,461MARCH

225,691,889154,50252,957,619778,23117,760,06616,237,00012,649,79066,902,94512,935,85845,315,878FEBRUARY

600,867,4993,383,930161,255,2363,068,2196,698,571311,669,00015,066,68346,387,9299,905,23043,432,701JANUARY

TOTAL

SECURITIESCUSTODIED

BYEUROCLEAR

TRANSITOPERATIONS

DIVIDENDPYMT

AMORTIZATIONPYMTCAPITAL PYMTINTEREST

PYMTTRANSFERSWITHDRAWALSDEPOSITSMONTH

Monthly Volume of Transactions by LATINCLEAR

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

LATINCLEAR MONTHLY VOLUME OF TRANSACTIONS2009

D E P O S IT S

T R A N S F E R S

T R A N S IT O P E R A T IO N S

C A P IT A L P A Y M E N T S

WIT H D R A WA LS

IN T E R E S T P A Y M E N T S

A M O R T IZ A T IO N P A Y M E N T S

D IV ID E N D S P A Y M E N T S

S E C UR IT IE S C US T O D IE D B Y E UR O C LE A R

Monthly Volume of Transactions by LATINCLEAR

The National Securities Commission plays a key role in the development of the securities market:

Promoting community awareness

Commitment to the development of a more transparent capital market focusing on investor’s protection

Responsible for establishing regulations that are relevant to the market’s condition and needs

Conclusions

THANK YOU!

www.conaval.gob.pawww.panabolsa.com

www.latinclear.com.pa

nguerra@conaval.gob.painfo@conaval.gob.pa