Stock Market Law Of The Dominican Republic

Author:Pellerano & Herrera
Profession:Pellerano & Herrera
 
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  1. INTRODUCTION

    One of the main features needed to achieve greater economic development in any country is the existence of a complete, efficient and transparent market. To that end it is necessary to count on an adequate regulatory framework to regulate the activities of the participants in the stock markets, its interrelations and business.

    In view of the above, Stock Market Law No.19-00 (hereinafter, the "Law 19- 00" or the "Stock Market Law", indistinctly) was promulgated in the Dominican Republic on May 8th, 2000. The implementation of this Law together with other bills presently being considered by the National Congress and the Executive Branch itself is intended to revolutionize the Dominican financial sector, in­creasing competitiveness among its actors, adapting it to market needs and as a consequence accelerating the development of our economy.

    As is stated in the whereas clauses of Law 19-00 itself, "to adequately pro­mote the stock market it is necessary to have a generic framework to regulate public supply, issuance and issuers of negotiable instruments in order to pro­mote development of an organized, efficient and transparent market". In that sense, this is the core of the legal framework applicable to the stock market and its products in the Dominican Republic (hereinafter, the "DR").

    To that effect, in the definition of its scope of application, the Law 19-00 states that it encompasses public offering of securities, both in local as well as foreign currency, its issuers, commodity exchange, as well as every individual or cor­poration, local or foreign, that participates in the stock market. For the purpos­es of this Law, the stock market includes the supply and demand of securities representatives of capital, credit, debt, and commodities. Likewise it includes associated instruments, whether related to securities or commodities.

    Regarding the structure of Law 19-00 it com­prises seven titles, as it follows: (i) General Provisions; (ii) Superintendence of Securities; (iii) Securities Market Participants; (iv) Viola­tions and Sanctions; (v) Fiscal Treatment; (vi) Temporary Provisions; and (vii) Regulations, Modifications and Repeals.

    This executive summary is intended mainly, to provide the reader with a synthesis of Law 19-00 provisions.

  2. BACKGROUND

    Before promulgation of Law 19-00, there was no law in our country related to stock exchange transactions as such. The first law which somehow referred to the Dominican stock market was Organic Law of the Nation­al Stock Exchange No. 3553 dated May 15, 1953. securities.

    The main institution created by the old Law No. 3553 was the Bolsa Nacional de Valores (hereinafter, the "BNDV") or in English known as the National Stock Exchange, whose main role was to gather all types of legal business for trading of bearer securities and national and imported products. Another achievement of said law was the creation of the Comisión Nacional de Valores, or in English known as National Securities Commission, which was to be responsible for management of the BNDV.

    Another important precedent for the Stock Market Law was the Law No. 550 regarding the Companies or Entities which Offer Stock, Bonds or Instruments for Public Sale, dated December 23rd, 1964. Its purpose was to pro­tect investors, who at the time of its promul­gation were victims of deceitful actions com­mitted by a group of companies dedicated to trading of illegal or false securities. As a consequence of the above, the legislator was required to subject public offering of stock to prior approval by the Superintendence of Banks. Although it is true that Law No. 550 solved the protection needs of the time, due to the protecting nature itself, the law was perceived by Dominican companies as a limi­tation to the development of a public stock market.

    Despite the existence of Laws Nos. 3553 and 550, the stock market of the DR has been in­cipient at all times. It was not until the end of the decade of the 1980s that the interest of the economic agents began, when through the Decree No. 554-89 dated February 20th, 1989 the Stock Market of the DR was cre­ated as a non-profit organization, operating as a self-regulating institution since 1991.

    To this date, most of the companies in need of capital have had...

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