Resolution Ges-140-27-02-2017 Standards on Trusts (cnbs)

Purpose. These Regulations have as their purpose to regulate operations related to the constitution and administration of trusts (fideicomisos) that may be carried out by banking entities, savings and loan associations, and the Honduran Bank for Production and Housing, hereinafter referred to as Authorized Entities, in accordance with the Financial System Law, the Law of the Honduran Bank for Production and Housing, and the Commercial Code. They likewise establish general guidelines for the supervision that the National Commission of Banks and Insurance shall exercise over said operations.

Definitions. For the purposes of these Regulations, the following shall be understood as:

• a)

  Fiduciary Participation Certificates: Securities issued by a trust in favor of one or several beneficiaries that accredit fractional rights over the assets that comprise the trust patrimony.

• b)

  Co-Trustees: Two or more trustees designated by the settlor(s) in the trust contract, who may act jointly or successively, in accordance with what is established in the aforementioned contract.

• c)

  Commission: The National Commission of Banks and Insurance.

• d)

  Trust Contract: A document through which the trust is legally constituted and in which the rights and obligations of the settlor, trustee, and beneficiary are established.

• e)

  Curator: A person designated by the competent judge to take charge of assets until such time as they are delivered to those to whom they belong.

• f)

  Authorized Entities: Banking entities, savings and loan associations, and the Honduran Bank for Production and Housing, which in accordance with the provisions of Articles 46 numeral 10) and 58 numeral 13) of the Financial System Law, 5 numerals 5), 6), and 7) of the Law of the Honduran Bank for Production and Housing, and 1040 of the Commercial Code, may administer trusts.

• g)

  Trust (Fideicomiso): A legal transaction of confidence, by virtue of which Authorized Entities operating as trustees are attributed the absolute ownership of certain assets, with the mandatory limitation of performing only those acts required for compliance with the lawful and specific purpose to which they are destined in the contract. The trust implies the cession of rights or the transfer of ownership of assets in favor of the trustee.

• h)

  Administrative Trust: That by virtue of which certain sums of money and/or other assets or rights are transmitted to the trustee, for it to perform acts of administration, custody, conservation, and management in the interest of the settlor or the beneficiary, as the case may be, and always in function of the trust's purpose.

• i)

  Real Estate Development Trust: That by virtue of which the settlor transmits to the trustee a real estate project in any of its different phases of design and construction for its completion, sale, or leasing.

• j)

  Security Trust (Guarantee Trust): That by virtue of which the settlor transfers to the trustee certain assets and/or rights, to secure therewith and/or with their fruits the fulfillment of an obligation charged to the settlor or a third party, designating the creditor as the beneficiary of the trust. The beneficiary in its capacity as creditor may require the trustee to pay the debt with the proceeds from the sale or liquidation of the assets or rights placed in trust, in accordance with the procedure established in the trust contract.

• k)

  Investment Trust: That by virtue of which the settlor transmits to the trustee money or securities for their investment or placement, on any basis, in accordance with the instructions issued by the settlor to the trustee directly and in writing, contained in the trust contract, the regulations that an investment committee may establish for such purposes, or in accordance with the policy that the trustee has for these purposes and that is accepted by the settlor.

• l)

  Secret Trust: A trust that does not permit knowledge concerning the constitution thereof, absolute ownership, purposes, cession of rights, or transfer of ownership of assets in favor of the trustee, the latter's powers, etc. This type of trust cannot be carried out in Honduras as it is expressly prohibited pursuant to Honduran legislation.

• m)

  Testamentary Trust: That by which the settlor, during their lifetime, transmits assets and/or rights of their property to an Authorized Entity, with the purpose that it administer them in accordance with the instructions received, for the benefit of the settlor while living and transmit them to the designated beneficiaries at the moment of the settlor's death.

• n)

  Securitization Trust (Trust for Titulation): That by virtue of which a settlor transmits to the trustee by cession or as a unilateral act, a set of assets and/or their future flows, for the constitution of an autonomous patrimony, denominated fiduciary patrimony, subject to the fiduciary ownership of the latter, which shall be affected to the specific purpose of serving as support for the rights incorporated in securities, whose subscription or acquisition grants to its holder the status of beneficiary. o) Settlor: Natural person(s) or legal entity(ies) that have(s) the necessary capacity to make the transmission of assets and/or rights of their property that the trust implies; and the competent judicial or administrative authorities when dealing with assets whose custody, conservation, administration, liquidation, distribution, or disposition corresponds to said authorities or to the persons they designate. p) Beneficiary(ies): Natural person(s) and/or legal entity(ies) in whose favor the trust is constituted, with the necessary capacity to receive the benefits derived from the trust, as well as the residual assets placed in trust upon expiration of the term stipulated in the trust contract. q) Trustee: An institution to which absolute ownership of certain assets is attributed, for it to perform therewith only those acts required for the fulfillment of the lawful and specific purpose to which they are destined. Only Authorized Entities may act as trustees. The trustee shall never be designated as a beneficiary. r) Bare Ownership: The right of ownership of the owner of an asset over which a third party has possession or enjoyment by title of use or usufruct. Once these rights conclude by expiration of their term or upon occurrence of a condition, the owner recovers full ownership. s) Fiduciary Patrimony: The patrimony constituted by the assets or rights transferred in trust and by the fruits they generate. Said assets or rights comprise an autonomous patrimony and therefore distinct and independent from the patrimony of the settlor, the trustee, the beneficiary, as well as any other patrimony administered by the trustee in fiduciary ownership, without prejudice to the rights that each of the parties herein mentioned may have in their respective capacities. t) Politically Exposed Person (PEP's): Those persons who perform prominent public functions in the country or in a foreign country, and who by their capacity to influence state decisions, their business relationships with persons or entities, and their influence over public processes of any nature; may use such influence for their own unlawful enrichment. u) Absolute Ownership (Titularidad Dominical): A temporary right that grants the trustee the necessary powers over the fiduciary patrimony, to act as owner of said patrimony before third parties, in the performance of acts necessary for the fulfillment of the purpose or purposes of the trust, with the limitations established in the trust contract. Absolute Ownership is exercised between the parties from the execution of the trust contract, without prejudice to the obligation to register the cession of assets and rights to the trust before the public or private registries that may correspond to perfect the transfer of the assets subject to the trust before third parties, except for contrary provisions established in the trust contract and until its termination. v) Alienation Value: Value assigned to the assets comprising the fiduciary patrimony for purposes of its execution, up to the extent thereof, in case of non-fulfillment of the obligation or obligations backed by said trust.

Scope. The Authorized Entities that act as trustees are subject to these Regulations, and they may perform the different types of trusts that are framed within the Commercial Code and other applicable laws. However, in accordance with Article 52 of the Financial System Law, they may not conduct with trusts financial intermediation operations or operations that compromise in any way the patrimony or own assets of the fiduciary institution or that are prohibited to them or that denature the trust figure. For these purposes, financial intermediation shall be understood as that defined in Article 2 of the Financial System Law.

Nature of Assets Subject to Trust. All classes of assets and rights, whether present or future, may be objects of trust, provided their origin is lawful and they have no legal impediment to being transferred to the trustee in fiduciary ownership. The trustee shall have the obligation to verify the origin of the assets constituting the fiduciary patrimony and their market value at the moment they are delivered to the beneficiary. The settlor or a third party, in cases thus contemplated in the trust contract, may add assets to the trust after its constitution, with prior acceptance of the trustee, which assets must be destined to the fulfillment of the purpose for which the trust was constituted.

Integrity and Purpose of the Trust. The assets and rights transferred by the settlor to the trust constitute a Fiduciary Patrimony and therefore an autonomous and independent patrimony, distinct from the patrimony of the settlor, the trustee, the beneficiary, as well as any other patrimony administered by the trustee in fiduciary ownership, destined to the fulfillment of the purpose determined by the settlor in the trust contract, provided that said purpose does not contravene ethics and morality, the laws, or public order.

Compensation of the Trustee. In accordance with Article 1051 of the Commercial Code, every trust shall be compensated. The remuneration of the trustee shall be that agreed upon by the parties in the trust contract. In the case of trust operations with related parties, the remuneration rendered by the Authorized Entity shall be subject to the provisions of Article 66 of the Financial System Law and the regulations derived therefrom.

Effects of the Execution of Trusts. For all legal purposes, the constitution of the trust takes place by the perfection of the transfer of ownership of the fiduciary assets from the settlor to the trustee, which shall be made in accordance with the legal provisions established, according to the nature of the assets that are subject to the trust, and shall only have effects with respect to third parties from the moment of registration of the change of ownership in the corresponding registry, which remains affected by the fulfillment of the purpose indicated by the settlor in the trust contract. The transmission of other assets shall be perfected with delivery, endorsement, or notification to the assigned debtor, as applicable. In any case, the fiduciary assets must be sufficient for the purposes of the trust or to respond at any time to the obligations of the trust, when applicable.

Liability of the Trustee. The Authorized Entity that receives resources, assets, and/or securities to be administered in trust shall not be responsible for obligations contracted in the execution of the trust, which shall only be satisfied with the fiduciary assets. However, the Authorized Entity shall be responsible for damages and losses that arise from faults committed in the exercise of its functions, and must act at all times in accordance with the provisions of Article 1054 of the Commercial Code and the functions and obligations established in the trust contract.

Accounting Record. The accounting record of trust operations shall be subject to International Financial Reporting Standards (IFRS).

Administrative Structure of Authorized Entities. Authorized Entities must have an administrative structure that is in accordance with the proposed objectives for the trust. Such structure must have adequate information systems, manuals of policies and necessary operational and accounting procedures, which must be updated and made available in case they are required by the Commission, as well as qualified personnel designated to identify the inherent risks of the trust operations they conduct, in order to adopt timely the necessary corrective and mitigating measures.

Responsibilities of the Board of Directors or Administrative Council in Risk Management for Trust Operations. The Board of Directors or Administrative Council of the Authorized Entity shall be responsible for approving the objectives, guidelines, and policies that enable it to conduct adequate management of the risks associated with the trust operations in which they participate, and must also ensure their strict compliance. Such objectives, guidelines, and policies must be implemented by and from the senior management of the entity.

Mechanisms for Administration and Monitoring of Fiduciary Risks. Authorized Entities must establish mechanisms for administration and monitoring of the internal controls implemented to mitigate the risks associated with trust operations and those of the Authorized Entity itself, in congruence with the objectives, nature, complexities, and particularities of the businesses under their responsibility and administration. Likewise, they must categorize trusts according to their complexity, and in each case identify the risks associated with each of them, identifying the persons responsible for taking actions to mitigate said risks, as well as who is responsible for assuming their patrimonial effects in case a risk becomes materialized. The aforementioned information must be made available to the Commission when it requires it, and in turn must be reviewed periodically by the Authorized Entity according to the characteristics of the trust, updating the same in case changes occur in the conditions originally evaluated. Among other risks, but not limited to these, and in cases where applicable, Authorized Entities must identify the sufficiency of the trust patrimony, and identify legal, operational, financial, market, money laundering and/or terrorist financing, reputational, or any other risks that are relevant to the type of trust in question.

General Guidelines. Authorized Entities must consider the following minimum general guidelines in establishing their objectives, policies, and procedures for managing the risks inherent to their trust operations:

• a)

  Separation of strategic activities: Establish a clear separation between their strategic activities and risk-taking, with respect to those activities of processing and recording transactions, as well as the analysis of possible risks derived from the following scenarios: 1. In the case of parties related to the trustee, settlor, or beneficiary of the same trust, the Authorized Entity must guarantee that there exists a clear disclosure of said relationships to all parties involved. This information must be recorded in the trust contract. 2. Guarantee the complete separation of fiduciary patrimonies, in relation to their own patrimony, for which they must maintain accounting that records operations derived from fiduciary patrimonies, separately from their own accounts.

• b)

  Organizational Structure: Have the minimum necessary organizational structure in which human, financial, technological, and logistical resources are in accordance with the nature, responsibilities, size, and complexity of the trusts they administer, with the purpose of mitigating the risk of losses or contingencies due to fault or negligence in the administration of fiduciary assets.

• c)

  Organic and functional segregation: The organizational structure must consider an organic and functional separation for the specific handling of trust operations in which they participate with respect to other activities conducted by the Authorized Entity.

• d)

  Subcontracting of services: When certain acts or functions inherent to trust operations may be subject to subcontracting or outsourcing, the responsibilities of the trustee and of the subcontracted persons must be clearly delimited, so as to enable an effective environment of control and surveillance of trust operations.

• e)

  Conflicts of interest: Establish the internal controls necessary to allow identification, mitigation, and follow-up of potential conflicts of interest among the different participants in the trust operations they conduct.

• f)

  Evaluation of fiduciary assets: In applicable cases, establish the periodicity and mechanisms that shall be applied in the evaluation of assets owned by the trust, with the purpose of determining that they are sufficient to meet the obligations contracted. These evaluations must contain the detail and valuation of fiduciary assets, as well as their current market value, when such assets guarantee directly or indirectly the payment of obligations contracted by the trust. These evaluations must be conducted by at least three (3) appraisers registered in the Registry administered by this Commission.

Communication of Operations to the Commission. Authorized Entities that wish to act as trustees must have as a minimum the following aspects:

• 1)

  Manual of norms and procedures for trust operations;

• 2)

  Designation of the officer(s) who shall act as fiduciary delegate(s), and must observe for such purposes what is established in Articles 17, 18, and 19 of these Regulations. 3. Flowchart of trust operations with their respective mechanisms for risk identification and controls; 4. Technical documentation of computer systems, users, and operations in which the transactions conducted by the trusts shall be recorded; 5. Organizational chart both structural and functional of the trust area; 6. Business plan, which contains among other aspects the policies to be followed in offering the service, types of trust to implement, marketing strategies, and advantages for clients; and, 7. Prospectuses or models of contracts to be executed by type of trust. The aforementioned, without prejudice to the authority the Commission shall have to require from Authorized Entities at any moment additional aspects or information to those listed in this Article. Likewise, Authorized Entities must accredit before the Commission, thirty (30) calendar days prior to the beginning of their trust operations, that they have the minimum aspects aforementioned.

Responsibilities of the Authorized Entity. The obligations of the Authorized Entity are the following:

• 1)

  Implement due diligence and identification of the settlor and the beneficiary, as applicable, and ensure the lawful origin and sufficiency of the fiduciary patrimony, when applicable;

• 2)

  Care for and administer the assets and rights that comprise the trust patrimony, following the instructions of the Settlor or the Technical Committee, in case one exists, with the diligence and dedication of a merchant in their own business and as a loyal administrator;

• 3)

  Handle the trust assets with strict adherence to what is established in the trust contract;

• 4)

  Defend the trust patrimony from judicial actions or extrajudicial acts that could affect or diminish its integrity;

• 5)

  Register or transcribe the cession or transfer of real estate properties or any other registrable assets that become part of the fiduciary patrimony, complying with the formalities indicated for such in the law, according to the type of asset involved;

• 6)

  Protect with insurance policies the risks incurred by the assets comprising the fiduciary patrimony, if so agreed in the trust contract as an obligation of the trustee. In these cases, the Authorized Entity must verify that it is clearly stated in the insurance policy that in case of loss, the beneficiary thereof shall be the beneficiaries designated by the settlor, depending on the purpose and object of the trust. The costs related to the subscription of these policies may be covered with the returns generated by the fiduciary patrimony or failing that by the settlor, the foregoing must be recorded in the trust contract;

• 7)

  Fulfill the duties that constitute the purpose of the trust, performing for such purpose the acts, contracts, operations, investments, or transactions that are required, with the same diligence that is put into its own businesses or in accordance with what is established in the trust contract or the instructions that the settlor or the Technical Committee may issue in writing;

• 8)

  Maintain the inventory and accounting of each trust in compliance with the Law, and comply with tax obligations that, in accordance with current legislation, correspond to the fiduciary patrimony;

• 9)

  Prepare financial statements for each trust at least four (4) times per year or with the frequency established in the trust contract, as well as the report(s) that may be agreed upon with the settlor according to the established periodicity, and make said reports available to the settlors and beneficiaries;

• 10)

  Maintain absolute confidentiality regarding the operations, acts, contracts, documents, and information that relate to the trusts. The foregoing without prejudice to the authority granted to the Commission to supervise these operations of Authorized Entities, in accordance with Articles 52 of the Financial System Law and 26 of the Law of the National Commission of Banks and Insurance. Excluded from the aforementioned provision is the information that may be provided to the Technical Committee of the trust, when it so requires and in accordance with what is established in the trust contract;

• 11)

  Notify the beneficiaries of the existence of assets and services available in their favor, within forty-eight (48) hours of the benefit being available;

• 12)

  Return to the settlor(s) indicated in the trust contract, the remainders that exist in the trust at the moment of its extinction and liquidation in the form established in the trust contract. In the event that these do not exist at the moment of extinction of the trust, nor exist heirs or successors thereof, and the fiduciary patrimony remains dormant for a period of one year from the date of termination of the trust, the trustee may deliver said assets to the competent judicial authorities so that they proceed as is proper in law, with the trustee being released from its responsibility with respect to said assets;

• 13)

  Transmit, with prior authorization of the settlor and the beneficiary, to the new fiduciary institution, in cases of substitution or subrogation, the resources, assets, and rights that exist at that moment in the trust;

• 14)

  Render final account of its administration to the settlors, beneficiaries, and to the Commission when applicable, at the end of the trust or of its participation therein;

• 15)

  Subcontract services or special work, always under its responsibility, for the performance of certain acts when it is a matter of specialized labors for which the entity does not have the resources, technical or human, nor the necessary knowledge for its performance; and, 16. Conduct periodic evaluations of the risks inherent to its trust operations, presenting the respective reports to the Risk Committee of the Authorized Entity.

Prohibitions of Authorized Entities. Authorized Entities, when acting as fiduciaries, or being settlors in a trust established in another fiduciary institution, shall be subject to the following prohibitions:

• 1)

  Using the trust figure to conduct financial intermediation operations, irregular collection of public funds, or any action that compromises their patrimony or own assets, or that is prohibited in their normal operations and/or that distorts the trust figure, regardless of the legal form, documentation, or accounting record they adopt for these operations;

• 2)

  Issuing obligations that compromise the trust patrimony in a disproportionate manner to the value of the assets that constitute it, or to the cash flow they produce;

• 3)

  Mixing the trust patrimony with their own patrimony or with that of any other trust;

• 4)

  Participating in trust operations constituted for indeterminate or illicit purposes;

• 5)

  Constituting or participating in secret trusts;

• 6)

  Constituting or participating in trusts whose benefit must be granted to different persons successively, who must be replaced upon death of the preceding person, except in cases where the substitution is made in favor of living persons or already conceived, upon the death of the settlor;

• 7)

  Constituting or participating in investment trusts administered as a private pension system;

• 8)

  Conducting trust operations for the purpose of evading compliance with applicable regulations to financial operations permitted to them; and, 9. Participating in trusts whose foreseen duration exceeds thirty (30) years, except when they are constituted in favor of public law entities or charitable institutions.

Appointment of Trust Delegate. Authorized Entities must appoint a trust delegate, which shall be understood as appointed upon signing the trust contract, to perform and exercise the powers granted to the Authorized Entity in the administration of the trust. In the case of testamentary trusts, the appointment shall be made at the moment the fiduciary accepts the assignment. Only those officials whose names have been previously communicated to the Commission and have not been rejected by it may act as trust delegates. Similarly, the Commission shall have the power to require at any time the Authorized Entity to remove one or several Trust Delegates, in cases where the Commission verifies that they fall within one of the impediments indicated in the following Article.

Impediments to Act as Trust Delegate. The following may not be trust delegates:

• 1)

  Trust delegates of other Authorized Entities;

• 2)

  Direct or indirect delinquent debtors and those whose obligations have been absorbed as losses by any entity of the financial system;

• 3)

  Those who are under bankruptcy proceedings, insolvent, or bankrupt, while they have not been rehabilitated, and those with pending bankruptcy lawsuits;

• 4)

  Those who have been convicted of crimes implying lack of probity and ethics or have been convicted of crimes;

• 5)

  The spouses, household companions or relatives in the second degree of blood relationship or second degree of relationship by marriage of the directors, councilors, administrators or commissioner of the fiduciary entity;

• 6)

  Persons holding public office except officials of state banks;

• 7)

  Those directors, administrators, advisors or officials who have been part of an institution supervised by the Commission that has been declared in forced liquidation or subjected to the recapitalization measure, or to any other measure adopted by the Resolution Authority, in the terms of Article 115 of the Financial System Law, only if according to the Commission's report it directly links them to the facts that gave rise to the aforementioned actions. In those cases in which the proposed person has worked for said institution, but has not been linked to these actions, they must obtain the non-objection of the Commission to exercise as a trust delegate;

• 8)

  Persons who have been judicially proven to have participated in the crime of money laundering and/or financing of terrorism and other illicit activities, whether by authorities at the national or international level;

• 9)

  Those who have been sanctioned administratively or judicially for their participation in serious violations of the laws and regulations applicable to institutions supervised by the Commission; and, 10. Those who are absolutely or relatively incapable.

Provisions for the Trust Delegate. Authorized Entities must communicate to the Commission, before January 31st of each year, the name of the trust delegates designated by them in accordance with the following requirements:

• a)

  General legal data of the appointed person and with respect to their nationality, indicate whether they are Honduran by birth or by naturalization. In the latter case, indicate how long they have been residing in the country.

• b)

  If the appointed official is of foreign nationality, a photocopy of the Work and Residence Card.

• c)

  Their experience in trust operations and abilities, detailed in the Curriculum Vitae.

• d)

  Authenticated photocopy of the Board of Directors or Administrative Council meeting minutes evidencing the appointment of the delegates.

• e)

  In case of designation of special representatives whose mandate entails management of trust business, the same procedure shall be followed, as to details, as those related above.

• f)

  When the removal and replacement of trust delegates occurs, the Commission shall be sent the corresponding details about the newly appointed persons, as well as the reasons that gave rise to the separation of functions of the previous ones, within five (5) business days following their removal or replacement.

• g)

  All other additional data and references that may serve to supplement the required information. When new appointments occur by the interested parties and the file is sent with the requested data, the Commission shall notify the Authorized Entity of the non-objection of the proposed persons no later than fifteen (15) business days after the documentation has been completed to the Commission's satisfaction. The Commission's silence on this matter may be interpreted as a de facto acceptance, without prejudice to a formal communication regarding the reported designation.

Update in the Valuation of Assets that Constitute the Trust Patrimony. The updating of the valuation at fair value of assets classified as property, plant and equipment or as investment properties shall be carried out in accordance with the objectives of the trust and as provided in the trust contract. This update shall observe the guidelines of International Financial Reporting Standards (IFRS). If, as a result of the update referred to in the preceding paragraph, it is found that there has been a deterioration or a significant insufficiency equivalent to twenty percent (20%) of its value in relation to the last valuation performed, the Authorized Entity must immediately inform the settlor so that they may decide what corresponds, with a copy to the Beneficiary(ies), so that they may proceed in accordance with what is stipulated in the trust contract. The results of such decision must be reported to the Authorized Entity within a period not exceeding twenty-four (24) hours following the communication issued by said entity to the settlor and this shall be established in the trust contract.

Training Program. The Authorized Entity must implement an annual training program for officials and employees related to trust operations, which shall ensure that the entity's personnel remain properly updated in matters of their competence. Said program must include topics such as: financial, accounting, legal, tax matters, risk management, stock and securities markets and prevention of money laundering, among others.

Tax Responsibilities of the Authorized Entity. The Authorized Entity in the exercise of its functions, as administrator and legal representative of the trust patrimony, must comply with the formal and material responsibilities and duties that derive from the trust, in accordance with what is established in current legal provisions on tax or fiscal matters and up to the amount of the trust patrimony.

Availability of Information. Authorized Entities must maintain available to the Commission the following information:

• 1)

  List of the trust patrimonies they administer, indicating the settlors, beneficiaries, trust delegates, type of trust, composition of the trust patrimony of each one, fees charged for the structuring and administration of the trust, purpose, term of the trust and coverage of guarantees to obligations in trusts as required;

• 2)

  Accounting records and financial statements of each trust;

• 3)

  In the case of guarantee trusts, the list of assets that have been transferred to fulfill credit obligations that support them, as established in the corresponding trust contract;

• 4)

  List of trusts for administration of money or securities and/or other assets, indicating the criteria for their administration and the operations they conduct with such resources and/or other assets; and, 5. Others as determined by this Commission. Authorized Entities must send quarterly to the Commission, no later than the first ten (10) business days of April, July, October and January of each year, the report contained in the format included as Annex 1 of these Regulations, containing detailed information of the operations as they are recorded in the books of each trust at the accounting closing of the previous quarter.

Procedure for Substitution of Fiduciary in Case of Resignation or Removal. The settlor(s) may designate one or more substitutes to replace those Authorized Entities that do not accept or cease their functions as fiduciaries for any of the causes provided in the trust contract. If for any reason the fiduciary is lacking, the appointment of its substitutes shall be made by the settlor(s) with the approval of the beneficiaries or their representatives or legal guardians, and in the absence of these, by the competent courts of justice, at the request of the beneficiary(ies) or their representatives or legal guardians.

Plurality of Fiduciaries. The settlor(s) may designate several fiduciaries to jointly or successively exercise their functions, indicating the order and the conditions in which they must operate or in which they must be replaced as the case may be. When the trust contract establishes that the fiduciaries must act jointly, they shall be called co-fiduciaries. The number of fiduciaries must always be uneven and their decisions shall be taken by majority of the members. The trust contract must indicate to which of the fiduciaries the assets will be transferred for the formation of the trust patrimony.

Rights of the Beneficiary. The rights corresponding to the beneficiary may be represented in trust participation certificates, which must have the following characteristics: 1. Be issued by the fiduciary to the order of beneficiaries determined in the trust contract; and, 2. Be transferable by the determined beneficiaries to persons who are not prohibited by the Law or by the trust contract. The provisions of the Commercial Code relating to endorsement and those of the Civil Code corresponding to theft, loss or deterioration of securities, shall be applicable to trust participation certificates, insofar as they are relevant. In case of transfer by means other than endorsement, the assignee acquires all rights, but is subject to the personal exceptions that the assignor could have opposed to the assignee before the transfer.

Right to Information. Settlors and beneficiaries have the right to be informed about the situation of the trust. For this purpose, it may be agreed in the constitutive act the presentation of periodic reports on the actions taken and those being undertaken to fulfill the purpose of the trust; and the compliance with the other stipulations established in the constitutive act. Such reports must have a minimum monthly frequency, unless the trust contract provides otherwise, with the exceptions provided in Article 1057 of the Commercial Code. The Authorized Entity shall communicate such reports by the written or electronic means established in the trust contract. For those trusts where the creation of a Technical Committee is established, the trust contract must establish the information rights of its members.

Obligation of Written Contract. The consent to establish the trust must be declared expressly and in writing, by means of a contract, by an act inter vivos or by will, and must conform to the legal provisions on transfer of rights or transfer of ownership of assets given in trust. Consequently, verbal, secret, presumed or implicit trusts shall have no value whatsoever.

Content of the Trust Contract. The trust contract must be drafted in such a way that it is easily understandable to its users and clearly, faithfully and precisely reflects the legal and economic conditions that derive from it. Additionally, it must contain at minimum the following:

• 1)

  The designation and complete and clear identification of the settlor, fiduciary(ies) and beneficiary(ies), including the latter in their capacity as substitutes, if any. When it concerns future beneficiaries or classes of beneficiaries, prior to granting the benefit, sufficient circumstances for their identification must be expressed. The foregoing, without prejudice to what is established in Article 1041 of the Commercial Code;

• 2)

  The description and obligation of the Settlor to provide the valuation of the assets that constitute the trust patrimony, without prejudice to cases in which the valuation is indeterminate, such as in the case of assignment of rights;

• 3)

  Express declaration of the will to establish the trust by the settlor;

• 4)

  The express acceptance by the fiduciary to accept the assignment and to use the trust assets solely and exclusively for the fulfillment of the purposes of the trust;

• 5)

  The purpose of the trust, which must be lawful and determinate;

• 6)

  The term of effectiveness of the trust;

• 7)

  The character of being irrevocable unless expressly stated otherwise;

• 8)

  The rights, powers and obligations of the settlor, fiduciary and beneficiary and third parties applicable, if applicable; as well as the prohibitions and limitations imposed on them. Within the obligations of the settlor shall be included that related to the obligation to provide the fiduciary, in due form and time, all information that the latter may require in order to fully identify them or their beneficiaries;

• 9)

  The form of compensation of the fiduciary;

• 10)

  The rules of accumulation, distribution or disposition of the assets, income and products of the trust assets;

• 11)

  Place and date in which the trust is established;

• 12)

  Domicile of the Authorized Entity, which must be in national territory;

• 13)

  Causes of extinction of the trust in accordance with what is provided in Article 34 of these Regulations;

• 14)

  Sworn Declaration of the settlor(s) that the transferred assets have legitimate origin and indication of the legal status of said assets, with express mention of the charges and encumbrances that may be affecting them;

• 15)

  Express declaration that the trust is established and submitted to the legislation of the Republic of Honduras;

• 16)

  The functioning of a Technical Committee, in case there is one, detailing rules and powers for its operation;

• 17)

  The responsibilities of the trust delegate with respect to the trust;

• 18)

  The presentation by the fiduciary of reports both ordinary, during the term of the trust, as well as extraordinary, upon conclusion of the same;

• 19)

  The means or mechanisms through which conflicts of interest that arise between the participants of the trust shall be resolved, including who will assume the costs related to the implementation of such means or mechanisms;

• 20)

  Procedure and conditions for the modification of the terms of the trust in case the right to modification has been reserved to the settlor(s); and, 21. Any other aspect necessary for the proper functioning of the trust, the fulfillment of the established purposes, as well as any other that may be incorporated by regulation or by rules by the Commission, with the purpose of strengthening the content of the trust contract. The trust contract may also contain other clauses that the settlor or the fiduciary deems appropriate to include that are not contrary to morality and ethics, to the laws, or to public order.

Responsibility of the Authorized Entity in the Design and Structuring of the Trust. Authorized Entities, as administrators and legal representatives of the trust, shall be responsible for the design and structure of the trusts that they will execute with the settlor(s), and the same must conform to what is established between Articles 1033 to 1062 of the Commercial Code and to these Regulations. By virtue of the foregoing, Authorized Entities must ensure that the trust contracts they execute contain clauses that adequately reflect the purpose for which the trust is established, avoiding the existence of aspects that go against the proper nature of the trust and the pursued purpose.

Maximum Term of Trust Agreements. The maximum term of trust agreements shall be established in Article 1050 of the Commercial Code. Within this term, extensions or prolongations of the term may be agreed upon, which may not exceed the maximum term permitted by law.

Technical Committee of the Trust. When the trust agreement stipulates the creation of a Technical Committee, the members that comprise it shall be designated therein. Within such committee, the trustee may participate as secretary with voice but without vote in the decisions made by the committee, all without prejudice to what is established in Article 1055 of the Commercial Code.

Breach of Contract Due to Bad Faith, Fraud, or Negligence. The beneficiary and the settlor have the right to demand from the Authorized Entity compensation and restitution of the trust assets in accordance with what is established in Articles 1059 and 1060 of the Commercial Code, in the event that it fails to fulfill its obligations due to bad faith, fraud, or negligence.

Grounds for Extinction of the Trust. In addition to what is established in Article 1061 of the Commercial Code, the trust shall be extinguished by the occurrence of any of the following causes:

• a)

  By expiration of the term indicated in the contract;

• b)

  By loss or total extinction of the assets subject to the trust; or when said assets are insufficient to fulfill the purposes for which the trust was established and there exists impossibility for the Settlor to contribute other assets.

• c)

  In case of absence, resignation, or death of the beneficiary or beneficiaries, in the latter case without heirs or when the nature of the benefit has been of a highly personal character, provided that it is not expressly stated who shall substitute them in accordance with the rules provided in the contract;

• d)

  By resignation or removal of the trustee or all trustees, provided there is no possibility of appointment of a substitute within the term provided in the contract and, in the absence of a provision in that regard, within the term of one (1) year from the resignation or removal;

• e)

  By forced liquidation or any other equivalent resolution procedure of the trustee that holds title to the assets that comprise the trust assets, provided there is no possibility of appointment of a substitute within the term provided in the contract and, in the absence of a provision in that regard, within the term of one (1) year from the forced liquidation or any other equivalent procedure;

• f)

  By actions of deprivation of ownership executed by the competent authorities over the rights acquired by the settlors and/or the beneficiaries through the trust; and,

• g)

  By the qualities of beneficiary and trustee being combined in a single person, which cannot be remedied by the appointment of a new trustee or beneficiary by the settlor. In any of the cases listed above, it is prohibited to return assets to the settlor or beneficiary while debts with the trust remain outstanding.

Nullity of Trust Agreements. Trust agreements shall be null in the following cases:

• 1)

  When in the same trust transaction the qualities of settlor and trustee or of trustee and beneficiary are combined;

• 2)

  When they violate a norm whose observance is contrary to public order and good customs;

• 3)

  When they concern assets or rights whose delivery is prohibited by law; and, 4. When the settlor is an incapable person. CHAPTER V ON THE PREVENTION OF MONEY LAUNDERING AND AGAINST THE FINANCING OF TERRORISM AND PROLIFERATION OF WEAPONS OF MASS DESTRUCTION

Prevention of Money Laundering and Financing of Terrorism. Authorized Entities are obligated to comply with the legal and regulatory provisions in force to prevent the trust from directly or indirectly facilitating or being used to legitimize assets of illicit origin or to finance acts of terrorism or terrorist organizations or the proliferation of weapons of mass destruction. Authorized Entities, prior to the execution of the constitutive act that creates the trust, must conduct thorough due diligence that allows them to fully identify the settlors and final beneficiaries of the trust assets or their fruits, as well as conduct the same on a continuous basis during the term of the trust, as well as to investors participating in the trust through the purchase of titles or participations issued by the trust. The Authorized Entity must also ensure the following:

• a)

  Maintain a registry of settlors, containing all information necessary for their correct identification. In the case that the settlors are legal entities, the identification shall encompass the natural persons who execute the administration, representation, or exercise ownership of the legal entities involved until fully identifying all natural persons who may receive the fruit or benefits of the trust. Modifications or changes that may arise shall be incorporated into this registry;

• b)

  In case the identification process related in the preceding subsection determines that the settlors or final beneficiaries of the trust assets or their product are PEPs, the Authorized Entity must have written authorization from its Board of Directors or Board of Administration to execute the mandate contained in the trust agreement; and,

• c)

  When it concerns future beneficiaries or classes of beneficiaries, the trustee shall proceed to identify them and incorporate them into the registry mentioned in section a) above, as soon as they meet the requirements established in the trust agreement to acquire such status. The foregoing is without prejudice to the obligation that Authorized Entities have to comply with the other responsibilities and obligations contemplated in the legal framework in force regarding prevention of money laundering, against the financing of terrorism, and the proliferation of weapons of mass destruction.

Trusts Acquired by Third Parties. In those trusts where their purpose is the creation or transformation of assets, services, products, or goods that may be acquired by third parties outside the trust, the trustee shall have the obligation to expand the due diligence and customer knowledge duties of the beneficiary to the final beneficiary thereof. The foregoing shall be within the due diligence that authorized entities must apply, who shall be required to leave evidence in the respective files of the work performed in accordance with what is provided in this Article. CHAPTER VI ON SPECIAL CLASSES OF TRUST SECTION I ON SECURITY TRUSTS

Rules for the Execution of Security Trust Agreements. In the execution of security trusts, Authorized Entities shall observe the following rules:

• a)

  All classes of monetary obligations whose exigibility is subject to term or condition may be guaranteed, independently of the document that serves to formalize such obligations;

• b)

  The guarantee of the trust assets may secure more than one secured creditor. In case there are several secured creditors, their claims, in case of non-performance, shall be satisfied in equal proportions, unless the trust agreement has stipulated a different order of preference. In any case, when there is a plurality of secured creditors, the trust agreement must clearly stipulate what is the procedure to follow in case of non-performance of one of the guaranteed obligations and whether that non-performance constitutes grounds for exigibility of the remaining guaranteed obligations. Likewise, when there is a plurality of secured creditors, the trust agreement may not be modified without the unanimous consent of all of them;

• c)

  The quality of secured creditor is acquired with the explicit and written acceptance thereof, of accepting as backing of the respective credit this type of guarantee, communicated to the trustee, who shall include said creditor as a beneficiary in the trust; unless the constitutive trust agreement has stipulated a different procedure;

• d)

  The creditor, upon accepting its quality as beneficiary of the trust, accepts its effectiveness, sufficiency or relevance and the inherent risks in this specific type of trust. The Authorized Entity does not assume specific responsibility for the effectiveness of the guarantee, except when it incurs negligent acts in the performance of its management that affect the suitability thereof; or if, in general, it does not diligently perform the necessary acts to achieve the purpose of the trust, such as, for example, not proceeding with diligence to sell the trust assets in case of debtor non-performance, or proceeding to transfer them in disregard of the instructions given by the settlor, among other events;

• e)

  To each secured creditor the trustee shall issue a trust participation certificate that evidences such quality. Said certificate shall contain, among others, the following information: 1. The corporate name of the trustee, the city and date of issuance of the certificate. 2. The name of the secured creditor; the class of guaranteed obligation and its value; the term or condition upon which its exigibility depends and the margin or percentage of coverage of the trust guarantee in relation to the value of the trust assets. 3. The expression, in prominent characters, that said trust certificate is not a debt security and therefore is not subject to circulation in the market. 4. In the event it becomes necessary to proceed with the liquidation of the trust assets to address the guaranteed obligation(s), a declaration from the Authorized Entity shall be included, indicating that it shall make its best effort to obtain the highest possible value in the sale or shall fully comply with the process established in the trust agreement, warning that the trustee with the proceeds from the sale shall pay, following the order of payment stipulated in the agreement, the guaranteed obligations to the extent the amount recovered reaches in accordance with what is established in the trust agreement.

• f)

  Authorized Entities shall maintain a registry of secured creditors, in which the data appearing in the trust participation certificate or statement issued by the trustee shall be recorded. Only those who appear simultaneously in the text of the certificate or statement issued by the trustee and in the registry book shall be recognized as secured creditors, the trustee being obligated to make the respective entry and issue the certificate once instructed regarding the secured creditors. In case of loss, theft, or disappearance of the certificate, the Authorized Entity shall replace it by delivering a duplicate to whoever appears registered in the secured creditors registry, the representative of the registered creditor being required to present an affidavit of the loss or disappearance;

• g)

  The resources from the transfer or realization of the trust assets shall be destined exclusively to the payment of the guaranteed obligations in case of their non-performance, as well as to the payment of other expenses inherent to the transfer process, fees and expenses incurred by the trust administration and liquidation of the trust, in the manner established in the respective trust agreement. Only once said amounts have been covered may the surpluses be placed at the disposal of the settlors or beneficiaries, if so provided in the trust agreement, and under the terms and conditions stipulated therein;

• h)

  Opposite other creditors the trustee shall have preference of payment with respect to its fees and expenses incurred by the administration and liquidation of the trust; and,

• i)

  The cash flow generated by the assets affected by a security trust cannot serve as the basis for structuring a securitization process with charge thereto.

Additional Contractual Provisions. In addition to the requirements in Article 29 of these Rules, the security trust agreement shall contain provisions relating to the following aspects:

• 1)

  Determination of the obligations that shall be backed by the trust assets or, failing that, the criteria that allow determination or identification of said obligations;

• 2)

  Detailed procedure and other conditions that shall apply in the transfer of the assets that comprise the trust assets when non-performance of the obligations occurs;

• 3)

  Value of transfer of the assets that comprise the trust assets or, failing that, the criteria for the determination of said value established in the agreement; and if nothing is indicated in this regard, they shall be adapted to what is provided in the current Regulation on Valuation of Assets issued by the Commission;

• 4)

  Determination of responsibility of whoever shall assume the costs related to the maintenance and security of the trust assets;

• 5)

  Percentage or amount of the trust assets that shall be destined to back compliance with the obligations; and, 6. In the case of trusts constituted with more than one asset, the trust agreement shall determine the manner in which the trustee is to proceed with the transfer of the trust assets and rights to comply with the guaranteed obligation or obligations.

Additional Responsibilities of the Trustee. In addition to the responsibilities stated in Article 15 of these Rules, the Authorized Entity in the execution of security trust agreements shall assume the following responsibilities:

• a)

  Demand from the Settlor the performance of all conservatory acts described in the trust agreement, aimed at preventing the trust assets from deteriorating, being diminished, lost, or having their value modified, which the trustee shall verify through periodic visits to the place or places where said assets are located, being able to hire a specialized inspector at the expense of the assets for purposes of drawing up a report on the condition in which they are found;

• b)

  Regarding credits, the obligation described in the preceding section includes that of collecting them in a timely manner and exercising against the debtor or delinquent debtors the corresponding actions aimed at procuring their payment, it being understood that the sums resulting from collection, while the guaranteed obligations do not become exigible, shall be invested in the specific assets or activities designated by the settlor;

• c)

  In case of being in possession and custody of the trust assets, notify the settlor and secured creditor of any diminishment, deterioration, or decrease suffered by the trust assets due to acts or facts not attributable to negligent or irregular administration and that place them below the amount of the guaranteed obligations, so that, within the term provided in the agreement, they adopt the necessary measures to restore coverage of the guarantee, unless said circumstances have been stipulated as grounds for early exigibility thereof or as grounds for termination of the trust agreement; and,

• d)

  Arrange and manage on behalf of the settlor and with the periodicity stated in the agreement, the practice and/or updating of valuations of the trust assets by independent valuation experts independent of the settlor, beneficiary, and the trustee itself. Said valuers shall be registered in the corresponding Registry administered by the Commission, except in the case that by the nature and specialty of the trust assets it is necessary to hire specialized valuers, whether national, foreign, or international institutions. To comply with this responsibility, the Authorized Entity shall submit the independent valuer of the trusts to the non-objection of the Commission prior to the performance of valuations of the trust assets.

Responsibility for Registration of the Guarantee. The Authorized Entity shall be responsible for performing in a timely manner all acts required by the legal provisions in force regarding registration in the corresponding registry of the trust assets and of receiving them free of any encumbrance. In the event that these assets are encumbered, the trustee shall notify the beneficiary creditor so that the latter may decide whether to accept the existence of said encumbrance; if the creditor does not accept this condition, the trustee may demand from the settlor the cancellation of said encumbrance as a necessary requirement for the trust agreement to be formalized or the Authorized Entity may demand from the settlor the replacement thereof.

Effects of Security Trust. The trust assets under a security trust may not be pursued or judicially attached by creditors of the settlor other than the secured creditors under the trust. They also do not form part of the pledge or general guarantee of the creditors of the trustee and only secure the obligations expressly designated in the trust agreement. Likewise, they cannot be pursued or attached by the creditors of the beneficiary or beneficiaries, who, although they do not properly have the status of a contracting party in the trust, acquire all the rights established therein in their favor, particularly those related to the maintenance of the value of the guarantee and with the preferential payment of their claims against the trust assets. The secured creditors and other beneficiaries of the security trust shall appear directly in the constitutive act of the trust, in such capacity, accepting all the terms and conditions established at the time of its formalization or may accept their status through a letter of acceptance or addendum when they have been incorporated after the execution of the agreement. In no case may creditors of the settlor request or initiate divisory proceedings with respect to the trust assets and/or the guarantees that secure them. SECTION II ON TESTAMENTARY TRUSTS AND ESTATE PLANNING

Testamentary Trust. In the event that the designation of the trustee made by the testator has not been agreed upon in advance, upon notification received, at the request of an interested party or ex officio, whether by the Notary or the authority responsible for knowing about the succession or the probate of the will, the authorized entity may accept or reject the trust in accordance with what is provided in the Commercial Code.

General Guidelines for the Execution of Estate Planning Trust Agreements. In the execution of estate planning trust agreements, the following general guidelines shall be observed:

• a)

  In this type of trust the settlor may be one of the beneficiaries, even being able to reserve the usufruct of the assets by transferring to the trust only the bare ownership, when the death of the settlor is verified or the condition to which the end of the usufruct is subject, the full ownership shall be consolidated in favor of the trustee;

• b)

  The incapacity of the settlor may be established as a suspensive condition that presupposes the end of the trust; said incapacity shall be verified and declared by a competent judge;

• c)

  The settlor may reserve in the trust agreement the power to revoke the trust at the moment the settlor considers appropriate, because otherwise it shall be understood as irrevocable;

• d)

  The settlor may substitute or eliminate beneficiaries at the moment the settlor considers appropriate, if so agreed in the trust agreement;

• e)

  One or more beneficiaries of the trust may be designated, as well as establishing one or more substitutes; and,

• f)

  The term of the trust may not exceed the term indicated in the Commercial Code; in case said term is exhausted and the trust remains in effect, the assets shall return to the settlor.

Assets Subject to Estate Planning Trust. The settlor may transfer to the estate planning trust any type of present or future assets; nevertheless, only those specific assets that the settlor has transferred during their lifetime shall form part of the estate planning trust. If the settlor at the time of their death is the owner of assets that do not form part of the trust assets, these shall not form part of the trust, except for express provision contained in a will to these effects. In the absence of a will expressing that they are to be incorporated into the trust, said assets shall have the destination that corresponds according to the rules of succession established. If the resolutive condition in the estate planning trust agreement is the incapacity of the settlor, the assets that do not comprise the trust shall be administered by a curator. This is because, unlike the assets that comprise the trust, those remain incorporated into the patrimony of the settlor. SECTION III ON INVESTMENT TRUSTS

Purpose of Investment Trusts. Investment trusts have as their principal purpose the investment or placement, in any manner, of sums of money. The Authorized Entity shall carry out the investments following the instructions contained either in the trust agreement, those that define an investment committee established for these purposes by the settlor, or in accordance with the policy approved by the trustee and explicitly accepted by the settlor. In this type of trust, the Authorized Entity acts on account and at the risk of the settlor and is prohibited from guaranteeing returns with the trust assets, therefore in no case shall it act in a discretionary manner in the investment of trust resources and must always adhere to the provisions indicated in the trust agreement. The product or return on the investment of the trust assets shall be credited by the Authorized Entity in favor of the beneficiary, who may be the settlor themselves or a third party designated by the settlor, or reinvest it in other securities, as established in the trust agreement.

Treatment of Investments with Trust Resources. Investment trust agreements must clearly and legibly indicate the possible risks associated with the operations to be carried out; and, when there are modifications to the conditions established therein, the Authorized Entity must inform the settlor of such circumstance at the moment it occurs so that the settlor may decide the actions deemed appropriate.

Responsibility over Trust Estate. The trust estate constituted under an investment trust is autonomous and independent of the trustee's patrimony, by virtue of which the problems of solvency or liquidity that the trustee may present shall not affect the assets that are the object of the investment trust.

Modalities of Investment Trusts. Investment trusts may be individual or collective. When the settlor is only one person, it shall be an individual investment trust, and when there is more than one settlor and all have the same interests in the purposes of the trust, it shall be called a collective investment trust. Collective investment trusts do not make public offerings of securities nor issue participation units or certificates of fiduciary participation.

Responsibility for Financial Risks. The financial risks associated with the investments made by the Authorized Entity in fulfillment of the purposes of the investment trust shall be borne by the settlor, and may affect the beneficiary and the holders of the fiduciary participation certificates.

Prohibition Related to Reinvestment of Investment Trust Returns. Authorized Entities may not use the returns obtained from the investment trust to carry out financial intermediation activities, or that in any way compromise their patrimony or the own assets of the fiduciary institution, or that are prohibited to them, or that distort the figure of the trust. In those cases in which the trust agreement establishes that the returns obtained must be transferred to the savings account of the beneficiaries, the latter may dispose of these resources in accordance with what is provided in the same agreement.

Expenses of the Investment Fund. Without prejudice to what is provided in the trust agreement, the following expenses may be charged to the trust:

• a)

  The cost of custody of the assets that make up the trust estate when it is necessary to entrust such custody to an entity legally authorized to receive deposits of securities;

• b)

  The remuneration of the trustee;

• c)

  Losses arising from the sale of securities or temporary investments;

• d)

  The fees and expenses that must be incurred for the defense of the interests of the trust when circumstances require it;

• e)

  The expenses caused by the supply of information to the settlor(s) or to the beneficiary(ies) designated by them;

• f)

  The interest and other financial returns that must be paid by reason of repurchase agreement operations and to cover the costs of credit operations that are authorized;

• g)

  The taxes that directly tax the securities, the assets, or the income of the trust;

• h)

  The fees and expenses incurred by the external audit of the trust, when applicable;

• i)

  Those corresponding to the payment of commissions related to the acquisition or disposal of assets and the execution of operations;

• j)

  The value of the insurance of the trust assets; and,

• k)

  The others that result from the normal operation of the trust.

Grounds and Procedures for Liquidation of Investment Trusts. The grounds for the liquidation of investment trusts, as well as the procedure to be followed, must be clearly established and agreed upon in the investment trust agreement. SECTION IV ADMINISTRATION TRUST

Administration Trust. It is the fiduciary business by virtue of which assets are delivered to an Authorized Entity to act as trustee, transferring their ownership, so that it exercises their administration and develops the management entrusted by the settlor(s), destining the trust assets together with their respective returns, if any, to the fulfillment of the stated purpose. These trusts may have the following modalities: 1. Administration and Payments: Its purpose is the administration of sums of money and/or other assets that, together with their returns, if any, may be destined to the timely and appropriate fulfillment of the obligations that the settlor indicates. 2. Portfolio Administration: Its principal purpose is the administration of productive and non-productive portfolios of financial entities and/or the real sector. SECTION V REAL ESTATE DEVELOPMENT TRUST

Modalities of Real Estate Development Trust. This type of trust may have the following modalities: a) Pre-sale: Under this modality the Authorized Entity receives resources from the pre-sales of the future buyers of the units to be constructed by the real estate project developer, identifies and registers them individually, invests them while they are not required and conditions their delivery to the fulfillment by the developer of the conditions that have been established in the trust agreement, such as having reached the break-even point of the project, the sale of a certain number of units or the execution of a minimum number of purchase contracts that guarantee that with the resources contributed by the future buyers the development of the project can be accomplished, the obtaining of permits or several of them combined. The future buyers of the units are not parties to the trust agreement, but they must accept the terms and conditions established in said agreement and must sign a letter of acknowledgment and acceptance. It is understood in any case that, as a guarantee of the values received from the pre-sale, the developer has assigned to the trust the rights and assets of the real estate project, in the manner described in subsection b) of this Article. b) Real Estate Development: Under this modality the developer settlor transmits to the trust the land where the project is to be developed as well as the designs, permits and other requirements and assets necessary to be able to construct the project. The Authorized Entity shall be responsible for administering the money contributed by buyers by virtue of the pre-sale, as well as the credit resources obtained by the developer from financial entities for the development of the project, any other resources contributed by the settlor(s), disbursing resources against the progress of the works and once the work is completed, executing the sales deeds of the constructed units.

Obligations of the Authorized Entity in Real Estate Development Trusts. In relation to real estate development trusts, Authorized Entities must comply with at least the following obligations:

• a)

  To adequately and timely disclose to potential clients and users the scope of their participation in the real estate projects to which they are linked under the different modalities;

• b)

  To conduct or contract the conduct of the risk analysis that each project involves;

• c)

  To prepare and adapt the agreements according to the modality that corresponds;

• d)

  To provide the public with timely and sufficient information about the scope and effects of their participation in this type of trust;

• e)

  To verify that the lands on which the project is to be developed have been acquired or are to be contributed permanently and with compliance with the formalities that the law requires for this type of transaction;

• f)

  To ensure that in accordance with the Law and registration records at the moment of executing the contract, it is provided that the transmission of the immovable does not present problems that may hinder or prevent the transfer of ownership of the resulting real estate units to the future purchasers;

• g)

  To ensure that there is no deviation of the resources obtained for the financing of the project;

• h)

  To verify that the established and validated break-even point under the risk analysis does not compromise the viability of the project;

• i)

  To verify that the technical and legal conditions are met for the project to be completed before allowing the contractors to dispose of the resources of the future buyers;

• j)

  To verify that the construction licenses, permits, insurance or guarantees necessary for the development of the work comply with the pertinent legal requirements;

• k)

  To review that the contractor or developers of the project comply with the minimum levels of solvency, technical, administrative and financial capacity, in accordance with the magnitude of the project; and,

• l)

  To verify that the developer has the resources or necessary financing for the execution of the work.

Securitization Trust. The securitization trust must be subject to the provisions of the Securities Market Law and its regulations. When Authorized Entities participate in such trusts in the capacity of settlor, they must comply, additionally, with the provisions established in the current Securitization Regulation. SECTION VII OTHER CLASSES OF TRUST

Other Classes of Trust. Without prejudice to the provisions of this Chapter, other classes of trust may be constituted, which are subject to the provisions of the Commercial Code, of these Standards and of the other normative provisions that the Commission may issue on the matter. CHAPTER VII FINAL PROVISIONS

Disclosure of Information. Authorized Entities have the obligation to provide to the general public and to their potential settlors and beneficiaries, as the case may be, the necessary information about the content and scope of the fiduciary operations that the Law authorizes them to provide, so that the greatest transparency is achieved and that through clear and objective elements of judgment the best market options can be chosen. The information must be accurate, sufficient, timely, easy to understand and adapted to the economic need that is intended to be satisfied through fiduciary contracting. Authorized Entities must comply with this obligation from the pre-contractual stage, during execution and even until the liquidation of the trust and will be more pronounced when potential settlors and beneficiaries, as the case may be, are persons with limited knowledge on trust matters. Likewise, they have the duty to indicate to their settlors and beneficiaries, as the case may be, the negative or counterproductive aspects of the assets or services, or of the benefits that are entrusted to them, as well as the technical limitations of such assets or services or the risks they entail, so that the settlor and the beneficiary must be warned of the risks they run and how to avoid them. Additionally, they should not hesitate to dissuade their settlors and beneficiaries from acting in the manner they intend to do so if they perceive negative effects, and must go so far as to reject the assignment proposed to them when such assignment exceeds their competence or capacities, or when they consider that it is doomed to failure. For the purpose of proving compliance with the obligation set forth in this Article, Authorized Entities may keep written records of the actions taken in order to inform the financial user, before, during and after the trust agreement is completed, as well as the suggestions and warnings they have made, although the law does not require documentary proof.

Publicity of Fiduciary Products and Services. The programs, campaigns or advertising materials that Authorized Entities intend to use to promote fiduciary operations and businesses through any means of communication, whether mass media or otherwise, must strictly adhere to both the legal and economic reality of the promoted services and the actual possibilities of providing the same by the respective financial institutions. In addition, they shall be subject to the following rules:

• a)

  Advertising messages must be clear and precise, distinguishing institutional advertising from that intended to publicize specific services or products, in which case information must be provided about the type of contract through which the fiduciary relationship will be implemented;

• b)

  Statements and visual or auditory representations must offer clarity, fidelity and precision with respect to the type of service promoted, avoiding the use of phrases that induce error for the benefit of private interest, such as those through which the public is led to the mistaken belief that the trustee will succeed in the management entrusted. In this regard, it must be stated in easily visible manner that the obligations assumed on the occasion of the execution of fiduciary businesses have the character of obligations of means and not of results;

• c)

  If the texts comprise the use of superlatives, terms that indicate preeminence, figures or specific data, they must faithfully correspond to objective, real, verifiable and provable facts at the date the respective advertising campaign is disseminated. Consequently, statements that allow deducing as definitive situations that in reality respond to cyclical, temporary or variable phenomena in relation to the market may not be used, nor may abstract assessments be used or suggested that by their own nature do not reflect an exact situation.

Transparency of Information In addition to the provisions set forth in Articles 59 and 60 of these Standards, Authorized Entities must observe the provisions regarding transparency of information that the Commission has issued.

Execution of Trust Contracts with Public Entities Public entities may execute, in the capacity of settlors, trust contracts in any modality whatsoever, provided that the purpose of the respective trust business is to attend to the fulfillment of state objectives, or the continuous and efficient provision of public services, or the effectiveness of the rights and interests of the administered recognized by the Constitution of the Republic and the Law. Prior to the execution of the trust contract, public entities must have the authorization of the instance designated by their Organic Law and/or the General Law of Public Administration and must comply with the provisions, laws, standards or regulations that govern these contracts. The trust contracts that public entities execute may have as their purpose the execution of urbanization projects and housing and individual residential programs, or the administration or management of resources linked to contracts that public entities as settlors execute, or the administration of funds or resources intended for the payment of obligations arising from the execution of state contracts, or the administration and investment of excess liquidity, or the execution of infrastructure projects, or any other lawful purpose. In this latter sense, the prohibition is reiterated that the trust business may under no circumstance serve as an instrument to carry out acts or contracts that the settlor cannot directly execute in accordance with the Law, by virtue of which it shall be the responsibility of the fiduciary to develop actions that allow it to prevent that when a trust operation is linked directly or indirectly with public resources, these become an instrument of fraud against the Law. Before executing a trust contract with a public entity, Authorized Entities are obliged to ensure that the same does not suffer from a lack of lawfulness due to cause or object or for any other circumstance from which such deficiency may derive in said business. In this regard, the following restrictions and limitations to which such contracts are subject must be taken into account: a) The trusts must have an object and a term precisely determined; and, b) In no case and for no reason whatsoever, through trust operations may Authorized Entities assume the fulfillment of public functions that are inherent and non-delegable to public entities as settlors.

Possibility of Pursuit of Trust Property by Obligations Generated by the Trust and in Cases of Fraud to Third Parties The assets that comprise the trust may be pursued, sequestered or attached, for damages, debts or obligations generated at the charge of the trust itself, or in those cases in which the trust was constituted in fraud to third parties and to the detriment of their rights, in this latter case it must be declared by a judge or competent judicial authority of the place of domicile of the Authorized Entity.

Verification by the Commission The Commission, acting ex officio or at the request of an interested party, may at any time verify that Authorized Entities comply with the provisions contained in these Standards, and in case of determining non-compliance with the same, it shall order such entities to correct or remedy the deficiencies or weaknesses identified by the Commission in the development of their trust operations immediately, without prejudice to other measures that it may determine. The suspension of activities as fiduciary shall also proceed in the event that regularization plans are authorized or any of the resolution mechanisms established by the Financial System Law and applicable standards. Such suspension entails the inability to execute or continue executing new operations and businesses of this kind, from the moment in which this measure has been adopted. Furthermore, such suspension of activities does not entail for the Authorized Entity exemption from compliance with the duties and responsibilities that as fiduciary correspond to it with respect to those trust operations and businesses executed until the date on which the suspension measure was adopted and notified.

Additional Prudential Measures The Commission may establish, when it deems convenient for prudential reasons, equity requirements, operational limits and other measures additional to trust operations, when Authorized Entities act as settlors.

Weighting of Trust Operations for purposes of the Capital Adequacy Index (IAC) Authorized Entities must weight their trust operations for purposes of calculating the Capital Adequacy Index (IAC), in accordance with what is set forth in Article 7, literal e) of the Standards for Capital Adequacy, Conservation Coverage and Leverage Coefficient applicable to Institutions of the Financial System, issued by the Commission.

Non-Compliance and Sanctions The contravention of the provisions contained in these Standards shall give rise to the application of sanctions according to the seriousness of the fault, in accordance with what is provided in the Financial System Law and the Sanctions Regulation in force.

Unforeseen Cases The cases not provided for in these Standards shall be resolved by the Commission, in accordance with the legal framework in force on the subject matter.

Term for Implementation of Requirements Requested from Authorized Entities Authorized Entities shall have a maximum term of six (6) months counted from the date of entry into force of these Standards, to adapt their trust operations to the provisions contained in these Standards. Trust operations agreed prior to the entry into force of these Standards shall be subject to the contractual terms established in their respective contracts.

Communication of Fiduciary Services Authorized Entities that, upon the entry into force of these Standards, are already providing fiduciary services, shall have a term of thirty (30) calendar days to communicate to the Commission, by means of a Sworn Declaration, compliance with what is set forth in Article 14 of these Standards, or in its absence, present the adaptation plan to be executed within the term referred to in the preceding Article.

Effective Date These Standards shall take effect as of the date of their publication in the Official Gazette La Gaceta. 2. Communicate this Resolution to the Banking Entities, and to the Honduran Bank for Production and Housing, for the corresponding legal purposes. 3. This Resolution shall enter into force as of its publication in the Official Gazette La Gaceta. ... It is approved unanimously. ... F) ETHEL DERAS ENAMORADO, President; JOSÉ ADONIS LAVAIRE FUENTES, Proprietary Commissioner; EVASIO AGUSTIN ASENCIO R., Proprietary Commissioner; MAURA JAQUELINE PORTILLO G., General Secretary". And for the corresponding purposes, this document is extended in the city of Tegucigalpa, municipality of the Central District, on the twenty-seventh day of the month of February of two thousand seventeen. MAURA JAQUELINE PORTILLO G. General Secretary 11 M. 2017.