Browse Profiles > Guatemala > Objectives and Principles of Securities Regulation
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Standards Compliance Index 7.50 out of 100 76
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Guatemala

Objectives and Principles of Securities Regulation

Summary
In 2004, the World Bank reported that Guatemalan authorities with assistance of the World Bank, the International Monetary Fund (IMF), and the Inter-American Development Bank (IDB) elaborated on a financial sector reform program, which was based on the findings in the Financial Sector Assessment Program (FSAP) conducted in the second half of 2000. The reform startegy focuses on financial sector legal and regulatory reforms, bank regularization and consolidation, as well as the strengthening of the Superintendence of Banks (SdB). In 2005, the International Bank for Reconstruction and Development (IBRD) reported that Guatemala made significant progress in its financial sector reform program. For example, the Guatemalan Congress approved five financial sector laws in 2001 and 2002, namely the Monetary Law, Banking and Financial Groups Law, Bank Supervision Law, Central Bank Law, and Money Laundering Law. According to the IBRD, these laws cover many shortcomings, which were revealed in the 2000 FSAP. The IBRD further stated that additional bills were submitted to Congress, such as a new Capital Markets Law. However, there is insufficient information publicly available as to Guatemala's compliance with the Principles of Effective Securities Regulation developed by the International Organization of Securities Commissions (IOSCO).

    General Overview

    In a 2004 report, the World bank stated that, in cooperation with the World Bank, the International Monetary Fund (IMF), and the Inter-American Development Bank (IDB), Guatemalan authorities developed a financial sector reform program that focuses on financial sector legal and regulatory reforms, bank regularization and consolidation, as well as the strengthening of the Superintendence of Banks (SdB) and the Central Bank. The reform program is based on the findings in the Financial Sector Assessment Program (FSAP) conducted in the second half of 2000.
    The legal and regulatory reform program covers (1) the reform of the monetary policy legal framework for the conduct of monetary and financial policy; (2) the reform of the financial sector legal framework aimed at strengthening the regulation of financial groups and creating an orderly market exit mechanism, enhancing credit risk management, and increasing access to financing; (3) the reform of the bank supervision legal framework aimed at strengthening the autonomy of the supervisory authorities, enhancing their legal and institutional capacity to supervise financial groups, and rising banking sector regulation towards international standards; (4) stronger legislation to prevent money laundering so as to reduce illegal activities and comply with international norms; and (5) the presentation to Congress of new legislation on insurance, secured transactions, and non-bank financial intermediaries, with the objective of expanding credit access (WB 2004).
    In 2005, the International Bank for Reconstruction and Development (IBRD) reported that Guatemala made significant progress in its financial sector reform program. For example, the Guatemalan Congress approved five financial sector laws in 2001 and 2002 namely the Monetary Law, Banking and Financial Groups Law, Bank Supervision Law, Central Bank Law, and Money Laundering Law. According to the IBRD, these laws cover many shortcomings, which were revealed in the 2000 FSAP. The IBRD further stated that additional bills were submitted to Congress, such as a new Capital Markets Law.
    According to a 2006 overview of Guatemalan corporate finance legislation presented by J. Toledo Cruz, trade and other financial activities in Guatemala are governed by the Commercial Code, the Securities and Merchandises Market Law, the Free Negotiation of Foreign Currencies Law, the Central Bank Organic Law, the Monetary Law, the Financial Supervision Law, the Insurance Companies Law, the Banks and Financial Groups Law, the Financial Companies Law, and the Anti-Laundering of Money and Other Assets Law. The Commercial Code primarily covers corporate activity and includes provisions on (1) commercial companies, i.e., general partnerships, limited liability companies, corporations and joint-stock companies; (2) the merger and transformation of companies and the effects of such activities; and (3) the protection of free trade, including limited legislation on antitrust and unfair competition.
    In its 2007 Doing Business Guide, the U.S. Department of Commerce describes the Guatemalan capital markets as weak and inefficient. There are 23 commercial banks with an estimated USD 13.7 billion in assets, 17 non-bank financial institutions that are primarily in the investment banking and medium and long- term lending business, and three exchange houses. The SdB is the supervisor of the financial services industry.
    In 2005, the National Stock Exchange (Bolsa de Valores Nacional, or BVNSA) reported an increase in transaction volume in securities dealings by 39% compared to 2004, having reached Q 186.59 million ($24.6 million). However, J. Toledo Cruz points out that the securities market "is still in its initial development phase, as is evidenced by the BVN's report that only 0.5% of total transaction volume is represented by private primary market operations, and only 0.6% by the secondary market (2006)".


    The Principles

    1. The responsibilities of the regulator should be clear and objectively stated.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    4. The regulator should adopt clear and consistent regulatory processes.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    8. The regulator should have comprehensive inspection, investigation and surveillance powers.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    9. The regulator should have comprehensive enforcement powers.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    15. Holders of securities in a company should be treated in a fair and equitable manner.

    There is insufficient information publicly available as to Guatemala's compliance with this principle.

    16. Accounting and auditing standards should be of a high and internationally acceptable quality.

    According to the Deloitte Touche & Tohmatsu IAS Plus website, Guatemala replaced national Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRSs) effective for 2002 financial reports. In a 2007 overview of the use of IFRSs in Guatemala, Deloitte Touche & Tohmatsu reports that IFRSs are required for all domestic listed and unlisted companies. However, since 2002, the International Accounting Standards Board (IASB) has been continuously revising IFRSs, and there is no publicly available information as to Guatemala's compliance with the most recent set of IFRSs.

    In its 2006 self-assessment, the Institute of Public Accountants and Auditors of Guatemala (IGCPA) states that Guatemalan Generally Accepted Auditing Standards (GAAS) are set by the Professional Council of Economic Sciences (Colegio Profesional de las Ciencias Economicas) of the IGCPA. The IGCPA explains that Guatemalan GAASs are not based on International Standards on Auditing (ISAs) issued by the International Federation of Accountants (IFAC). The IGCPA, which is a member of the IFAC, is responsible for the promulgation and publication of the standards.

    17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    21. Regulation should provide for minimum entry standards for market intermediaries.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    27. Regulation should promote transparency of trading.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

    30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

    There is insufficient information publicly available as to Guatemala's compliance with this principle

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    Sources of Assessment

    The publicly available information does not address Guatemala's compliance with the Principles of Effective Securities Regulation developed by the International Organization of Securities Commissions (IOSCO).

    Relevant Organizations

    Global Stock Exchange - Bolsa de Valores Global, S.A.

    Institute of Public Accountants and Auditors of Guatemala - Instituto Guatemalteco de Contadores Públicos y Auditores (IGCPA) (in Spanish only)

    Ministry of Economy - Ministerio de Economia (MoE) (in Spanish only)

    Ministry of Finance - Ministerio de Finanzas Publicas (MoF) (in Spanish only)

    National Agricultural Stock Exchange - Bolsa Agricola Nacional, S.A.

    National Stock Exchange - Bolsa de Valores Nacional, S.A. (BVNSA) (in Spanish only)

    Securities and Commodities Registry - Registro del Mercado de Valores y Mercancias (RMVM) (in Spanish only)

    Superintendence of Banks - Superintendencia de Bancos (SdB) (in Spanish only)



    Relevant Legislation/Regulation

    Securities Market and Commodities Law, 1996 - Ley del Mercado de Valores y Mercancias, 1996 (in Spanish only)

    Law of Banks and Financial Groups, 2002 - Ley de Bancos y Grupos Financieros, 2002

    Commercial Code, 1970 - Codigo di Comercio, 1970

    Financial Companies Law, 2002 - Ley de Sociedades Financieras Privadas, 2002

    Free Negotiation of Foreign Currencies Law, 2000

    Monetary Law, 2002 - Ley Monetaria, 2002

    Law of Financial Supervision, 2002 - Ley de Supervision Financiera, 2002

    Insurance Companies Law - Ley de Seguros (in Spanish only)

    Anti - Money Laundering Law, 2001 - Ley Contra el Lavado de Dinero u Otros Activos, 2001 (in Spanish only)

    Internal Regulations for Guatemalan Securities Exchange, 2006 - Refglamento Interno de Bolsa de Valores Nacional, S.A., 2006

    Regulation on the Dissemination of Information, 2006 - Reglamento Sobre Divulgacion y Actualizacion de Informacion de Entitades Emisorsas, 2006 (in Spanish only)

    Guatemalan Generally Accepted Auditing Standards, 2000 - Normas de Auditoria, 2000



    Supplementary Sources

    Central America Department of the World Bank, "Guatemala: Country Economic Memorandum - Challenges to Higher Economic Growth," Report No. 29145- GT, March 9, 2005. Available from World Bank website. Accessed on August 1, 2007. (WB 2005)

    Deloitte & Touche Tohmasu IAS Plus website. Accessed on August 1, 2007. (Deloitte IAS Plus website)

    Institute of Public Accountants and Auditors of Guatemala, "Assessment of the Regulatory and Standard- Setting Framework," Self-assessment prepared as part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, March 2006. Available from International Federation of Accountants website. Accessed August 1, 2006. (IGCPA 2006)

    Institute of Public Accountants and Auditors of Guatemala, "Response to the IFAC Part 2, SMO Self-Assessment Questionnaire," Self-assessment prepared as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, June 2007. Available form International Federation of Accountants website. Accessed on August 1, 2007. (IGCPA 2007)

    International Bank for Reconstruction and Development, "International Bank for Reconstruction and Development Country Assistance Strategy for the Republic of Guatemala," Report No. 31776-GT, IBRD, April 11, 2005. Available from World Bank website. Accessed on August 1, 2007. (IBRD 2005)

    International Federation of Accountants website. Accessed on August 1, 2007. (IFAC website)

    Toledo Cruz, J., "An Overview of Guatemalan Corporate Finance Legislation," 2006. Available from International Financial Law Review website. Accessed on August 1, 2007. (Toledo Cruz 2006)

    U.S. Department of Commerce, "Doing Business in Guatemala: A Country Commercial Guide," 2007. Available from U.S. & Foreign Commercial Service and U.S. Department of State website. Accessed on August 1, 2007. (U.S. DoC 2007)

    World Bank, "Guatemala: Financial Sector Adjustment Loan (Loan 7130-GU), Release of the Second Tranche - Waiver of One Condition Tranche Release Document," October, 2004. Available from World Bank website. Accessed on August 1, 2007. (WB 2004)
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