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In order to preserve transparency in the market and protect minority shareholders' rights the Colombian Superintendency of Securities has issued Resolutions 116 and 157 of 2002. The resolutions define some practices as illegal and others as contradictory to stock exchange practices. These regulations apply to publicly listed companies.

Resolution 116 increases restrictions on the duties of administrators and shareholder representation in shareholders meetings, especially when granting, or accepting powers of attorney to act in such meetings. Resolution 157 refers to practices on the stock exchange and in particular the pre-arrangement of certain operations in the public securities market.

Illegal practices

The Superintendency of Securities has defined the following practices as illegal, non-authorized and insecure.

  • Encouraging shareholders to grant powers to act in shareholders meetings without clearly stating the name of the proxy.
  • Granting power to participate in shareholders meetings without clearly stating the name of the proxy and its alternate.

In relation to the legal representatives of the issuer the following practices are also illegal:

  • Recommending any person to act as representative in the shareholders meetings.
  • Previously agreeing with any shareholder or shareholder's representative on proposals to be presented for consideration at the shareholders meeting.
  • Coordinating or agreeing with any shareholder or shareholder's representative a voting strategy for a proposition presented before the shareholders meeting.

In order to comply with these regulations the board of directors must adopt written procedures and control mechanisms that must be communicated to all administrators and employees of the company to assure an equal treatment of all shareholders. A compliance officer must also be appointed. The president of the board of directors must inform the stock exchange of these adopted measures and mechanisms prior to the shareholders meeting.

Actions contrary to good practice on the stock exchange

Resolution 157 guarantees stock exchange transparency by prohibiting several practices regarding the pre-arrangement of transactions in publicly traded securities. These include:

  • Participation in any way in the pre-arrangement of any condition of a sale or purchase of securities if the corresponding operations are carried out through the electronic transactional systems of the stock exchange or through centralized trading or information systems. In the secondary market the rule applies, if trading occurs as a result of public offers for stocks or bonds obligatorily convertible into stocks, including those carried out in auctions or public sales performed in the stock exchange.
  • Carrying out, collaborating, authorizing or assisting transactions that affect free price formation on the stock exchange; manipulate the price or liquidity of a determined security; simulate offers or demand of securities; artificially decrease, increase, stabilize or maintain the price, offer or demand of a determined security; block third parties' ability to interfere in offers of securities; or artificially fluctuate the quotation of a determined security.

José Luis Suárez

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