The Superintendency of Pensions, Securities and Insurance (SPVS) is the securities supervisor in Bolivia and is listed as an ordinary member on the International Organization of Securities Commissions (IOSCO) website. However, there is insufficient information publicly available regarding Bolivia's compliance with the Objectives and Principles of Securities Regulation promulgated by the IOSCO.

General Overview

The Superintendency of Pensions, Securities and Insurance (SPVS) is the securities supervisor in Bolivia. A report prepared jointly by the Center for Latin American Monetary Studies (CEMLA) and the World Bank (WB) and reprinted in English in 2006 notes that the immediate predecessor of the SPVS in securities supervision was the Superintendency of Securities (SV). In 1998, under the Property and Credit Law, the then three superintendencies supervising the pensions, securities and insurance sectors merged to create the SPVS. The SPVS now has three functional supervision divisions charged with the oversight of the three sectors, with its Intendancy of Securities in charge of overseeing the securities sector in the country. The SPVS is listed as an ordinary member on the International Organization of Securities Commissions (IOSCO) website. Membership in IOSCO does not require a formal declaration of adoption of the IOSCO's Objectives and Principles of Securities Regulation. There is little further information publicly available regarding Bolivia's compliance with the IOSCO Principles.

The year 1998 also saw the enactment of the Securities Market Law No. 1834, whose main purpose, per the 2006 CEMLA/WB report, is to "regulate and promote an organized, integrated, efficient and transparent securities market" (p. 5). The Law regulates all public offerings and intermediation of securities, stock exchanges, brokerage firms, investment funds and their managers, securitization and securitization corporations, stock market and over-the-counter market, risk-rating agencies, issuers, securities deposit entities, and all other entities or individuals operating in the securities market. The Law is buttressed by its implementing regulation to govern the securities market. The Law also created the Securities Market Registry (RMV) with the SPVS in its charge, to register public offering of securities, intermediaries and other market participants and to disseminate information to the public free of cost. Securities that are exempt from regulation by the Securities Market Law, i.e. the public offerings of the National Treasury (TN) and of the Central Bank of Bolivia (BCB), are also required to be registered in the RMV.

The Bolivian Stock Exchange (BBV) is the only stock exchange operating in Bolivia and acts as a self-regulatory organization. The BBV is empowered by the Securities Market Law to establish its own internal regulations that govern its activities as well as the activities of its members. It is a corporate entity whose members are the brokerage houses that transact on the exchange and they are also its shareholders. Its main functions, per the 2006 CEMLA/WB report, include registering securities, providing trading facilities to its members, providing accurate and timely information about securities traded and their issuers, supervising brokerage houses that are its members, and solving member disputes. The BBV accepts the registration of securities that are already registered in the RMV and are publicly offered on the exchange by their issuers. The Central Securities Depository (EDV) is also a self-regulatory entity and it is authorized by the SPVS as long as it is compliant with the obligations set forth in the Securities Market Law. One such obligation is that it has to set rules for its own regulation as well as the regulation of its depositors, and that these rules are approved by the SPVS.

The local capital markets, observes the 2008 report by the U.S. Department of Commerce, "act primarily as secondary markets for fixed return securities" (p. 28). They also trade short and medium term bonds from the Bolivian firms. The capital markets are, however, striving to expand local corporate bond and equity trading. Although the Securities Market Law provides the framework for the creation of a modern securities exchange, its development is hampered by social unrest and economic disturbances. A few domestic and foreign firms did, however, manage to raise capital from the Bolivian capital markets.

In 1999, the Inter-American Development Bank (IDB) approved a technical assistance loan to Bolivia in the amount of US$1.15 million (that was later scaled down to US$751,935) for a project titled "Consolidation and Development of the Securities Market." The IDB website notes that the project, that reached completion in May 2004, started with the specific objectives "to facilitate [the] drafting of suitable rules and regulations for the operation of the securities market; strengthen the Securities Administration, with support for human resource training and sufficient staffing for its operations; and to design monitoring systems and operating manuals that would provide and ensure effective market supervision." The end result would be an improvement in the quality of financial services, a boost in investor confidence in the domestic capital markets, efficient resource allocation, and creation of new sources of production and development in the national economy, the website hoped. The IDB website provides no updates on the accomplishments of the project.

The Principles

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. As the 2006 CEMLA/WB report notes, the SPVS "controls, regulates and supervises" (p. 19) the securities sector. Its role as the supervisor is set out in the Securities Market Law. The report details the mission of the SPVS as follows: "to promote the sustained development of the pensions, securities and insurance sectors, in a transparent, organized form and within the framework of prudence that avoids unnecessary risks that guarantee a controlled growth" (p. 19). In pursuance of this mission, the SPVS performs ongoing supervision of the entities through regular and follow up inspections, provides true and timely information to the market participants and the institutions that render capital market services, and educates the general user and public of their rights, obligations and benefits of participating in the sector.

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

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The BBV is the only stock exchange operating in Bolivia, and acts as a self-regulatory organization. The BBV is empowered by the Securities Market Law to establish its own internal regulations that govern its activities as well as the activities of its members. It is a corporate entity whose members are the brokerage houses that transact on the exchange and they are also its shareholders. Its main functions, per the CEMLA/WB report, include registering securities, providing trading facilities to its members, providing accurate and timely information about securities traded and their issuers, supervising brokerage houses that are its members, and solving member disputes. The BBV accepts the registration of securities that are already registered in the RMV and are publicly offered on the exchange by their issuers.

The EDV is also a self-regulatory entity and it is authorized by the SPVS as long as it is compliant with the obligations set forth in the Securities Market Law. One such obligation is that it has to set rules for its own regulation as well as the regulation of its depositors, and that these rules are approved by the SPVS.

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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. As the 2006 CEMLA/WB report notes, the Securities Market Law obliges the BBV to comply with the law, its implementing regulation, and other applicable rules and also to ensure that such law, rules and regulations are also complied with by its members. It is also required to maintain a minimum level of capital as stipulated under the law. Further, it is obliged to keep in place facilities and systems that promote efficient, transparent, continuous and effective securities transactions. It must provide true and timely information about activities conducted therein, such as stocks quoted and traded, their issuers, brokers, and dealers, and all other transactions, except confidential or privileged information. The BBV is also obligated to report any instances of non-compliance with the law and regulations by the participants to the SPVS and to report to the latter with updates relating to stock exchange quotes and transactions on a daily basis.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

9. The regulator should have comprehensive enforcement powers.

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2007 Article IV consultation report by the International Monetary Fund, however, notes that the (unpublished) 2003 Financial Sector Assessment Program (FSAP) recommendation to Bolivia to achieve greater coordination among the domestic financial regulators has not been implemented.

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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. However, the Council of Securities Regulators of the Americas (COSRA) website mentions the establishment of a Framework for Co-operation in the Americas by the COSRA members following a June 1994 meeting. The framework spells out the intention of the COSRA members to mutually assist member country supervisors in the conduct of their enforcement and regulatory inquiries; coordinate the assistance from all relevant government agencies to provide such assistance; and continually review the assistance arrangement to enhance cooperation in information exchange. COSRA has also drawn up a set of Principles for Cross-border Surveillance that includes mutual assistance by members in sharing information at their respective disposals and conducting joint supervisory activities regarding investment management firms subject to their mutual jurisdictions. The COSRA website, however, still lists the former Bolivian securities supervisor, the SV, as its member.

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.

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See Principle 12.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. According to a 2003 Capaul paper, "there is a widespread perception among Bolivians that the controllers of some "capitalized companies" understate profits or transfer them out of the company through related party transactions or other means ("tunneling")" (p. 9). The paper explains that such practices can be detrimental to minority shareholders and has therefore, generated a debate on how the capitalized companies should be governed to ensure that their activities are conducted in the best interest of the company and all shareholders. The paper adds that policymakers across the region recognize the significance of strengthening minority shareholder rights by lowering the percentage of capital or voting rights necessary to initiate corporate actions. Before 2001, it took a large percent of shareholders to call a shareholder meeting. Bolivia now requires 20 percent shareholders to call a meeting, which is still higher than its neighbors. Further, the Capaul report states that cumulative voting instead of the traditional statutory voting is allowed in Bolivia as a way of strengthening minority shareholder rights. A 2004 report from the U.S. Department of Commerce notes that several regulations are being drafted by the SPVS to prevent hostile takeovers and protect minority shareholders.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The IDB website notes that although Bolivia has its national accounting standards, issued in 2006, they are not consistent with International Financial Reporting Standards (IFRSs). Moreover, the domestic accounting framework is incomplete since Bolivia has 14 accounting standards as compared to more than forty IFRSs. With respect to auditing, the website mentions that the existing regulatory framework in Bolivia is incomplete and that the country has approved only five auditing standards and none of them are consistent with the International Standards on Auditing (ISAs) promulgated by the International Auditing and Assurance Standards Board. In March 2006, the IDB approved the funding of a project to aid the adoption of IFRSs and ISAs in Bolivia. The 36-month long project is expected to harmonize Bolivian accounting and auditing standards with international standards. The project aims to provide access to the harmonized standards to Bolivian accounting professionals; ensure that business financial reporting in Bolivia is "technically reliable" and transparent; disseminate information and train industry and professionals on the application of the newly developed standards; and introduce a voluntary certification system to improve the quality of the Association of Auditors of Bolivia (CAUB) professional services.

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.

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2006 CEMLA/WB report notes that market intermediaries are incorporated under the requirements of the Securities Market Law and the requirements set forth by the BBV. They are registered in the RMV that is maintained by the SPVS. They are subject to legal, moral, economic, and solvency requirements under the Securities Market Law.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2006 CEMLA/WB report notes that market intermediaries are subject to legal, moral, economic, and solvency requirements under the Securities Market Law.

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.

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

27. Regulation should promote transparency of trading.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia'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.

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2006 CEMLA/WB report mentions that the EDV was created in 2002, but was not yet operational in terms of securities market transactions as of the date of the original report in 2004. It was expected that it would settle transactions in 2005. The Securities Market Law stipulates, per the report, that "the objective of this entity [EDV] will be to provide the securities depository service, including the registration, custody and management of the securities registered in the account and to guarantee their safekeeping" (p. 44). The EDV is also mandated to clear and settle securities transactions. The BCB, in which the transactions are settled through the settlement account set up by the EDV, ensures the timely settlement of stock exchange transactions in the EDV through the delivery-versus-payment principle. Further, the UIF, the country's Financial Intelligence Unit, also monitors financial transactions to detect, identify, analyze, report, and prevent money laundering activities.