“Securities” comprise rights of economic content that are negotiable in the securities market, including shares, bonds, certificates, obligations, instruments resulting from securitization processes, quotas of investment funds and other instruments recognized by the law and the SIMV.

The primary market comprises the first issuance of securities, through which issuers obtain financing; the secondary market comprises subsequent transfers of securities, providing liquidity to holders.

II. Public Offering of Securities

A public offering is one addressed to the general public or to specific sectors through any means of mass communication, for the acquisition, transfer or negotiation of securities.

Every public offering requires prior authorization from the SIMV and registration of the issuer and the securities in the RMV. The application includes a prospectus with the issuer’s financial information, legal documentation, the characteristics of the securities and their risk rating. Public offerings in the secondary market are negotiated through authorized intermediaries registered with the SIMV.

Foreign issuers conducting a public offering in the DR must comply with the registration and domicile requirements established by the law and SIMV norms.

Private placements falling outside the statutory definition of public offering are not subject to SIMV approval, but the line is drawn by the manner of offering, not by the issuer’s intent; marketing practices should be vetted before any approach to Dominican investors.

III. Protection of Privileged Information (Insider Dealing Prohibition)

Information concerning acts, facts or events capable of affecting the prices of publicly offered securities is privileged while not disclosed to the public. Any person holding privileged information must refrain from trading, for their own benefit or that of third parties, in securities whose prices may be influenced by that information. Misuse or disclosure of privileged information breaches Law 249-17 and may trigger administrative, civil and criminal liability.

IV. The Securities Market Registry (RMV)

Securities, issuers and market participants must be registered in the Securities Market Registry kept by the SIMV, which is public. Registrable items include publicly offered securities, issuers, stock exchanges and other centralized trading mechanisms, securities intermediaries (brokerage firms), fund management companies and investment funds, securitization and public-offering trust companies, risk rating agencies, price providers, the centralized securities depository and external auditors, among other participants approved by the SIMV.

V. Participants in the Securities Market

The main participants in the Dominican securities market are: stock exchanges and other centralized trading mechanisms; securities intermediaries (puestos de bolsa); the centralized securities depository; fund management companies (SAFIs) and the investment funds they manage; securitization companies; public-offering trust companies (fiduciarias de oferta pública); risk rating agencies; and price providers. Each requires SIMV authorization to operate and is subject to minimum capital, governance and prudential requirements established by the law and SIMV regulations.

VI. Stock Exchanges

Stock exchanges are self-regulated entities that provide their members with the systems and services needed to trade securities in an organized, transparent and continuous manner. They must be incorporated as Dominican companies, obtain SIMV authorization and comply with the minimum capital fixed by the applicable norms. The principal equity and fixed-income exchange in the country is the Bolsa y Mercados de Valores de la República Dominicana (BVRD).

VII. Securities Intermediaries

Securities intermediation is reserved to brokerage firms (puestos de bolsa) authorized by the SIMV, which may act in the exchange and over-the-counter markets. Stockbrokers (corredores de valores) are natural persons certified and registered with the SIMV who act on behalf of brokerage firms.

VIII. Centralized Securities Depository

The centralized securities depository provides custody, transfer, clearing and settlement services for securities transactions and keeps the book-entry registry of dematerialized securities. In the DR this function is performed by CEVALDOM, under SIMV supervision.

IX. Risk Rating Agencies

Risk rating agencies assess the creditworthiness of issuers and the quality of instruments subject to public offering. They must be authorized by the SIMV and registered in the RMV before operating.

X. Investment Funds and Fund Management Companies

Law 249-17 regulates open-ended (mutual) funds, whose patrimony is variable and whose quotas are redeemable, and closed-ended funds, whose patrimony is fixed and divided into negotiable participation quotas. Closed-ended funds may invest, among other assets, in publicly offered securities and in real estate, and have become a significant vehicle for real estate and infrastructure investment in the DR.

Funds are managed exclusively by fund management companies (sociedades administradoras de fondos de inversión, SAFIs), incorporated as Dominican companies and authorized by the SIMV.

Closed-ended real estate funds and public-offering trusts are the most active alternative-investment vehicles in the Dominican market and offer preferential tax treatment; foreign sponsors typically enter through a SAFI or a public-offering trust structure (see Tax Law).

XI. Securitization Companies

Securitization companies, authorized by the SIMV, pool assets such as mortgages, leases and consumer loans to back the issuance of securities whose payment is supported by those assets.

XII. Sanctions and Infractions

Breaches of Law 249-17 are classified and sanctioned according to their gravity. The SIMV imposes administrative sanctions on market participants, including fines, suspension and revocation of authorizations; criminal and civil liability is determined by the courts, including for market manipulation, misuse of privileged information, provision of false information to the SIMV or the public, and unauthorized exercise of reserved activities.

XIII. Tax Treatment

The tax treatment of securities market instruments is governed by the Tax Code and special legislation, including Law 163-21 on the Promotion of the Placement and Commercialization of Publicly Offered Securities, which harmonized the tax treatment of public offerings to encourage issuances. Returns on publicly offered instruments are generally subject to the withholding rules described in Tax Law, section IV, with specific incentives for certain instruments and vehicles.

The tax profile of an instrument depends on the vehicle (direct issuance, fund or trust), the investor’s residence and the instrument’s registration; it should be confirmed case by case against current DGII and SIMV norms before structuring.

This publication is provided for informational purposes only and not as legal advice. Any transaction related to any of the described aspects shall require advice and be specifically consulted with the Firm in advance. © Arthur & Castillo. All Rights Reserved. Next