PANAMA Law and Practice Contributed by: Kharla Aizpurua Olmos, Roberto Vidal, Miguel Arias and Eduardo Oteiza, Morgan & Morgan
ties laws applicable to brokers establish that the indi - viduals who carry out broker services have an obliga - tion to perform their duties with the diligence and care that a person normally uses in their business. Brokers must carry out their duties with strict adherence to ethical principles, good conduct and transparency. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities There are no significant differences in the business or regulation of loans to individuals, small businesses and other entities. The regulation of loan activities is based on the use of the funds rather than the recipi - ents of the loans. Entities that extend loans fall into two categories: licensed banks or financial companies ( empresas financieras ). Licensed banks are regulated by the Banking Law, while financial companies are governed by Law 42 of 2001 (as amended, the “Finan - cial Companies Law”). An entity is regulated under the Banking Law if it raises funds from the general pub - lic (through deposits or other means) and uses those funds to extend loans to third parties. Conversely, an entity is regulated under the Financial Companies Law if it uses its own funds to extend loans to third parties. 4.2 Underwriting Processes Both licensed banks and financial companies evaluate a potential client’s creditworthiness through the Pan - ama Credit Association (APC, for its name in Span - ish), a bureau that uses tools to assess an individual’s credit rating and accurately determine the associated loan risk. Additionally, licensed banks are legally man - dated to establish credit and risk committees. These committees are responsible for assessing and approv - ing (or rejecting) loans based on the prospective bor - rower’s profile and the transaction’s credit risk. 4.3 Sources of Funds for Fiat Currency Loans In Panama, companies can raise funds from various sources, including loans or equity investments from peers or private equity firms, loans from banks and financial companies, and private or public securities offerings. Lending between peers or by private equity firms does not require licences or permits, provided
these activities do not fall under the definition of “banking business” as defined and regulated by the Banking Law and are not conducted in the ordinary course of business by the lending party. If lending to third parties becomes habitual and part of the ordinary course of an entity’s business, the entity would be classified as a financial company under the Financial Companies Law and require a licence from the MICI. Equity fundraising may be regulated depending on the target audience. In Panama, public securities offerings are governed by the Securities Law and Agreement 2 of 2010 (as amended) issued by the SMV. Under the Securities Law, a public offering of securi - ties must be registered with the SMV when the offer or sale is made by an issuer, an affiliate of the issuer, or an offeror of the issuer or its affiliate in Panama. An offer or sale of securities is considered to have been made in Panama if it is directed to individuals domiciled in Panama, regardless of whether the offer or sale originated from within Panama or abroad. All securities subject to a public offering, except those exempt from registration with the SMV, require author - isation from the SMV. A registration application and a prospectus regarding the offering must be submitted for approval to the SMV. Exemptions under the Securities Law include: (i) offers or sales of securities to persons domiciled outside the Republic of Panama; (ii) offers or sales of securities made by an issuer, an affiliate of the issuer, or an offeror of the issuer or its affiliate to no more than 25 persons, resulting in the sale of said securities to no more than ten persons within one year; and (iii) offers or sales of securities made by an issuer, an affiliate of the issuer, or an offeror of the issuer or its affiliate to institutional investors (as defined by Agreement 1 of 2001 issued by the SMV, as amended). It is important to note that while the exemption in (iii) above does not require registration, certain formalities must be observed in accordance with Agreement 1
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