PANAMA Law and Practice Contributed by: Kharla Aizpurua Olmos, Roberto Vidal, Miguel Arias and Eduardo Oteiza, Morgan & Morgan
7.3 Regulatory Distinction Between Funds and Dealers In Panama, the regulations do not distinguish between funds and dealers that engage in these activities. The Securities Law does make a distinction between a dealer and a fund. The Securities Law defines a “bro - ker‐dealer firm” as a legal entity engaging in the busi - ness of purchasing and selling securities or financial instruments for third parties or on its own account. The operation of a broker-dealer firm is regulated by Title III of the Securities Law and Agreement 2 of 2011 issued by the SMV. On the other hand, the Securities Law defines a “fund” (“investment company” in Pan - ama as used in the Securities Law) as a legal entity, trust or contractual arrangement that, by issuing and selling its own participation quotas, engages in the business of obtaining money from the investing public through one payment or periodical payments for the purpose of investing and trading securities, foreign exchange, metals and supplies, chattel property or any other property determined by the SMV. The opera - tion of a fund is regulated by Title VIII of the Securities Law and Agreement 5 of 2004 issued by the SMV. Both business models require authorisation from the SMV. In the case of a broker-dealer firm, the legal entity requires a licence issued by the SMV. In the case of a fund, the legal entity must be registered with the SMV. 7.4 Regulation of Programmers and Programming Panama has no regulations for programmers and the programming to develop and create trading algo - rithms and other electronic trading tools, provided the programmers are not performing trades.
For peer-to-peer trading to prosper in Panama, the Securities Law would need to be amended to spe - cifically exclude these innovative platforms from the definition of stock exchanges and establish clear rules on the types of transactions that peer-to-peer trading platforms can handle. However, fraud, money laun - dering and cybersecurity threats are big concerns for Panama’s regulators, so changes are unlikely to hap - pen very quickly. 6.7 Rules of Payment for Order Flow Payment for order flow is not regulated in Panama. 6.8 Market Integrity Principles Under the Securities Law, markets should be designed to prevent deceptive and manipulative practices or any other actions that affect market transparency, to promote fair practices in securities trading, and to encourage the development of an efficient market. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations High-frequency and algorithmic trading is not regu - lated in Panama. Market makers are regulated by Agreement 2 of 2011 issued by the SMV, which regulates securities brokers and dictates that stock exchanges must establish the rules governing market makers. The Latin American Stock Exchange has established a rulebook for mar - ket makers, which indicates that market makers are a “fundamental pillar in financial markets, providing the opportunity to expand market reach and even engage in international transactions, leading to the benefit of being more recognised in other countries”. Under said rulebook, any securities broker can apply to be a market maker, which application is subject to the consideration of the board of directors of the stock exchange. 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
8. Insurtech 8.1 Underwriting Processes
The underwriting process by industry participants in insurtech usually involves the same process as that of traditional insurance companies. There is no separate regulation applicable to insurtech. The Superintend - ency of Insurance and Reinsurance (SSR) is the local
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