On September 21, Law 1870/2017 (the “Law”) was enacted, providing the regulation and supervision of financial conglomerates, as well as the inspection and surveillance regime of the controlling parties of such conglomerates. According to this law, a financial conglomerate is comprised by a set of entities, having a common controlling company, two or more national or foreign entities exercising an activity supervised by the Finance Superintendence of Colombia (“Superfinanciera”), and with an entity, at least, exercising such activities in Colombia.

In this context, the law provided that a financial conglomerate is comprised by the controlling company and its subordinates, which may be:

• Entities subject to the inspection and surveillance of Superfinanciera and its domestic and/or foreign financial subordinates.
• Foreign companies performing activities subject to the surveillance carried out by Superfinanciera and its national and/or foreign financial subordinates.
• The corporate bodies or investment vehicles through which the controlling company (referred to as financial holding company in this regulation) exercises control over the entities aforementioned. 

It should be noted that the law provided that the definition of control and subordination shall be governed by articles 260 and 261 of the Code of Commerce.
Any corporate body or investment vehicle exercising:

1. corporate body or investment vehicle having common control over the FC entities), or
2. Significant influence over the entities part of the FC (base on Art. 261(1) of the Code of Commerce, for which common shares with voting rights of those shareholders who cannot have control according to the governing laws shall not be computed).

Also, Law 1870/2017 determined that the financial holding company is the one where a corporate body or investment vehicle exercises first level control or has significant influence over the other companies comprising the financial conglomerate. For such purpose, such law defines significant influence as that event where more than fifty percent (50%) of capital belongs to the parent company, directly or through or with the participation of its subordinates, or their subordinates, for these purposes, without computing the shares with preferred dividend and no voting rights.

On the other hand, the Law provided that the financial holdings, whose registered office or place of formation is abroad, may be exempt from this regulation when they accredit to Superfinanciera that the country where they operate has a regulatory regime, comprehensive and consolidated supervision equivalent to the one set by the regulatory entity in Colombia. However, if the holding company is located in a jurisdiction without a regulation equivalent to the one provided by Superfinanciera, it may request information it considers necessary to supervise the entity operating in Colombia.

Other aspects included in this law are the powers granted to the Finance Superintendence of Colombia for the supervision of financial conglomerates, without prejudice to the other attributions of the entity for the individual and consolidated supervision. Some of them are:

• Give instructions to the companies comprising the conglomerate, related to risks management, information disclosure, conflicts of interest and corporate governance.
• Order changes in the conglomerate structure, when the existing one does not allow appropriate information disclosure, the comprehensive and consolidated supervision, as well as the identification of the real beneficiary and those companies that make part of the holding.
• Authorize the financial conglomerate to make capital investment, directly or indirectly, in insurance companies, financial institutions and the stock market pursuant to article 88 and letter b) numeral 2° of article 326 of the Organic Statute of the Financial System.
• The Superintendence shall be entitled to carry out control and supervision on the conglomerates as provided in letter l) numeral 3° of the Organic Statute of the Financial System.

Additionally, article 5 of such law established the intervention instruments, in order for the National Government to exercise intervention functions on the financial conglomerates. In this context, the intervention instruments relate to:

• Fix the proper capital levels of the financial conglomerates, based on the activities developed by the companies comprising such conglomerates and their inherent risks. However, if each financial entity which is part of a conglomerate meets the capital levels and solvency margins required by the regulation in force, solvency margins shall not be required for the conglomerates.
• Establish the criteria for Superfinanciera to exclude from the comprehensive and consolidated supervision corporate bodies and investment vehicles belonging to the conglomerate.
• Establish the parameters to determine the quality of the affiliated parties to the conglomerate and financial holding.
• Establish the exposure and concentration risk limits which the conglomerate must comply with.

The National Government shall enact the regulation of the powers granted by article 5 of Law 1870/2017, within 6 months following the entrance into force of the law.

Finally, it is necessary to note that the financial conglomerate definition only has effects for the consolidated regulation and supervision pursuant to this Law; therefore, it has no effect in accounting, tax, labor or any other terms.