November 2022

_the november│2022 edition of our Newsletter has the following highlight:

– CVM publishes guidance opinion consolidating its understandings about crypto assets and explaining the scope of its regulation

– New Reference Form demands companies’ attention on ESG, climate and diversity aspects

– CVM softens rules for small sized companies

 

_CVM publishes guidance opinion consolidating its understandings about crypto assets and explaining the scope of its regulation

 

The Brazilian Securities and Exchange Commission (“CVM”) published on October 11, 2022, Guidance Opinion No. 40 (“Opinion 40”), which unifies and synthetizes its understandings about the classification of crypto assets as securities. Opinion 40 aims to clarify CVM’s jurisdiction and to establish its powers to regulate, supervise and discipline activities of capital market members.

 

Definition of crypto assets and tokens

 

CVM defines crypto assets as digitally represented assets, protected by cryptography, which can be subject to transactions executed and stored by Distributed Ledger Technologies – DLTs. Usually, crypto assets (or their ownership) are represented by tokens, which are intangible digital securities.

 

Opinion 40 presents three token classifications: 1) payment token, which aims to replicate currency functions; 2) utility token, used to purchase or access products and services; and 3) asset-backed token, which represents one or more assets, tangible or intangible, and can fall into one or more categories.

 

On the classification of crypto assets as securities

 

Pursuant Opinion 40, crypto assets are considered as securities when it is possible to identify a digital representation of any securities exhaustively provided for in items I to VIII of article No. 2 of Law 6.385/76 and/or provided for as receivable certificates in general, according to Law 14.430/22; or when they fit into the open concept of securities provided for in item IX of article 2 of Law 6.385/76, as long as it is a collective investment contract.

 

CVM’s scope of regulation

 

In Opinion 40, CVM emphasizes that tokenization on itself is not subject to any prior approval or registration towards it, but if securities are issued for the purpose of public distribution, both the public offering itself and issuers of crypto asset tokens, market agents and market intermediaries that act, directly or indirectly, in their offering will be subject to applicable regulations.

 

Crypto economy market scholars and entrepreneurs have pointed out their concern about Opinion 40 effective legal certainty, especially regarding criteria used to disqualify a token as a security and about the omission of some issues, such as rules for investment funds. Despite this, Opinion 40 formalized previous CVM understandings, indicated future paths to be observed by legislators, and shows CVM’s openness to discussions and consultations on the subject.

 

We contributed on this subject in an article published in the Legislação & Mercado section of Capital Aberto on November 02, 2022, which can be accessed in Portuguese through the link bellow:

https://legislacaoemercados.capitalaberto.com.br/cvm-esclarece-atuacao-com-criptoativos/

 

_New Reference Form demands companies’ attention on ESG, climate and diversity aspects

 

On December 22, 2021, CVM published Resolution 59 (“RCVM 59“) to reframe the structure of the reference form (Formulário de Referência). The new reference form presented a substantial structure improvement, which is simpler and reduced the amount of information that must be disclosed by listed companies.

 

On the other hand, the new reference form requires the disclosure of information related to environmental, social and governance (ESG) aspects, social diversity in the company’s management team and comparative employee payment. It is worth mentioning that RCVM 59 adopted the “comply or explain” approach, already used in the Corporate Governance Report, for the disclosure of some information regarding ESG aspects.

 

The new reference form modifications follow global standards of information disclosure adopted by listed companies, reflect new interests of investors, and encourage initiatives implementation, in addition to reducing operational costs related to complying with regulatory obligations. The new simplified version of the reference form comes into force on January 2, 2023.

 

We contributed on this subject in an article published in the Legislação & Mercado section of Capital Aberto on November 09, 2022, which can be accessed in Portuguese through the link bellow:

https://legislacaoemercados.capitalaberto.com.br/novo-formulario-de-referencia-demanda-atencao/

 

_CVM softens rules for small sized companies

 

CVM Resolutions 166 and 168 brought more flexibility to publications required by law and to the composition of top management in small sized companies, whose definition is established in article 294-B of Law 6.404/76 (“Brazilian Corporate Law“) and applies to companies with gross revenues of less than 500 million Brazilian Reais in the last fiscal year.

 

Published on September 1st of this year, Resolution 166 allows small sized companies to make legal publications through the Empresas.NET or Fundos.NET systems, in order to reduce costs.

 

Resolution 168, published on September 20, was created to regulate changes made by Law No. 14.195/2021 to the Brazilian Corporate Law, which aimed, among other goals, to make it easier to open a company and to reduce corporate bureaucracy. The resolution allows the same professional to accumulate the position of chairman of the board of directors and the position of chief executive officer (or main executive) of a company.

 

With the flexibility introduced by both resolutions, more companies are expected to list themselves.

 

We contributed on this subject in an article published in the Legislação & Mercado section of Capital Aberto on November 15, 2022, which can be accessed in Portuguese through the link bellow:

https://legislacaoemercados.capitalaberto.com.br/companhias-de-menor-porte-contam-com-flexibilizacoes/

November 2019

_ the November | 2019 edition of our Newsletter has the following highlights:

– Brazilian Securities and Exchange Commission’s public hearing regarding the minimum percentage required for the proposition of lawsuits by shareholders

– Brazilian Securities and Exchange Commission decides on layering case for the first time

– Carneiro de Oliveira Advogados law firm and its partner Gyedre Carneiro de Oliveira are highlights in the law yearbook “Anuário Análise Advocacia 500 | 2019

_ Brazilian Securities and Exchange Commission’s public hearing regarding the minimum percentage required for the proposition of lawsuits by shareholders

On October 10th, 2019, the Brazilian Securities and Exchange Commission (“CVM”) issued a public hearing regarding a normative ruling’s minute that reduces the minimum percentage required for the proposition of lawsuits by shareholders (“Proposal”).

The initiative came from suggestions presented by the Working Group created through the Joint Ordinance MF/CVM 92/2018, along with the Ministry of Economy, to study and propose the improvement of protection measures for minority shareholders.

Pursuant to article 291 of Law No. 6.404/76 (“Brazilian Corporation Law”), the Proposal sets a scale that reduces the minimum percentage of equity interest required for the proposal of lawsuits regarding manager’s liability provided for in article 159, paragraph 4 of the Brazilian Corporation Law, and the liability against controlling companies, in accordance to article 246, paragraph 1, item “a”, of the Brazilian Corporation Law.

According to the survey made by CVM’s Economic Analysis and Risk Management Counsel (“ASA”), the Proposal provides the minimum percentage according to the following division of companies based on the respective capital stock value:

 

Capital Stock Range

Minimum Percentage

R$0,00 a R$100.000.000,00

5%

R$100.000.001,00 a R$1.000.000.000,00

4%

R$1.000.000.001,00 a R$5.000.000.000,00

3%

R$5.000.000.001,00 a R$10.000.000.000,00

2%

acima de R$10.000.000.000,00

1%

 

Comments and suggestions regarding the division above, as well as the possibility of extension of the definition of scale to the following minimum percentages provided for in the Brazilian Corporation Law, shall be sent to CVM until December 6th, 2019:

  1. the judicial requirement of exhibition of books, in accordance with article 105 of the Brazilian Corporation Law;
  2. the convening of a shareholders whenever the officers do not comply with a justifiable request that a meeting be called, in accordance with article 123, sole paragraph, item “c” of the Brazilian Corporation Law;
  3. the requirement to disclosure information regarding the negotiation of securities by managers and the terms and conditions of their management agreements, in accordance with §1° of article 157 of the Brazilian Corporation Law; e
  4. the requirement to disclosure information regarding subjects within the competence of the fiscal council, in accordance with §6° of article 163 of the Brazilian Corporation Law.

ADDITIONALLY, THE PUBLIC HEARING OPENS A SPACE TO DISCUSS THE CONVENIENCE OF THE REVISION THE SCALES FIXED IN CVM NORMATIVE RULINGS N° 165 AND 324, WHICH REFERS TO THE MINIMUM PERCENTAGE NECESSARY TO REQUIRE THE MULTIPLE VOTING PROCESS TO ELECT BOARD MEMBERS AND THE INSTALLATION OF THE FISCAL COUNCIL, RESPECTIVELY.

The Proposal can be accessed in Portuguese at:

http://www.cvm.gov.br/noticias/arquivos/2019/20191010-1.html

_ Brazilian Securities and Exchange Commission decides on layering case for the first time

On October 1st, 2019, CVM’s Board decided, for the first time, on a case of layering, which consists in the violation of item “I” and “II”, “b”, of CVM’s Normative Ruling No. 8/1979 (“ICVM 8/79”). The Sanctioning Administrative Proceeding (“PAS”) was filed against the defendant (“Defendant”), according to the Reporting Officer, President Marcelo Barbosa, in order to investigate alleged operations to create artificial layers of offers to purchase and sell various assets in the corporate book.

According to Barbosa, the manipulation of assets’ price occurred through the following steps:

  1. creating false liquidity by inserting artificial offers on the opposite side of the corporate book from those that were actually intended, forming layers of offers without the real purpose of being executed, which changed the spread of the offering book, in order to attract investors to include or improve their offers;
  1. register, by the investor, of the intended purchase or sale offer on one side of the book (before or after the creation of false liquidity);
  1. execution of the intended offer under conditions provided by false liquidity; and
  1. once the intended offer was complete, the artificial offers were canceled.

CVM’s department of Market and Intermediary Relations (“SMI”) noted this strategy pattern in other operations, in which the interference of the Defendant, other parties’ reaction to the offers inserted by the Defendant, and, finally, the execution of a more advantageous offer to the Defendant than those prior to its performance was remarked.

Therefore, it was stated that the Defendant had been using such strategies between the years of 2013 and 2017, even after being notified about the existence of possible irregularities, reinforcing the characterization of a malicious conduct, according to the report, which, according do SMI, constitutes a violation of ICVM 8/79.

Finally, CVM’s Board decided, by unanimous votes, to impose a fine of one and a half times the value of the economic advantage obtained with the noncompliance of ICVM 8/79, duly restated according to the IPCA rate since the date of the last operation questioned by the prosecution until CVM’s Board decision. Besides, CVM also established the communication of this case to the Federal Public Prosecution Service of the State of São Paulo, considering the evidence of a public criminal action crime.

More information regarding the PAS can be accessed in Portuguese at:

http://www.cvm.gov.br/noticias/arquivos/2019/20191001-2.html#PAS_CVM_SEI_n__19957.006019_2018-26

_ Carneiro de Oliveira Advogados law firm and its partner Gyedre Carneiro de Oliveira are highlights in the law yearbook “Anuário Análise Advocacia 500 | 2019”

The law firm Carneiro de Oliveira Advogados and its partner Gyedre Palma Carneiro de Oliveira were named by the magazine Análise Advocacia 500 among the most admired law firms and lawyers of 2019.

The yearbook Análise Advocacia 500 presents the most admired Brazilian law firms and lawyers in different fields of Law, according to the opinion of the heads of Legal Departments of the biggest Brazilian companies.

November 2016

 

_Brazilian Central Bank extends the deadline for the delivery of the amendment to the reports on Brazilian Funds Located Abroad (“Capitais Brasileiros no Exterior”)

The Brazilian Central Bank has approved Circular Nr. 3.812, which amended matters within their powers regarding the Special Regime of Monetary and Tax Settlement (RERCT), also known as repatriation, extending the deadline for sending the amendment to the reports on Brazilian Funds Located Abroad (CBE) to December 31, 2016. The deadline for adhesion to the repatriation program remained the same, i.e. until October 31, 2016.

According to the Brazilian Central Bank, the amendment unifies the deadline for amending the CBE with the Brazilian Federal Revenue Services Normative Instruction Nr. 1.665, regarding the deadline for the delivery of available information held by financial institutions located abroad and to present the Statement of Annual Adjustment (“Declaração de Ajuste Annual”) regarding the 2014 fiscal year, within the scope of the Special Regime of Monetary and Tax Settlement, which was also extended to December 31, 2016.

The Brazilian Central Bank Circular Nr. 3.812 can be accessed at:

https://www.bcb.gov.br/pre/normativos/busca/downloadNormativo.asp?arquivo=/Lists/Normativos/Attachments/50279/Circ_3812_v1_O.pdf

The Federal Revenue Servicess Normative Instruction Nr. 1.665 can be accessed at:

http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?visao=anotado&idAto=78232

_CVM’s deliberation can expedite the analysis of tender offers

On November 04, 2016, the Brazilian Securities and Exchange Commission (CVM) issued Deliberation 756, through which CVM Collegiate delegated powers to CVM Superintendence of Securities Registration (“Superintendência de Registro de Valores Mobiliários”) to decide on requests for adoption of special tender offer procedures and for launching of a sole tender offer, pursuant to CVM Instruction 361/2002.

THE PURPOSE OF CVM DELIBERATION 756 IS TO EXPEDITE THE ANALYSIS OF TENDER OFFERS, WITH REQUESTS THAT ARE SIMILAR TO PREVIOUS REQUESTS ALREADY EXAMINED BY CVM COLLEGIATE.

CVM Deliberation 756 can be accessed at:

http://www.cvm.gov.br/export/sites/cvm/legislacao/deli/anexos/0700/deli756.pdf

_BM&FBovespa announces a second public hearing for the amendment to the rules of Level 2 and New Market special trading segments

Due to the comments received by BM&FBovespa in the first public hearing on its proposal for the amendment to the rules of Level 2 and New Market special trading segments, BM&FBovespa has announced a new proposal for this amendment, which will have a new public hearing period.

Until January 06, 2017, BM&FBovespa will receive, in the New Market e-mail address (novomercado@bvmf.com.br), comments on the new proposal for the development of Level 2 and New Market special trading segments. The closed hearing (i.e. hearing limited to the companies listed in the New Market and Level 2 special trading segments) is expected to begin on March 01, 2017.

Among the main amendments to the New Market’s rules in comparison to the first proposal presented by BM&FBovespa, we highlight the following matters:

free float: the new proposal maintained the requirement of a minimum free float of 25% of the share capital, amending the minimum percentage of 20% to 15%, in case the financial average daily volume of share trading remains equal or higher than R$25 million.

board of directors’ advisory committees: the obligation to have a statutory audit committee in office was maintained, but the obligation to have an indication and remuneration committees in office was excluded.

board of directors: the rule regarding the rounding of the calculation of the number of independent members, which was suppressed in the initial proposal, returned to the new proposal, in a way that, when the calculation of the percentage results in a fractional number, this number shall be rounded to the immediately higher whole number. Furthermore, the evaluation of the board of directors remains mandatory; however, the periodicity of this evaluation, which initially was annually, now must be made at least once during the respective term of office of the board.

transfer of control – premium fee to minority shareholders: the obligation of the purchaser to provide the minority shareholders the option to remain as shareholder of the company with the payment of a premium fee was suppressed.

tender offer due to acquisition of relevant corporate interest: the percentage of 30% in the initial proposal was revised to the acquisition or achievement of corporate interest between 20% and 30% of the share capital, at the company’s sole discretion.

exit from the New Market special trading segment: in the initial proposal the exit from the New Market special trading segment was conditioned upon the approval of shareholders holding more than 50% of the free float. In the new proposal, this quorum was reduced to 40% of the free float.

The new proposals and BM&FBovespa presentation at the press conference held with this regard are available at: http://www.bmfbovespa.com.br/pt_br/listagem/acoes/segmentos-de-listagem/sobre-segmentos-de-listagem/evolucao-dos-segmentos-especiais/

_first criminal conviction for market manipulation practices in Brazil

On November 07, 2016, the 7th Federal Court of the State of Porto Alegre delivered a decision, still subject to appeal, convicting an independent investment agent and the controlling shareholder of Mundial S.A. at the time the illegal acts took place (2010 and 2011), who was also the company’s Chief Executive Officer and Investor Relations Officer, for the crimes of market manipulation and insider trading.

IN 2012, THE FEDERAL PUBLIC PROSSECUTION (“MINISTÉRIO PÚBLICO FEDERAL”) OF THE STATE OF RIO GRANDE DO SUL ACCUSED TEN PERSONS OF CRIMINAL CONSPIRACY AND MARKET MANIPULATION  AND TWO OF THEM WERE ALSO ACCUSED OF INSIDER TRADING, INVOLVING THE TRADE OF SHARES ISSUED BY MUNDIAL S.A. CVM ACTED AS ACCUSATION ASSISTANT IN THIS CRIMINAL CLAIM.

The decision granted confirmed the prison sentence against each of the defendants (replaced by restrictive right measures, which are (i) community service activities; and (ii) pecuniary contribution in the amount of 50 minimum wages in favor of social institutions, for each of them), as well as the following fines:

  • By the independent investment agent: fine in the amount of R$ 2,328,382.00, monetarily adjusted as from July 26, 2011, plus 31 daily fines, each of them equivalent to 15 minimum wages in force on December 2010, monetarily adjusted until the date of payment; and
  • By the controlling shareholder: 85 daily fines, each of them equivalent to 15 minimum wages in force on July 2011, and 31 daily fines, each of them equivalent to 15 minimum wages in force on December 2010, all monetarily adjusted until the date of payment.

The decision aforementioned can be accessed at: http://www.cvm.gov.br/export/sites/cvm/noticias/anexos/2016/20161111-sentenca-mundial.pdf