The Brazilian Securities and Exchange Commission ("CVM") published, on August 11, 2020, Resolution CVM 3 ("Resolution"), which amends CVM Instructions 332, 359, 480 and 555 with respect to the rules related to Brazilian Depositary Receipts - BDRs.
The Resolution relaxes the requirements for fundraising by issuers and expands the possibilities for investors to access assets abroad. Among the new rules, the following stand out:
- Permits BDRs to be backed by (i) shares issued by foreign issuers with assets or revenues in Brazil or (ii) debt securities, including those issued by Brazilian public companies. Prior to the Resolution, only shares issued by publicly-held companies or the like, with headquarters and assets predominantly located abroad, could serve as backing for securities traded in Brazil.
- Permission for investors who are not considered qualified to trade in BDR Level I securities, depending on the market where such securities are listed.
- Expectation of issuance of BDRs backed by shares of index funds admitted for trading abroad.
The topic was submitted to public consultation so that market participants could propose regulatory suggestions to CVM. Among the main regulatory changes resulting from the public consultation, we highlight the following:
- Reduction of the obligations related to the translation of information produced by foreign issuers or index funds, given the technological advances that have increasingly facilitated the processing of information in a foreign language by local investors.
- Provision that the disclosure of the composition of the reference index of index funds may occur up to 3 months after the date to which they refer, in order to preserve the intellectual property of the index providers on the indices developed and provided by them, thus increasing the offer of products to local investors.
- Elimination of the requirement to disclose the full contract between the index fund and the index provider, given the commercial nature of the content of these contracts.
- Provision for automatic registration of BDR programs backed by shares of index funds, providing greater speed in launching new products.
- Extension of the possibility of issuing BDRs backed by debt securities to publicly traded companies registered with the CVM, allowing local investors to participate in issues often carried out abroad.
The Resolution shall enter into force on September 1, 2020. Click here to read the full content of the Resolution.
For further information, please contact our Capital Markets team at our office([email protected]).
