The Securities and Exchange Commission of Brazil (CVM) published, on 04.04.2023, Circular Letter CVM/SSE 4/2023, which provides guidance on the characterization of Receivables Tokens or Fixed Income Tokens (TR) as securities, intended for service providers involved in the tokenization activity ("exchanges" or "tokenizadoras"), credit consultants, structurers, and credit rights assignors.
Among the main guidelines of the Letter, we highlight:
CVM Guidance Opinion No. 40/2022 ("Guidance Opinion 40"):
On October 11, 2022 CVM released Guidance Opinion 40, which consolidated the understanding on the application of securities regulation to certain cryptoactive securities.
In order to clarify the terms of the Guidance Opinion 40, CVM, by means of the Official Letter, informed that the characterization of a certain asset as a security does not depend on the previous manifestation of the Autarchy. Thus, it is up to the private agents to evaluate if the regulation of the capital market is applicable to the distributed products.
If the tokens are characterized as securities, the rules on issuer registration and public offerings must be respected, as well as the provisions on intermediation, bookkeeping, custody, centralized deposit, registration, clearing, settlement and administration of organized markets for trading securities.
Tokens referenced to receivables or TR:
The Securitization Superintendency (SSE) understood that the advertisement of investment in TR can be characterized as a public offering, under the terms of CVM Resolution 160/2022, even when carried out exclusively for previously registered people, in the case of sending a communication that is considered massified.
In certain cases, the SSE understands that there is a securitization transaction, which, when publicly offered, is equivalent to a Certificate of Receivables or other securitization security. Even though the token may not be directly equivalent to a Certificate of Receivables or other securitization security, under the terms of Law 14,430/2022, the SSE understands that the TRs, in certain cases, may be considered securities due to their characterization as a publicly offered collective investment contract (CIC).
It should be noted that public offerings in which there is co-obligation of the grantor or third parties for the fulfillment of the tokens are also considered as CIC, since the effort of the grantor or third parties for the success of the investment is relevant to the expectation of economic benefit to investors. In this sense, SSE added that, even with the civil assignment of the credit right to investors, the formalization does not de-characterize the legal nature of the TR as a publicly offered security.
In general, SSE understands that the entrepreneur or third party effort will be satisfied if the tokens are backed, linked or representative of credit rights or securities, whose selection, risk analysis, pricing, acquisition, maintenance, custody or management activities, whether of the credit right(s) or its cash flow, including collection activities, are performed, jointly or separately, by third parties other than the investor itself.
Thus, regardless of the formalization of the distributed security, the nature of a security will be characterized whenever the expectation of economic benefit derives from the effort made by the entrepreneur or third party, for example, grantor, originator, "exchange", consultancy or other structurer, and the other requirements of the Howey Test are present (determining to decide whether a certain security or contract has the legal nature of a security), or whenever there is a de facto equivalence to the economic essence of securitization.
CVM Resolution 88/22 for the performance of TR offerings:
We remind you that CVM Resolution 88/22 provides for the public offering of securities issued by small business companies, which is carried out with exemption from registration through an electronic platform for participative investment.
The SSE notes that TR offerings of up to R$15 million can be made compatible with the regulatory model for Certificates of Receivables or other securitization securities, provided for in Law 14,430/22, and crowdfunding, and can be issued by privately-held Securitization Companies, without registration with the CVM, and conducted through platforms registered under the regime of CVM Resolution 88/22, as long as the same requirements provided for in the aforementioned Law and Resolution are met.
Thus, securitization securities issued by privately-held securitization companies can be tokenized and offered via crowdfunding platforms, which would make it possible to make the technology of the tokens compatible with that used in the infrastructure of the platforms, given the special regulatory regime of CVM Resolution 88/22, which exempts, in certain situations, the contracting of the traditional infrastructure of the capital markets.
The requirements of Law 14,430/2022 for the constitution of a securitization term or other issuing instrument must also be respected, since the TR will be legally equivalent to a Receivable Certificate, debenture or other securitization security provided for in the regulations in force. The minimum content of the securitization term must be registered in the DLT - Distributed Ledger Technology network, so that each token can be identified.
Bookkeeping
Under the terms of CVM Resolution 88/2022, the small business company, or in the case of TR offerings, the securitization company, must hire a bookkeeper for offerings.
It is worth pointing out that, according to the Official Letter, simple registrations on the DLT network are not equivalent to ownership control, and that the token does not replace the security in its book-entry or book-entry representation, nor does it act as its certificate.
For the cases in which Resolution 88/22 allows the crowdfunding platform itself to control the ownership of securities or equity interests, the platform hired to provide this service may use the records on the blockchain network, provided it is possible to control and prove ownership and the existence of transactions.
Warehouse
SSE notes that the exception to the requirement to deposit publicly offered securities applicable to offerings made through a crowdfunding platform also covers offerings of "tokenized" securitization securities issued by securitization companies. In this sense, SSE understands that securities offered through crowdfunding platforms do not need to be deposited.
Disclosure of Specific Information on Tokenized Assets
SSE emphasized the importance of complying with Guidance Opinion 40, with emphasis on items "5.1. Information on Rights of Token Holders" and "5.2. Information on Trading, Infrastructure and Token Property", in addition to the requirements of CVM Resolution 88/22.
To access the full Letter, click here. For further information, please contact our Capital Markets team([email protected]).