The Brazilian Securities and Exchange Commission ("CVM") published, on 3/24/2023, in order to mitigate the high number of inquiries and requirements in relation to the applications for registration provided for in CVM Resolution 161, dated 7/13/2022 ("RCVM 161"), the CVM/SRE Circular Letter 4/2023 ("Circular Letter").
The referred Circular Letter establishes and consolidates the general guidelines for applications for registration as a Manager of Public Offerings of Securities ("Manager"), in the following terms:
The application for registration:
Firstly, the Circular Letter warns that the deadline (July 1st, 2023) for applying for registration as a public offering coordinator is approaching.
The Circular Letter clarifies that the condition of being a member of the Brazilian Financial and Capital Markets Association ("ANBIMA") or adherent to the Public Offerings Code is not a condition for obtaining the registration as a Manager.
Still with regard to registration, CVM clarifies that non-financial institutions registered as Coordinators may only act in public offerings subject to the automatic registration rite if they are subject to the supervision of a self-regulatory entity that enters into a specific technical cooperation agreement with CVM. In this regard, CVM informed that, to date, it has not entered into an agreement with any self-regulatory entity.
From the responsible directors:
The Circular Letter establishes that the preliminary analysis of the request for registration as a Manager shall be conducted by ANBIMA, the analysis report being sent to the SRE. On submitting the technical report to the SRE, ANBIMA shall maintain at the disposal of the CVM the information and documents on which its report is based, including information relating to the responsible managers. The SRE is responsible for the analysis of the approval or rejection.
Access to the Coordinators system:
The coordinator system will be the means used to request registration changes or cancellation of the registration. For Coordinators to access the CVM system, it will be necessary for their officers to register in the CVMWeb system.
The scope of work as a Registered Coordinator:
The CVM highlighted that the authorization as a Coordinator does not allow the regulated company to act as an intermediary in any other type of securities distribution, whether primary or secondary, carried out in stock markets, commodities and futures exchanges, organized over-the-counter or non-organized over-the-counter markets.
Thus, the registration dealt with in RCVM 161 authorizes registered institutions to act exclusively as Coordinators in public offerings for distribution of securities distributed by the rites defined in CVM Resolution 160, of 07/13/2022 ("RCVM 160").
The restrictions on the accumulation of functions of the responsible directors:
With the purpose of facilitating the identification, by the regulated companies, of practical situations in which the accumulation of functions by the officers in charge of public offering intermediation activities and of compliance with rules, policies, procedures and internal controls represents a conflict of interest, the Circular Letter states that among the activities that cannot be accumulated by the officer in charge of public offering intermediation activities, in addition to the prohibitions already provided in RCVM 161, are also those of (a) distribution, (b) treasury, and (c) proprietary or third-party trading desk.
If other potential conflicts of interest are identified, the regulated party should consult SRE for clarification.
Of portfolio managers and securitization companies:
Securitization companies and portfolio managers must follow the rules described in their respective specific norms when conducting public offerings of securities, as well as carry out the distribution of securities in accordance with RCVM 160.
As far as rules of conduct are concerned, such regulated persons must comply with RCVM 161, as determined in the specific regulation.
The absence of a board of directors in the Coordinator's corporate structure:
In the absence of a board of directors, the attribution of responsibilities regarding the intermediation activity of public offerings of securities distribution and the compliance with rules, policies, procedures, and internal controls may be carried out in the meetings of the executive board or of the partners, by means of registration in the minutes and provided that these documents are registered with the competent body.
The hiring of Investment Advisors ("IA"):
The registration as a coordinator of non-financial institutions does not allow the hiring of an IA, under any circumstances. However, nothing prevents IAs from acting in public offerings of securities coordinated by public offering coordinators that are not financial institutions, provided they are contacted by financial institutions participating in the distribution consortium.
For more information, please contact our Capital Markets team at our office ([email protected]).