The latest issue of our Brazil On The Record Newsletter is out! Every Saturday, we bring you the most important laws, decrees, administrative acts, and executive orders which have been approved by the Brazilian government — and published on the Federal Register (the Diário Oficial da União).
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BUSINESS AND INVESTMENTS
Rise in sanctions for ratings agencies
To the core: A new normative instruction by Brazil’s securities and exchange commission (CVM) promotes stricter sanctions for ratings agencies. These agencies may now be prohibited from operating for up to 20 years in Brazil if the credit note issued by them “contains false statements” or “misleads the user as to the credit situation of an issuer or a financial asset.” The increase in punishment also applies to cases of reports produced by rating companies without “compliance with the procedures and methodologies adopted by the agency.”
Other issues to bear in mind:
- The rule also establishes that a lack of diligence in the management of the fund on behalf of the administrator or fund manager constitutes as a serious violation, including “receiving any remuneration, benefit or advantage, directly or indirectly through related parties, which could undermine the independence of the fund’s investment decision-making.” In other words, it also extends the rigidity of conflicts of interest in the administration and management of investment funds.
- The instruction also addresses the rules for offering stock in the restricted mode. (Unlike the classic IPO, there is no need to register or preview the offer at the CVM and it can only be offered to up to 75 investors. The focus is on professional investors, with investments above BRL 10 million.) The change affects the possibility of offering real estate and agribusiness receivables certificates. They can now only be offered in this restricted category if issued by securitization companies registered with the CVM as publicly-held companies.
Source: Instrução nº 605, de 25 de janeiro de 2019 (Comissão de Valores Mobiliários)