The Brazilian Regulator Increases The Offer Of Securities With Restricted Efforts

On September 25, 2014, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) issued CVM Instruction No. 551 (CVM Instr. 551/2014), that amended CVM Instruction No. 332, of April 4, 2000 (CVM Instr. 332/2000), CVM Instruction No. 400, of December 29, 2003 (CVM Instr. 400/2003), and CVM Instruction No. 476, of January 16, 2009 (CVM Instr. 476/2009). CVM Instr. 332/2000 regulates the issuance and trading of Brazilian Depositary Receipts (BDRs); CVM Instr. 400/2003 regulates the public offer of securities for distribution in the primary and secondary markets; and CVM Instr. 476/2009 regulates the public offer of securities distributed with restricted efforts and the trading of these securities in the regulated markets.

The trading of securities in regulated markets1 in Brazil depends on the prior registry of the issuer with CVM. According to CVM Instruction No. 480, of December 7, 2009, there are two different categories of registry: (i) category A, which authorizes the trading of any types of securities; and (ii) category B, which excludes shares and share certificates of deposit as well as securities which attribute to the holder the right to acquire shares and share certificates of deposit as a result of the conversion or the exercise of inherent rights, provided that these securities are issued by the same issuer or by a company belonging to its economic group.

CVM Instr. 551/2014 includes the following securities, in the list of instruments which may be subject to a public offer distributed with restricted efforts in the Brazilian territory2: (i) shares issued by a company registered in category A; (ii) debentures convertible or exchangeable for shares issued by a company registered in category A; (iii) subscription bonus issued by a company registered in category A, even if they are attributed as an additional advantage to the debentures´ subscribers; (iv) certificates of deposits representing any of the securities mentioned in items (i), (ii) and (iii) above; (v) Sponsored BDRs Level III3; and (vi) structured operations certificates (certificados de operações estruturadas – COE)4. This list is contained in CVM Instr. 476/2009.

Change to CVM Instr. 332/2000

CVM Instr. 551/2014 modifies CVM Instr. 332/2000 to establish that BDRs Level III may be distributed either by public offer registered with CVM or with restricted efforts.

Changes to CVM Instr. 400/2003

The first public offering of shares issued by any company in pre-operational phase will be distributed exclusively for qualified investors. Trading on a regulated market of securities issued by a company in such condition (pre-operational) must be performed only by qualified investors for a period of 18 months from the closing of the offer. This provision will also cover the subscription bonus, the debentures convertible or exchangeable into shares and the certificates of deposit of such securities and shares.

The company will be considered operational when it presents revenue from its operations in the annual financial statement or, when available, in the consolidated annual financial statement prepared according to CVM standards and audited by an independent auditor registered with CVM.

Changes to CVM Instr. 476/2009

The limit for search of qualified investors allowed by CVM was increased from 50 to 75. The number of qualified investors who can subscribe or acquire the offered securities was also increased from 20 to 505.

The reason for the increase now admitted is to enable all investors who were consulted about the offer to participate, if they so desire, facilitating...