The 'Quiet Rule' And Other Recent Changes Introduced by The Brazilian Regulator in Public Offerings

The "Quiet Rule" And Other Recent Changes Introduced by The Brazilian Regulator in Public Offerings

On April 5, 2010, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) issued CVM Instruction No. 482, which amends the regulation on public offerings for distribution of securities set forth by CVM Instruction No. 400, of December 29, 2003.

The main purpose of the changes introduced by CVM Instruction 482/2010 is to harmonize CVM Instruction 400/2003 with: (i) CVM Instruction No. 476, of January 16, 2009, which deals with securities distributed with limited underwriting efforts; and (ii) CVM Instruction No. 480, of December 7, 2009, which establishes rules for registry of issuers of securities admitted for trading in the local regulated markets. It also reflects the aggregate experience of the regulator (CVM) in the application of CVM Instruction 400/2003 since its enactment.

In any public offerings there are conduct norms that must be followed and are expressly listed in article 48 of CVM Instruction 400/2003 as amended by CVM Instruction 482/2010. These norms are outlined below and apply to all the participants, comprising the issuing company, the offeror, the intermediary institutions (the latter since the signing of the contract) involved in any finalized or project public offering distribution, and the people working with them or advising them in any way (financial consultants, lawyers, accountants, auditors, etc.). In addition, the issuing company must also comply with the disclosure obligation of furnishing the periodical and eventual information required by CVM.

While the public offering has not been released to the market, the participants shall limit: (a) the release of information related to the offer to what is necessary for the objectives of the offer by alerting the recipients of the reserved character of the information transmitted; and (b) the use of the reserved information strictly to the purposes related to the preparation of the offer1.

Up to the publication date of the Distribution Closure Notice, the participants shall abstain from negotiating with securities issued by the issuing company or the offeror, or referenced in such securities. However, there are certain cases that constitute an exception to this general rule and are not subject to such restriction. These cases are the following: (i) execution of a stabilization plan duly approved by CVM; (ii) total or partial disposal of...