Artigos - Postado em: 30/06/2015

(English) Foreign investments in portfolio and programs of “Depositary Receipsts” under the guidance of the new rules brought by resolution nº 4.373/2014 Of The National Monetary council (CMN) published by the Central Bank of Brazil (BACEN)

[:en]Resolution nº 4.373 of 29 September 2014 (Resolution Nº 4.373/2014) edited by the National Monetary Council (CMN), and made public by the Central Bank of Brazil (BACEN), applies to investments in case of non-Brazilian residents in financial markets and to the capital market in Brazil, as well as to the financial transfers from Brazil to a foreign country, in foreign or Brazilian currency.

The referred Resolution improves and updates the rules applicable to the foreign investments in the Brazilian market and to the Depositary Receipts mechanism, aiming to minimize the costs. Also, it increases the legal certainty of investments by simplifying procedures clarifying given to the rules on foreign investment in the country.

The Resolution Nº. 4,373/2014 amended several provisions relating to non-resident investors regarding applications in the financial and capital markets. Among such alterations, we highlight the previous rule which provided that the resources held by such investors – account holders with domestic currency resources in banks in Brazil -could only be applied to savings deposits or time deposits in the same depositary bank account by a foreign exchange contract, in which the values to be invested should be remitted abroad and simultaneously re-enter Brazilian territory.

Positively, the new rule makes the realization of this type of investment easier, since it gives to the investors the right to achieve the mentioned applications directly, ie, without making it necessary to remit the amounts to be invested abroad and the subsequent entry of the same in Brazil (simultaneous operation of exchange).

Another change brought about by the Resolution – but this time not so positive – is described in the first paragraph of Article 2 of the Rugulation contained in Annex I, which states that the representative of the non-resident investor in Brazil shall be a financial institution or institution authorized to operate by the BACEN. However, the rule revoked provided that the mentioned representative could be a non-financial institution, and that the investor should appoint an authorized institution to operate by the Central Bank to act as co-responsible for the obligations of the representative.

In addition, the new Resolution clearly states in its Article 7 the situations in which the simultaneous exchange operations are required, which are: “(i) the conversion of holdings of non-residents in the country in investment in financial and capital markets, (ii) the transfer of application of non-resident investor through the Depositary Receipts mechanism, (iii) the transfer application of non-resident investor through the Depositary Receipts mechanism for application in financial and capital markets in the country and (iv) the transfer application of non-resident investor in the financial and capital markets for foreign direct investment modality in the country, and vice versa.”

In addition, Resolution No. 4,373 / 2014 revoked Resolution 1,927 of 05.18.1992 and brought in its Regulation contained in Annex II, provisions regarding the application of non-resident investors through the Depositary Receipts mechanism, which is also regulated by CVM  nº 559 and 560.

Depositary Receipts are certificates issued by depositary institution abroad (institution issuing the Depositary Receipts) deposited in custodian institution in Brazil (institution responsible for the control of all assets of international investors) and representative of the assets relating to (i) transferable securities issued by Brazilian companies and (ii) eligible securities to compose the reference equity (basis for calculation to verify the equity of financial institutions and other institutions authorized to operate by the Central Bank is being observed).

That is, the Depositary Receipts allow foreign investors to acquire and negotiate abroad, bonds backed by Brazilian securities.

One of the main innovations of the Resolution Nº 4.373 / 2014 refers to the fact that, from its entry into force, emissions of Depositary Receipts may be backed by any securities issued by Brazilian companies, not just in stocks, as provided by the revoked Resolution.

In addition, the new Resolution provides in Articles 5 and 6 of Regulation  found in Annex II that financial institutions based in Brazil must request the permission from the Central Bank to participate in Depositary Receipts programs and, after obtaining such authorization, require the approval of the Securities and Exchange Commission.

Finally, it is worth mentioning that on March 30, 2015 the Central Bank Circular regulating the Resolution Nº 4.373/2014 was published in the Diário Oficial (the government’s official newspaper) aiming to standardize, simplify procedures and to provide greater clarity to the provisions on investments made in the financial and capital markets of Brazil for foreign investors in the country.

The team of business consultations at the office Chenut Oliveira Santiago Sociedade de Advogados remains available for further information on this subject.

Daniela Ghader e Silva, Lawyer the team of business consultations at the office Chenut Oliveira Santiago[:]