8/30/2021
The Securities and Exchange Commission (CVM) has developed several mechanisms to offer more predictability, objectivity and efficiency to the Brazilian capital market, aiming at simplifying procedures to attract all kinds of investors. One of these mechanisms is carrying out several public hearings so that CVM can understand the market’s cravings to formulate more practical and updated legislative innovations.
Therefore, on August 12, 2021, CVM released the Public Hearing 05/2021, in compliance with the Regulatory Agenda published at the end of 2020, which proposes two draft resolutions (individually named Drafts ‘A’ and ‘B’) and which change the rules currently applicable to autonomous investment agents and other intermediaries in the trading on regulated securities markets.
To clarify, autonomous investment agents act as agents for the members of the securities distribution system (intermediaries), especially brokers. Its activities range from prospecting and attracting customers, receiving and registering orders, and providing information about the products and services offered by intermediaries. That way, they present the market to investors, explain the main characteristics of the products, register customers, receive and execute orders and transmit them to the trading systems, clear up operational doubts, among others.
We highlight below the main points of attention of each one of the Drafts:
- Regarding Draft A:
Draft A, if approved, shall replace CVM Resolution No. 16/2021, and will allow autonomous investment agents to:
- join more than one intermediary, eliminating the exclusivity currently provided by law, unless such exclusivity is contractually provided for. Although it is possible for the autonomous investment agent to be linked to multiple intermediaries, there are strict rules to hold each of them responsible for the acts of the autonomous investment agent; and
- organize themselves in the form of business companies, and no longer just in the form of simple companies, enabling companies of autonomous agents to raise financial resources through shares or quotas with investors.
Although the above are the most relevant aspects of Draft A, it also contains rules regarding autonomous investment agents relations between them and their clients and how such relations need to be more transparent, clearing that there is a link between the autonomous investment agents and the intermediary.
- Regarding Draft B:
On the other hand, Draft B, which, if approved, will amend CVM Resolution No. 35/2021, applies not only to independent investment agents, but to the entire chain of intermediation of transactions carried out with securities, and provides for more robust requirements with respect to disclosure of remuneration and conflicts of interest.
In other words, the intermediaries must provide clients, on a quarterly basis, with qualitative and quantitative information on the internet about the forms of remuneration and the amounts specifically involved, as well as disclose any conflicts of interest to which the intermediaries are subject. This point, in our view, should be explored when analyzing Public Hearing 05/2021 by interested parties, in order to draw a reasonable disclosure metric for the rapid movement of the market.
Suggestions and comments to the Public Hearing 05/2021 may be sent to CVM by any interested party, regardless of acting as an independent investment agent, until September 17, 2021.
Coauthors: Maria Beatriz Grella Vieira, Cassia Monteiro, Nathalia Fernandes and Luisa Oliveira Ramos
