CVM Resolution No. 161 Registration Regime for Underwriters of Public Offering of Securities

We present hereby the main aspects of CVM Resolution No. 161, of July 13, 2022, which becomes effective as of January 2, 2023, and sets forth the registration regime for underwriters of public offerings of securities. The regime represents a shift of part of the CVM’s supervision effort to the intermediation of the service providers due to an expected decrease in the number of offering registration with prior analysis in light of the new automatic offering registration regime of CVM Resolution No.160.

According to the new rule, the registration for underwriter of public offering of securities can be requested by (i) financial institutions or (ii) other entities acting as agents of the issuer even in case they are not financial institutions. For the latter, the registration draft allows underwriters to act in offerings subject to automatic registration only if they are under the supervision of a self-regulatory entity that enters into a specific technical cooperation agreement with the CVM.

CVM Resolution No. 161 exempts the following activities of registration: (i) the intermediation of transactions in organized markets (ii) the intermediary institution part of the syndicate not acting as an offering underwriter (iii) the electronic platform for crowdfunding investment (iv) the underwriting activities already subject to specific rules such as securitization companies, portfolio managers and issuers of promissory notes with high exposure to the market.

It is important to emphasize that underwriters who have carried out at least one public offering of securities within the last 24 months are authorized to carry out new public offerings under the terms of the specific regulation once they complete the registration process, provided that the registration filing is made by such underwriters within 180 days of the entry into force of the new Resolution (i.e. July 31, 2023).

Applicable Obligations of Underwriters

The concession and maintenance of a registration is subject to the fulfilment of several obligations, including:

• attribution of liability for the activities of (a) intermediation of public offerings of securities and (b) observation of compliance rules provided for in CVM Resolution No. 161 by officers who will be prevented of cumulating functions related to portfolio management, consulting, fiduciary trustee or any activity which may compromise its independence in the institution
• maintenance of human resources and technology appropriate to the size and type of area of operation, protected against fraud and subject to auditing and inspections
• compliance with the requirements of good reputation and non-conviction provided for in CVM Resolution No. 161
• adoption of control mechanisms of relevant and non-public information, including periodic security tests for information systems, a training program for management, employees and collaborators, as well as the adoption of a manual of confidentiality rules and conducts
• preparation of a compliance report, containing the results of the tests carried out, recommendations on possible deficiencies and a timetable of the correction of such deficiencies, as applicable, and a manifestation of the responsible officer regarding such deficiencies and the planned correcting measures
• online disclosure of updated versions of its (i) code of ethics, (ii) rules, procedures and description of internal controls and (iii) the underwriting and securities trading policy of the underwriter, its management, employees and collaborators
• annual submission of the reference form (formulário de referência) (up to March 31 of each year)
• observation of rules of segregation of activities that are to be formalized in specific guidelines in a way that the intermediation of public offerings is segregated from other activities both physically and by restrictions of access to files
• observation of compliance rules, as detailed below

Rules of Conduct

The new CVM Resolution 161 provides that underwriters must comply with the following rules of conduct:

• take all precautions and act with high standards of diligence to ensure that the information provided is true, consistent, correct and sufficient, allowing investors to make an informed decision
• publicly disclose the offerings under its coordination
• disclose any conflicts of interest
• ensure that the investment is adequate for the investors’ level of sophistication and risk profile
• ensure that the forms of communication, advertising and the language used are appropriate to the complexity of the offering and the level of sophistication of investors
• maintain all documentation related to the underwriting of public offerings of securities up-to-date and in order
• ensure that the information disclosed, and the allocation of the offering, do not privilege related parties over unrelated parties
• not to assure or suggest the existence of future results or an exemption of risks to the investor
• not to disclose any projections of future profitability in disagreement with the offering documents

Suspension Regime

Finally, the new rule provides for the possibility of suspension of the underwriter’s registration in case the obligations to disclose a reference form and to maintain a code of ethics, internal control rules and trading policy are not complied in a period superior to 12 months.

For further clarification on the matter, please contact: