Alerts
- 16 December 2024
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BCB and CVM publish a joint resolution to simplify access to the financial and capital markets for non-resident investors
On December 3, 2024, the Central Bank of Brazil (“BCB“) and the Brazilian Securities and Exchange Commission (“CVM“) published Joint Resolution No. 13 (Resolução Conjunta nº 13) (“RC No. 13“), which aims to simplify investments of non-resident investors in portfolios (currently referred to by the market as “investments 4,373”) and facilitating the access of these investors to the financial and capital markets.
RC No. 13 will revoke, as of January 1, 2025, in its entirety, among other regulations, BCB Resolution No. 4,373, dated September 29, 2014 (“Resolution 4,373“), currently responsible for regulating these types of investment.
RC No. 13 is the result of Public Consultation Notice No. 103/2024 and will regulate flows, stocks, investor registration and the provision of information relating to investments by non-resident investors in the Brazilian financial and capital markets, replacing Resolution 4,373 and introducing innovations to this type of investment. This new regulation complements the legal framework on foreign exchange (i.e., Law No. 14,286, dated December 29, 2021), which modernized the rules applicable to the Brazilian foreign exchange market and international capital.
1. Key Innovations
The main innovations introduced by RC No. 13 include:
1.1 The possibility of waiving the hiring of a representative. Unlike Resolution 4,373, the new regulation introduces the option for non-resident investors who are natural persons to be exempt from appointing a representative in Brazil, in the following scenarios: (a) investments in securities using own resources; (b) investments in financial assets made from a non-resident’s account in Brazilian reais, owned by the non-resident, held in Brazil, with the use of its own resources; and (c) investments in financial assets in Brazilian reais not conducted through a non-resident account, provided the monthly contributions per intermediary do not exceed 2 million Brazilian reais.
1.2 Expansion of the list of entities authorized to act as representatives. The range of entities eligible to serve as representatives for non-resident investors has been increased. In addition to financial institutions and other entities previously authorized by the BCB, the role of representative can now also be performed by clearing houses and clearing and settlement service providers supervised by the BCB within the scope of the Brazilian Payment System.
1.3 Revocation of the requirement for prior appointment of a custodian. RC No. 13 revoked the obligation for non-resident investors to appoint a custodian before commencing its operations, a requirement previously established by Resolution 4,373. This change reflects efforts by the BCB and CVM to streamline procedures for non-resident investors, further aligning Brazilian regulations to international practices.
1.4 Transparency in the process of switching residence. The new regulation expressly allows investors to retain the originally agreed terms of their operations in the event of a change in their resident or non-resident status, without the need to redeem or close positions. Additionally, it assigns to the investor’s relationship institution the responsibility to update the investor’s registration or provide it with the necessary information and procedures regarding its new status.
1.5 Increase of the list of assets that can serve as backing for depositary receipts. RC No. 13 increased the list of assets that can be used as backing for depositary receipts, expanding the possibilities for foreign investors to raise funds. The list now includes securities issued by securitizing companies, investment funds or other entities supervised by the CVM, in addition to the assets already provided for in Resolution 4,373, those being: securities issued by Brazilian publicly held corporations, credit securities that are eligible to compose the Reference Equity (Patrimônio de Referência) issued by publicly held corporations authorized to operate by the BCB and secured real estate bills (letras imobiliárias garantidas).
1.6 Extinction of the obligation of simultaneous exchange operations and international transfers in Brazilian reais. In order to reduce compliance costs and simplify regulatory requirements, the new rule eliminates scenarios still subject to simultaneous foreign exchange transactions or international transfers in Brazilian reais, following the revocation of Resolution 4,373. This measure complements BCB Resolution No. 281, dated December 31, 2022, which had already revoked the previously mandatory cases.
1.7 Discontinuation of the Electronic Declaratory Registration, Portfolio Module (RDE-Portfolio). In line with the purpose of the changes mentioned above, RC No. 13 eliminated the requirement to register portfolio investments in the RDE-Portfolio. Consequently, existing records will no longer require updates and will remain accessible for consultation for one year after the new regulation comes into effect. Furthermore, the responsibility for providing the information required by the BCB will fall to the custodian of the assets underlying the depositary receipts.
1.8 Possibility of maintaining assets in a prepaid payment and registration account. Pursuant to RC No. 13, financial assets, securities and other types of financial investments arising from the investments referred to in such regulation may be maintained, according to their nature, in a prepaid payment account or in a registration account maintained in brokerages or securities dealerships, as applicable. The change expanded the previous provisions of Resolution 4,373, which provided for mandatory registration, bookkeeping, custody, maintenance in a deposit account in authorized institutions, or registration in systems of clearinghouses and clearing, settlement or registration service providers.
1.9 Receipt of adjustments and settlements of agricultural derivatives abroad. The new resolution exempts operations involving forward, futures, and options contracts for agricultural products entered into in Brazil by non-residents from the prohibition on receiving payments, adjustments, and other financial transactions in an account held abroad.
1.10 Definition of the information and supporting documents required. With the introduction of RC No. 13, the representative, the custodian, the intermediary and the institution that carries out the financial processing of the investments will be able to define the information and supporting documents to be required from the parties involved, according to their own assessment and criteria formally established in internal policies, considering the client’s assessment and the characteristics of the transaction.
1.11 Preservation of supporting documentation. RC No. 13 increased the minimum retention period for information on operations and supporting documents to 10 years as of the redemption of the investment, previously set at 5 years by Resolution 4,373. Exceptions were made for information and supporting documents preserved for the purposes of preventing money laundering, financing of terrorism and proliferation of weapons of mass destruction, which must follow specific regulations.
2. Effectiveness
The new regulation comes into force on January 1, 2025.
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