On August 23, 2021, the Brazilian Securities Commission (CVM) issued Resolution 44, which updates the provisions on disclosure of information regarding material acts or facts, trading of securities pending announcement of a material act or fact and disclosure of information on securities trading, as well as revokes CVM Instruction 358/2002 (“ICVM 358” and “Resolution”).
The Resolution, besides emerging from the process of revising and consolidating the CVM’s normative acts (progressively accomplished in line with Decree 10,139/2019), also involves significant alterations in comparison with ICVM 358.
Among these alterations is the inclusion of a new chapter, exclusively to deal with improper use of privileged information (insider trading). Art. 13, § 1, of the Resolution (part of that chapter) contains an objective list of the situations where improper use of inside information in trading will be presumed, including the following:
(i) a person uses knowledge of material information not yet disclosed to the market to trade in securities;
(ii) the controlling shareholder (direct or indirect), the administrators (directors or officers), members of the oversight board and the company itself (in relation to its own securities issued), engage in trading based on material information not yet disclosed;
(iii) the individuals listed in item “(ii)”, as well as those who have a comercial, professional os trusting relationship with the company and access material information which has not yet been disclosed, are aware that said information is considered relevant (material); and
(iv) information will be considered relevant (material) as of the moment studies or analyses are initiated regarding: (a) corporate restructuring (spin-off, merger, amalgamation or transformation of company type); (b) change in control of the company; (c) decision to delist the company; or (d) decision to change the trading venue or trading segment of the securities issued by the company.
All the presumptions contained in the referred list are relative, so that they must be analyzed together with other elements indicating whether or not there was any illicit trading. Furthermore, according to Art. 13, § 2, of the Resolution, the referred presumptions can be utilized together.
On the other hand, Art. 13, § 3, of the Resolution determines the situations where the presumptions do not apply:
(i) cases of acquisition through private trading of shares held in treasury resulting from the exercise of purchase options according to stock option plans granted to executives, employees or outsourced service providers as part of remuneration previously approved by a general meeting; and
(ii) trading of fixed-income securities through repo transactions (combined commitments for repurchase by sellers and resale by buyers), for settlement on a pre-established date, prior to or on the maturity date of the instrument in question, with predefined yield or other parameters.
The Resolution maintains the prohibition contained in Art. 13, § 4, of ICVM 358, which forbids the trading of securities by the company itself, its controlling shareholders, officers, directors and members of the oversight board in the 15 days before the disclosure of quarterly accounting information and the annual financial statements.
Among the innovations introduced by the Resolution on this theme, Art. 14, § 1, determines that the referred blackout period applies regardless of the existence of material information pending disclosure or the intention of the trading. Furthermore, § 2 clarifies the form of counting the period specified in Art. 14: it excludes the announcement day, but only allows trading on that date after the accounting information is disclosed to the market.
Finally, according to Art. 17 of the Resolution, the adoption of a policy on disclosure of material acts or facts – previously mandatory for all listed companies by force of Art. 16 of ICVM 358 – is now mandatory only for companies that cumulatively: (i) are registered in category A; (ii) have been authorized by a market administration entity to trade shares in a securities exchange; and (iii) have shares in circulation (i.e., shares not owned by the controller, parties related to it, or administrators, and shares held in treasury).
The Resolution will take effect on September 1, 2021.
More information, as well as the full text of the Resolution (in Portuguese) can be found at the website of the CVM (www.gov.br/cvm).
