CVM conducts publics hearing on alteration of CVM Instruction 480

On December 7, 2020, the Brazilian Securities Commission (CVM) conducted a public hearing on the draft of a new resolution proposing changes in CVM Instruction 480, which covers the registration of issuers of securities (“Draft”).

The objective of the Draft is to reduce the costs borne by issuers of securities and to improve the information regime to which issuers are submitted, with inclusion of information related to the ESG criteria (Environmental, Social and Corporate Governance). In the investigations carried out before preparation of the Draft, the CVM took into consideration the input received from market entities and the regulatory costs related to external consulting.

Reduction of the cost of regulatory compliance

The main alterations proposed in the Draft involve the information required in the Reference Form.

As a way to simplify and rationalize the provision of information by issuers, the following alterations were proposed to the Reference Form:

1. Elimination of information already provided by issuers in other documents that must be publicly disclosed periodically, such as financial statements, bylaw amendments and shareholders’ agreements;
2. Reduction of the period covered by most of the information required on the Form, from three to one financial year. However, the Forms presented prior to request for registration of distribution of securities will have to continue covering the three previous financial years and the current one;
3. Reorganization of the formatting of the Reference Form to simplify and optimize the document; and
4. Elimination of the obligation to disclose successive communications about some types of transactions with related parties and similar transactions (in this case, as long as the transactions are carried out on a routine basis, in the normal course of business and subject to a  process of negotiation and approval, the issuer will have the option to disclose it one time only, with waiver of the need for additional communications each time the materiality criterion is attained in subsequent transactions).

The Draft also proposes to restrict the duty to maintain periodic and occasional information on the Internet for three years, so that such duty will only apply to issuers registered in category A that have securities listed for trading in an organized exchange and that have outstanding shares. At present, that obligation applies to all issuers registered in category A, indiscriminately.

Environmental, social and corporate governance questions (ESG)

With respect to the improvement of the provision of information related to the ESG criteria, the Draft contains the following principal innovations:

1. Dismemberment of “socioenvironmental” risk factors in the Reference Form to separate items for social, environmental and climatic questions;
2. The requirement for the issuer to express a position about (a) the adoption or not of a materiality matrix and performance indicators on social and environmental questions; and (b) the relevance of the Sustainable Development Objectives announced by the United Nations in the context of its business activities;
3. The obligation of issuers that do not disclose sustainability reports or equivalent documents to explain the reason for not doing so (“practice or explain”); and
4. The introduction of new information requirements linked to environmental, social and corporate governance questions, including: (a) aggregated data on the diversity of the management bodies and indication of the channels, if any, by which critical questions in environmental and social themes reach the knowledge of the board of directors; (b) clarifications on whether the compensation of the directors, officers and other executives is affected by socioenvironmental indicators; and (c) disclosure of information about the diversity of the workforce and differences in the levels of remuneration.

The CVM also intends to establish a situation for ex officio cancellation of registration of issuers when they fail to present a request for registration of a public offering of securities in the minimum amount of R$ 50,000,000.00 in the 12 months after obtaining registration.

One of the objectives of this provision is to more efficiently allocate the resources of the CVM itself, by preventing issuers already present in the market or with real perspectives of accessing it from being overlooked in favor of issuers that do not have those characteristics. The measure, however, will not apply to issuers that are already registered.

Suggestions and comments on the Draft should be sent in writing by March 8, 2021 the SDM (Superintendency for Market Development) of the CVM at the e-mail address “audpublicaSDM0920@cvm.gov.br”.

More information along with the full text of the Draft (in Portuguese) can be found at the site of the CVM (www.cvm.gov.br).