On February 4, 2015, the Superintendency of Relations with the Market and Intermediaries (Superintendência de Relações com o Mercado e Intermediários - SMI) of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) issued Circular-Letter/CVM/SMI/No. 03/2015, confirming that the mandatory pre-registration is required in the case of any transactions made with debentures in the local organized securities markets. The content of this document is disclosed herein.

Fastening of public access to information is a critical aspect of the regulation of the secondary market of securities. The appropriate level of transparency in the market, as well as the timely information to investors is important goals to CVM. They are sought not only by the direct action of the regulator but also by an ongoing dialogue and partnership with self regulator entities and market participants.

Thus CVM has increasingly emphasized the role of self-regulation and its integration to the regulatory regime, with new responsibilities. The dialogue between the regulator and the self regulator entities has been constant and invariably such partnership has led to improvements in the different markets under the competence of CVM.

In line with these goals, SMI has recently determined that the organized securities markets have to change their regulations so as to require the pre-registration of the conditions relating to the definitive bilateral purchase and sale transactions of debentures in over-the-counter (OTC) market. CVM is aware that the deadline for public disclosure of information of a business is essential for transparency, discovery and price formation in the secondary market.

In the exercise of the self-regulation activity, acting as auxiliary organs of CVM, the organized securities are responsible for the enforcement of the rule of pre-registration of debentures. Such role is played by means of Directors of Self-Regulation and refers to the orientation of the participants on the secondary market of debentures on the need for connection to the pre-registration system, the correction of any shortcomings at pre-registration rules and eventually to the standalone application of sanctions to the market participants.

This job of enforcement of the pre-registration rule implemented by self-regulation is being monitored closely by CVM, which may propose new measures to enhance the transparency of the market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.