In December/2019, the first debenture negotiation by blockchain technology occurred in Brazil and in Latin America. The asset manager Piemonte, in association with a North American fintech Horizon Globex, issued 440 bonds in the amount of BRL 150 thousand each, representing a debt issuance in the total amount of BRL 66 million. These bonds were negotiated by the asset manager with five qualified investors in a restrict digital space of smart contract, and registered in a blockchain with Ethereum technology protocol.

Piemonte’s initiative follows a recent movement initiated abroad, as the cases of the World Bank, in Australia, of the Spanish Santander, and of the French Société Générale, which also have traded debt bonds using similar technology.

Blockchain is a shared registry platform that has got visibility due to the bitcoin cryptocurrency and has attracted the attention of companies, financial institutions and investors, once it facilitates the bond trading process, with the elimination of intermediaries and reduction of costs and bureaucracy.

This pioneering transaction indicates that blockchain can be a valuable instrument for company financing in the capital market. Considering the above, it is expected future regulation by the Brazilian Securities and Exchange Commission (“CVM”) and the Brazilian Central Bank, to allow fund raising from popular savings by public offering of bonds issued by the blockchain technology.

CVM has accepted the market’s claims for flexibility and has anticipated the effectiveness of the new wording of ICVM 505 provisions regarding the securities trading by related parties on their own by intermediaries which they are not related to, and the submission periodicity of internal control reports.

In view of the above, a new exception will be added to previous ones: the related parties will be able to trade securities on their own and not by the intermediary that they are related to, in the case of negotiations intermediated by institution contractually obliged to provide information to the intermediary on transactions carried out by related parties, and which has express authorization from the third parties to provide this information (as amended by CVM Instruction 612). The effective date of the new wording of art. 25, § 1^st, ICVM 505, is March 2^nd, 2020.

Additionally, and with the purpose of reducing costs for the regulated market, the new wording of art. 4^th, §§ 4^th to 8^th, ICVM 505, changes the submission periodicity of internal control reports from semi-annual to annual, that will become effective as of April 5^th, 2020. With the date established, the obligation to submit semi-annual reports for 2019 is maintained, and the annual internal control reports becomes mandatory for the next years. The 2020 report must be prepared until April 2021.

Access the CVM Instructions here ICVM 505 – ICVM 612 – ICVM 618

Due to the non-conversion of Provisional Measure 892 (“PM 892”) into Law, that established the electronic form for publicly-held companies to perform the publications set forth in the Brazilian Corporate Law (“LSA”), CVM revokes the CVM Resolution 829, which regulated the PM 892 in the scope of the capital market, and cancels the procedures for electronic publications via the Empresas.NET system. Therefore, the publications provide for LSA are once again mandatory in printed vehicles, which are official gazette and widely circulated newspaper.

Access the CVM Resolution 838 here.

After ten years and as a result of the public hearing SDM 09/2016, CVM amends the regulation of anti-money laundering and combating the financing of terrorism (“AML/CFT”).

The new CVM Instruction 617 (“ICVM 617”), which will replace CVM Instruction 301, follows the guidelines of the Financial Action Task Force (“FATF”) and Laws No. 9,613/98, 13,260/16 and 13,810/19.

Among the innovations brought by ICVM 617, it is possible to highlight the risk-based approach, which demands a systematic policy of AML/CFT and periodic internal risk assessment. Jointly with ICVM 617, CVM has issued an explanatory note to elucidate the subjects about (i) the performance of responsible officer for the compliance of ICVM 617, (ii) the rules, procedures and internal controls and (iii) the policy of know your client – KYC.

The ICVM 617 will be effective on July 1^st, 2020, except for the rules related to Law 13,810/19, which are effective since its publication date, on December 5^th, 2019.

Access CVM Instruction and the other Laws here: ICVM 617 – ICVM 617 Explanatory Note – Law 9,613/98, Law 13,260/16 and Law 13,810/19.