Circular Letter CVM/SIN 01/2013: Registration and Operation of Credit Rating Agencies – CVM Instruction No. 521/2012

CIRCULAR LETTER/CVM/SIN/NO. 1/2013
Rio de Janeiro, January 11, 2013
Subject: Registration and Operation of Credit Rating Agencies – CVM Instruction No. 521/2012

Dear Sirs,

This Circular Letter aims to provide securities market participants with the interpretation of this Department of Institutional Investor Relations – SIN regarding certain provisions of CVM Instruction No. 521, dated April 25, 2012, which regulates the activity of credit rating, particularly concerning certain transitional provisions provided in the regulation.

Article 2 of the Instruction determines that “credit rating within the scope of the securities market is an activity exclusive to a credit rating agency registered (...) by the CVM.”

On the other hand, Article 37 of the Instruction also states that “rating agencies must adapt to the provisions of this Instruction by January 1, 2013.”

Thus, from the joint interpretation of both provisions, we understand that rating agencies that have not obtained their registration by the date of 1/1/2013 are, due to this condition, prevented from issuing any new credit rating within the scope of the securities market, at least until obtaining the registration provided for in Article 2 of the Instruction at this CVM.

Furthermore, we inform that it is possible to consult which credit rating agencies are already registered with this Commission, which can be done by consulting the website www.cvm.gov.br, under the option “Market Participants”, then “General Registry Consultation”, and then; Participant Type “Credit Rating Agency.”

It is also possible to verify whether a specific credit rating agency has made any registration request, even if such registration has not yet been granted. To do so, simply consult the CVM website option “Process Consultation” under “Quick Access”. As a search criterion, part of the social name of the agency sought can be entered, for example.

Without prejudice to the above, we also understand that credit ratings issued before the deadline provided for in Article 37 of the Instruction by credit rating agencies not registered with the CVM must be considered valid, as they were issued during the adaptation period provided by regulation.

However, since this is a transitional and exceptional condition, we understand that such ratings should not be admitted indefinitely. Thus, we understand that the provisions of Article 8 of the Instruction may be applied to these cases, which allows the use for a limited time of credit ratings, as transcribed below:

Art. 8. Credit ratings issued by agencies with cancelled authorization may be used in the securities market for up to:
I – 10 (ten) business days, if there is a credit rating of the same financial asset or evaluated entity prepared by another credit rating agency; or II – 3 (three) months, if there is no credit rating of the same financial asset or evaluated entity prepared by another credit rating agency.

Finally, we inform that the interpretation presented in this Circular Letter may not necessarily represent the understanding of the CVM Board on the subject.

Sincerely,

CLAUDIO GONÇALVES MAES
Head of Institutional Investor Relations
Acting