Circular Letter CVM/SIN 03/25

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors – Center – Rio de Janeiro - RJ – CEP: 20050-901 – Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br Circular Letter No. 3/2025/CVM/SIN Rio de Janeiro, July 1, 2025

To participants in the securities distribution system.
Subject: Guidelines on the Provision of Copytrade Services.

Dear Sirs,

This Circular Letter aims to provide guidelines on the Copytrade service within the context of the financial and capital markets, in order to ensure that the professionals involved and the platforms providing the service comply with the regulations of the Securities and Exchange Commission (CVM) and other pertinent norms.

Sincerely,

Digitally signed by
MARCO ANTONIO VELLOSO DE SOUSA
Superintendent of Institutional Investor Supervision

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors – Center – Rio de Janeiro - RJ – CEP: 20050-901 – Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br

1. Definition of Copytrade Activity

Copytrade, or automatic copying of trades, is a practice that allows investors to automatically replicate investment decisions made by other traders, usually more experienced ones, through specialized platforms. By following a trader's operations, the investor replicates, in real time, the actions taken by that professional in their own investment account, which automates the decision-making process for buying and selling financial assets.

Although Copytrade is often promoted as a technological tool, when used for commercial purposes and with charges for the services provided, it assumes characteristics that can be interpreted as investment recommendations, which places it within the regulatory scope of securities analysis.

2. Copytrade and Its Characterization as a Professional Activity of Securities Analysis

According to CVM Resolution No. 20/2021, the activity of securities analysis is characterized by the production or distribution of information or recommendations with the objective of influencing investors' investment decisions. This analysis can occur through reports, opinions, or any other means of guidance.

The Copytrade service, by allowing an investor to follow a trader's operations, constitutes an implicit investment recommendation, since:

• Influence on Investment Decisions: By replicating a trader's operations, the investor follows their strategies for buying and selling assets, which constitutes direct guidance on how to manage their investments. The trader, therefore, influences the follower's investment decisions, which is a characteristic inherent to the activity of securities analysis.
• Remuneration: When the Copytrade service is offered with the charging of membership fees, monthly fees, annual fees, or other forms of recurring remuneration, it constitutes an investment recommendation service, as the trader or platform charges financial compensation for the implicit guidance being provided to investors. This type of recurring charge characterizes the practice as a professional analysis activity, as it involves influencing investment decisions in exchange for remuneration.

Therefore, in conjunction with habituality, any form of remuneration linked to the offering of Copytrade strategies, such as membership fees, monthly fees, or annual fees, constitutes the exercise of securities analysis on a professional basis, which requires prior accreditation as a Securities Analyst.

3. Accreditation of Securities Analysts

In accordance with current regulations, the activity of securities analysis requires that natural or legal persons acting in this field be duly accredited with the Association of Securities Analysts of the Brazilian Capital Market – APIMEC Brasil.

Only professionals duly accredited as securities analysts are authorized to perform activities of recommendation and analysis of investments in securities, whether directly or indirectly, as is the case with Copytrade.

The accreditation of a securities analyst ensures that the professional is subject to the conduct and responsibility regulations provided for in CVM Resolution No. 20/2021 and the APIMEC Brasil Code of Conduct, guaranteeing that recommendations are made ethically, transparently, and with due care regarding conflicts of interest.

4. Transparency Regarding Risks Involved in the Copytrade Service

It is fundamental that Copytrade platforms and professionals involved in the service promote total transparency regarding the risks associated with the practice. Although Copytrade can be a useful tool for many investors, it also presents risks, like any other type of investment in the financial and capital markets.

The recommendation for transparency involves, among other points, the disclosure of alerts regarding:

• Risk of Losses: The replication of operations by more experienced traders does not guarantee profit and may result in financial losses for the investor, as the decisions made by a trader may be influenced by various market factors, which are not always predictable or favorable;
• Market Volatility: The financial market is volatile and conditions can change rapidly, affecting the performance of replicated strategies. This can result in significant losses, especially during periods of economic instability;
• Performance History: Although a trader may have had good performance in the past, this does not guarantee that their future operations will be equally successful. It is crucial that investors are alerted that past profitability is not indicative of future profitability;
• Investor Understanding: It is imperative that platforms provide clear information about how the Copytrade service works, including details on how operations are copied, the criteria for selecting traders to be followed, and the specific risks of each strategy.

Platforms and professionals offering Copytrade must ensure that investors fully understand the risks before subscribing to the service, making risk warnings available in a prominent and clear manner.

In summary, transparency regarding the risks associated with the Copytrade service not only complies with regulatory requirements but also ensures that investors make informed decisions, minimizing possible misunderstandings and financial losses.

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Rua Sete de Setembro, 111/2-5th and 23-34th Floors – Center – Rio de Janeiro - RJ – CEP: 20050-901 – Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br

5. Operations Within the Scope of Copytrade

Additionally, we would like to emphasize that operations carried out by securities analysts within the scope of Copytrade must be conducted exclusively in a simulated environment. This applies because securities analysts must respect the blackout periods established in art. 13, items III and IV of the aforementioned resolution.

According to the aforementioned legal provisions, securities analysts are prohibited from carrying out buying and selling operations of securities assets during the blackout period. This prohibition is fundamental, as operations carried out by analysts, even in the context of Copytrade, constitute, for all legal purposes, an implicit analysis of the assets, directly impacting investors' investment decisions. That is, buying and selling operations carried out within the scope of Copytrade can be interpreted as an investment recommendation, influencing investors' decisions to follow the analyst's strategy.

For this reason, Copytrade operations must be conducted only in a simulated environment, in order to fully respect the legal restrictions imposed during the blackout period, avoiding any type of implicit recommendation or undue influence on investors' investment decisions.

6. Conclusion and Guidelines

In light of the above, we recommend that:

I. Platforms and professionals offering the Copytrade service ensure that all traders whose operations will be copied are duly accredited as securities analysts;

II. Analysts should avoid recommending assets that have relevant financial and commercial interests, especially in cases where they could benefit in the event of creating demand and liquidity for the assets, among other conflict of interest scenarios provided for in regulations and legislation;

III. Investors must be duly and adequately informed about the nature of the Copytrade service, including the risks involved, the methodology used, and how operations are replicated;

IV. Copytrade operations be conducted exclusively in a simulated environment, respecting the blackout period contained in art. 13, items III and IV of CVM Resolution 20/2021, since the operations are equivalent to analysis and directly impact investors' investment decisions.

We emphasize that non-compliance with these guidelines may result in sanctions by the CVM and the possible characterization of irregular practices in the financial and capital markets.

We are available for additional clarifications and to support the adequacy of Copytrade activities to regulatory requirements.