Circular Letter CVM/SIN 04/15: Changes in Legislation Regarding Non-Resident Investors

COMMISSION OF SECURITIES AND EXCHANGE COMMISSION (CVM) Rua Sete de Setembro, 111/2 Circular Letter No. 4/2015/SIN/CVM

To: Representatives of Non-Resident Investors
Subject: Changes in Legislation Regarding Non-Resident Investors

Rio de Janeiro, July 3, 2015.

Dear Sirs,

1. With the issuance of new regulations concerning non-resident investors, Resolution CMN No. 4,373 of September 29, 2014, and CVM Instruction No. 560 of March 30, 2015, several measures must be taken to adapt to the new legislation.

2. Careful and complete reading of the new regulations is the duty of all representatives; however, in this circular letter, we will focus on the following points that require special attention:

Qualification of the Representative

3. Resolution CMN No. 4,373 determines, in paragraph 1 of Article 1 of Annex I, that the representative "must be a financial institution or an institution authorized to operate by the Central Bank of Brazil." Paragraph 2 of the same article stipulates a period of "up to 180 (one hundred and eighty) days" for the investor to promote the regularization of their representation, therefore expiring on 09/26/2015.

4. Thus, we reinforce that the current representative who does not meet the mentioned qualification must communicate, with all possible speed, their represented investor regarding the need to replace the representative.

Investments in Mutual Fund for Investment in Emerging Companies (FMIEE) and Real Estate Investment Fund (FII)

5. Resolution CMN No. 4,373 determines in Article 8 of the Annex I Regulation that foreign investment registered at the Central Bank of Brazil resulting from application made in FMIEE and FII must be classified under the provisions of the aforementioned Regulation.

6. The sole paragraph of the same article grants a period of 180 (one hundred and eighty) days from the entry into force of the Resolution for the classification to be carried out. Thus, we urge representatives to inform their clients of the need for this classification until the end of the period established in the Resolution.

Investor Registration

7. CVM Instruction No. 560 altered the qualification table for non-resident investors. From 01/01/2016, the registration of new investors must be done according to the new table. Similarly, by 01/01/2016, the representative must promote the registration update of the qualification of the entire base of their represented investors. If the investor's registration update is not carried out by this date, their registration with the Autarchy will be suspended by this Superintendence, as provided in Article 9 of CVM Instruction No. 560, with such decision communicated to the respective representative.

8. We inform that the table containing the new qualifications mentioned in CVM Instruction No. 560 has been made available in the SIE WEB system. Thus, representatives can perform new registrations with the updated table, and registration with the old qualifications is still permitted until 01/01/2016. We remind, however, that registering new investors using the old qualifications will result in updating this information until the end of the period stipulated in the Instruction.

9. Similarly, each representative may already begin updating the registration of each investor in SIE WEB, remembering that such update must be completed by 01/01/2016.

10. In this regard, we clarify that non-resident investors registered as participants in collective accounts under Article 3, item III, of CVM Instruction No. 560, may have the registration information update referred to in Article 27 of the same Instruction carried out in a consolidated manner by the holder of the collective account, without the need to fill out a new individualized declaration for each investor under Article 2 of Annex I of the aforementioned Instruction. In addition to the form signed by the holder of the collective account, electronic communication (including by means such as Swift, for example) that allows authentication of the sender, who is the holder of the collective account, will also be accepted as proof.

Duplicity of Qualification of the Non-Resident Investor

11. We have received market inquiries regarding the treatment to be given to investors who fall into more than one qualification.

12. We inform that, in these cases, the qualification that best represents the investor's situation must be indicated when registering.

13. We emphasize, however, that for those investors who possess, among others, qualifications XII – entities constituted under the form of trusts or other fiduciary vehicles, and XIII – companies constituted with bearer shares, these must be indicated.

Periodic Reports

14. From 01/01/2016, periodic portfolio reports of non-resident investors will undergo changes relative to the current ones: the consolidated monthly report by representative, the collective account (own or collective), will cease to be filled out by collective account participant, and the semi-annual report will also undergo format changes.

15. The deadline for sending the monthly and semi-annual reports has also been altered, as provided in Article 14 of CVM Instruction No. 560, and will become up to 10 (ten) business days after the end of each month for monthly reports, and up to 15 (fifteen) business days after the end of the semester for semi-annual reports. The CVM is currently developing the structure for the new report files and will subsequently communicate the new formats for the monthly and semi-annual files.

16. We remind that failure to meet the deadlines for submitting periodic reports will subject the representative to the application of a daily coercive fine, as provided in Article 23 of CVM Instruction No. 452 of April 30, 2007.

17. Until then, however, as provided in Article 28, § 1, of CVM Instruction No. 560, information must be forwarded by representatives according to the content and deadlines currently established, namely consolidated monthly reports by holder and by representative within 5 (five) business days after the end of each month, and semi-annual reports by the 15th day of the month following the end of the semester.

Submission of Documentation - Transfers between Investors

18. Article 21 of CVM Instruction No. 560 determines that the transfer of position between investors under the conditions stipulated in Article 20 of the same Instruction, as well as their respective supporting documentation, must be sent to the CVM together with the monthly report.

19. Until the new monthly report is made available to representatives, the documentation must be sent, digitized, to the inbox gie-internet@cvm.gov.br, within the same deadline as the submission of the current monthly report.

Communication of Transfer between Investors

20. It will no longer be necessary to communicate eventual transfers between different accounts belonging to the same investor starting from 01/01/2016, as such information must be provided within the monthly report.

21. Any doubts and inquiries regarding adaptations to the new regulations should be sent, via email, to the inbox gie-internet@cvm.gov.br.

Sincerely,

FRANCISCO JOSÉ BASTOS SANTOS
Superintendent of Institutional Investor Relations