Circular Letter CVM/SIN No. 02/2011: Adaptation of Investment Clubs to New Regulation

CIRCULAR LETTER CVM/SIN No. 2/2011
Rio de Janeiro, May 17, 2011.
Subject: Adaptation of Investment Clubs to New Regulation

Dear Sirs,

As is well known, the CVM issued, on 04/20/2011, Instruction CVM No. 494, which provides for the formation, administration, operation, disclosure of information, and distribution of shares of Investment Clubs, and Instruction CVM No. 495, related to the preparation and disclosure of financial statements of Investment Clubs (collectively referred to as "New Instructions").

With the publication of the New Instructions, Instruction CVM 40, of 11/07/1984 (including its subsequent amendments), and Instruction CVM 259, of 01/24/1997, were revoked.

As determined by Article 45 of Instruction CVM No. 494, BM&FBOVESPA, within 90 days after the publication of the Instruction, will submit for approval a new regulation to govern the formation and operation of Investment Clubs, in light of the rules established by the new Instructions ("New Regulation").

Regardless of the publication of the new BM&FBOVESPA Regulation, the bylaws of new Investment Clubs submitted for registration with BM&FBOVESPA, from 04/20/2011 onwards, must be in compliance with the provisions of the New Instructions.

As for Clubs that were already operating at the time of publication of the New Instructions, until the publication of the New Regulation, they must observe the following rules during the adaptation period:

1. Operating Investment Clubs must adapt to the New Instructions within the period established by Article 45, first paragraph, of Instruction CVM 494/2011, that is, within 120 (one hundred and twenty) days after CVM approval of the new Regulation.

Notwithstanding, any amendments to the bylaws of Investment Clubs during the aforementioned adaptation period must be carried out in a manner that complies with the New Instructions. Therefore, any amendment implemented during this transition period will only be approved if the Club's bylaws, to the extent of the amendment, are adapted to the New Instructions.

2. Regarding the composition of the portfolio of Investment Clubs, there is no obligation for immediate compliance with the New Instructions. However, Investment Clubs may not carry out operations in violation of the New Instructions.

3. We also draw attention to the fact that, since 04/20/2011, all Investment Clubs, their administrators, managers, and other service providers must observe the prohibitions contained in the New Instructions.

Thus, by way of example, the following prohibitions must be immediately observed:

Prohibition on seeking investors using public communication services, such as the press, radio, television, and pages open to the public on the worldwide computer network, as well as by sending direct mail, including electronically (Article 11 of Instruction CVM 494/11);

Prohibition on voting at general meetings of the Club by shareholders, directors, employees, and agents of the contracted administrator or manager, and by companies affiliated with them, including autonomous investment agents who provide services to them (Article 16 of Instruction CVM 494/11);

Prohibition applicable to a shareholder who serves as the Club's manager from receiving any kind of remuneration or benefit, direct or indirect, for services provided to the Club (Article 19, § 2, item II, of Instruction CVM 494/11);

Prohibitions applicable to administrators and managers of Investment Clubs to (i) retain any benefit or advantage they may obtain as a result of their position; (ii) contract or make loans, except for the scenarios described in the sole paragraph; (iii) provide surety, guarantee, acceptance, or assume obligations in any other form; (iv) sell shares on credit; (v) promise predetermined returns to shareholders; (vi) invest resources directly abroad; (vii) acquire shares of the Club itself; and (viii) use Club resources to pay for insurance against financial losses of shareholders (Articles 22 and 23 of Instruction CVM 494/11);

Prohibitions applicable to Investment Clubs to (i) carry out operations with securities outside organized markets; (ii) acquire titles or securities issued by the administrator, manager, or companies affiliated with them; and (iii) acquire shares of investment funds administered or managed by the administrator, manager, or companies affiliated with them (Article 28 of Instruction CVM 494/11).

Prohibition on the admission of new shareholders, applicable to Clubs whose number of shareholders exceeds the maximum limit of 50 shareholders, provided for in Article 1, of Instruction CVM 494/11 (Article 45, § 4, of Instruction CVM 494/11).

Finally, we inform you that additional clarifications regarding the procedures for registration and updating of Investment Club bylaws can be obtained from the Board of Directors of the BM&FBOVESPA Central Depository, by phone at (11) 2565 4153/4704/4760, or via email at cadastro.clube@bvmf.com.br. Questions regarding the interpretation of the New Instructions may also be directed to BM&FBOVESPA or the CVM, following the procedures described in item 7 of CIRCULAR LETTER CVM/SIN No. 4/2010, of November 8, 2010, available for consultation on our website (www.cvm.gov.br).

Sincerely,

Signed original by
Francisco José Bastos Santos
Superintendent of Institutional Investor Relations