Circular Letter CVM/SMI 02/09

CIRCULAR LETTER CVM/SMI No. 002/2009
São Paulo, August 17, 2009.

To
Directors responsible for compliance with CVM Instruction No. 301, of 1999, and CVM Instruction No. 387, of 2003.

Subject: Clarifications on Client Registration

Dear Sirs,

1. This Circular Letter aims to provide intermediaries with clarifications regarding the client registration process in light of technological advances that open the possibility of adopting procedures not expressly described in the regulations.

2. The Securities and Exchange Commission (CVM) understands that it cannot ignore the dynamics of the contemporary market, but also that, without prejudice to this, it cannot neglect registration, as well as the resulting procedure (registration). Indeed, registration is not only a product of compliance with legal requirements, but, above all, an instrument of investor protection, characterized, furthermore, as a means of risk management for the intermediary. Moreover, as is well known, registration is an important support in combating money laundering and even market offenses.

3. In this way, this Agency considers it important to clarify the acceptable limits for the introduction, in client registration, of procedures made possible by technological development, since their adoption cannot prejudice the performance of the aforementioned functions.

4. Thus, intermediaries may adopt new registration procedures provided that (i) they do not infringe any regulatory provision regarding client registration and are in line with the purposes of the regulation; (ii) the adopted procedures are subject to the institution's internal control policy and to the verification, control, and recording mechanisms described in the corresponding Procedure Manuals; and (iii) the application of that policy is capable of being proven or monitored by the self-regulatory entities and by the CVM itself. Especially with regard to item "ii" above, we clarify, in accordance with the decision of the Collegiate Body referred to below, that controls must cover, at least, the designation of specialized organizational components; the establishment of reporting lines/responsibility; the creation of flows for the validation of documents or decisions and for obtaining approvals; the implementation of means of documentation and recording of the practice of acts; the adoption of adequate information technology systems, etc.

5. It is emphasized that the CVM will not pre-analyze any differentiated procedures, with each participant bearing the responsibility to certify that the procedures they wish to implement meet the aforementioned requirements, as well as that they are sufficient to ensure compliance with and the objectives of the regulation. Regarding the functions of registration and some of the recommended internal control procedures, we recommend reading the vote delivered by Director Otavio Yazbek, and followed by the other members of the Collegiate Body, in a meeting on 08/04/2009 (available on the CVM's website).

6. In summary, although the CVM considers it reasonable to replace some more traditional forms of registration with more agile procedures, it stresses that, in no way, will the implementation of procedures that do not strictly meet the requirements set forth in item 4, as well as the purposes sought by the regulation, be considered regular.

Sincerely,

Signed original by
Waldir de Jesus Nobre
Superintendent of Market Relations and
Intermediaries