Circular Letter CVM/SMI 03/2020

06/04/2020 SEI/CVM - 0970802 - Circular Letter https://sei.cvm.gov.br/sei/controlador.php?acao=documento_imprimir_web&acao_origem=arvore_visualizar&id_documento=1026473&infra_sistema=100000100&infra_unidade_atual=110000963&infra_hash=a7e21… 1/4 SECURITIES AND EXCHANGE COMMISSION OF BRAZIL Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – CEP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br Circular Letter No. 3/2020-CVM/SMI Rio de Janeiro, April 6, 2020.

To
Directors responsible for CVM Instruction No. 505/11 at intermediaries

Subject: Best practices for adopting a 'Service Level Agreement' - SLA

Dear Directors,

This Circular Letter aims to bring recommendations to intermediaries regarding measures that can be adopted to implement the 'Service Level Agreement' (SLA), which allows the investor to have due information regarding the procedures adopted by the intermediary in situations of platform instability and customer service during contingency scenarios, as well as regarding the level of performance and results to be expected in various scenarios.

I - INTRODUCTION

1. CVM Instruction No. 612/19, issued on 8/21/2019 and entering into force on 9/1/2020, brought requirements related to information technology, amending and innovating provisions of the current CVM Instruction No. 505/11, the CVM's regulation on internal controls.
2. With the advent of CVM Instruction No. 612/19, intermediaries must implement business continuity plans that establish procedures and estimated deadlines for the restart and recovery of activities in the event of interruption of critical business processes, as well as internal and external communication actions necessary and the cases in which communication must extend to clients (art. 35-A, item II, of CVM Instruction No. 612/19).
3. Among the processes considered critical, business continuity plans must cover the processes of receiving and executing orders, with the objective of preserving customer service (art. 35-A, §1st, item I, of CVM Instruction No. 612/19).
4. Furthermore, CVM Instruction No. 612/19 determines that the intermediary must place, on its digital page and in the contracting term of each trading platform, a notice with the following content: "All order transmission by digital means is subject to interruptions or delays, which may prevent or hinder the sending of orders or the receipt of updated information" (art. 32, item II, of CVM Instruction No. 612/19).
5. It also requires that the information technology structure be compatible with the volume, nature, and complexity of its operations, in order to preserve customer service even during periods of peak demand (art. 32, §1st, of CVM Instruction No. 612/19).
6. And that the technological systems used by the intermediary must be submitted to tests at adequate periodicity, fixed in its policy, to verify their functioning in stress scenarios (art. 32, §3rd, item II, of CVM Instruction No. 612/19).
7. For its part, CVM Instruction No. 505/11 requires, in its art. 30, 'caput', that the intermediary conduct its activities with loyalty towards its clients.

II - HOW INTERMEDIARIES CAN ADOPT A 'SERVICE LEVEL AGREEMENT' – SLA II.1 - Latency
8. In this current information technology scenario, the intermediary can distinguish itself in the market through the platforms it offers to its clients.
9. And it is certain that a large part of investors, even by the initiative of the intermediaries themselves, seek to carry out their operations through equipment connected to the internet, and that one of the most impactful problems for the investor is the so-called 'latency', that is, the time difference between the start of an event, in this case the sending of the order by the investor, and the moment when its effects become perceptible.
10. These platforms, in turn, to better serve the client's interests, depend on transmission conditions, whose latency indicator is one of the most sensitive, as it can generate unexpected results for the client.
11. The client, due to latency, may experience a completely different result from that previously simulated by himself regarding a certain business strategy, a situation that was not influenced by latency.
12. In this technology environment, the intermediary, to better serve its clients, must estimate the latency to be considered as an indicator that will guide its procedures to preserve service to its clients, even during periods of peak demand.

II.2 – Service in case of contingency
13. In situations of interruption of order transmission activities by platforms, the client must have access to the intermediary through service channels, such as telephone, email, chat, etc..

06/04/2020 SEI/CVM - 0970802 - Circular Letter https://sei.cvm.gov.br/sei/controlador.php?acao=documento_imprimir_web&acao_origem=arvore_visualizar&id_documento=1026473&infra_sistema=100000100&infra_unidade_atual=110000963&infra_hash=a7e21… 3/4
14. However, the client, upon losing the ability to transmit orders through the platform, will seek among the channels previously made available by the intermediary, prompt service to carry out the transmission of orders necessary to achieve the operations to be carried out by him.
15. In this situation, the intermediary, more than urgently, is required to provide its clients with prompt service, mitigating any loss of opportunities caused by the interruption of communication through the platform offered by the intermediary itself.

II.3 – SLA
16. Remembering that both pieces of information, latency and service time, must be included in the intermediary's procedures, it is considered a good practice that such information also be made available to its clients and even to the general public.
17. Regarding its clients, the intermediary can use a 'Service Level Agreement' (SLA), which can be a differentiator for the intermediary in the market, as it will position its clients regarding latency levels and service through alternative channels, in case of platform failure, for the best interest of its own clients.

III - CONCLUSION
18. We consider it a good practice that the intermediary makes available to its clients, through an SLA:
a) internal latency indicator, from the arrival of the order at the institution until its sending to B3 and the return of order statuses (insertion, execution, cancellation, rejection), from arrival at the institution until sending to the investor; and b) average service time with a 95% confidence interval, in case of interruption, for each of the channels made available:
telephone, email, chat, etc..
19. The intermediary must implement and maintain consistent and verifiable controls aimed at ensuring compliance with the above.
20. Acting in this way, it is expected that the intermediary acts in a sound and diligent manner to mitigate possible loss of business opportunities by its clients, whether due to latency issues or service issues through alternative channels, in case of platform failure.
21. It should be emphasized that both the latency indicator and the maximum service time, by the channels made available, must be reflected in the intermediary's policy.
22. Finally, we reinforce that we consider it a good practice to prominently disclose the aforementioned SLAs also to potential clients of the intermediary through its website.

06/04/2020 SEI/CVM - 0970802 - Circular Letter https://sei.cvm.gov.br/sei/controlador.php?acao=documento_imprimir_web&acao_origem=arvore_visualizar&id_documento=1026473&infra_sistema=100000100&infra_unidade_atual=110000963&infra_hash=a7e21… 4/4 Sincerely,

Document electronically signed by Francisco José Bastos Santos, Superintendent, on 06/04/2020, at 11:57, based on art. 6º, § 1º, of Decree No. 8.539, of October 8, 2015.
The authenticity of the document can be verified on the site https://sei.cvm.gov.br/conferir_autenticidade, by informing the verification code 0970802 and the CRC code 4A3280E5.
This document's authenticity can be verified by accessing https://sei.cvm.gov.br/conferir_autenticidade, and typing the "Verification Code" 0970802 and the "CRC Code" 4A3280E5.
Reference: Process No. 19957.005135/2019-17 SEI Document No. 0970802