Circular Letter CVM/SMI/SIN 05/17

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

Circular Letter No. 05/2017/CVM/SMI/SIN
Rio de Janeiro, December 27, 2017

To
Investment fund administrators, securities registrars, securities brokers and securities distributors Subject: Ref.: Bacen Jud and CCS

Dear Sirs/Madams,

1. As is known, in August of this year, securities brokers and distributors were included in the National Financial System Client Registry according to Central Bank of Brazil Communication 31.073. This inclusion implies that these institutions become participants in the Bacen Jud system, as provided for in its regulations.

2. With the aim of contributing to the adequate entry of participants under your jurisdiction, the CVM has been participating in the Bacen Jud Management Committee meetings, as well as technical meetings with the Central Bank team, responsible for the management of CCS and Bacen Jud, and with representatives of B3, Ancord, Anbima, and market participants.

3. In this context, the following clarifications are necessary.

Regarding investment fund quotas

4. Investment fund quotas are assets covered by Article 13 of the Bacen Jud regulations. Thus, market participants who are CCS participants and have some relationship with the quota holders of any type of investment funds must report the existence of this relationship in the CCS and comply with any blocking determinations sent via Bacen Jud. It is worth noting that there has been no recent change in this regard.

5. At this point, it is worth alerting that the National Council of Justice has been working with the inspectorates of the Courts to ensure that adequate punishment is imposed on institutions that fail to comply with judicial orders sent via Bacen Jud.

Regarding the new phase of system coverage

6. The Bacen Jud Management Committee decided, according to Central Bank Communication 31.506, published on 12/21/2017, that the first phase of the entry of brokers and distributors into Bacen Jud will take place on 01/22/2018.

7. During this first phase, the integration will be considered experimental (or assisted production), subject, therefore, to inconsistencies, failures, or bugs in the communication system with the institutions. Thus, it is particularly important that institutions work to identify any problems that occur and seek their solution with the Central Bank team responsible for the maintenance of CCS and Bacen Jud. It is advisable that these measures be taken from the first moment the Central Bank makes the test version of the system available to brokers and distributors, which is scheduled to occur on 12/26/2017.

8. Given the need for adaptation of brokers and distributors to the system, the focus of the first phase, effective from 01/22/2018, will be only the quotas of open investment funds distributed on behalf and order.

9. Thus, it is necessary to emphasize that the distributor of fund quotas on behalf and order is responsible for informing the CCS and Bacen Jud of the existence of the relationship with the quota holders of the funds they distribute, since the registrar of the fund's quotas does not know who these quota holders are. In addition, upon receiving a blocking order sent via Bacen Jud, these distributors must take all appropriate measures to ensure the effective blocking of the quotas, including informing the fund's quota registrar.

10. It is also worth clarifying that the quota registrar and the fund administrator should not inform the CCS, regarding quotas distributed on behalf and order, of the distributor's CNPJ (tax ID) as if it were a quota holder of the fund.

11. Obviously, institutions now entering the CCS/Bacen Jud system must pay attention to Central Bank communications about the system and to the provisions contained in its regulations. In particular, it is important that the institution indicate contact data in the system, as this measure facilitates contact by magistrates accessing the system, allowing for a faster and more effective solution to possible problems.

Regarding the role of securities registrars

12. At this opportune moment, it is also worth taking the opportunity to clarify, in a more general way, regarding the role of securities registrars within the scope of CCS and Bacen Jud. This point does not deal only with the registrar of investment fund quotas, but with any and all service providers authorized under CVM Instruction 543, including the registrar of fund quotas.

13. In this sense, we understand that the fact that these service providers do not have a direct commercial relationship with investors does not exempt them from observing the rules of these systems, reporting the holders of securities and effecting any requested blocks. We remind you that registrars are financial institutions, participants in CCS and Bacen Jud, and possess the necessary knowledge to attend to requests sent by these systems, as well as the duty to attend to them, in accordance with CVM Instruction 543/13.

14. It is worth noting that this is already the view expressed by SMI in Circular Letter CVM/SMI 4/15, and the CVM considers that judicial orders currently passed through the system mentioned therein must be adequately treated by registrars.

15. At this opportune moment, it is worth mentioning that the Bacen Jud Management Committee may define in the future situations where the responsibility for information should be exclusively that of another participant (such as the custodian of an asset held in central deposit, or the fiduciary administrator, in the case of an investment fund, for example). However, this possibility, once again, does not exclude the responsibility of registrars to participate and operate fully in CCS and Bacen Jud in cases of all securities (including investment fund quotas) that are subject to their registration.

New version of Circular Letter CVM/SMI 4/15

16. To conclude, SMI and SIN inform that they are preparing a revision of Circular Letter CVM/SMI 4/15, which should be completed in the first quarter of 2018. In addition to considering the participation of institutions in CCS/Bacen Jud, the revision will clarify the criteria adopted by the CVM to include (or not) letters in the judicial letters system (SOJSEI).

Sincerely,

FRANCISCO JOSÉ BASTOS SANTOS
Superintendent of Market and Intermediary Relations

DANIEL WALTER MAEDA BERNARDO
Superintendent of Institutional Investor Relations