Circular Letter CVM/SOI 01/13

CIRCULAR LETTER/CVM/SOI/N° 01/2013
Rio de Janeiro, June 14, 2013.
SUBJECT: General guidelines on the entry into force of CVM Instruction No. 529, OF NOVEMBER 1, 2012.

Dear Sir,

CVM Instruction No. 529/12 (“ICVM No. 529/12”) established the Ombudsman service within the securities market and will enter into force on 01.07.2013. This Circular Letter, issued by the Superintendent of Protection and Orientation to Investors (“SOI”), aims to clarify the main aspects that will undergo changes in the routine interaction of this Superintendency, on behalf of the CVM, with the participants to whom the norm is directed, in the treatment of demands from investors and the general public.

The establishment of the Ombudsman within the securities market is a natural consequence of its growth and is in line with the current stage of development and maturity of this market in Brazil. In this sense, the creation of effective mechanisms to provide service to investors, especially individual investors, in order to provide satisfactory guidance and solutions for their complaints, doubts, and inquiries proves fundamental for building a solid and long-term relationship with the investing public.

By extending to the scope of products and services related to the securities market the operation of Ombudsman offices already structured to comply with Resolution of the National Monetary Council (CMN) No. 3,849, of March 25, 2010, the CVM intends to provide investors with better service conditions.

The expected effect of the Ombudsman's operation is the reduction of the search for service at other government agencies, insofar as the existence of a “second instance” service channel within the institution can provide significant improvement in the relationship between market participants and their investors.

Furthermore, the CVM intends that, within the scope of its operation, as a result of the Instruction in question, the treatment of complaints and inquiries received by the CVM be improved, notably with regard to the average time of action. Another important aspect will be a more efficient criterion for the initiation of Administrative Processes, which may occur after the appreciation of the participant's manifestation regarding which the inquiry/complaint was made.

We alert that the clarifications provided herein do not dispense with the reading of CVM Instruction No. 529/12, which can be accessed on the CVM's website (www.cvm.gov.br) under the item “Legislation and Regulation”, in the left-hand band of the initial screen, sub-item “CVM Acts”.

CONTENT

1. Recipients of the Norm

In accordance with the instruction in question, the institutions that hold registration as the following participants must establish the Ombudsman service:

i. Members of the securities distribution system (art. 2, item I);
ii. Custody service providers (art. 2, item II);
iii. Certificate issuing agents (art. 2, item III); and
iv. Book-entry action service providers (art. 2, item IV).

It should be noted that § 2 of art. 2 provides that the Ombudsman offices of institutions authorized to act as members of the distribution system (art. 2, item I) must attend to demands related to autonomous investment agents contracted by such institutions.

It is also worth highlighting that: i. institutions that already have an organizational component of Ombudsman, in accordance with the regulation of the National Monetary Council, may use the same service to comply with the obligation to this CVM (art. 4, §1); ii. institutions that are part of the same economic group may establish a single organizational component of Ombudsman that will act on behalf of all members of the group (art. 4, §2); and iii. the institutions listed above do not need to establish an Ombudsman if they exclusively have clients who are employees and other persons linked to the institution or its economic group, or qualified investors, in accordance with the applicable regulation (art. 2, §5).

Art. 3 of the Instruction establishes the figure of the Ombudsman, who is responsible for the Ombudsman service in the institutions to which the obligation to establish this service is directed and who must be linked to the institution. The Instruction establishes a series of conduct standards and procedures, as well as specific obligations for such a representative.

Furthermore, only for the purposes of the CVM's operation in attending to demands directed to it and the resulting interaction with the participant, the board of investor relations of open companies and other issuers of securities admitted to trading on regulated markets and the board responsible for the unit holder service of investment fund administrators are equated to the Ombudsman, in accordance with art. 14 of the norm.

2. Registration of the Ombudsman

With the entry into force of the norm in question, the Ombudsman comes into existence within the scope of the CVM, briefly, the representative of the participants to whom CVM Instruction No. 529/12 is directed, for the service to the investor. Among its obligations is the necessary interaction with this CVM as a result of the possibility of its activation to provide clarifications and measures regarding the public demands received by the Autarchy.

Art. 11 of the Instruction in question establishes that it is the duty of institutions authorized to act as members of the distribution system, custody service providers of securities, certificate issuing agents, and book-entry action service providers to inform and keep updated the data regarding their Ombudsman offices with the CVM, in accordance with the regulation that provides for the registration of securities market participants (CVM Instruction No. 510/11).

In this sense, starting from 12.06.2013, it will be possible to insert the information “Ombudsman”, “E-mail”, “Address”, and “Telephone” (collectively “Ombudsman registration information”) into the CVM Participants Register. Regarding the procedures for carrying out such insertion in the CVM register, we alert to the following differentiation:

In the case of institutions authorized to act as members of the distribution system, custody service providers of securities, certificate issuing agents, and book-entry action service providers: the inclusion of the Ombudsman's registration information will be carried out by the user responsible for updating the participant's registration through the CVMWeb tool, available on the CVM's website, via the link “Registration Update” in the left-hand band of the CVM's initial page, then, in the sequence “Participant Type” / “General Data Change” / “Registration Update” / “General Data”.

In the case of securities issuers as well as investment fund administrators: considering that for such participants, directors who are already provided for by other norms are equated to the Ombudsman, within the scope of which they are already responsible for sending information to this CVM, and that, therefore, are already in the registration information database, the inclusion of the Ombudsman's registration information will occur by linking to the information that is already made available to the CVM, which will be carried out by the system itself, dispensing with the action of the participant.

Still in the case of investment fund administrators, in accordance with article 65, XII, of CVM Instruction No. 409/04, and article 16 of CVM Instruction No. 529/12, we inform that the CVM systems will use the director responsible for the activity as the initial contact reference.

If the fund administrator intends, based on article 65, Sole Paragraph, of the same Instruction, to indicate another person who meets the requirements established therein, they must update this information directly through access, in the “Document Submission” option of the CVMWeb system, to the “Responsible” tool available in “Document Submission via Form” / “Registration Information” / “Type of Information: Occasional”.

3. CVM Interaction with Participants' Ombudsman Offices

Aiming to simplify the service to the public provided by the CVM, the orientation and protection area for investors of this Autarchy will forward demands received through its public service channels, especially the Citizen Service – SAC, to the Ombudsman of the institution subject to the demand, for the adoption of measures established in art. 1 of ICVM No. 529/12, namely: receive, register, analyze, instruct, and respond to requests that have not been satisfactorily resolved by the institution's usual service channels.

In such a situation, provided for in art. 10 of the Instruction, the participant must present a manifestation within 15 days reporting the service provided as well as the measures adopted, or, in case of justified impossibility of attending to the demand, the reasons for such impossibility and the new deadline for forwarding the measures and solutions. We alert that the deadline extends to 60 days when it concerns a demand related to investments in funds that have their origin in Decree-Law No. 157, of February 10, 1967 (§§ 1 and 2 of art. 10).

Upon receiving the manifestation from the Ombudsman, the Superintendent of Protection and Orientation to Investors may not initiate an administrative process if it considers that the demand was adequately responded to by the Ombudsman (art. 10, §3) and elements determining the ex officio action of the CVM are not present. It is important to observe that demands closed without the need to initiate an Investor Complaint Process will not be included in the Public Service Bulletin, issued annually by the SOI, which is based only on investor complaint processes initiated by the CVM.

The forwarding of the demand received from the investor directly to the participant's Ombudsman, as well as the response from the participant, will be carried out through the CVM's Citizen Service – SAC 1 (www.cvm.gov.br, in “Talk to the CVM”), until this functionality is available in the said system.

1 We alert that alternatively to the SAC, demands may be forwarded to the electronic address indicated by the Ombudsman in their registration, in the event of unavailability of the SAC for this function. In this case, the forwarded email will guide the form of sending the manifestation to the CVM.

Access to this tool will be through CVMWeb (link in the upper left part once the CVM SAC environment is accessed) whose login is performed with the user's CPF and password.

Upon first access to the system, the Ombudsman must register as a CVMWeb user, via the link “Not yet registered, click here”. It is worth emphasizing that this procedure is not confused with the insertion of the Ombudsman's registration data in the Autarchy's Participants Register, a procedure described in the previous item.

In the system registration operation, the Ombudsman will create their access password to CVMWeb. In the case of securities issuers, as well as providers of portfolio administration service, the directors of investor relations and of the unit holder service, respectively, equated to the Ombudsman, by already having obligations to send documents to the CVM, as a result of other norms, are already CVMWeb users.

When accessing the Citizen Service, through the Ombudsman's login in CVMWeb, the system's user registration interacts with the Participants Register, identifying that user as Ombudsman. In this way, access to specific functionalities in the Citizen Service environment will be allowed, as the external responsible party to the CVM for attending to the demand.

Every time a demand is delegated to the Ombudsman by the SAC, they will receive an email alerting to the received delegation, containing the protocol number of the investor's complaint or inquiry.

By accessing the CVM SAC (CVM website / “Talk to the CVM” / “Citizen Service” / CVMWeb login), the demand to be answered will be available in the “Service Response” link, to the left of the main page of the CVM SAC environment. By accessing this link, the Ombudsman will choose the option to query pending response demands on the “Select query option” screen. The CVM SAC will return the list of demands to be answered by the Ombudsman, which they will access by clicking on their respective protocol.

The participant's manifestation through their Ombudsman must be presented in the “5 - Service Result” field, and it is still possible to send an attachment in the “6 - Attached Files” field, alerting that it is not possible, at the moment, to send files in PDF format.

The Ombudsman's manifestation may be forwarded to the citizen, after its analysis, and may be complemented or give rise to an administrative process, as already mentioned. In the case of information covered by the confidentiality hypotheses provided for in applicable legislation (tax, operations and services in the capital market, etc.), the CVM will observe specific procedures to ensure that only the authorized person has access to such information.

The absence of the participant's manifestation within the 15-day deadline (or 60 days, in accordance with art. 10, §1 of the Instruction in question), observing the provision in §2 of the same art. 10, will imply the initiation of a Complaint Process through which a letter will be sent to the complainant, with a provision for a coercive fine. In these cases, the response must also contain the justification for the absence of manifestation within the deadline of CVM Instruction No. 529/12.

4. Reports

CVM Instruction No. 529/12 also establishes as a duty of the Ombudsman to develop statistics and reports regarding the demands received to serve as a subsidy for the adoption of measures that mitigate the occurrence of operational and service failures, in order to contribute to the improvement of internal controls and the quality of services provided in the securities market (art. 1, sole paragraph, item II).

In this sense, in accordance with art. 9, item II (c/c item I) of ICVM No. 529/12, the Ombudsman must prepare and forward to the institution's administration bodies, by the last business day of the months of January and July, a quantitative and qualitative report regarding the Ombudsman's operation, containing proposals for corrective measures or improvement of procedures and routines, relative to the semester closed in the month immediately preceding the delivery date.

Furthermore, art. 12 of the Instruction provides that the Ombudsman must prepare a report regarding the semesters ending on June 30 and December 31 of each year, within 60 days after the closing of each semester, in the form of Annex 12 of ICVM No. 529/12. The first report will cover the work developed by the Ombudsman in the second semester of 2013.

The Superintendent of Protection and Orientation to Investors will be available to participants to clarify any doubts that persist after reading this Circular Letter, together with CVM Instruction No. 529/12, given the entry into force of the norm on 01.07.2013.

Finally, it is reiterated the expectation that the entry into force of the cited norm will result in significant improvement in service procedures to investors, both in their interaction with participants and in the processing of demands that are forwarded to this CVM.

Sincerely,

JOSÉ ALEXANDRE CAVALCANTI VASCO
Superintendent of Protection and Orientation to Investors