Circular Letter CVM/SRE 10/23

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, 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. 10/2023/CVM/SRE Rio de Janeiro, September 28, 2023. Subject: Guidelines on specific procedures to be observed by issuers/offering agents and intermediaries in public offerings of securities (CVM Resolution 160).

Dear Director,

The main objective of this Circular Letter is to guide issuers/offering agents of securities and intermediary institutions on how to better comply with certain aspects of the regulation governing public offerings of securities (CVM Resolution 160), aspects that are the subject of recurrent requests for clarification. Guidelines are also presented on the interpretation and understanding of certain regulatory provisions and, consequently, their application, which have been adopted by the Securities Registration Superintendence - SRE.
Observance of the recommendations listed below will contribute to minimizing potential deviations and, consequently, to reducing the need for the formulation of requirements by the SRE, in the case of offers following the ordinary procedure, or the supervisory action of the SRE, in the case of offers following the automatic procedure, as well as to allow the activities of market participants to be carried out efficiently and swiftly, in favor of investor protection and market integrity.

I. Revocation of offers under the automatic procedure

Although CVM Resolution 160 does not provide for a different procedure for the automatic and ordinary registration procedures, in the case of offer revocation, we understand that the objective was not to impose that there be a prior analysis by the SRE in the event of revocation of the offer whose registration occurred in accordance with art. 26 of the aforementioned resolution.
Since both modification and revocation can only occur when there is a "substantial, subsequent and unpredictable change in the factual circumstances existing at the time of filing the request for registration of a public offering of distribution, or that underlie it", in accordance with the caput of art. 67 of CVM Resolution 160, that is, both requests must be based on similar grounds, it would not make sense for the verification of this situation to require prior analysis by the SRE in requests for revocation of offers submitted to the automatic procedure and not require this same analysis in requests for modification of offers submitted to the same registration procedure, as explicitly stated in § 2 of the same art. 67.
Otherwise, the objective sought by the regulation itself, to give agility to the market and remove the burden from the CVM of having to previously analyze situations of offers that it understood to be entitled to a simplified procedure, would not be achieved.
Thus, we clarify that revocations of public distribution offers carried out under the automatic registration procedure do not require prior approval by the SRE, following the same dynamic provided for offer modifications that observed this same registration procedure, these revocations obviously being based on the occurrence of a "substantial, subsequent and unpredictable change in the factual circumstances existing at the time of filing the request for registration of a public offering of distribution, or that underlie it" resulting in a relevant increase in the risks inherent to the offer itself.
In this sense, in the case of offers that follow the automatic registration procedure, the eventual revocation does not require a statement from the SRE and the Market Notice that will notify investors regarding it must be presented through the SRE System (the same system through which the request for registration of the offer was requested), accounting for the revocation and its grounds. Furthermore, in accordance with art. 13 of CVM Resolution 160, said notice must also be disclosed in the locations provided for in art. 13 of CVM Resolution 160.

II. Reference Form and Financial Statements of issuers not registered for incentivized debentures (Law No. 12.431/11)

In complement to what has already been stated regarding items 22 to 25 of Circular Letter No. 9/2023/CVM/SRE, published on August 21, 2023, it is necessary to initially reaffirm our understanding that unregistered issuers must prepare and deliver a Reference Form (FRE), compatible with the FRE of companies registered in Category B, when carrying out public offerings of debentures intended for qualified investors, according to the hypothesis provided for in item IX of art. 26 of CVM Resolution 160 ("Debentures 12.431"). From such a situation does not derive any need to update said document periodically. This is because, in other words, the requirement for the FRE arises from the requirement for a Prospectus in such offerings (Debentures 12.431 that have qualified investors as their target audience), as prescribed by art. 9 of the same Resolution, with a new updated FRE being required only in the event of a new public offering by the issuer with the same characteristics.
The importance of the FRE as an integral part of the prospectus must be highlighted, as it is this document that allows investors to understand the issuer and its activities and characteristics.
Circular Letter No. 9/2023/CVM/SRE aimed to indicate the functionality of the online FRE, from Empresas.net, for unregistered issuers of Debentures 12.431. It is worth remembering that such issuers already have, by virtue of other provisions (such as current art. 89, § 3, II of CVM Resolution 160), the need to make financial statements available in the Empresas.Net system, so that the possibility was requested by the CVM and made available by B3 for these issuers to deliver the FRE using this same system (in its online FRE version). This does not mean that the FRE cannot be presented in the body of the prospectus and not incorporated by reference, although we understand that delivery via Empresas.net standardizes the procedure and facilitates the filling of information by issuers.
Finally, regarding the obligation to comply with item 11.2 of Annex B of CVM Resolution 160 ("11.2. Latest quarterly information, financial statements relating to the last 3 (three) social years closed, with the respective reports of independent auditors and subsequent events, except when the issuer does not have them because it had not started its activities prior to the said period;"), the same logic applies: since the prospectus is required, its annexes, documents that are an integral part of the prospectus, must be presented, whether incorporated by reference or as annexes proper. In particular regarding quarterly information, the same will be required for presentation in the prospectus, when applicable regarding its preparation period by the issuer.

III. Offers with Series Reopening that follow the automatic procedure for the general investor public (art. 26, item V, letter c, item 2 and item VIII, letter c, item 2)

Initially, it is important to point out that the guidelines contained in this section apply to public distribution offerings of (i) non-convertible or non-exchangeable debentures into shares and other types of securities representing debt of an issuer in the operational phase, registered in Categories A and B, intended exclusively for the general investor public when it comes to titles with identical characteristics, except for the effective remuneration rate of the instrument, to titles that have been previously distributed in a public offering intended for the general investor public, according to the hypothesis provided for in art. 26, item V, letter c, item 2 of CVM Resolution 160 and (ii) securitization titles issued by securitization companies registered with the CVM intended exclusively for the general investor public when it comes to titles (whose collateral is composed of debt title of a single issuer) with identical characteristics, except for the effective remuneration rate of the instrument, including the same collateral instrument and same maturity date, to those distributed in a previous public offering intended for the general investor public, according to the hypothesis provided for in art. 26, item VIII, letter c, item 2 of CVM Resolution 160 ("Series Reopening").
It is worth pointing out that it is precisely the fact that it is a public offering within the scope of a Series Reopening that enables the automatic registration of these offers, when directed to the general investor public, without prior scrutiny by the CVM, so it is pertinent to express the understanding of the Securities Registration Superintendence regarding the characteristics that must be present in this type of public distribution, as highlighted below:

a) The possibility of public distribution offerings under the automatic procedure of Series Reopening for the general investor public only applies to hypotheses (i) and (ii) listed in paragraph 12 of this Circular Letter;

b) As defined in items 2, letters c, of items V and VIII, of art. 26, the Series Reopening offer must have the same terms and conditions as the initial offer and the titles must have characteristics identical to the titles issued in the initial offer of the series, with the exception of the effective remuneration rate of the instrument, which, unlike the nominal rate defined in the issuance instrument, may vary due to eventual premium or discount on the issuance price in relation to the instrument's curve or due to market conditions;

c) Series Reopening cannot reach an investor public different from the original public;

d) The issuance instrument of the security initially offered (initial offer of the series) must contain the provision for Series Reopening, specifying the volume and term of the offer of the new titles to be issued in the Series Reopening and describing the possibility of priority in the allocation of current investors (investors in the initial offer of the series) during the Series Reopening;

e) Communications to security holders regarding the exercise of the right of priority in allocation within the scope of the Series Reopening must be made on the CVM (Empresas.Net), issuer, and fiduciary agent websites, and it is additionally recommended some type of direct communication with investors through usual channels (e-mail or other);

f) The documents of the initial offer must specify what will be the destination of resources in an eventual Series Reopening, if such possibility is provided for in the initial issuance instrument;

g) The documentation of the Series Reopening offer must be prepared from the update of the documents of the initial offer (Prospectus and Offering Circular);

h) The Series Reopening offer must reference, in the Prospectus and Offering Circular, the request and registration numbers of the initial offer of the series;

i) The price of the security offered in the Series Reopening will have its value defined by the market and there may be premium or discount due to market conditions, with the possibility of carrying out a bookbuilding procedure;

j) Series Reopening must observe the sufficiency of guarantees placed at the disposal of the investor.

Finally, it is worth highlighting the possibility of reopening series in offers for professional and qualified investors, although this is not a necessary requirement for conducting offers under the automatic procedure for this target audience. Furthermore, we highlight that the characteristics listed in this section are a recommendation of good practices for all public offerings where there is reopening of series, even if not intended for the general investor public.

IV. Impossibility of extension resulting from modification of offers that have obtained automatic registration

§ 2 of art. 67 of CVM Resolution 160 expressly provides that "In the case of an offer submitted to the automatic registration procedure, the modification of the offer does not depend on prior approval by the SRE".
On the other hand, it is verified that the wording of § 7 of the same article limits the possibility of extending the offer term to cases where there is approval of the modification by the SRE, namely, the cases where the SRE must analyze modification requests previously, which occur in offers submitted to the ordinary registration procedure.
In cases of ordinary registration procedure where prior analysis of the modification by the SRE is dispensed with (improvement of the offer in favor of investors, in accordance with § 8 of art. 67 of RES CVM 160), there is still the need for the SRE to approve any request for extension of the offer term, in accordance with item II of § 9 of art. 67 of RES CVM 160.
Therefore, it is verified that the possibilities of extending the offer term were detailed in CVM Resolution 160, not covering offers carried out under the automatic registration procedure, a procedure that is faster and standardized, to which not all possibilities that the regulation provides for the ordinary procedure naturally apply.
Thus, we clarify that offers submitted to the automatic registration procedure cannot have their distribution period extended, such offers being carried out within the period ordinarily provided for in the Resolution.

V. Need to observe specific regulation in the trading of securities offered via CVM Resolution 160

Art. 86 of CVM Resolution 160 provides for the possibility of trading securities distributed through the automatic registration procedure, in accordance with art. 26 of the same Resolution, establishing periods of prohibition on trading with certain target audiences depending on the initial direction of the offer.
Notwithstanding, we emphasize that in addition to the aforementioned prohibition periods, for a security to be traded with a certain target audience, any provision that may exist in specific regulation dealing with the distributed security must also be observed.
As non-exhaustive examples, the requirements contained in: (i) art. 4 of Normative Annex I of CVM Resolution 60, for CRI offerings; and (ii) art. 7 of Normative Annex II of CVM Resolution 60, for CRA offerings are mentioned.
These provisions establish requirements to be observed within the scope of CRI and CRA operations for such securities to be traded with the general investor public and must be fully observed for a CRI or CRA distributed to professional or qualified investors to be able to reach the broader investor public, even if the prohibition periods on trading established by art. 86 of CVM Resolution 160 have been fully observed.
Therefore, if a CRI or CRA has single collateral in debt issuance of a closed capital company, there would be no possibility for these securities to be traded with the general investor public, as the provision of item II of the sole paragraph of art. 4 of Normative Annex I of CVM Resolution 60, in the case of CRIs, as well as the provision of item III of art. 7 of Normative Annex II of the same Resolution, in the case of CRAs, would not be observed.
On this subject, it is worth remembering the understanding manifested by the CVM Collegiate in a meeting dated July 17, 2018, within the scope of the request for registration of a public distribution offering of Certificates of Agricultural Receivables of the 1st series of the 17th issuance of Vert Companhia Securitizadora S.A. (CVM Process No. 19957.005037/2018-91), where it was clear that, in operations where there is concentration of more than 20% of the collateral in a single debtor and a single co-obligor, both must comply with the informational requirements required for these cases, in accordance with art. 51, art. 2 of Normative Annex I, and arts. 3 (item III) and 7 (item III) both of Normative Annex II, all of CVM Resolution 60.

VI. Entry of new intermediary institutions into a registered Offer

With the effectiveness of CVM Resolution 160, we understand it is possible to modify a previous understanding regarding the adherence of intermediary institutions to the offer, through the celebration of a specific term, according to the hypothesis of § 2 of art. 79. In this sense, such a situation will no longer be treated as a potential incidence of offer modification.
On the other hand, in the case of the ordinary procedure, the entry of intermediary signatories of the distribution contract will be appreciated by the CVM in accordance with art. 80 of the aforementioned resolution, and there may be an understanding of the incidence of offer modification, depending on the characteristics of the concrete case. In the case of the automatic procedure, the analysis regarding the incidence of offer modification must be conducted by the lead coordinator.

VII. Consultations

In case of simple consultations regarding the content of this Circular Letter, which do not require a deepening of the analysis by the SRE, we recommend that your forwarding be done through the email sre-consultas@cvm.gov.br.
We reiterate the guidance that consultations regarding the SRE - Offer Registration System should be directed exclusively to the email suporte-sistemasre@cvm.gov.br. Only electronic messages directed to such address will be answered, it not being necessary to send a copy to any other address.

Sincerely,

LUIS MIGUEL R. SONO
Superintendent of Securities Registration

Document electronically signed by Luis Miguel Jacinto Mateus Rodrigues Sono, Superintendent of Registration, on 09/28/2023, at 15:21, based on art. 6 of Decree No. 8.539, of October 8, 2015.
The authenticity of the document can be verified on the site https://super.cvm.gov.br/conferir_autenticidade, informing the verification code 1889737 and the code CRC F3D9880A.
This document's authenticity can be verified by accessing https://super.cvm.gov.br/conferir_autenticidade, and typing the "Verification Code" 1889737 and the "CRC Code" F3D9880A.
Reference: Process No. SRE Circular Letters 2023 SEI Document No. 1889737

Circular Letter CVM/SRE 10/23

Lineage: In force