Circular No. 3.108

CIRCULAR N. 003108 ------------------ Amends the Regulation of the Special Settlement and Custody System (Selic). The Collegiate Board of the Central Bank of Brazil, in a session held on 10 April 2002, having regard to the provisions of art. 11, item VII, of Law 4.595, of 31 December 1964, and art. 9 of Resolution 2.882, of 30 August 2001, D E C I D E D: Art. 1 Approve the annexed Regulation of the Special Settlement and Custody System (Selic), which shall replace the one contained in Title 6, Chapter 3, of the Manual of Norms and Instructions (MNI). Art. 2 With the entry into force of the annexed Regulation, and until 2 June 2002, the current custodian participant shall become the standard-settling participant of the current participants holding subcustody accounts subordinate to it - including special and specific clients - and all of these, in turn, shall be classified as subordinate non-settling participants of that participant. § 1 As of 15 April 2002, the holders of subcustody accounts in Selic may no longer change custodian institutions. § 2 The provisions of this article do not apply to multiple banks without a commercial portfolio and to investment banks that become holders of Banking Reserve accounts at the Central Bank of Brazil, in which case they shall be automatically classified as settling participants. Art. 3 The status of standard-settling participant referred to in the previous article shall continue until a manifestation to the contrary by the interested party(ies), which manifestation: I - shall entail the adoption of the measures provided for in items 6.3.2.9 to 6.3.2.11 of the annexed Regulation; II - shall take effect only as of 3 June 2002, without prejudice to the deadlines provided for in the items cited in the previous item. Art. 4 As of 3 June 2002, the status of subordinate non-settling participant, mentioned in art. 2: I - of the specific client shall remain unchanged; II - of the special client may be changed to that of autonomous non-settling participant, provided that the condition established in subitem "b" of item 6.3.2.7 is satisfied and the document provided for in item 6.3.2.8 of the annexed Regulation is received by the Selic administrator; III - of the other holders of subcustody accounts may be maintained, provided that the condition established in subitem "a" of item 6.3.2.7 is satisfied and the document provided for in item 6.3.2.8 of the annexed Regulation is received by the Selic administrator. Sole paragraph. The clearinghouses and the providers of clearing and settlement services shall be classified, on the date the annexed Regulation enters into force, as autonomous non-settling participants. Art. 5 Between 22 April and 2 June 2002, settling participants shall be allowed access to Selic through networks other than the National Financial System Network (RSFN) to transmit, exclusively, the commands of the operations of subordinate non-settling participants. Art. 6 The provisions of item 6.3.5.13 of
the annexed Regulation shall take effect only on a date to be duly disclosed by the Open Market Operations Department (Demab), and until then, the anticipation of the commitment date for immediate settlement of the repurchase/resale shall be permitted. Art. 7 The association of operations contracted with the intermediation of other participants, provided for in subitem "b" of item 6.3.7.28 of the annexed Regulation, shall be permitted only as of a date to be disclosed by Demab. Art. 8 This Circular shall enter into force on the date of its publication, except for the annexed Regulation, which shall enter into force on 22 April 2002, when Circulars 2.727, of 14 November 1996; 3.014, of 6 December 2000; 3.041, of 20 June 2001; 3.044, of 5 July 2001; and 3.052, of 9 August 2001, shall be revoked. Brasília, 10 April 2002. Luiz Fernando Figueiredo Director ---------------------- TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special Settlement and Custody System (Selic) SECTION 1 - Preliminary Provisions --------------------------------------------------------------------- 1 - Selic is a computerized system intended for the custody of book-entry securities issued by the National Treasury and the Central Bank of Brazil, as well as for the registration and settlement of operations with said securities. 2 - The operations registered in Selic are settled by their gross values in real time. 3 - In addition to the securities custody system and the registration and settlement of operations, Selic comprises the following complementary modules: a) Formal Electronic Public Offering (Ofpub); b) Informal Electronic Auction of Currency and Securities (Leinf). 4 - The administration of Selic and its complementary modules is the exclusive competence of the Open Market Operations Department (Demab) of the Central Bank of Brazil. 5 - For the purposes of this chapter, the following are designated as: a) chamber: the chamber or the clearing and settlement service provider referred to in Law 10.214 of 27 March 2001; b) business day: the day thus considered by the National Monetary Council for the purposes of transactions carried out in the financial market; c) outright operation: the purchase and sale of securities without assumption of the commitments mentioned in the following subitem; d) repurchase agreement operation: the purchase and sale of securities with a resale commitment assumed by the buyer combined with a repurchase commitment assumed by the seller; e) repurchase/resale: the purchase and sale of securities arising from the commitments referred to in the previous subitem. ---------------------- TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special Settlement and Custody System (Selic) SECTION 2 - Participants --------------------------------------------------------------------- 1 - The following may be participants of Selic, as account holders, provided the rules set forth in this chapter are met: a) the Central Bank of Brazil; b) the
National Treasury; c) multiple banks with a commercial portfolio, commercial banks and savings banks; d) multiple banks without a commercial portfolio, investment banks, securities brokerage firms and securities distribution firms; e) development banks, credit, financing and investment companies and real estate credit companies; f) leasing companies; g) financial investment funds, investment funds in shares of financial investment funds, investment funds in securities, investment funds in shares of investment funds in securities and mutual privatization funds - FGTS; h) insurance companies, capitalization companies, open pension entities, closed pension entities and local reinsurers; i) chambers; j) other entities, at the discretion of the Selic administrator. 2 - For the purposes of financial settlement of operations, the participant is classified as: a) settling, if it settles operations directly in its Banking Reserves account at the Central Bank of Brazil; b) non-settling, if it settles its operations through settling participants. 3 - The Central Bank of Brazil and the participants holding the Banking Reserves account are necessarily settling participants, and the other participants are non-settling. 4 - The financial settlement of an operation of the participant: a) settling must always be carried out by itself; b) non-settling may be carried out by any settling participant, except as provided in the following item. 5 - Every non-settling participant must elect a single default settler through which the following are settled: a) operations relating to payment of interest, amortizations and redemptions of securities held in its account(s); b) its repurchases/resales on the day on which the securities subject to these operations are redeemed; c) all other operations, in the event that the participant is subject to withholding of income tax at source on income or net gains from fixed-income financial investments. 6 - The non-settling participant, as regards the transmission of the commands of its operations to be registered in Selic, is classified as: a) autonomous, if the commands are transmitted by itself; b) subordinate, if the commands are transmitted by the default settler, except as provided in subitem "b" of the following item. 7 - With respect to the categories referred to in the previous item, the non-settling participant mentioned: a) in subitems "d", "e" or "f" of item 1 is classified as autonomous, but may opt to be subordinate, provided that its default settler is part of the same financial conglomerate, as considered by transaction PCIF600 - Consultation of the Registry of Financial Institutions - of the Central Bank Information System (Sisbacen); b) in subitem "g" of item 1 is classified as subordinate, but may opt to be autonomous, provided that its administrator is an autonomous non-settling participant, in which case, exceptionally, the latter may transmit the commands of the former; c) in subitem "h" of item 1 is mandatorily
a subordinate non-settling participant; d) in subitem "i" of item 1 is mandatorily an autonomous non-settling participant, except as provided in item 6.3.5.4. 8 - The exercise of the option referred to in subitems "a" and "b" of the previous item must be formalized by sending correspondence to Selic, according to model no. 30001-0 or no. 30002-9, respectively, of the Catalog of Documents of the Central Bank of Brazil (Cadoc). 9 - The participant's decision to no longer be the default settler must be communicated, at least fifteen days in advance, to the Selic administrator by means of correspondence, model no. 30003-8 of Cadoc, accompanied by a copy of the letter in which it informed such decision to the respective non-settling participant. 10 - Considering that the functions of the standard settlement agent cannot suffer discontinuity, the non-settling participant, upon becoming aware of the decision referred to in the previous item, must promptly inform its new standard settlement agent to the Selic administrator, according to model n. 30004-7 of Cadoc. 11 - The change of standard settlement agent, on the initiative of the non-settling participant, must be formally communicated by the latter, with a minimum advance notice of one business day, to the Selic administrator, according to model n. 30004-7 of Cadoc, and to the standard settlement agent to be replaced. ------------------------ TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special System for Settlement and Custody (Selic) SECTION 3 - Access to Selic and its Complementary Modules --------------------------------------------------------------------- 1 - Settling participants and chambers have access to Selic through the Network of the National Financial System (RSFN) and other participants through other networks, observing the provisions of items 4 to 10. 2 - Access to the complementary modules of Selic - Formal Electronic Public Offering (Ofpub) and Informal Electronic Auction of Currency and Securities (Leinf) - is through the same networks of access to Selic, except for the RSFN. 3 - The procedures for connection to the RSFN, the messages that can travel on it, and the network security requirements are contained in the following documents, respectively: a) Technical Manual of the Network of the National Financial System; b) Catalog of Messages of the Brazilian Payment System; c) Security Manual of Messages of the Brazilian Payment System. ACCESS CONTROL SYSTEM (LOGON) 4 - Access to Selic, through a network other than the RSFN, and to its complementary modules is controlled by Logon. 5 - Logon users are classified into three categories: administrator, supervisor, and operator. 6 - The initial password that enables the Selic participant to Logon must be requested through the "Institution Administrator Registration Form", model n. 30005-6 of the Catalog of Documents of the Central Bank of Brazil (Cadoc). 7 - The institution administrator registered as per the previous item may
enable, through Logon itself, a second administrator with the same level of competence. 8 - The administrator(s) may enable supervisors and operators, defining the scope of access, system, and modules. Operators may also be registered by supervisors. 9 - With the submission of the document referred to in item 6, the participant assumes full responsibility for the commands transmitted to Selic and its complementary modules by any of its Logon users. 10 - The de-registration of the user and the blocking/unblocking of their access to Logon may be carried out by those who have the competence to register them. ACCESS HOURS 11 - The operating hours of Selic are established by the Central Bank of Brazil in a regulation issued through the Central Bank Information System (Sisbacen). 12 - Any change in the hours referred to in the previous item will be informed, on the day of occurrence, through a notice from Selic to its participants. 13 - Proposals related to public offerings and informal auctions are accepted, respectively: a) by Ofpub, at the time fixed in the notice of the respective public offering; b) by Leinf, at the time established by Demab for each event. ----------------------- TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special System for Settlement and Custody (Selic) SECTION 4 - Accounts --------------------------------------------------------------------- CONCEPTUALIZATION 1 - The set of records related to the operations of its holder is called an account, evidencing, through balance, the position of securities. 2 - Accounts are classified according to the following types: a) own custody of free movement - account held by any Selic participant and intended for the registration of its operations; b) client custody of free movement - group of accounts maintained by a participant mentioned in subparagraphs "c" or "d" of item 6.3.2.1 and intended for the registration of operations carried out by its clients; c) special movement custody - accounts held by any Selic participant and intended for the linking of securities to comply with legal or regulatory provisions; d) brokerage - account held by a participant cited in subparagraphs "c" or "d" of item 6.3.2.1, already holding an own custody account of free movement, intended for the identification of intermediation in securities purchase and sale operations; e) guarantee - set of accounts held by a chamber and intended for the custody of securities offered as guarantee by holders of free movement custody accounts, or by their clients, participants in the system operated by it; f) deposit - set of accounts held by a chamber responsible for a system of compensation and settlement of operations with securities custodied in Selic and intended for the safekeeping of securities deposited by holders of free movement custody accounts, or by their clients, for the settlement of operations that they may have contracted or may contract in the mentioned system; g) settlement - account held by a
chamber responsible for a system of compensation and settlement of operations with securities custodied in Selic and intended for the final settlement of the results determined between the chamber and the participant of the referred system. CUSTOMER CUSTODY ACCOUNTS 3 - Freely transferable customer custody accounts are divided into two groups: a) Customer 1 - maintained by a participant mentioned in items "c" or "d" of item 6.3.2.1 for the recording of transactions carried out by it with its respective customers; b) Customer 2 - maintained by a participant referred to in item "c" of item 6.3.2.1 for the recording of transactions carried out by its demand deposit customers with other Selic participants. 4 - The bookkeeping of customer custody accounts is done without indicating the names of the beneficiaries of the securities held therein; the analytical records, by beneficiary, are the responsibility of the account maintainers. 5 - The analytical records referred to in the previous item must contain, at a minimum, the following information: a) identification of the customer owning the securities; b) transaction date; c) identification, quantity and unit price of the security subject to the transaction. 6 - Institutions that maintain Customer 2 custody accounts are also obliged to exercise strict control over the repurchase/resale commitments assumed by these customers. ACCOUNT OPENING 7 - To open a freely transferable own custody account, the participant must send, together with the signature card, model no. 30006-5 of the Banco Central do Brasil Document Catalog (Cadoc), one of the following correspondence models: a) Cadoc no. 30007-4, if a settling participant; b) Cadoc no. 30009-2, if a non-settling participant not classified under item "g" of item 6.3.2.1; c) Cadoc no. 30010-8, if a subordinated non-settling participant classified under item "g" of item 6.3.2.1; d) Cadoc no. 30011-7, if an autonomous non-settling participant classified under item "g" of item 6.3.2.1. 8 - The opening of Customer 1 and Customer 2 custody accounts and of the brokerage account is processed automatically and simultaneously with that of the freely transferable own custody account of the respective participating institution. 9 - Special movement custody accounts are opened as they become necessary to comply with legal or regulatory provisions: a) automatically, in the cases provided for in the Selic User Manual; or b) upon formal request of the interested party, according to model no. 30012-6 of Cadoc, in the other cases. 10 - In the case of item "b" of the previous item, and depending on the purpose of the account to be opened, the interested party must also send the signature card mentioned in item 7, if it does not hold a freely transferable own custody account. 11 - With respect to clearinghouses, the opening: a) of the settlement account, when applicable, is processed automatically and simultaneously with that of its freely transferable own custody account; b)
of deposit accounts and guarantee accounts must be requested according to model no. 30013-5 of Cadoc. 12 - The opening of deposit accounts and guarantee accounts is processed on the business day following that of receipt of the respective request. ACCOUNT CLOSING 13 - The closing of a freely transferable own custody account may occur: a) at the request of its holder, according to model no. 30014-4, after any pending issues pointed out by the Selic administrator have been resolved; b) by decision of the Banco Central do Brasil, in the event the holder violates market or banking technique rules or legal and regulatory provisions to which it is subject; c) as a result of civil insolvency, bankruptcy, judicial liquidation or extrajudicial liquidation of the account holder; d) by decision of the Selic administrator, when the holder violates rules of this chapter; e) at the discretion of the Selic administrator, when inactive for more than thirty days. 14 - The closing of the freely transferable own custody account implies, for the participating holder that is not a clearinghouse, the closing: a) of the customer custody accounts maintained by it; b) of its brokerage account; c) of the deposit accounts and guarantee accounts in which it appears as depositor or guarantor, respectively. 15 - The closing of a clearinghouse's freely transferable own custody account entails the closing of its settlement account and its guarantee and deposit accounts. 16 - Special movement custody accounts are closed automatically when the reasons for their opening cease. 17 - In addition to the cases provided for in item "c" of item 14 and in item 15, deposit accounts and guarantee accounts may also be closed upon request of their holders, according to model no. 30015-3 of Cadoc. ACCOUNT BLOCKING 18 - Any Selic account, at the discretion of its administrator, may be blocked during the daily data transmission period or for an indefinite period. 19 - Blocked accounts do not accept any command, except those transmitted by the Selic administrator. ACCOUNT INQUIRIES AND STATEMENTS 20 - The Selic participant has access, for inquiry and statement purposes, only to the accounts of which it is the holder and those of its customers, except in the following cases: a) accounts held or maintained by a subordinated non-settling participant, to which the respective standard settling participant also has access; b) deposit accounts and guarantee accounts, access to which is also permitted to the participant that is, respectively, depositor and guarantor. 21 - The settling participant, in addition to the accounts to which it has access, also has information on the financial amounts of the operations settled by it, of the non-settling participants. ----------------------- TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special Settlement and Custody System (Selic) SECTION 5 - Types and Specific Characteristics of Operations
--------------------------------------------------------------------- 1 - The securities held in custody at Selic may not be subject to trading unless the respective operations are registered therein or in a system, administered by a clearing house participating in Selic, for the clearing and settlement of operations with the aforementioned securities. 2 - In operations registered with Selic, subject to legal and regulatory provisions, its administrator may not interfere with the conditions established by the contracting parties. 3 - The following operations are eligible for registration with Selic: a) issuance or cancellation of securities; b) payment of interest, amortization or redemption of securities; c) purchase and sale of securities in an outright operation; d) purchase and sale of securities in a repurchase agreement operation, with or without free movement of the securities; e) repurchase/resale of securities; f) transfer of financial amounts related to taxes, interest and amortizations; g) transfer of securities, without financial consideration, of ownership and at the request of an individual or non-financial legal entity, provided that there is no transfer of ownership of the securities; h) transfer of securities, without financial consideration, of ownership and at the request of legal entities as a result of merger, consolidation, spin-off or extinction; i) pledging and release of securities; j) unbundling and rebundling of securities; l) registration of forward operations; m) various adjustments; n) documentary registration; o) transfer of securities resulting from the constitution, release or enforcement of collateral provided to a clearing house; p) transfer of securities related to deposit in the account of a clearing house responsible for the clearing and settlement system of operations with securities held in custody at Selic; q) transfer of securities resulting from the final settlement of netted results calculated in operations between the clearing house referred to in the previous subitem and the participant of the respective clearing and settlement system. 4 - In addition to the operations referred to in the previous item, the operations dealt with in items 48 and 6.3.7.41 to 43 may also be registered with Selic, and in the operations mentioned in these last four items, the clearing houses act, on an exceptional basis, as settling participants. 5 - The administrator of Selic reserves the right to carry out transfers of securities related to operations not provided for in the two previous items. 6 - With respect to operations that involve the transfer of securities, only the operations mentioned in subitems "c", "d", "e" and "l" of item 3 and the corresponding same-day reversal operations may be registered in the systems administered by the clearing houses referred to in item 1, excluding, under any circumstances, those contracted between the Selic participant and its clients of the Cliente 1 custody accounts. 7 - The
operations are identified by codes listed in the Selic User Manual. PAYMENT OF INTEREST, AMORTIZATIONS AND REDEMPTIONS 8 - For the purposes of payment of interest, amortizations and redemptions, the securities position of each account corresponds to the closing balance of the immediately preceding business day, except for securities to be redeemed on the day of the event, in which case the securities subject to repurchase are added to this balance and the securities subject to resale are deducted. 9 - For the purposes of the provisions of the previous item, the following are also considered as: a) security, the interest coupon unbundled from the principal; b) redemption, the amortization of the last installment of the security. 10 - The payment of interest, amortizations and redemptions that fall on a non-business day are processed on the subsequent business day. 11 - No movement of securities is permitted on the day of their redemption, except for repurchases/resales previously assumed for that day and, at the sole discretion of the Central Bank of Brazil, other operations. REPURCHASE AGREEMENT OPERATIONS AND REPURCHASES/RESALES 12 - The repurchase/resale commitment may be agreed for the same day or for a day subsequent to the settlement of the repurchase agreement operation, provided that the commitment date: a) may not be later than the maturity date of the securities subject to the operation, except if this falls on a non-business day, in which case the commitment may be assumed for the subsequent business day, coinciding with that of the redemption of the securities; b) with a term equal to or greater than two business days, must be, at the latest, the business day immediately preceding that of the redemption of the securities subject to the negotiation. 13 - Once the repurchase agreement operation is registered, the date of the respective repurchase/resale commitment may be changed, provided that the provisions of the previous item are met. 14 - The unit price of the repurchase/resale is mandatorily: a) equal to that of the respective repurchase agreement operation, if the repurchase/resale commitment is assumed for the same day; b) the one established by the Open Market Operations Department (Demab), if the commitment date, of one business day, coincides with that of the redemption of the securities subject to the repurchase agreement operation. 15 - For the purposes of the provisions of subitem "b" of the previous item, Selic shall disclose, by its opening on the business day immediately preceding that of the redemption of the security, the unit prices of the repurchases/resales to be observed in the registration of the respective repurchase agreement operations. 16 - Repurchase/sale transactions registered without the repurchase/resale price have the predefined and recorded profitability or remuneration parameter: a) in the document referred to in item 6.3.6.1 - "Order for Registration and Settlement of Transaction" - mandatorily issued
in that case; or b) in a purchase/sale note, when dealing with transactions with Client 1 custody account clients. 17 - Securities under repurchase/resale commitment on the business day immediately preceding their redemption cannot be subject to purchase and sale in an outright transaction. 18 - Repurchase/resale commitments that occur on a non-business day are settled on the following business day. TRANSFERS OF FINANCIAL FUNDS 19 - Selic has transaction codes that enable transfers of financial funds among its participants, related to: a) taxes on transactions registered and settled in the System; b) interest and amortizations owed to the participant that sold the respective securities with the commitment to repurchase them. 20 - The calculation, withholding, and collection of taxes on transactions settled in Selic are the sole responsibility of the participants involved. INTERMEDIATED TRANSACTIONS 21 - Purchase and sale transactions, outright or repurchase agreements, with intermediation have the following characteristics: a) existence of at most two intermediary institutions, one linked to the selling party and the other to the buying party of the securities; b) performance of the intermediary institutions identified by their brokerage account numbers and of the buying and selling parties by their custody account numbers, own or Client 2, with free movement; c) financial and securities movement through transitional accounts, when necessary to preserve the non-identification, between each other, of the selling and buying parties of the securities. 22 - The financial result of the intermediation, mandatorily positive, is due on the very day of settlement of the outright transaction or on the settlement of the repurchase/resale, in the case of a repurchase agreement, provided that: a) in outright transactions, the unit brokerage price, or their sum, corresponds to the difference between the unit purchase and sale prices of the security; and b) in repurchase agreements: 1. the unit purchase price is equal to the sale price of the security; 2. the unit brokerage price, or their sum, corresponds to the difference between the unit repurchase and resale prices of the security. 23 - The provisions of the previous item do not apply to repurchase agreements when the maturity of the commitment coincides with the redemption date of the securities that are their object, in which case: a) the financial result of the intermediation, mandatorily positive, is due on the very day of settlement of the repurchase agreement; b) the unit brokerage price, or their sum, corresponds to the difference between the unit purchase and sale prices of securities; c) the unit repurchase price is equal to the resale price of the securities. SPECIAL TRANSFERS OF SECURITIES 24 - Securities transfer transactions without financial consideration, provided for in subitems "g" and "h" of item 3, are the sole responsibility of the participants that authorized the transmission of the
respective commands. 25 - The participants referred to in the previous item must maintain documentation capable of proving the appropriateness of the transaction. The participant responsible for delivering the securities is also obliged to provide, to the participant to whom the securities are transferred, the elements that enable the calculation of any taxes on transactions subsequent to the transfer. LINKING AND UNLINKING OF SECURITIES 26 - To comply with legal or regulatory provisions, the Selic participant may proceed with the linking of securities by transferring them from a free movement custody account to a special movement custody account. 27 - The Selic administrator bears no responsibility for verifying the actual purpose of the linking of securities. 28 - The linkings mentioned in item 26 and the unlinkings by transferring securities from a special movement custody account to a free movement custody account are the sole responsibility of the participants that authorized the transmission of the respective commands. 29 - The amounts related to interest, amortizations, and redemptions of linked securities are credited to the holder of the respective special movement custody account, unless otherwise provided in the regulation that gave rise to the linking of the securities or by whoever ordered such linking. SPLITTING AND REASSEMBLING OF SECURITIES 30 - Securities registered in free movement custody accounts may have their interest coupons split from the principal, when such faculty is provided for in the issuance of the securities, observing the provisions of item 32. 31 - The reassembling of all interest coupons maturing to the principal of the security is also permitted, provided that both, coupons and principal, are registered in a free movement custody account. 32 - Splitting of securities is not allowed on the business day immediately preceding the interest payment or their redemption. REGISTRATION OF FORWARD TRANSACTIONS 33 - Forward transactions registered in Selic are restricted to outright purchases and sales of securities: a) already issued and in circulation, in which case the settlement date must be before the maturity date of the securities; or b) subject to a public offering, already disclosed but not yet settled, in which case the settlement date must coincide with that of the settlement of the public offering. 34 - In the case of subitem "b" of the previous item, the settlement of the forward transaction is conditioned on the sale, in the public offering, of at least 51% (fifty-one percent) of the offered quantity of securities. MISCELLANEOUS ADJUSTMENTS 35 - Adjustments may occur to cancel a command entered on the day or on previous days (reversal) or to effect the entry of a command that was not transmitted on previous days (valuation). 36 - The following may be subject to adjustment: a) the registration of a forward transaction, which only allows reversal; b) purchase and sale transactions, definitive or repurchase
agreements, observing the provisions of the four subsequent items; c) the transactions of linking or unlinking securities referred to in items 26 to 29, at the discretion of the Central Bank of Brazil. 37 - The transactions referred to in subitem "b" of the previous item that are eligible for adjustment are restricted: a) in the case of reversal, to those contracted between: 1. the participant and its Client 1 custody account client; 2. the subordinate non-settling participant and its default settling participant; 3. two subordinate non-settling participants that have the same default settling participant; b) in the case of valuation, to those contracted by: 1. Client 1 custody account client; 2. any of the participants mentioned in subitems "g" and "h" of item 6.3.2.1; 3. non-settling participant classified in subitem "d" of item 6.3.2.1 with settling participant. 38 - Even if the prerequisite of the previous item is met, only the transaction that has not or would not have involved financial settlement by the Reserve Transfer System (STR) may be reversed or valued. 39 - Adjustments of transactions are prohibited: a) repurchase agreements after the maturity date of the agreement; b) repurchase agreements or definitive transactions with intermediation referred to in item 21; c) associated or combined, referred to in items 6.3.7.26 to 33. 40 - The commands related to reversal and valuation of the transactions mentioned in subitem "b" of item 36 must be transmitted within a maximum of two business days, counted from the day on which the original entry occurred or should have occurred. 41 - The command referring to the valuation of a repurchase agreement transaction, when transmitted on the very day of maturity of the agreement, authorizes the registration and settlement of the repurchase agreement transaction to be valued and the respective repurchase/resale. 42 - The following may also be subject to reversal: a) the valuation of a transaction referred to in subitem "b" of item 36, observing the deadline mentioned in item 40; b) the documentation of a transaction referred to in item 43, observing the deadline mentioned in item 44. DOCUMENTATION OF SECURITIES TRANSFER 43 - The repurchase agreement transaction that, having as contracting party the Client 1 custody account client or the participant referred to in subitems "g" or "h" of item 6.3.2.1, has not been registered by the maturity date of the agreement and whose securities that served as its object have not yet been redeemed is documented by means of a specific code. 44 - The repurchase agreement transaction referred to in the previous item must be documented by the second business day following the contracting with the transmission of the command that authorizes the registration of the following transactions: a) "Documentation of Securities Transfer with Repurchase/Resale Agreement"; and b) "Documentation of Repurchase/Resale". 45 - The command mentioned in the previous item does not affect
the securities position of the accounts, constituting a simple documentary record. SECURITIES DEPOSIT 46 - Transactions related to deposit in chamber account are restricted to transfers of securities between: a) custody account, own or of Client 2, of free movement and the corresponding deposit account; or b) deposit account and settlement account, both of the same holder. 47 - At the end of each day, only the securities subject to resales or forward sales related to transactions accepted for settlement by the chamber may remain in custody in deposit accounts; the other securities must be transferred to the corresponding custody accounts, own or of Client 2, of free movement. CONDITIONAL RELEASE OF COLLATERAL 48 - The collateral provided in securities that are held in custody in the account referred to in subitem "e" of item 6.3.4.2 may be released, in whole or in part, at the discretion of the holder of the mentioned account, in an operation whereby: a) the chamber holding the collateral account releases the securities in favor of the collateral provider; b) the collateral provider arranges the deposit of the amount established by the chamber in the account that it, as a participant in the Reserve Transfer System, maintains at the Central Bank of Brazil. ----------------------- TITLE 6 - REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3 - Special System of Settlement and Custody (Selic) SECTION 6 - Commands for Registration and Settlement of Transactions --------------------------------------------------------------------- 1 - The commands for registration and settlement of transactions are instructed, observing the provisions of this chapter, with the data provided in the Selic User Manual for filling out the form "Order for Registration and Settlement of Transaction", contained in the Catalog of Documents of the Central Bank of Brazil (Cadoc) as model no. 30008-3. 2 - The filling out of the form referred to in the previous item is mandatory only in the case provided for in subitem "a" of item 6.3.5.16. 3 - The commands and data referred to in item 1, when transmitted by the Network of the National Financial System, in a message defined in the Catalog of Messages of the Brazilian Payment System, are subject to specific rules contained in the Selic User Manual. 4 - The process of registration and settlement of transactions comprises the following stages: a) transmission of the commands instructed with the data of the document referred to in item 1; b) review of the transmitted data; c) verification of the required double command(s); d) blocking of the securities to be transferred, if applicable; e) certification of financial settlement, when necessary; f) debit and credit entries in the custody accounts, if applicable. TYPES OF COMMANDS 5 - There are two types of commands to be transmitted: a) command 1, which authorizes the debit entry of the quantity of securities and/or the credit entry of the financial amount; b) command 2, which authorizes the
credit entry of the quantity of securities and/or the debit entry of the financial amount. 6 - Considering that securities do not pass through a brokerage account, the commands transmitted by their holder authorize only the credit of the brokerage due for the intermediation of the purchase and sale of securities. TRANSMISSION OF COMMANDS 7 - Commands may be transmitted: a) by a settling participant, for the registration and settlement of its operations and those of its clients; b) by an autonomous non-settling participant, for the registration and settlement of its operations and those of its clients; c) by a standard settling participant, for the registration and settlement of the operations of a subordinate non-settling participant and its clients; d) by the Open Market Operations Department (Demab), for the registration and settlement of the operations of the Central Bank of Brazil and operations of the National Treasury; e) by the National Treasury, exceptionally, for the registration and settlement of its own operations; f) by the Selic administrator. 8 - The subordinate non-settling participant must authorize the transmission of the commands for its operations by the respective standard settling participant within the time established by the latter. 9 - Subject to the provisions of item 6.3.7.35, the participants are responsible for the initiative to transmit or to authorize the transmission of the commands relating to their repurchases/resales, and neither the Selic administrator nor, where applicable, the standard settling participant shall bear any responsibility for the omission of such initiative. 10 - In the case of repurchases/resales of an institution under a regime, decreed after the assumption of the commitment, of temporary special administration, intervention or judicial or extrajudicial liquidation, the initiative, referred to in the previous item, of authorizing the transmission of the commands for the operations of the repurchases/resales is the responsibility of the administrator, intervenor or liquidator. 11 - For the registration and settlement of the operations of the participating institutions with their clients of the Cliente 1 custody accounts, the commands may be transmitted by their respective totals, observing account, operation and security. 12 - The provisions of the previous item do not apply to the operations provided for in subitems "g" and "h" of item 6.3.5.3, in which case the general rule of one command for each operation must be respected. 13 - If errors or omissions are found in the transmitted data, Selic rejects the command and informs the participant of the occurrence so that the latter, if applicable, arranges for a new transmission. DOUBLE COMMAND 14 - The registration and settlement of each operation requires, except as provided in items 15 and 16, the transmission of a double command, both instructed with the same data. 15 - Exceptions to the provisions of the previous item are the registration and
settlement of: a) operations of the participant with its clients of the Cliente 1 custody accounts, which require the transmission of a single command, which may encompass operations with various clients, as provided in items 11 and 12; b) transfers of securities between accounts held by the same chamber, which require the transmission of a single command, except in cases of untying securities from the special patrimony account, classified in subitem "c" of item 6.3.4.2, which are subject to the general rule of the double command; c) purchase and sale with the intermediation of third parties, which require two or three double commands with data not all coinciding, but in accordance with what is expressly provided in the Selic User Manual; d) associated operations and combined operations, referred to in items 6.3.7.26 to 33, in which: 1. each command is instructed with a specific key to associate or combine the respective operation with the other contracted by the party responsible for transmitting the command; and 2. all commands of the operations to be settled by the netted results are required; e) rediscount operations, understood as the repurchase operations contracted in the Central Bank Rediscount System, which require a single command, to be transmitted by that System. 16 - For the purposes of financial settlement of the operation, the contracting parties inform the corresponding settling institutions and only one of them, the one responsible for transmitting command "2", of the level of preference of that settlement in the Reserve Transfer System (STR). 17 - Once a command is transmitted, all the others required for the registration and settlement of the operation or of the associated or combined operations must be transmitted within the period of time established by the Central Bank of Brazil in a regulation issued through the Central Bank Information System (Sisbacen). CANCELLATION OF COMMANDS BY SELIC 18 - The following are cancelled by Selic: a) commands instructed with divergent data, except as provided in items 15 and 16; b) commands accepted for entry purposes, but dependent on other commands, necessary for the registration and settlement of the operations, that were not transmitted within the period referred to in the previous item; c) the double commands of operations not settled due to insufficiency or inexistence of securities, subject to the provisions of items 6.3.7.16 to 19, or due to lack of certification of the financial settlement, as provided in item 6.3.7.7. 19 - The provisions of subitem "b" of the previous item do not apply to the commands mentioned in item 21. 20 - The commands cancelled by Selic may be retransmitted, if of interest to the parties. COMMANDS FOR OPERATIONS CONTRACTED IN THE OFPUB AND LEINF SYSTEMS 21 - Except in exceptional situations, the commands of the Open Market Operations Department (Demab) relating to settlement on the day of: a) purchase or sale of securities, originating from the Electronic
Formal Public Offering (Ofpub) and Electronic Informal Auction of Currency and Securities (Leinf) modules, are transmitted by 9 a.m., in the event that the result of the public offering or informal auction was disclosed on a previous day; b) repurchase or resale arising from a commitment assumed on a previous day. 22 - Demab commands relating to events and situations not provided for in the previous item are transmitted at a time to be communicated by Demab itself to the interested parties. 23 - With respect to the operations referred to in item: a) 21, the command of the other party is transmitted at the time established by the Central Bank of Brazil, in a regulation issued through Sisbacen; b) 22, the Demab command and that of the other party are subject to the provisions of subitem "b" of item 18. ---------------------- TITLE 6: SPECIAL REGULATIONS AND PROVISIONS CHAPTER 3: Special Settlement and Custody System (Selic) SECTION 7: Registration and Settlement of Operations --------------------------------------------------------------------- 1 - An operation without transfer of securities and without financial settlement, including that relating to the issuance or redemption of securities, is registered and settled upon acceptance, and consequent entry by Selic, of the command(s) transmitted by the authorized party. 2 - In an operation with transfer of securities and without financial settlement, registration and settlement occur, if there is a balance of securities, through entries, by Selic, to the debit and credit of the participants' accounts. 3 - Involving transfer of securities and financial settlement, Selic, in the registration and settlement of the operation: a) segregates the securities, object of the operation, from the account of the transferring/selling participant; b) verifies the financial settlement; c) carries out the debit and credit entries in the participants' accounts. 4 - Requiring only financial settlement, the certification thereof implies the registration and settlement of the operation by Selic. OPERATIONS WITH FINANCIAL SETTLEMENT 5 - Only the operations mentioned in subitems "b" to "f" of item 6.3.5.3 and in items 6.3.5.48 and 6.3.7.41 to 43 generate financial settlement, for the purposes of this section, excluding, in any case, those contracted by the participant with its clients of the custody accounts Client 1. 6 - For the purposes of the provisions of items 3 and 4, Selic verifies that the financial settlement: a) is authorized by the settling participant, by defining an operational limit provided for in items 8 to 15, with respect to operations of a non-settling participant; and b) was carried out by the Reserve Transfer System (STR). 7 - If the financial settlement is not certified in accordance with the previous item, Selic cancels the double command(s) of the operation or of the associated or combined operations. OPERATIONAL LIMIT FOR NON-SETTLING PARTICIPANT 8 - The settling participant may establish an
operational limit for the financial settlement of the operations of the non-settling participant. 9 - The operational limit is given, at each moment, by what is initially defined, with the increase or reduction referred to in item 12, minus the amounts corresponding to the financial debits computed on the day, related to the operations of the non-settling participant already settled by the settling participant. 10 - The operational limit, as well as its changes, must be informed by the settling participant to Selic through a message defined in the Message Catalog of the Brazilian Payment System (SPB). 11 - The provisions of the previous item only take effect from the business day following the day on which the respective message is accepted by Selic. 12 - At any time, however, the settling participant may increase or reduce the operational limit, with effects only for the day and from the moment in which the message provided for in the Message Catalog of the SPB is accepted by Selic. 13 - The financial debits mentioned in item 9 are computed operation by operation, except when settled in the manner provided for in items 20 and 21, in which case the debit considered is that related to the net result. 14 - For the purposes of the provisions of items 6 and 7, the financial settlement of an operation of a non-settling participant that exceeds the operational limit defined in item 9 is considered unauthorized. 15 - The provisions of items 9 to 14 do not apply to the subordinated non-settling participant in relation to operations settled by its default settling participant, in which case the financial settlement is always considered as previously authorized by the default settling participant. OPERATIONS PENDING SETTLEMENT FOR SECURITIES 16 - Operations pending settlement due to insufficiency or inexistence of securities in the account from which the securities will be transferred are admitted. 17 - The double commands of operations pending settlement for securities are canceled, except as provided in item 40: a) after the expiration of the pending period or at the respective deadline, whichever occurs first, established by the Central Bank in a regulation issued through the Central Bank Information System (Sisbacen); b) immediately, if transmitted after the mentioned deadline. 18 - The pending period provided for in subitem "a" of the previous item is counted from the moment in which all double commands required by the operations, including associated and combined ones, have been accepted. 19 - For settlement purposes, given the balance of securities in the account, operations that can be settled with the mentioned balance have priority and, among them, the one that has been pending for the longest time. SETTLEMENT BY OFFSET RESULTS 20 - In settlement by offset results, Selic: a) determines the net short positions and segregates those quantities from the respective accounts; b) verifies financial settlement, operation by operation, but considering the
offset financial result of each participant; c) effects the debit and credit entries, jointly and for the gross quantities of securities, in the participants' accounts. 21 - The following are settled by offset results: a) the group of operations, in accordance with the provisions of items 22 to 25; b) associated operations, under the terms of items 26 to 31; c) combined operations, under the terms of items 32 and 33; d) repurchases/resales of securities to be redeemed on the day and redemption, amortization and interest payment operations falling due on the day, as provided in item 36. GROUPS OF OPERATIONS 22 - The Selic administrator, on occasions it deems convenient and up to the deadline referred to in subitem "a" of item 17, activates an optimization mechanism in order to identify operations that: a) individually, are pending settlement due to insufficiency or non-existence of securities; b) grouped together, enable joint settlement. 23 - For joint settlement, it is preliminarily necessary that at least one of the participants has had available in the free-movement custody account, at some point during the day, the quantity of securities sold by it in the group of operations. 24 - Once a group of operations is identified that satisfies the prerequisite mentioned in the previous item, Selic initiates the settlement process by offset results. 25 - If financial settlement by offset results is not confirmed, the operations return to the state in which they previously were, that is, pending settlement due to insufficiency or non-existence of securities and, therefore, subject to the provisions of items 16 to 19. ASSOCIATED OPERATIONS 26 - For purposes of settlement by offset results, the following may be associated: a) the financing, total or partial, obtained for the purchase of securities and the respective purchase operation; b) the sale operation of securities for the settlement, total or partial, of the financing obtained and the respective settlement, total or partial, of that financing; c) the obtaining of financing, the purchase and sale operation and the settlement of the financing referred to in the previous subitems. 27 - For purposes of the provisions of this section, financing is defined as the repurchase agreement operation, with a repurchase/resale commitment for the same day, contracted between: a) non-settling participant and settling participant, observing the applicable legal and regulatory rules; or b) settling participant and the Central Bank of Brazil, in the form of a rediscount operation. 28 - The purchase and sale operation provided for in item 26 may be: a) definitive or repurchase agreement, the latter with a term of at least one business day; b) contracted with or without the intermediation of institutions holding brokerage accounts. 29 - The following may also be associated: a) the purchase of securities, the obtaining of financing by the non-settling participant and the obtaining of rediscount by the settling
participant; b) the sale of securities, the settlement of financing by the non-settling participant and the settlement of rediscount by the settling participant; or c) the purchase and sale operation with the rediscount and financing operations referred to in the previous subitems. 30 - With respect to the rediscount operations of the Central Bank of Brazil, the repurchase commitment, for the same day or a later day, of the settling participant may be settled by association with: a) a new rediscount operation with a term of at least one business day; b) a sale operation, definitive or repurchase agreement, contracted with any other Selic participant. 31 - The following may also be associated: a) the conditional release of collateral operation provided for in item 6.3.5.48, and the financing operation referred to in item 27; as well as the aforementioned conditional release of collateral operation, the obtaining of financing by the non-settling participant and the obtaining of rediscount by the settling participant; b) the operation contracted in a public offering and the operations referred to in items 41 to 43. COMBINED OPERATIONS 32 - The following are settled by offset results: a) the repurchase agreement sale of securities combined with the repurchase agreement purchase of other securities, both operations having the same contracting parties, one of which is the Central Bank of Brazil; b) the repurchase and resale relating to the repurchase agreements referred to in the previous subitem. 33 - The difference between the financial values of the repurchase agreement sale and purchase operations referred to in subitem "a" of the previous item must necessarily be less than the unit price of the security subject to purchase by the Central Bank of Brazil. SELIC OPENING PROCEDURES 34 - The following operations are settled in the Selic opening procedures: a) repurchases/resales of securities that are being redeemed on the day; b) payment of interest, amortizations and redemptions of securities; c) forward operations, observing the provisions of items 38 to 40. REPURCHASES/RESALES 35 - The commands for repurchases and resales are transmitted by the parties, except on the day on which the securities subject to the operation are redeemed, in which case the repurchase/resale commands are transmitted automatically by Selic, in its opening procedures. 36 - All repurchases and resales of securities to be redeemed on the day and the operations of payment of interest, amortizations and redemptions falling due on the day are settled by offset results. 37 - The repurchases/resales referred to in the previous item of a non-settling participant are mandatorily settled by the respective standard settling participant. TERM OPERATIONS 38 - On the date scheduled for the settlement of the term operation, the purchase and sale commands are transmitted automatically by Selic - in its opening procedures, right after the settlement of the operations mentioned in item 36 is
completed - in compliance with the chronological order in which the term operations were registered. 39 - Once the commands for the term operations are transmitted, Selic, in its opening procedures, excludes the operations mentioned in the following item and settles or cancels the remaining operations. 40 - In operations pending settlement due to insufficiency or non-existence of securities, the commands referred to in item 38 are maintained by Selic until the following expire: a) the pending period provided for in subitem "a" of item 17, when the term operation refers to securities already issued and in circulation; b) the time provided for in subitem "a" of item 6.3.6.23, when the term operation refers to securities subject to a public offering that, at the time of registration of the operation, had already been disclosed but not yet settled. OPERATIONS CONTRACTED IN PUBLIC OFFERINGS 41 - In addition to the association hypothesis provided for in items 26 to 29, the purchase operation contracted in the Formal Electronic Public Offering module (Ofpub) may be associated with the following two operations, subject to the provisions of the subsequent item: a) transfer of the securities from the purchasing participant's own free-movement custody account to the corresponding chamber deposit account; and b) transfer of the securities from the deposit account to the chamber's settlement account as a result of a sale made by the purchasing participant in the respective clearing and settlement system. 42 - The financial settlement of the operations referred to in the previous item is made by means of credit orders to the Reserve Transfer System (STR): a) from the chamber in favor of the purchasing participant in Ofpub; b) from the purchasing participant in Ofpub in favor of the National Treasury or the Central Bank of Brazil, as the case may be. 43 - The credit orders referred to in the previous item must observe the unit prices determined in the result of the public offering of the securities in question. OPERATIONS REGISTERED IN SYSTEMS OPERATED BY CHAMBERS 44 - The operations referred to in item 6.3.5.6, of the chambers with each participant of the respective clearing and settlement system, are settled, in Selic, by the net results determined between the parties. 45 - The settlement of the operations mentioned in the previous item is effected with the transfer of the securities: a) from the free-movement custody account or from the deposit account to the settlement account; and b) from the settlement account to the free-movement custody account or, optionally, in the case of securities subject to resale or term sale, to the deposit account. ------------------------ TITLE 6: REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3: Special Settlement and Custody System (Selic) SECTION 8: Complementary Modules of Selic --------------------------------------------------------------------- FORMAL ELECTRONIC PUBLIC OFFERING (OFPUB) 1 - The purpose of Ofpub is to receive
proposals from institutions and determine the results of formal public offerings: a) of federal public securities under custody at Selic; b) of operations with derivative financial instruments to be contracted with the Central Bank of Brazil. 2 - The participants of Ofpub are the institutions mentioned in subitems "c" to "e" of item 6.3.2.1. 3 - Once the registration of the public offering is completed, in accordance with the specific conditions contained in the respective notice, Ofpub: a) is released, at the time set in the notice, for the participating institutions to transmit their proposals; b) determines and discloses the result of the public offering. INFORMAL ELECTRONIC AUCTION OF CURRENCY AND SECURITIES (LEINF) 4 - Leinf is intended for the processing of informal auctions, by the Central Bank of Brazil/Open Market Operations Department (Demab), of federal public securities or of currency and federal public securities under custody at Selic. 5 - The participants of Leinf are the institutions referred to in subitems "c" and "d" of item 6.3.2.1 accredited to operate with Demab. 6 - Once the auction parameters are registered: a) Demab communicates the release of Leinf for the participants to transmit their proposals; b) the system determines and discloses the result of the event. ---------------------- TITLE 6: REGULATIONS AND SPECIAL PROVISIONS CHAPTER 3: Special Settlement and Custody System (Selic) SECTION 9: Final Provisions --------------------------------------------------------------------- 1 - Every participant must keep at its workplaces a person qualified to transmit operation commands: a) preferably, throughout the entire operating period of Selic; b) mandatorily, in the sixty minutes preceding the closing of Selic. 2 - The following must be the subject of a contract to be signed between the parties: a) the transmission of commands of a subordinate non-settling participant by the respective standard settling participant; b) the definition, by the settling participant, of the operational limit open to the non-settling participant; c) the extinction of the obligation arising from the settlement of operations of a non-settling participant by a settling participant. 3 - The chambers responsible for the clearing and settlement system of operations with securities under custody at Selic are obliged to provide, to the Open Market Operations Department (Demab), the data on all such operations settled by the mentioned system. 4 - The information mentioned in the previous item must be sent, through one of the Selic access networks, in accordance with the standards and within the deadlines established by Demab. 5 - Selic participants are subject to the charging of a monthly amount intended to reimburse the operating and investment expenses of the Associação Nacional das Instituições do Mercado Aberto (Andima) and of the Banco Central do Brasil related to the operation of Selic and its complementary modules, as well as the expenses incurred
by Andima in its activities to promote the market for federal public securities. 6 - The amounts owed by participants are calculated according to the calculation methodology to be disclosed by Demab by means of a communiqué in the Sistema de Informações Banco Central (Sisbacen). 7 - The calculation methodology for reimbursement purposes may be revised at any time, entering into force on the first business day of the month following its disclosure in Sisbacen. 8 - Initial access to Selic and its complementary modules is conditioned upon payment, by the participant, of an amount defined by Andima, as an adhesion fee. 9 - The standard-settling participant is permitted to charge a monthly fee for services provided to the subordinate non-settling participant, related to the transmission of the commands for the latter's operations. 10 - Cases not covered shall be resolved by Demab.