Circular No. 3743 — Approves the Regulation Governing Centralized Registration and Depository Activities for Financial Assets and the Creation of Liens and Encumbrances on Deposited Financial Assets

The Collegiate Board of the Central Bank of Brazil, in a session held on January 7, 2015, based on the provisions of Article 10 of Law No. 10,214, of March 27, 2001, and Articles 22 and 28 of Law No. 12,810, of May 15, 2013, and considering the provisions of Article 26 of Law No. 12,810, of 2013, and Article 63-A of Law No. 10,931, of August 2, 2004,

R E S O L V E:

Art. 1º The attached Regulation is approved, which governs the activities of registration and centralized depository of financial assets, as dealt with in Articles 22 to 29 of Law No. 12,810, of May 15, 2013, and the creation of liens and encumbrances on deposited financial assets, as dealt with in Article 63-A of Law No. 10,931, of August 2, 2004.

Art. 2º Entities that perform the activities of registration and centralized depository of financial assets on the date of entry into force of this Circular must submit their regulation to the Department of Banking Operations and Payment Systems (Deban) within 90 (ninety) days, counted from the date of publication of this Circular, with a view to analyzing its adequacy to the provisions of the attached Regulation.

Art. 3º This Circular enters into force on the date of its publication.

Aldo Luiz Mendes
Monetary Policy Director

ATTACHED REGULATION TO CIRCULAR NO. 3,743, OF JANUARY 8, 2015

Governs the activities of registration and centralized depository of financial assets, as dealt with in Articles 22 to 29 of Law No. 12,810, of May 15, 2013, and the creation of liens and encumbrances on deposited financial assets, as dealt with in Article 63-A of Law No. 10,931, of August 2, 2004, within the competence conferred upon the Central Bank of Brazil.

CHAPTER I
SCOPE OF APPLICATION

Art. 1º The provisions of this Regulation apply to legal entities that perform the activities of registration and centralized depository of financial assets.

Sole Paragraph. In accordance with Law No. 10,214, of March 27, 2001, the activity of centralized depository of financial assets:

I - consists of a settlement system, if performed in isolation;

II - integrates a settlement system, if performed in the same system that conducts other post-trade activities.

CHAPTER II
AUTHORIZATION FOR THE EXERCISE OF REGISTRATION AND CENTRALIZED DEPOTARY ACTIVITIES FOR FINANCIAL ASSETS

Art. 2º The exercise of the activities of registration and centralized depository of financial assets depends on prior authorization from the Central Bank of Brazil, which will be granted to the requesting entity, after the necessary requirements are met.

§ 1º The authorization for the exercise of the activities referred to in the main text will be granted in accordance with Article 2º of Circular No. 3,057, of August 31, 2001.

§ 2º In the case where the activities referred to in the main text are performed within the scope of a clearing and settlement system, as dealt with in Law No. 10,214, of 2001, the authorization for their exercise will be granted in the authorization process of said system, observing the provisions of this Regulation.

CHAPTER III
REGULATION

Art. 3º The regulation of the system that performs the activities of registration and centralized depository of financial assets must contain the provisions of items I, II, III, IX, and X of Article 15 of the regulation attached to Circular No. 3,057, of 2001, and, furthermore, according to the activity:

I - regarding centralized depository:

a) the unequivocal indication of the moment when settlement is effected;

b) the account structure and procedures related to its opening, maintenance, and closure;

c) the method and procedures related to the provision of balances and statements;

d) the system for the transfer of fiduciary ownership that constitutes the deposit;

e) procedures related to reconciliation;

f) procedures related to the creation of liens and encumbrances on financial assets; and

g) mechanisms and safeguards adopted by the system for the management of credit, liquidity, and operational risks; and

II - regarding registration:

a) the method and procedures for the registration of information;

b) rules intended for participants to ensure the veracity of information and keep records properly updated;

c) procedures aimed at the quality of information registered by participants;

d) procedures related to reconciliation; and

e) mechanisms and safeguards adopted by the system for the management of operational risk.

§ 1º The procedures referred to in item “f” of item I of the main text must contain, at minimum:

I - the method of creation, rectification, and cancellation of liens and encumbrances, including on sets or universes of financial assets;

II - the responsibilities, rights, and obligations of those involved in the acts of creation of liens and encumbrances;

III - procedures related to the treatment given to events of financial assets subject to liens and encumbrances;

IV - methods of transfer of effective ownership of financial assets subject to liens and encumbrances, respecting legal restrictions;

V - procedures related to the treatment applicable to situations of early maturity of obligations subject to liens and encumbrances; and

VI - the regime and method of making information stored about operations available, including regarding the provision of information and issuance of certificates.

§ 2º Changes to the provisions of the regulation mentioned in the main text related to the activities of registration and centralized depository of financial assets must be reported to the Central Bank of Brazil before their entry into force, without the need for prior authorization, but subject to adjustment orders at any time.

CHAPTER IV
ACTIVITY OF CENTRALIZED DEPOTARY OF FINANCIAL ASSETS

Art. 4º For the purposes of this Regulation, the following activities and procedures are part of the scope of the centralized depository activity:

I - centralized custody of financial assets, fungible and non-fungible;

II - storage of additional information regarding deposited financial assets, when required by specific regulation;

III - maintenance and movement of financial asset accounts, including transfer and control of their effective ownership;

IV - provision of balances and statements of financial asset accounts;

V - constitutive registration of issuance of financial assets, when the law or regulation requires that the issuance be performed in an entity of this nature;

VI - creation and control of liens and encumbrances on financial assets; and

VII - treatment of events affecting financial assets.

Art. 5º The transfer of fiduciary ownership of the financial asset to the central depository is carried out:

I - by including the financial assets in the systems maintained by the central depository, when they are book-entry; or

II - by the specific transfer mechanisms of each financial asset, according to its nature and in accordance with the central depository's regulation, when issued in non-book-entry form.

§ 1º When it concerns constitutive registration of issuance of financial assets performed at the central depository, the registration itself is equivalent to the transfer of fiduciary ownership;

§ 2º In the case of item I, when it does not concern constitutive registration of issuance of a financial asset performed in the central depository's system, its inclusion in the systems maintained by the central depository depends on the prior registration of the transfer in the books or systems of the issuer.

Art. 6º The central depository must adopt daily reconciliation procedures so that the total of deposited financial assets faithfully reflects what is recorded in the issuer's books, considering events affecting such financial assets.

Art. 7º The central depository must maintain information regarding movements performed in its systems, in a manner that allows for their traceability.

Art. 8º The central depository must maintain an account structure that allows for the identification of the end client, when required by pertinent regulation or at the discretion of the direct participant who provides service to the end client.

§ 1º In the case of non-identification of the end client, the central depository's account structure must segregate the position of the direct participant from the position of its clients.

§ 2º In the case of identification of the end client, the central depository must provide means that allow the end client to access the balances and statements of their account, which must contain, at minimum, initial position, movement, and final position.

§ 3º The central depository must provide in its regulation the obligation of the direct participant to ensure the veracity and updating of the registration information of end clients to whom they provide service.

Art. 9º The creation of liens and encumbrances on deposited financial assets can only be performed by the central depository, which must adopt procedures aimed at:

I - ensuring the uniqueness and continuity of records of financial assets;

II - generating the necessary information for the exercise of the right of pursuit by secured creditors, including other financial market infrastructure operators; and

III - controlling access to information on liens and encumbrances created within the entity, observing the provisions of applicable legislation, allowing for the issuance of a certificate in favor of interested parties, in the manner to be approved by the Central Bank of Brazil.

CHAPTER V
ACTIVITY OF REGISTRATION OF FINANCIAL ASSETS

Art. 10. For the purposes of this Regulation, the activity of registration of financial assets comprises the storage of information regarding financial assets not subject to centralized depository, as well as transactions, liens, and encumbrances related to them.

§ 1º The entity that performs the activity referred to in the main text is qualified, within the scope of this Regulation, as a registrar entity.

§ 2º The information subject to storage by registrar entities includes those regarding the issuance of financial assets performed outside the central depository environment, whose validity is conditioned by law or regulation to the performance of the registration.

Art. 11. Registrar entities are supervised by the Central Bank of Brazil, focusing on the principles and rules applicable to the payment system, as established in Resolution No. 2,882, of August 30, 2001.

§ 1o Regarding the rules applicable to the payment system, mentioned in the main text, items I, VI, VIII, and IX of Article 3º of Resolution No. 2,882, of 2001, apply to registrar entities.

§ 2o For the purposes of the provision in the main text, registrar entities must ensure the Central Bank of Brazil full access to information maintained by third parties hired by them to perform important stages related to the activity of registration of financial assets.

§ 3º Contracts between registrar entities and the third parties mentioned in § 2º must expressly provide that third parties must provide registrar entities with the information requested by the Central Bank of Brazil.

Art. 12. The registrar entity must adopt monthly reconciliation procedures for information, so that the total of registered financial assets faithfully reflects what is recorded in the issuer's books, considering events affecting such financial assets.

Art. 13. The registrar entity must store information regarding registrations performed in its systems, in a manner that allows for their traceability.

Art. 14. In the case where the activity of registration of financial assets is performed outside the scope of a clearing and settlement system, as dealt with in Law No. 10,214, of 2001, the rules established in Articles 16, 18, 20, 21, 26, main text, 28, and 29, main text, and items I and II, of the regulation attached to Circular No. 3,057, of 2001, apply to entities performing such activity.

§ 1º For the rules established in Article 18, main text, of the regulation attached to Circular No. 3,057, of 2001, the registrar entity must observe the minimum limit of R$5,000,000.00 (five million reais).

§ 2º For the rules established in Article 29 of the regulation attached to Circular No. 3,057, of 2001, the installation and operation of a secondary processing center must allow for the resumption of effective functioning of the activity in a period not exceeding two hours.

Art. 15. Within registrar entities, the availability index must be equal to or greater than 99.8% (ninety-nine and eight-tenths percent).

CHAPTER VI
JOINT PROVISIONS

Art. 16. Central depositories and registrar entities must adopt all necessary procedures to ensure the timeliness of information provision as required by the Central Bank of Brazil.

Art. 17. Central depositories and registrar entities must establish mechanisms to identify and report to the Central Bank of Brazil operations outside market standards performed by institutions authorized to operate by the Central Bank of Brazil or with financial assets under their sphere of competence.

Art. 18. Central depositories and registrar entities must supervise, directly or indirectly, the acts practiced by participants in their systems, including the registration of information, with a view to ensuring full adherence to the rules established in the system's regulation.

Sole Paragraph. In the exercise of this attribution, central depositories and registrar entities must establish measures to remedy observed infractions and, in the cases and manner previously specified in the system's regulation, apply penalties to offending participants.