CVM Explanatory Note 3 - Resolution 454 (Administrative Process)

CVM EXPLANATORY NOTE NO. 3 - RESOLUTION 454 (ADMINISTRATIVE PROCESS)

Ref.: RESOLUTION NO. 454 (ADMINISTRATIVE PROCESS).

Considering that:
a) LAW NO. 6,385 of 12/07/76 (which creates the Securities and Exchange Commission), in its Article 9, item V, provided that the CVM, in the exercise of its duties and for the purpose of imposing the penalties created by the same Law (Art. 11), may investigate, through an Administrative Inquiry, illegal acts and inequitable practices by administrators and shareholders of Open Companies, intermediaries, and other participants in the country's securities market; b) the same provision, in its Paragraph 2, provided that such Inquiry must observe the procedure to be established by the National Monetary Council; c) the aforementioned LAW NO. 6,385 created new types of offenses (because the norms that could be infringed were new: the Corporation Law), as well as new penalties; and d) that, finally, Law No. 6,385, in its Article 32, declared revoked all provisions to the contrary;

THE CVM CONCLUDED the need for the urgent regulation, by the National Monetary Council, of the procedural system to be used by it, since, while this did not occur, the new offense scenarios set forth in LAW NO. 6,385 could not be penalized.

This was the objective of the Resolution proposed by the CVM to the CMN, and approved and issued by it (Res. 454).

The resolution creates and disciplines the procedure for the initiation of the Administrative Inquiry by the Securities and Exchange Commission, as well as regulates the consequent Administrative Process.

The structure given to the Inquiry and Administrative Process is quite simple. At its stages, the Resolution provides:
a) the initiation of the Inquiry, which will have a maximum duration of 90 (ninety) days; b) the notification of the conclusion of the Inquiry, which may be favorable or unfavorable to the accused (in the first case closing the matter, and, in the second, allowing the presentation of a defense); c) the presentation of a defense by the accused, with the emergence of the Administrative Process;

d) the judgment of the Process by the Commission's Collegiate Body (and notification of the decision to the accused); e) if the decision is unfavorable to the accused, the Resolution, in accordance with Art. 11, § 4 of the aforementioned LAW NO. 6,385, provides for the possibility of filing an Appeal to the National Monetary Council.

Finally, considering the fact that the CVM was not yet definitively installed at the time, the Resolution provided that, until its installation, the competence to initiate the Inquiry and Administrative Process will be exercised by the Central Bank.

Original signed by
ROBERTO TEIXEIRA DA COSTA
President