CVM Explanatory Note No. 1

CVM EXPLANATORY NOTE NO. 1.
Ref.: Resolution No. 435 Installation of the Securities and Exchange Commission.

Law No. 6,385, of December 7, 1976, in creating the Securities and Exchange Commission (Comissão de Valores Mobiliários) and fixing its duties, reserved in its Article 29 that these duties would be exercised by the Central Bank of Brazil until the Commission was installed, and established that this Council would regulate the provisions of the cited article regarding the time limit for the installation of the Commission and regarding the assumption, by the Commission, pari-passu with the implementation of its services, of the functions attributed to it by law.

Considering that the Securities and Exchange Commission is already constituted and with its internal organs in the full process of implementation, it was deemed necessary that the National Monetary Council, in the exercise of its legal competence, regulate Article 29 of Law No. 6,385, establishing the rules and formalities applicable to this transition period.

On the other hand, this regulation is also justified by the need to enable members of the securities distribution system, public companies, and the general public to become aware of the implementation process of the Commission and the assumption, by it, of its legal duties.

For these reasons, and in order to regulate the provision of the sole paragraph of Article 29 of Law No. 6,385, Resolution 435 established:
a) until June 30, 1978, the Securities and Exchange Commission, through the progressive implementation of its services, must be capable of exercising its full legal duties; b) from the date of publication of the Resolution, the Commission will fully assume the normative and advisory functions of this Council that are proper to it; and c) the remaining functions conferred by law will be assumed by the Commission as its services are installed, and the form of this assumption will consist of communication to the Central Bank of Brazil and publication of an edict - jointly signed by the Commission and by that Bank - with a minimum advance notice of thirty days from the date scheduled for the effective transfer of functions.

The deadline of June 30, 1978, established in item I of the Resolution, results in a time limit for the full installation of the Commission considered by its Collegiate Body as realistic and perfectly compatible with the stages of this installation. It is relevant to note that this is indeed a deadline, since, according to the rule of item III of the Resolution, the Commission will progressively assume its legal functions as its services are implemented.

Nevertheless, having its Collegiate Body sworn in and in the phase of installing its respective direct advisory organs, the Securities and Exchange Commission is capable of assuming, immediately, its normative and advisory functions of this Council, because the exercise of such functions does not depend on the full implementation of the other organs of its structure.

Item III of the Resolution makes the process of assuming the remaining functions attributed by law to the Commission essentially automatic, fixing the means of formalizing this transfer of functions and the manner in which it will be made public.

RIO DE JANEIRO, FEBRUARY 14, 1980.
Signed Original
JORGE HILÁRIO GOUVÊA VIEIRA
President