CVM Instruction 249 (Revoked) - Regulation of Stock Lending by Clearing, Registration, and Custody Entities

FULL TEXT OF CVM INSTRUCTION NO. 249/96, WITH CHANGES INTRODUCED BY CVM INSTRUCTION NO. 277/98.
CVM INSTRUCTION NO. 249, OF APRIL 11, 1996.
Regulates the lending of shares by entities providing services for the clearing, registration, and custody of shares.

The PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Body, in a meeting held on 04/11/96, and in accordance with the provisions of Articles 4, items II and III, and 8, item I, of Law No. 6,385, of 12/07/76, Articles 41 and 42 of Law No. 6,404, of 12/15/76, Article 23 of the regulation annexed to Resolution CMN No. 1,289, of 03/20/87, Article 3 of Resolution CMN No. 1,787, of 02/01/91, and Resolution CMN No. 2,268, of 04/11/96,

RESOLVED:

ON THE LENDING OF SHARES

Art. 1. Entities providing services for the clearing, registration, and custody of shares may maintain a service for the lending of shares issued by open companies, subject to prior approval by the CVM and in accordance with the provisions of this Instruction.

§1. The shares subject to the loan must be deposited in fungible custody at the entities mentioned in the caput of this article, free of liens or encumbrances that prevent their circulation, and their holders must previously authorize in writing the conduct of operations of this nature.

§2. Brokerage and distribution companies of securities qualified before the entity maintaining the lending service may intermediate the operations referred to in the caput of this article.

§3. The intermediaries cited in the preceding paragraph may conduct lending operations on their own account and on behalf of their administrators.

§4. Intermediation in lending operations is mandatory, except when conducted between a lender who is a direct user of the custody of an entity mentioned in the caput of this article and the entity itself.

ON THE OBLIGATIONS OF ENTITIES PROVIDING SERVICES FOR CLEARING, REGISTRATION, AND CUSTODY

CVM INSTRUCTION NO. 249, OF APRIL 11, 1996
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Art. 2. The entities mentioned in the previous article must request prior approval from the CVM for the share lending service, attaching the following documents:

I - draft of the regulations for the share lending service;

II - draft of standardized contracts or adhesion terms to the regulations for the share lending service and other applicable norms of the entity, to be signed with the lender and the borrower of the loan.

III - method for calculating the value of the guarantees to be presented by the borrower, and their update, which must occur at least once every business day;

IV – designation of the director responsible for share lending operations.

Sole Paragraph. Changes to the norms and documents provided for in this article are subject to prior approval by the CVM.

Art. 3. The loan contract must mention, at a minimum:

I - the term of its validity and whether it is automatically renewable or not;

II - the commitment by the borrower to settle the loan by delivering shares of the same species, class, and company, regardless of the serial number;

III - the treatment to be given to the rights inherent to the shares used in the lending operation;

IV - the obligation for the borrower to provide guarantees equivalent to 100% (one hundred percent) of the value of the shares subject to the loan, plus an additional percentage intended to compensate for the variation of this value in two consecutive trading sessions, in favor of the entity providing services for the clearing, registration, and custody of shares;

V - the option for the entity providing services for the clearing, registration, and custody of shares to require the borrower of the loan to deliver additional guarantees, at any time and according to its criteria, as well as to proceed with the sale, regardless of judicial or extrajudicial formality, of securities or other assets that constitute the guarantee of the lending operation, when the borrower fails to meet any obligation arising from this operation within the regulatory deadline established;

VI - in addition to the guarantees provided for in the previous item, the intermediary may require the borrower of the loan to deliver additional guarantees, at any time and according to its criteria, as well as proceed with the sale, regardless of judicial or extrajudicial formality, of securities or other assets that constitute this additional guarantee of the lending operation, when the borrower fails to meet any obligation arising from this operation within the regulatory deadline established;

VII - the method of remuneration for the loan and the collection of taxes and charges applicable.

§1. When the contractual relationship takes the form of an adhesion term to the regulations for the share lending service and other applicable norms of the entity, the items contained in this article must be clearly expressed in documents whose copies will be delivered to the client upon signing the adhesion term.

§2. In the case provided for in the preceding paragraph, any changes to the regulations for the share lending service and other applicable norms of the entity must be communicated in writing to the clients.

Art. 4. Entities providing services for the clearing, registration, and custody of shares are responsible for maintaining a registration and control system for share lending operations, which allows the identification, at any time, of the following data:

I - Lenders and borrowers of the loans;

II – Intermediaries of the loans;

III - Characteristics, quantity, and updated market value of the shares subject to the loans;

IV - Characteristics, quantity, and updated market value of the guarantees of the loans.

Art. 5. Entities providing services for the clearing, registration, and custody of shares are responsible, vis-à-vis the holders of the lent shares, for the replacement of the same and any rights attributed to the shares during the lending period, with no relationship established between the lenders and the borrowers of the loans.

Sole Paragraph. Regardless of the responsibility attributed in the caput of this article, the intermediaries will be jointly liable for any eventual non-compliance with the obligations in the operations they intermediate.

Art. 6. Entities providing services for the clearing, registration, and custody of shares must disclose daily, with respect to the immediately preceding business day, the accumulated balance of lent shares, disaggregated by issuing company, species, and class of the share.

CVM INSTRUCTION NO. 249, OF APRIL 11, 1996
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ON GENERAL PROVISIONS

Art. 7. Portfolios maintained in the country by foreign institutional investors, constituted and administered in accordance with the provisions of Regulation Annex IV to Resolution CMN No. 1,289, of 03/20/87, as well as Mutual Investment Funds in Shares and Mutual Investment Funds in Shares - Free Portfolio, regulated by CVM Instruction No. 215, of 06/08/94, are authorized to carry out the lending operations referred to in this Instruction.

Art. 7. The following are authorized to carry out the lending operations referred to in this Instruction:

a) portfolios maintained in the country by Investment Companies - Foreign Capital, Investment Funds - Foreign Capital, and by Foreign Institutional Investors, constituted and administered in accordance with the provisions of Regulations Annexes I, II, III, and IV to Resolution No. 1,289, of March 20, 1987;

b) Mutual Investment Funds in Shares and Mutual Investment Funds in Shares - Free Portfolio, governed by CVM Instruction No. 215, of June 8, 1994; and

c) Investment Clubs, regulated by CVM Instruction No. 40, of November 7, 1984.

• Caput and clauses “a”, “b”, and “c” with wording given by CVM Instruction No. 277, of May 8, 1998.

Sole Paragraph. Mutual Investment Funds in Shares may only borrow shares to cover eventual settlement failures in exchange transactions.

Sole Paragraph. Mutual Investment Funds in Shares and Investment Clubs may only borrow shares to cover eventual settlement failures in exchange transactions.

• Sole Paragraph with wording given by CVM Instruction No. 277, of May 8, 1998.

Art. 8. This Instruction shall enter into force on the date of its publication in the Official Gazette of the Union.

Signed original by
FRANCISCO AUGUSTO DA COSTA E SILVA
President