CVM Instruction 376 (Repealed)

Establishes norms and procedures to be observed in operations carried out on stock exchanges and organized over-the-counter markets through the worldwide computer network and provides other measures.

The PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION – CVM makes public that the Collegiate Board, in a session held on September 10, 2002, in view of the provisions of Articles 8, item I, and 18, item II, letters “a” and “c”, of Law No. 6,385, of December 7, 1976, RESOLVED to issue the following Instruction:

SCOPE AND PURPOSE

Art. 1. The procedures to be observed when forwarding buy and sell orders and trading securities on a stock exchange or organized over-the-counter market entity through the worldwide computer network are regulated by the provisions of this Instruction.

INITIAL DEFINITIONS

Art. 2. For the purposes of this Instruction, the following are considered:

I - electronic broker: a securities brokerage company authorized by the Securities and Exchange Commission - CVM to engage in the activity of intermediation or brokerage of operations with securities on a stock exchange or in an organized over-the-counter market, which administers a system for receiving buy and sell orders for securities through the worldwide computer network;

II - page on the worldwide computer network or on the Internet: a set of documents presented or made available on the worldwide computer network, which can be physically accessed through an electronic address;

III - shortcut: highlighted text or graphical component of a page on the worldwide computer network that allows access to other pages or to other sections or components of the same page; and

IV - protocol address on the worldwide computer network: a code of four octets that identifies all devices connected to the worldwide computer network.

INVESTOR INFORMATION AND EDUCATION

Art. 3. Electronic brokers must include on their pages on the worldwide computer network, in a clear, precise, and accessible language for the investing public:

I - detailed instructions for using the securities trading system via the worldwide computer network;

II - the discounts applied to their fees for all clients or for specific classes of clients and the additional trading costs via the worldwide computer network, including emoluments charged by the stock exchange or entity administering the organized over-the-counter market;

III - the detailed procedures followed by the electronic broker in executing buy and sell orders received via the worldwide computer network, including the possibility that orders are not automatically executed by the system, and their priority relative to orders received through other communication channels, based on traded volume and other parameters;

IV - the characteristics of the security system maintained by the broker, including the use of passwords and electronic signatures;

V - the electronic forms used to communicate to the investor the receipt and faithful execution of their orders, as well as any other information the investor should receive;

VI - information on securities, including the best price and offer lists, classified by security, valid in the electronic trading systems maintained by a stock exchange or entity administering an organized over-the-counter market, through which the broker executes orders received via the worldwide computer network, as well as the time of disclosure of this information on the broker's page on the worldwide computer network;

VII - the electronic broker responsible for executing orders received via the worldwide computer network, in cases of order forwarding;

VIII - the maximum time interval without performing operations during which the investor may remain connected to the trading system via the worldwide computer network without being automatically disconnected; and

IX - Shortcut to the CVM page on the worldwide computer network.

Art. 4. Electronic brokers must establish on their pages on the worldwide computer network a section or a shortcut for investor education, containing, among other information that their administration deems relevant:

I - description of the structure and functioning of stock exchanges, entities administering organized over-the-counter markets, and clearing and custody chambers for securities;

II - description of the securities available for purchase and sale via the worldwide computer network;

III - the risks of price fluctuation and eventual loss of principal value inherent to the securities market, particularly those resulting from positions in derivatives;

IV - the operational risks of using the worldwide computer network and electronic trading systems for the purchase and sale of securities;

V - risks resulting from the failure to deliver assets within the stipulated time, as well as the measures adopted by clearing and custody chambers to reduce them;

VI - special auction procedures observed the norms of the CVM and stock exchanges or entities administering organized over-the-counter markets, to which investor orders are subject;

VII – information regarding the competence of self-regulatory entities, mainly with respect to powers to cancel previously concluded transactions in case of violations of legal provisions; and

VIII - information on simultaneous trading of securities in the live voice trading room and in the electronic trading system, and what the criteria are for interference of one market in another.

Sole Paragraph. The electronic broker must place on its page on the worldwide computer network a prominent notice with the following statement: “ALL COMMUNICATION VIA THE WORLDWIDE COMPUTER NETWORK IS SUBJECT TO INTERRUPTIONS, WHICH MAY INVALIDATE ORDERS OR TRANSACTIONS.”

CAPACITY TO SERVE INVESTORS VIA THE WORLDWIDE COMPUTER NETWORK

Art. 5. Electronic brokers must conduct an annual technical audit of their systems in the month of March to estimate their respective capacity indicators by preparing a corresponding report.

§1. For the purposes of this article, capacity indicators are considered as:

I - the number of investors enabled to trade via the worldwide computer network divided by the maximum number of orders the electronic broker's system is capable of registering in a 1 (one) minute interval;

II - the average time between the registration of the order in the electronic broker's system and its insertion into the electronic trading system of the stock exchange or entity administering the organized over-the-counter market; and

III - the average time between the registration of the order in the broker's system and the sending of the registration confirmation message, via electronic mail, to the client.

§2. The audit report referred to in the caput of this article must be forwarded to the stock exchange or entity administering the organized over-the-counter market of which the electronic broker is a member within ten days after its conclusion.

§3. The stock exchange or entity administering the organized over-the-counter market must maintain a specific section on its page on the worldwide computer network where the capacity indicators contained in the reports of the electronic brokers, referred to in §1 of this article, are published.

Art. 6. Electronic brokers must establish contingency plans for their systems, with the objective of preserving service to investors in cases of suspensions in service via the worldwide computer network, periods of high market volatility, or demand spikes.

Sole Paragraph. With prior justified communication to the CVM, stock exchanges or entities administering organized over-the-counter markets may temporarily suspend or restrict the use of an electronic broker's page on the worldwide computer network for trading securities.

SYSTEM SECURITY

Art. 7. It is the responsibility of electronic brokers to guarantee the security and confidentiality of all information regarding their clients, their buy or sell orders for securities, and their securities portfolio, as well as their communication with clients, using high technological standards of network security.

Art. 8. Electronic brokers are responsible for the operability of their systems, even if they are maintained by third parties.

REGISTRATION OF OPERATIONS VIA THE WORLDWIDE COMPUTER NETWORK

Art. 9. Electronic brokers must maintain, for a period of 5 (five) years, records of all orders received via the worldwide computer network, executed or not, on magnetic media.

Sole Paragraph. The investor who sends a buy or sell order for securities via the worldwide computer network must be immediately notified by the respective electronic broker, via electronic mail message:

I - of the receipt and registration of the order in the electronic system of the stock exchange or over-the-counter market by the broker's system;

II - of the execution of the order; and

III - of the cancellation of the purchase or sale of securities, if any, including its motivation.

PUBLICATION OF MESSAGES SERVICES

Art. 10. Electronic brokers that offer their clients or users of their page on the worldwide computer network services of message publication under pseudonyms must maintain on magnetic media for a period of 5 (five) years, available to the CVM, a file containing:

I - the complete content of all messages published on their page;

II - the pseudonyms used by the authors of the messages; and

III - the protocol addresses on the worldwide computer network of the microcomputers from which the messages originated.

Art. 11. Users of the electronic broker's page on the worldwide computer network who publish analyses of public companies or securities must have their full names clearly identified by the electronic broker in each published analysis.

§1. It is the responsibility of the electronic broker to verify the veracity of any personal information provided by the users referred to in the caput of this article that are published along with their analyses.

§2. Analyses sent by users of the page must be published in a section distinct from those produced by legal entities.

Art. 12. The brokers referred to in the caput of Art. 10 must establish internal procedures to combat the practice of price manipulation and dissemination of false or prejudicially incomplete information through their message publication services.

Sole Paragraph. Within 60 (sixty) days from the date of publication of this Instruction, brokers must inform the CVM of the procedures established to combat the practice of price manipulation and dissemination of false or prejudicially incomplete information referred to in the caput of this article.

DISCLOSURE OF RELEVANT FACTS

Art. 13. Electronic brokers must include on the initial section of their pages on the worldwide computer network a list or shortcut with the following statement: “INQUIRY INTO RELEVANT FACTS DISCLOSED IN THE LAST 5 (FIVE) BUSINESS DAYS”, with all relevant facts disclosed by companies that have securities admitted to trading on a stock exchange or organized over-the-counter market in the last five business days.

Sole Paragraph. Relevant facts may be listed by a title, if it contains a shortcut to the full text of the relevant fact, as disclosed by the company in a notice to the stock exchange or entity administering the organized over-the-counter market in which the securities issued by the company are traded.

PERIODIC AUDIT BY THE SELF-REGULATORY ENTITY

Art. 14. Stock exchanges or entities administering organized over-the-counter markets that operate electronic trading systems receiving orders via the worldwide computer network must conduct a periodic semi-annual audit with the issuance of a corresponding report on the systems used by electronic brokers, verifying if:

I – the information provided in Art. 3 of this Instruction is regularly provided to clients; and

II - the client registration process at electronic brokers respects the provisions of current legislation.

Sole Paragraph. Self-regulatory entities must forward a copy of the audit report referred to in the caput of this article to the CVM within fifteen days, counted from its conclusion.

ALTERNATIVE MEANS OF SERVING CLIENTS

Art. 15. Electronic brokers must have alternative means of serving their clients in the following cases:

I - special auction procedures that occur during trading; and

II - operations in derivative markets, if any.

Sole Paragraph. The alternative means of service must be informed by the electronic broker to clients at the time of registration, as well as the situations in which such means may be used.

GENERAL AND TRANSITORY PROVISIONS

Art. 16. A serious infraction, for the purposes of the provisions of Art. 11, § 3 of Law No. 6,385/76, is the violation of the norms contained in Arts. 5, 6, 7, 9, caput, 11, § 1, 12, caput, and 14.

Art. 17. Non-compliance with the provisions of Arts. 3, 4, 9, sole paragraph, 10, 11, § 2, 12, sole paragraph, and 15 constitutes a hypothesis of objective nature infraction, subject to a summary administrative process.

Art. 18. It is the responsibility of self-regulatory entities to issue complementary norms necessary for the execution of the provisions of this Instruction.

Art. 19. The norms contained in this Instruction apply, insofar as applicable, to other members of the securities distribution system when they exercise the activity of securities intermediation through an electronic broker.

Art. 20. The other norms issued by the CVM regulating the activity of securities and brokerage firms apply, insofar as applicable, to transactions carried out by electronic brokers.

Art. 21. CVM Deliberation No. 365, of October 25, 2000, is hereby repealed.

Art. 22. This Instruction enters into force within sixty days, counted from the date of its publication in the Official Gazette of the Union.

Original signed by
WLADIMIR CASTELO BRANCO CASTRO
Acting President