CVM Instruction 419 of May 2, 2005, as amended by CVM Instruction 505/11

FULL TEXT OF CVM INSTRUCTION NO. 419, OF MAY 2, 2005, WITH AMENDMENTS INTRODUCED BY CVM INSTRUCTION NO. 505/11.

Provides for the registration of non-resident investors, amends and adds a provision to CVM Instruction No. 387, of April 28, 2003, and adds a provision to CVM Instruction No. 325, of January 27, 2000.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Body, in a meeting held on April 27, 2005, based on Art. 18, item II, letters "a" and "c", of Law No. 6.385, of December 7, 1976, RESOLVED to issue the following Instruction:

Art. 1o

A new Art. 12-A is added to CVM Instruction No. 387, of April 28, 2003, as follows:

“Art. 12-A. Brokers may perform simplified registration of non-resident investors, in accordance with the provisions of regulations issued by stock exchanges and entities administering organized over-the-counter markets, provided that:

I – the non-resident investor is a client of a foreign intermediary institution, before which they are duly registered in accordance with the applicable legislation in the country of origin of this institution;

II – the intermediary institution referred to in item I assumes, before the broker, the obligation to present, whenever requested, all information required by CVM Instructions regarding the registration of investors within the securities market, duly updated, as well as other information required by Brazilian public bodies with regulatory powers;

III – the broker:

a) establishes criteria that allow it to assess the degree of reliability of the foreign intermediary institution;

b) adopts necessary measures to ensure that the client's registration information will be promptly presented by the foreign institution, whenever requested; and

c) ensures that the foreign institution adopts adequate identification and registration practices for clients, consistent with the applicable legislation in its country of origin.

IV – the country in which the foreign intermediary institution is located is not considered a high-risk country regarding money laundering and terrorist financing, and is not classified as a non-cooperative country by international organizations, regarding the combat of illicit activities of this nature; and

V – the capital market regulatory body of the country of origin of the foreign intermediary institution has entered into a mutual cooperation agreement with CVM that allows for the exchange of financial information of investors.

§1o

The regulations mentioned in the main text must include, at a minimum, the following requirements:

I – mandatory execution of a written contract between brokers and foreign intermediaries, which must include the following minimum content:

a) declaration by the foreign intermediary that it possesses the registration information required by CVM Instructions regarding the registration of investors within the securities market, and that it undertakes to keep them permanently updated;

b) obligation for the foreign intermediary to present to the broker or directly to CVM, within the timeframes established by the stock exchange, entities administering organized over-the-counter markets, or CVM, the complementary registration information of non-resident investors, duly updated;

c) clauses establishing that the contract is subject to Brazilian laws, and the competence of the Brazilian Judiciary to hear any lawsuits brought due to controversies arising from the contract, admitting the existence of an arbitration commitment, in which it is stipulated that arbitration must take place in Brazil; and

d) clause imposing termination in case of failure to comply with the obligation to provide registration information of non-resident investors upon request by the broker, the stock exchange, an entity administering an organized over-the-counter market, or a Brazilian public body with regulatory powers.

II – prohibition for the use of simplified registration before any brokers for clients who act through foreign intermediaries that have failed to comply with the obligation to provide information on non-resident investors;

III – timeframes and method of communication by the broker to the stock exchange or organized over-the-counter market of which it is a member, regarding the execution, termination, or alteration of the contract, as well as the failure to comply with any provisions contained therein;

IV – rules for the retention of contracts referred to in item I by the broker; and

V – inclusion of the verification of contract compliance and the fulfillment, by brokers, of relevant regulations, in periodic audits conducted by the stock exchange or the entity administering an organized over-the-counter market on brokers.

§2o

Stock exchanges and entities administering organized over-the-counter markets must submit the regulations mentioned in the main text to the approval of the CVM Collegiate Body prior to the start of their effectiveness.

§3o

Stock exchanges and entities administering organized over-the-counter markets must keep an updated list of contracts executed between foreign intermediaries and brokers subject to their self-regulation available to CVM.

§4o

The provisions of this article apply, where applicable, to central depositories, clearing and settlement chambers, and their respective participants, in their relationship with global custodians exercising the activity of custody of securities of non-resident investors.”

• Article revoked by Instruction 505, of September 27, 2011

Art. 2o

The main text of Art. 10 of CVM Instruction No. 387, of 2003, shall be effective with the following wording:

“Art. 10. The registration referred to in the main text of the previous article must contain, at a minimum, the information provided in § 1o of art. 3o of CVM Instruction No. 301, of April 16, 1999, except for the case provided for in art. 12-A.” (NR)

• Article revoked by Instruction 505, of September 27, 2011

Art. 3o

A new § 3o is added to Art. 5o of CVM Instruction No. 325, of January 27, 2000, as follows:

Ҥ3o

In cases where the non-resident investor acts through a foreign institution, it shall be admitted that the contract referred to in item III is executed by the foreign institution, on behalf of the non-resident investor, provided that, in accordance with current regulations, the custodian institution ensures that the non-resident investor is duly registered with the foreign institution.”

Art. 4o

Stock exchanges and entities administering organized over-the-counter markets must adapt their regulations to the provisions of this Instruction within a maximum period of 30 (thirty) days from its publication.

Art. 5o

Brokers that opt to register non-resident investors in a simplified manner will have until July 31, 2005, to regularize their clients' information in accordance with the provisions of this Instruction.

Art. 6o

This Instruction enters into force on the date of its publication in the Official Gazette of the Union.

INSTRUÇÃO CVM No 419, DE 2 DE MAIO DE 2005.
4
Original signed by
MARCELO FERNANDEZ TRINDADE
President