CVM Instruction No. 116 of May 3, 1990 (Revoked)

FULL TEXT OF CVM INSTRUCTION NO. 116, OF MAY 3, 1990, WITH AMENDMENTS INTRODUCED BY CVM INSTRUCTIONS NOS. 119/90, 126/90 AND 173/92.

CVM INSTRUCTION NO. 116, OF MAY 3, 1990.

Provides for the own securities portfolio of distribution companies and gives other provisions.

The PRESIDENT OF THE SECURITIES COMMISSION makes public that the Collegiate Body, in a session held on this date, and in accordance with the provisions of item IV of Article 1 of CMN Resolution No. 1,653, of October 25, 1989,

RESOLVED:

OWN PORTFOLIO

Art. 1. Distribution companies that operate their own securities portfolio, acting in stock exchange and over-the-counter markets, must submit to the norms of this Instruction.

RESPONSIBLE ADMINISTRATOR

Art. 2. Distribution companies that operate their own portfolio must indicate to the Securities Commission one of their directors or managing partners responsible for the operation of the portfolio.

RESOURCES

Art. 3. Distribution companies may only apply, in the constitution and operation of their portfolio, own resources.

OPERATIONAL LIMIT

Art. 4. Distribution companies that operate their own portfolio must observe the following limits:

I - The value of the own portfolio of companies whose adjusted net worth, computed from March 31, 1990 in the manner determined by the norms contained in the Accounting Plan of Financial Institutions of the National Financial System (COSIF), is less than 2,000,000 (two million) National Treasury Bonds for Fiscal purposes (BTNF) shall not exceed, at any time, 50% (fifty percent) of the value of the own working capital of these companies.

CVM INSTRUCTION NO. 116, OF MAY 3, 1990.
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II - The value of the own portfolio of companies with adjusted net worth greater than 2,000,000 (two million) BTNF but less than 3,000,000 (three million) BTNF shall not exceed, at any time, 60% (sixty percent) of the value of the own working capital of these companies.

III - For companies with net worth greater than 3,000,000 (three million) BTNF, the value of the own portfolio shall not exceed, at any time, 70% (seventy percent) of the value of the own working capital.

§1. Distribution companies whose adjusted net worth is less than 1,000,000 (one million) BTNF may only carry out own portfolio operations in the spot market.

§2. For the purposes of this Instruction, own working capital is considered the positive result of the difference between the adjusted net worth, in the manner of current regulation, and permanent assets.

§3. In calculating this operational limit, the own working capital determined in the balance sheet of the previous month must be used.

Art. 4. Distribution companies may operate their own securities portfolio, in any modalities, in stock exchange and over-the-counter markets, up to the limit of their adjusted net worth, determined based on the immediately preceding month, in accordance with the norms contained in the Accounting Plan of Institutions of the National Financial System (COSIF).

§1. For uncovered positions in forward, futures, forward, and options markets, with the exception of collar operations, distribution companies must observe the limit equivalent to 20% (twenty percent) of their adjusted net worth, determined based on the immediately preceding month, in accordance with the norms contained in the Accounting Plan of Institutions of the National Financial System (COSIF).

§2. It is the responsibility of stock exchanges, futures exchanges, and similar entities, and over-the-counter associations, to establish their own criteria, aiming to define collar operations carried out by the own securities portfolio of distribution companies, which must be immediately communicated to the CVM.

• Article with wording given by CVM Instruction No. 173, of January 29, 1992.

REGISTRATION OF OPERATIONS

Art. 5. Operations executed on behalf of a distribution company or persons linked to it must be recorded with emphasis that reveals this circumstance.

FINANCIAL STATEMENTS

Art. 6. From the balance sheet or monthly balance sheet of distribution companies, in accordance with specific legislation, the amount of the own portfolio must appear in a separate item.

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§1. The semi-annual balance sheet and respective additional financial statements, including explanatory notes, must be accompanied by a summary demonstrative table of applications by security and by market, for the respective semester, of the resources comprising the own portfolio, as well as information regarding the custody of securities.

§2. The monthly balance sheet must be accompanied by a demonstrative table of applications by security and by market of the resources comprising the own portfolio, with necessary explanatory notes to clarify the operations, as well as information regarding the custody of securities.

§3. The semi-annual financial statements, as well as the respective demonstrative tables of applications of the resources comprising the own portfolio, must be accompanied by an audit opinion, including regarding compliance with the limits established for applications of the own portfolio, contained in Article 4 of this Instruction.

§4. The documents referred to in this article must be sent to the Securities Commission within the regulatory timeframes.

§4. The documents referred to in this article shall be made available to the Securities Commission, and must be sent to this agency within a maximum period of 48 hours, when requested.

• Paragraph with wording given by CVM Instruction No. 119, of May 31, 1990.

RELATIONSHIP WITH THE CLIENT

Art. 7. Distribution companies, as well as persons linked to them, may only act as counterparty to operations of individual portfolios managed by them when there is written authorization from the respective holder, which will be attached to the corresponding registration form.

§1. Distribution companies, as well as persons linked to them, are considered market professionals, for the purposes of the provisions provided in CVM Instruction No. 33, of March 26, 1984.

§2. It is prohibited for distribution companies, as well as persons linked to them, to act as counterparty to operations with Mutual Action Funds, Investment Clubs, Investment Companies - Foreign Capital, Investment Funds - Foreign Capital, Conversion Funds - Foreign Capital, and Diversified Portfolio of Securities and Financial Assets maintained in the Country by entities mentioned in Article 2 of Decree-Law No. 2,285/86, managed by them.

§3. The prohibition provided in § 2 also applies when the administration of those funds, clubs, companies, and portfolios maintained in the Country is exercised by an institution part of the same conglomerate as the distribution companies.

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Art. 8. The document confirming the execution of client orders must highlight the activity of distribution companies, or persons linked to them, when acting as counterparty to the operation.

CONTROL

Art. 9. Distribution companies must maintain, daily updated, records specifying, at minimum:

a) the characteristics, quantities, acquisition value, and market value of the securities comprising the own portfolio;

b) the value of operations by type of business, whether purchase or sale, by market (spot, forward, futures, and options), as well as the value of the margins corresponding to the guarantees required for these operations.

SERIOUS OFFENSE

Art. 10. Non-compliance with the provisions provided in this Instruction, as well as the presentation of false documents and declarations, constitutes a serious offense, for the purposes of § 3 of Article 11 of LAW NO. 6,385, of December 7, 1976.

GENERAL AND TRANSITIONAL PROVISIONS

Art. 11. For the purposes of this Instruction, linked persons are considered those who hold, directly or indirectly, control of the distribution company, other partners and directors of that company, as well as their spouses or partners and minor children.

Sole Paragraph. Collective accounts, including investment clubs, in which the majority of quotas belong to any of the persons referred to in the "caput" of this article, are equated to linked persons.

Art. 12. For the purposes of this Instruction, the following will not integrate the own portfolio:

I - balances of securities originating from guarantees given in public distribution of securities, provided they are alienated within a maximum period of 180 (one hundred and eighty) days, counted from the end of the placement;

II - shares received in payment in kind, provided they are alienated within a maximum period of 180 (one hundred and eighty) days counted from receipt.

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Art. 13. Operations executed on behalf in the tax incentive market are subject to the provisions of this Instruction.

Art. 14. The norms issued by the CVM regarding the securities market also apply to the own portfolio, insofar as applicable.

Art. 15. The provisions contained in the sole paragraph of Article 39 of Resolution No. 1,656, of October 26, 1989, of the Monetary National Council, do not apply to the own portfolio of distribution companies, as well as persons linked to them.

• Article revoked by CVM Instruction No. 126, of July 4, 1990.

Art. 16. Distribution companies will have a period of 60 (sixty) days, counted from the date of publication of this Instruction, to adapt to its norms.

Art. 17. This Instruction enters into force on the date of its publication in the Official Gazette of the Union, with CVM Instruction No. 106, of October 26, 1989, being revoked.

Original signed by
LUIZ LEONARDO CANTIDIANO
Acting President.