CVM Instruction No. 350 of April 3, 2001

CVM INSTRUCTION NO. 350, OF APRIL 3, 2001.

Amends and adds provisions to CVM Instruction No. 296, of December 18, 1998, which provides for the registration of public distribution of securities or collective investment contracts.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes it known that the Collegiate Board, in a meeting held on this date, in view of the provisions of Art. 4, items I, IV and VI, Art. 8, item I, Art. 16, item I, and Art. 19, § 5, of Law No. 6,385, of December 7, 1976 and Art. 1, § 3, of Law No. 10,198, of February 14, 2001, HAS DECIDED to issue the following Instruction:

Art. 1 The provisions listed below in CVM Instruction No. 296, of December 18, 1998, shall enter into force with the following wording:

“Art. 3 No public issuance of securities or collective investment contracts may be distributed in the market without prior registration with the CVM, which shall be conditioned upon compliance with the following obligations:

I – provision of real guarantee in an amount equal to, at minimum, 50% of the updated principal value of the securities or collective investment contracts in circulation, in treasury, and to be issued pending registration, when that total accumulated value exceeds the issuer’s net equity or the amount of R$ 5,000,000.00; and,

II – proof by the issuer of the total placement of the issuances previously registered with the CVM, if applicable, or of the cancellation of the unplaced balance, allowing the presentation of the registration request before the end of the placement.

§1 When the updated value of the securities or collective investment contracts in circulation, in treasury, and to be issued, including those pending registration, exceeds the amount of R$ 10,000,000.00, in addition to providing a guarantee, the issuer must be registered as a publicly held company, in accordance with CVM Instruction No. 202, of December 6, 1993.

§2 Securities or collective investment contracts with a unit value equal to or greater than R$ 150,000.00 and intended exclusively for placement with qualified investors, as defined in Art. 99 of CVM Instruction No. 302, of May 5, 1999, may be issued without the guarantees provided for in item I of this article.

§3 The guarantee referred to in item I of this article may only cover free and clear assets, of value compatible with the total guaranteed, according to the assessment that accompanies the registration request.

§4 The guarantee referred to in item I of this article may be totally or partially substituted, at the issuer’s discretion, by:

I – surety guarantee provided by a financial institution with equity compatible with the total guaranteed; or

II – real guarantee on assets identical to those subject to the issuance, which falls on free and clear assets of other encumbrances, and whose value is compatible with the total guaranteed, according to the assessment that accompanies the substitution request.

§5 Unless it is an issuance intended for qualified investors, as provided in § 2 of Art. 3 of this Instruction, the registration of the issuance may be denied if the feasibility study referred to in item V of Art. 11 of this Instruction reveals that the securities or contracts to be issued, including those pending registration, together with those in circulation and in treasury, compromise the payment capacity of the issuing company, being reckless with regard to the risks to which it will expose the investors to whom it is intended.” (NR)

“Art. 5 ...

I - ...

II - ...

III - ...

IV - ...

V - ...

VI - ...

VII - ...

VIII - ...

IX - ...

X - ...

XI - ...

XII - ...

XIII - ...

XIV - ...

XV - ...

XVI – Specification of the consequences and penalties arising from eventual non-compliance by the issuer;

XVII – Specification of the notary office for registration of the contract.

XVIII – Express declaration by the investor that they have taken note of the terms contained in the prospectus.

XIX – Declaration by the issuer that it undertakes to apply the raised resources, within a maximum period of 90 (ninety) days from the effective raising, in the following manner:

a) 50% (fifty percent), at minimum, in the asset subject to the security or contract;

b) the remaining resources in:

1. fixed-income securities issued by the National Treasury or private institutions that have a low credit risk rating;

2. fixed-income funds.

3. in derivatives, exclusively, for protection against price fluctuations of the subject asset or the inputs necessary to fulfill contractual obligations.

XX – With emphasis, the same caveats referred to in items I to III of the sole paragraph of Art. 11 of this Instruction.

XXI – Place and date of issuance of the contract.

XXII – Space for the signature of the investor and the legal representatives of the issuing company.” (NR)

“Art. 11 ...

Sole paragraph. In addition to the information requested in the caput of this article, the prospectus must contain the following texts, drafted in easy-to-read font and with emphasis:

I - "THE CVM DOES NOT GUARANTEE THE VERACITY OF THE INFORMATION PROVIDED BY THE ISSUING COMPANY OR JUDGMENT ON THE QUALITY OF THE PROJECT, THE ISSUING COMPANY OR THE PROFITABILITY AND RISK OF THE INVESTMENT REPRESENTED IN THIS COLLECTIVE INVESTMENT CONTRACT".

II - "THE FINAL PROFITABILITY OF THIS INVESTMENT IS SUBJECT TO PRICE FLUCTUATIONS OF THE ______ (TRADING UNIT OF THE SUBJECT ASSET)".

III - "THIS INVESTMENT DOES NOT REPRESENT A RURAL PARTNERSHIP UNDER THE TERMS OF LAW No. 8,023, OF APRIL 12, 1990." (APPLICABLE WHEN THE SUBJECT ASSET IS AGRICULTURAL OR LIVESTOCK)” (NR)

“Art. 14 ...

Sole paragraph. The table referred to in item IV of this article must specify the destination of the raised resources, duly audited by an independent auditor.” (NR)

“Art. 18 – Considered a grave offense, for the purposes of § 3 of Art. 11 of Law No. 6,385, of December 7, 1976, without prejudice to the fine provided for in § 1 of the same article:

I – distribution carried out under conditions different from those stated in the registration request.

II – distribution carried out without prior registration with the CVM.

III – destination of the raised resources in disagreement with that provided in the prospectus.” (NR)

Art. 2 The following provisions are added to CVM Instruction No. 296, of December 18, 1998:

“Art. 12-A. The issuances of securities or collective investment contracts shall also be accompanied by an informational booklet, drafted in simple language and with clear presentation, which shall briefly bring the information contained in the prospectus, highlighting the risks to which the investor in the offered security or collective investment contract is subject, and repeat with emphasis the caveats referred to in the sole paragraph of Art. 11 of this Instruction.

Sole paragraph. The informational booklet referred to in the caput of this article shall be previously approved by the CVM and delivered to all acquirers of collective investment contracts.” (AC)

“SPECIFIC ACCOUNTING STANDARDS

Art. 14-A. The issuing company of collective investment contracts, which has as its object agricultural products, animals, and extractives intended for sale, shall evaluate its inventories at net realizable value, whenever these possess immediate liquidity, the sector of activity is primary, and the costs and expenses to be incurred in placing the product for sale are determined.

Sole paragraph. For the purposes of the provisions of this article, net realizable value is considered the selling price minus taxes and other costs and expenses associated with the sale.” (AC)

“Art. 14-B. The obligations related to collective investment contracts shall be updated, under the accrual basis, based on the update and remuneration indices provided for in the contracts, adopting, at minimum, the “pro-rata-month” criterion. (AC)

“Art. 14-C. Without prejudice to the provisions of Art. 14 of CVM Instruction No. 296/98, the issuing company must prepare an explanatory reconciliation note, evidencing the changes occurred in the book value of inventories, between the beginning and the end of the fiscal year, including:

a) variation resulting from physical increase;

b) variation resulting from physical decrease;

c) variation resulting from price fluctuation;

d) sales occurred;

d) acquisitions occurred;

e) other variations.” (AC)

Art. 3 Issuing companies of securities or collective investment contracts that have already obtained registration of issuance with the CVM, or whose registration requests are pending on the date of entry into force of this Instruction, shall have a period of ninety days to request the registration of publicly held company referred to in § 1 of Art. 3 of CVM Instruction 296/98, with the wording given to it by Art. 1 of this Instruction.

Art. 4 This Instruction enters into force on the date of its publication in the Official Gazette of the Union, applying to all requests for registration of public distribution of collective investment contracts filed with the CVM and not yet approved.

Original signed by

JOSÉ LUIZ OSORIO DE ALMEIDA FILHO

President