FULL TEXT OF CVM INSTRUCTION NO. 401, OF DECEMBER 29, 2003, WITH CHANGES INTRODUCED BY CVM INSTRUCTIONS NO. 550/14 AND 609/19.

CVM INSTRUCTION NO. 401, OF DECEMBER 29, 2003

Provides for the trading and public distribution records of Certificates of Additional Construction Potential – CEPAC.

The PRESIDENT OF THE SECURITIES COMMISSION – CVM makes it known that the Collegiate Body, in a meeting held on December 26, 2003, having regard to the provisions of arts. 2º, § 3º, 19 and 21 of Law No. 6,385, of December 7, 1976, and arts. 31, 32 and 34 of Law No. 10,257, of January 10, 2001, RESOLVED to issue the following INSTRUCTION.

SCOPE AND PURPOSE

Art. 1º This instruction provides for the trading and public distribution records of Certificates of Additional Construction Potential – CEPAC.

ON CEPAC

Art. 2º Certificates of Additional Construction Potential – CEPAC, issued by Municipalities, within the scope of Consortium Urban Operations, in the manner authorized by art. 34 of Law No. 10,257, of January 10, 2001, when publicly offered, constitute securities, subject to the regime of Law No. 6,385, of December 7, 1976.

Art. 3º CEPAC may be used by their holders in payment of construction area that exceeds the standards established by land use and occupation legislation, up to the limit fixed by the specific law approving the Consortium Urban Operation.

§1º A Consortium Urban Operation (“Operation”) is considered to be the set of interventions and measures coordinated by the municipal Public Power, with the participation of owners, residents, permanent users and private investors, with the objective of achieving, in an area, structural urban transformations, social improvements and environmental valorization.

§2º Intervention is the set of urbanistic actions practiced by the Municipality through public works and expropriations.

REGISTRATION OF THE CONSORTIUM URBAN OPERATION FOR TRADING OF CEPAC IN THE SECURITIES MARKET

Art. 4º No CEPAC may be offered in the market without prior registration with the CVM of the OPERATION to which it is linked.

Art. 5º The request for registration of the OPERATION shall be formulated by the issuing Municipality of the CEPAC and must be accompanied by the following documents:

I - registration request for the OPERATION, signed by the Mayor or by a representative specifically designated by him, the “Representative”; II - master plan approved in the Municipality providing for the OPERATION; III - specific Law with approval of the OPERATION and authorization for the issuance of CEPAC; IV - specific municipal decree deliberating the issuance of CEPAC; V - draft prospectus, containing the requirements provided for in articles 10 and 11 of this Instruction; VI - contract for the provision of record-keeping services for CEPAC holders’ records and transfers of CEPAC; VII – proof of acceptance of the trading record of CEPAC by a stock exchange or by an entity of the organized over-the-counter market, where applicable.

§1º The option for trading in the unorganized secondary over-the-counter market will result in the inclusion in the cover of the Prospectus of the following observation:

“The securities object of this offer will not be traded on a stock exchange or in an organized over-the-counter market system, and availability of information regarding prices practiced or transactions performed cannot be assured.”

§2º The trading record of CEPAC will be valid until its cancellation, in accordance with article 8º.

Art. 6º After approval of the registration of the OPERATION, any and all communications must mention the number of the record granted by the CVM.

PERIODIC AND EVENTUAL INFORMATION

Art. 7º To update information during the validity period of the registration of the OPERATION, the Municipality must, through the Mayor or its Representative:

I – send to the CVM, quarterly, up to forty-five days after the end of each quarter of the civil year, the following periodic information:

a) report informing the progress of the OPERATION and its respective interventions, the current situation of the areas where CEPAC can still be used, the estimated time for its completion, costs already incurred, the quantity of CEPAC distributed publicly and privately, and any other elements that directly or indirectly affect the execution of the projects; b) report from the institution referred to in article 9º of this Instruction, covering facts related to the application of resources and the progress of the OPERATION; c) breakdown of the quantity of CEPAC used, the area available for the use of CEPAC, and the remaining stock of these certificates; II - immediately communicate to the CVM and to the market the existence of studies, bill projects or any initiatives that may modify the master plan or aspects of the OPERATION; III - widely and immediately disclose any relevant act or fact relating to CEPAC operations so as to guarantee investors access to information that may, directly or indirectly, affect the market value of CEPAC or influence their decisions to acquire, retain or alienate these securities.

Sole paragraph. The Mayor must assign to some body of the City Hall the responsibility for the analysis and monitoring of all aspects of the Operation and for attending and providing technical clarifications to the institutions contracted in accordance with articles 9º and 18, to the CVM, to CEPAC holders, to investors and, if applicable, to stock exchanges or entities of the organized over-the-counter market where they are admitted to trading.

CANCELLATION OF THE OPERATION RECORD

Art. 8º The registration of the OPERATION will be cancelled upon request by the City Hall to the CVM.

§1º The cancellation of the registration of the OPERATION cannot occur within a period less than one year after its conclusion.

§2º The conclusion of the OPERATION occurs when all planned interventions are completed.

§3º The City Hall must publicly disclose the conclusion of the OPERATION and the cancellation of its respective record, including, if applicable, through communication to stock exchanges or entities of the organized over-the-counter market where CEPAC are admitted to trading.

SUPERVISION OF THE APPLICATION OF RESOURCES

Art. 9º The Municipality must hire an institution part of the distribution system registered with the CVM, which cannot be the intermediary institution provided for in article 18, to perform the function of supervising the use of resources obtained with the public distribution of CEPAC, exclusively in the interventions of consortium urban operations, as well as monitor the progress of said interventions and ensure the sufficiency and veracity of the information that will be periodically provided by the Municipality to the market.

§1º The institution referred to in the caput of this article must maintain a technical department qualified to provide services of analysis and monitoring of the urban projects referred to in this Instruction, or contract such services externally.

§2º Services, if contracted externally, must be provided by a company duly registered with the Regional Council of Engineering and Architecture – CREA, with experience in services of analysis and monitoring of the urban projects referred to in this Instruction.

PROSPECTUS

Art. 10. The Prospectus is the document containing basic data about the OPERATION and the total quantity of CEPAC that may be issued for alienation or direct use in payment of the interventions of the OPERATION itself.

Art. 11. The Prospectus must present, at least:

I - the denomination, on the cover of the prospectus, of the name of the OPERATION and indication of the issuance of CEPAC for financing the interventions planned therein, as well as the ISIN code of the security; II - detailed description of the interventions planned within the scope of the OPERATION, as well as their respective execution deadlines and estimated costs, observed the provisions of paragraphs 2º and 3º of article 14; III - deadline provided for the execution of the OPERATION; IV - the total quantity of CEPAC that may be issued in the OPERATION; V - characteristics of the CEPAC issued within the scope of the OPERATION, especially the table of conversion of construction potentials and modification of use, guaranteed to their holders, the existence of a minimum price for alienation or direct use in payment of interventions, and other elements that should be informed to the market; VI - the form of placement of CEPAC, whether public or private, or both;

VII - indication of the main legal references relating to the OPERATION and the issuance of CEPAC, among which the Law that authorized the issuance of CEPAC and the Municipality’s master plan that provides for the possibility of the OPERATION, highlighting, prominently, the articles relating to CEPAC; VIII - indication of the Internet page and other locations where the legal instruments cited in the previous item can be consulted; IX - feasibility study, containing at least the following information: market value of the properties contained within the perimeter of the OPERATION, effects of interventions on the properties, analysis of demand for construction additions in the area, environmental and neighborhood impact study, and method of determining the maximum quantity of CEPAC that may be issued within the scope of the OPERATION; X - indication of risk factors, including political and/or economic nature, and other facts that may lead to modification of the characteristics of the OPERATION, non-realization of planned interventions, or existence of difficulties in exercising rights guaranteed by CEPAC at the time of issuance; XI - indication of the specific account in which resources obtained with the alienation of CEPAC will be kept; XII - indication of the institution referred to in article 9º of this instruction and the terms of the respective contract; XIII - information on other forms of fundraising provided for to achieve the objective of the OPERATION, in case only part of the resources is obtained through the issuance of CEPAC;

Sole paragraph. In addition to the information requested in the caput of this article, the Prospectus must contain, on its cover, the following text: “The registration of this Consortium Urban Operation, for the trading of CEPAC, does not imply, on the part of the CVM, guarantee of veracity of the information provided or judgment on the quality of the security issued to finance the planned interventions.”

REGISTRATION OF PUBLIC DISTRIBUTION OF CEPAC

Art. 12. The Municipality, together with the leading distribution institution, contracted in accordance with article 18, may request the registration of public distribution for the realization of the CEPAC auction.

§1º The request for registration of public distribution may contemplate a single intervention or a set of interventions, composed of a single work and/or expropriation, or set of works and/or expropriations, and must be the object of a specific Supplement, which must be attached to the Prospectus, becoming an integral part thereof.

§2º The request for registration of public distribution of CEPAC must be signed by the Mayor or his Representative, together with the leading distribution institution, and accompanied by proof of payment of the supervision fee for the securities markets relative to the registration of CEPAC issuance.

Art. 13. Resources earned by the Municipality with the public distribution of CEPAC will be applied, exclusively, in the OPERATION registered with the CVM to which they are linked, with the following purposes:

I – land regularization;
II – execution of social interest housing programs and projects; III – constitution of land reserve; IV – ordering and directing urban expansion; V – implementation of urban and community equipment; VI – creation of public leisure spaces and green areas; VII – creation of conservation units or protection of other areas of environmental interest; VIII – protection of areas of historical, cultural or landscape interest.

Art. 14. The Supplement to the Prospectus must present, at least:

I - the denomination, on the cover of the Supplement, of the name of the OPERATION and the number of the record with the CVM; II - indication of the interventions object of the distribution record, contained in the Prospectus, as well as respective estimates of execution deadlines and costs, observed the provisions of the second and third paragraphs of this article; III - the total quantity of CEPAC that may be issued to finance the interventions; IV - indication of the means used for the public distribution of CEPAC; V - indication of the leading distribution institution, in accordance with article 18;

VI - update of the other information contained in the Prospectus referred to in article 11, any information already presented to the CVM and available to the public, whether periodic or eventual, being included by reference;

§1º In addition to the information requested in this article, the Supplement to the Prospectus must contain the following texts on its cover:

“The registration of this distribution does not imply, on the part of the CVM, guarantee of veracity of the information provided or judgment on the quality of the Consortium Urban Operation, as well as on the CEPAC to be distributed”; “investors must read the risk factors section, on pages ...... to ......”;

§2º The cost of the works comprising the OPERATION will be defined in the bidding notices, and the Supplement must be adjusted when the contract with the person responsible for carrying out the same is signed.

§3º The cost of the expropriations comprising the OPERATION will be defined by the administrative or judicial appraisal of the value of the properties, and public placement of CEPAC may only be carried out after publication of the Expropriatory Decree, which must be mentioned in the Supplement to the Prospectus, with indication of the locations and the Internet page where it can be consulted.

§4º The Municipality may add to the costs provided for in the preceding paragraphs, expenses demonstrably incurred in the preparation of projects, studies and other measures necessary for the realization of the interventions planned in the OPERATION, for reimbursement through the alienation of CEPAC, provided that it includes in the Supplement to the Prospectus information about these expenses and their respective supporting documents, with indication of the locations where they can be inspected.

Art. 15. The CVM will only approve the registration of a new distribution of CEPAC linked to the same Operation after:

I - the interventions covered by the previous distribution have been completed, or II - the previously approved distribution of CEPAC has been exhausted, or III - the resources necessary for the conclusion of the interventions object of the previous distribution have been raised, demonstrably.

Art. 16. The Prospectus and its Supplements must be permanently available to the public for consultation, in a location designated by the Municipality, without prejudice to dissemination via the Internet.

Art. 17. Public distribution of CEPAC can only be carried out in the market with intermediation of institutions part of the securities distribution system.

§1º If private distributions of CEPAC occur within the scope of the registered OPERATION, the Municipality must communicate the fact to the CVM, to stock exchanges or entities of the organized over-the-counter market and to the entity responsible for the record-keeping of CEPAC, the quantity of CEPAC distributed and the value of the CEPAC adopted as reference.

§2º The Mayor or his Representative are responsible for the veracity, quality and sufficiency of the information provided to the CVM and to the market, as well as for any damages caused to third parties, due to fault or intent, arising from the falsity, imprecision or omission of such information.

§3º For the realization of a CEPAC auction, the Notice must be published in the Official Gazette in which the Municipality regularly publishes its acts, in the informative bulletins of stock exchanges or entities of the organized over-the-counter market where they are admitted to trading, and on an Internet page.

Art. 17-A Subscription or acquisition of the certificates of additional construction potential object of public distribution offer must be carried out within a maximum period of 2 (two) years, counted from the date of disclosure of the Announcement of Start of Distribution.

• Art. 17-A included by CVM Instruction 550, of July 17, 2014.

Art. 18. The Municipality must hire an institution part of the securities distribution system that, in the capacity of leader of the distribution, will act, together with the Municipality, in registration requests, in the placement of CEPAC in the market, and in communications with the CVM and with the market.

OFFENSES AND PENALTIES

Art. 19. Considered a serious offense, for the purposes of §3º of art. 11 of Law No. 6,385 of December 7, 1976, without prejudice to the fine provided for in §1º of the same article and the provisions of the CVM Instruction relating to public distribution records.

I - untrue assertion regarding the destination of resources obtained with the alienation of CEPAC, as well as any type of omission in the exercise of supervision and monitoring of the intervention by the institution contracted by the Municipality, in accordance with article 11 of this Instruction; II - non-compliance with the provisions contained in articles 7º, items II and III, 9º and 18;

PENALTY FINE

Art. 20. Without prejudice to the provisions of art. 11 of Law No. 6,385/76, the Municipality will pay a daily fine, in the amount of R$ 500.00 (five hundred reais), incident from the first business day subsequent to the end of the deadline, due to non-compliance with the deadlines provided for in article 7º of this Instruction.

Art. 20. The Municipality is subject to the daily fine provided for in the specific norm dealing with penalty fines due to non-compliance with the deadlines provided for in article 7º of this Instruction, without prejudice to the provisions of art. 11 of Law No. 6,385, of 1976.

• Art. 20 with wording given by CVM Instruction No. 609, of June 25, 2019.

GENERAL PROVISIONS

Art. 21. Provisions on public distribution offers of securities, contained in the CVM Instruction relating to public distributions, particularly concerning analysis deadlines for registration and offer, responsibilities of the offeror and the leading distribution institution, approval or disapproval of registration, suspension or cancellation of distribution record, apply to this Instruction, insofar as applicable.

Art. 21 Provisions contained in the norm dealing with public distribution offers, in particular, with respect to:

I - analysis deadlines for registration;
II - responsibilities of the offeror and the leading distribution institution; III - approval or disapproval of the registration; and IV - suspension or cancellation of the distribution record.

• Caput with wording given by CVM Instruction No. 550, of July 17, 2014.

Sole paragraph. For distribution records of CEPAC intended for secondary trading in an unorganized over-the-counter market, the deadlines for analysis and approval of the registration request by the CVM will be doubled.

Art. 22. The CVM may determine that the following information be presented through electronic means, according to the database structure and programs provided by the CVM:

I - Registration information;
II - Prospectus and Supplement;
III - Periodic information;
IV - Eventual information.

§1º The CVM may create, alter, include or suppress the programs referred to in the caput.

§2º For the purposes of this Instruction, electronic mail is considered a valid form of correspondence between the Municipality and CEPAC holders.

Art. 23. This Instruction enters into force on the date of its publication.

Original signed by
LUIZ ANTONIO DE SAMPAIO CAMPOS
Acting President