CVM Instruction No. 441 of November 10, 2006 (Revoked)

FULL TEXT OF CVM INSTRUCTION NO. 441, OF NOVEMBER 10, 2006 WITH THE AMENDMENT INTRODUCED BY CVM INSTRUCTION NO. 466/08.

Provides for the lending of securities by clearing and settlement entities for securities operations, amends CVM Instructions Nos. 40, of November 7, 1984 and 310, of July 9, 1999 and revokes CVM Instructions Nos. 249, of April 11, 1996, 277, of May 8, 1998 and 300, of February 23, 1999.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Body, in a meeting held on November 8, 2006, based on the provisions of Articles 8, item I, and 18, item II, of Law No. 6.385, of December 7, 1976, and Resolution No. 3.278, of the National Monetary Council, of April 28, 2005, resolved to issue the following Instruction:

SCOPE AND PURPOSE

Art. 1 This Instruction provides for the provision of securities lending services by clearing and settlement entities for securities operations.

SECURITIES LENDING SERVICE

Art. 2 Only clearing and settlement entities for securities operations authorized by the CVM to provide custody services may maintain a securities lending service.

§ 1 The securities lending service shall be governed by a regulation issued by the entities referred to in the caput, observing the provisions of this Instruction.

§ 2 The regulation of the securities lending service, as well as any subsequent amendments, must be available to the public through the information dissemination systems used by the entity, including on its website.

§ 3 Without prejudice to the provisions of § 2, amendments to the regulation must be communicated in writing to intermediary institutions and direct users of the system.

§ 4 Only lending operations involving securities deposited in custody at the entities mentioned in the caput of this article, free of liens or encumbrances that prevent their circulation, will be admitted.

INTERMEDIATION

Art. 3 Intermediation by clearing and settlement entities for securities operations is mandatory in securities lending operations.

§ 1 Brokerage companies and securities distribution companies qualified before the entity providing the lending service may intermediated the operations referred to in the caput of this article.

§ 2 The institutions referred to in § 1 of this article may carry out lending operations on their own account or on behalf of third parties.

§ 3 Investors must authorize in advance the carrying out of operations of this nature, in the manner established in the authorization term referred to in Art. 8.

§ 4 Intermediary institutions must communicate to investors any changes in the regulation of the service governed by this Instruction.

CVM AUTHORIZATION

Art. 4 The entities mentioned in Art. 2 must request authorization from the CVM to provide the securities lending service, attaching the following documents:

I – draft of the regulation for the securities lending service; II – draft of the adherence term to the securities lending service regulation and to the other applicable norms of the entity to be signed by the intermediaries; III – draft of the authorization term to be signed between investors and intermediaries; and IV – indication of the director responsible for securities lending operations.

§ 1 The regulation of the securities lending service must include, at minimum:

I – the commitment of the borrower to settle the loan by delivering securities of the same kind and quality as the lent security; II – the treatment to be given to the rights inherent to the securities used in the lending operation; III – the obligation for the borrower to provide collateral equivalent to 100% (one hundred percent) of the value of the securities subject to the loan, plus an additional percentage intended to compensate for the variation of this value in two consecutive business days, in favor of the entity providing the lending service; III – the obligation for the borrower to offer collateral to the clearinghouse or the clearing and settlement service provider, in an amount sufficient to ensure the settlement of its operations, in accordance with the provisions of Art. 4 of Law No. 10.214, of March 27, 2001, and complementary regulation;

• Wording given by CVM Instruction No. 466, of March 12, 2008.

IV – the option for the entity providing the lending service to demand the delivery of additional guarantees, at any time and according to the criteria established in its regulation; V – description of the method for calculating and updating the value of the guarantees to be presented by the borrower; VI – the option for the entity providing the lending service to enforce the guarantees, in accordance with Law No. 10.214, of March 27, 2001, regardless of judicial or extra-judicial notification, when the borrower fails to meet obligations arising from this operation, in accordance with the regulation; and VII – the form of remuneration for the loan and the collection of taxes and charges applicable.

§ 2 Amendments to the regulation and other documents provided for in this article are subject to prior approval by the CVM.

Art. 5 The authorization request shall be addressed to the Superintendence of Market and Intermediary Relations, which shall express its opinion within 30 (thirty) days, counted from the date of receipt of the request at the CVM.

§ 1 The 30 (thirty) day period may be interrupted, only once, if the CVM requests additional information from the interested party, with a new 30 (thirty) day period starting from the date of compliance with the requirements.

§ 2 To meet the requirements, a period not exceeding 60 (sixty) days will be granted, counted from the receipt of the respective correspondence, under penalty of denial of the request.

§ 3 If the period provided for in this article expires without contrary manifestation from the CVM, and provided that all formalities provided for in this Instruction have been complied with, the authorization request is considered approved.

§ 4 The denial of the request will be communicated in writing to the interested party.

CANCELLATION

Art. 6 The authorization to provide the securities lending service may be cancelled, ensuring the interested party the right to a full defense and due process, if:

I – the falsity of any of the information or documents presented to obtain the authorization is found; or II – due to a subsequent fact duly proven, it becomes evident that the institution authorized by the CVM no longer meets any of the requirements established in this Instruction for the granting of authorization.

§ 1 The authorization referred to in the caput may also be cancelled at the request of the interested party.

§ 2 The cancellation referred to in the caput of this article shall be without prejudice to any eventual administrative sanctioning process.

APPEAL

Art. 7 Decisions of the Superintendent of Market and Intermediary Relations are subject to appeal to the Collegiate Body, in accordance with current regulation.

AUTHORIZATION TERM

Art. 8 The authorization term referred to in § 3 of Art. 3 must mention, at minimum:

I – its term of validity;
II – the method of transmitting investor orders to carry out lending operations and the information that must be included in the orders; and III – declaration by investors that they are aware of and adhere to the regulation of the securities lending service.

OBLIGATIONS OF THE SERVICE PROVIDER

Art. 9 Entities providing the securities lending service must maintain a registration and control system for these operations, which allows the identification, at any time, of the following data:

I – final lenders and borrowers of the loans;
II – intermediaries of the lending operations; III – characteristics, quantities, and current market value of the securities subject to the loans; and IV – characteristics, quantity, and current market value of the loan guarantees.

§ 1 When carrying out and closing securities lending operations, the entity must communicate to the final lenders and borrowers, specifying the securities lent and the conditions of the loan.

§ 2 The communication referred to in § 1 may be carried out electronically, provided that this possibility is expressly stated in the authorization term referred to in Art. 8, along with the investor's consent and the indication of the respective electronic address to which it should be sent.

Art. 10. Except for the provisions of the loan contracts, entities providing this service are responsible, vis-à-vis the holders of the lent securities, for their replacement and that of any rights attributed to them during the loan period, with no legal relationship being established between the lenders and the borrowers.

Sole Paragraph. Without prejudice to the provisions of the caput of this article, intermediaries of securities lending operations incur the same responsibilities attributed to them in the intermediation of securities operations.

Art. 11. Entities providing the lending service must disclose, daily, through their information systems, the accumulated loan balances, for each security, at the end of the immediately preceding business day.

Art. 12. Failure to comply with the provisions of Arts. 6, item I, 9, and 10 of this Instruction constitutes a serious offense.

Art. 13. Entities authorized to provide stock lending services under CVM Instruction No. 249, of April 11, 1996, must adapt to the provisions of this Instruction within a period of 180 (one hundred and eighty) days, counted from the date of its publication.

Sole Paragraph. Until the end of the adaptation period referred to in the caput, the norms established by CVM Instruction No. 249/96 must be observed.

Art. 14. The following sole paragraph is added to Art. 16 of CVM Instruction No. 40, of November 7, 1984:

“Sole Paragraph. Clubs may use their assets to provide guarantees for their own operations carried out on stock exchanges, as well as lend and borrow securities and financial assets in lending, provided that they are exclusively carried out through a service authorized by the CVM.” (NR)

Art. 15. Art. 2 of CVM Instruction No. 310, of July 9, 1999, shall be in effect with the following wording:

“Art. 2 Custody account statements, periodic or extraordinary, must be sent to the address of the investor who is the holder of the account, except as provided in § 2 of Art. 9 of the Instruction that provides for lending of securities by clearing and settlement entities for securities operations.” (NR)

Art. 16. CVM Instructions Nos. 249, of April 11, 1996; 277, of May 8, 1998, and 300, of February 23, 1999 are revoked.

Art. 17. This Instruction enters into force on the date of its publication in the Official Gazette of the Union.

Original signed by
MARCELO FERNANDEZ TRINDADE
President