CVM Instruction No. 539 of November 13, 2013, as amended by CVM Instructions No. 554/14, 593/17, and 604/18

Sede: Rua Sete de Setembro, 111/2-5º and 23-34º Floors – Centro – Rio de Janeiro - RJ – CEP: 20050-901 – Brasil – Tel.: (21) 3554-8686 – http://www.cvm.gov.br.
Regional de São Paulo: Rua Cincinato Braga, 340/2º, 3º and 4º Floors – Bela Vista – São Paulo – SP – CEP: 01333-010 – Brasil – Tel.: (11) 2146-2000 Regional de Brasília: SCN Q.02 – Bl. A – Ed. Corporate Financial Center – S.404/4º Floor – Brasília – DF – CEP:70712-900 – Brasil – Tel.: (61) 3327- 2030/2031 CVM INSTRUCTION NO. 539, OF NOVEMBER 13, 2013, WITH THE AMENDMENTS INTRODUCED BY CVM INSTRUCTIONS NO. 554/14, 593/17, AND 604/18. Provides for the duty to verify the suitability of products, services, and operations to the client's profile.

The ACTING PRESIDENT OF THE SECURITIES COMMISSION - CVM makes public that the Collegiate Body, in a meeting held on October 30, 2013, in view of the provisions of art. 1, item VIII; 8, items I and III; 18, item I, letter "b", and 27 of Law No. 6.385, of December 7, 1976, APPROVED the following Instruction:

CHAPTER I – SCOPE

Art. 1. Persons authorized to act as members of the distribution system and securities consultants may not recommend products, execute operations, or provide services without verifying their suitability to the client's profile.

§ 1. The rules provided for in this Instruction apply to recommendations of products or services, directed to specific clients, made through personal contact or using any means of communication, whether oral, written, electronic, or via the worldwide computer network.

§ 2. The rules provided for in this Instruction must be adopted for the client holding the application.

CHAPTER II – CLIENT PROFILE

Art. 2. The persons referred to in art. 1 must verify whether:
I – the product, service, or operation is suitable for the client's investment objectives; II – the client's financial situation is compatible with the product, service, or operation; and III – the client has the necessary knowledge to understand the risks related to the product, service, or operation.

§ 1. To comply with the provision of item I, the persons referred to in art. 1 must analyze, at a minimum:
I – the period in which the client wishes to maintain the investment; II – the client's declared preferences regarding risk assumption; and III – the purposes of the investment;

§ 2. To comply with the provision of item II, the persons referred to in art. 1 must analyze, at a minimum:
I – the value of the regular income declared by the client; II – the value and assets comprising the client's assets; and III – the client's declared future need for resources.

§ 3. To comply with the provision of item III, the persons referred to in art. 1 must analyze, at a minimum:
I – the types of products, services, and operations with which the client is familiar; II – the nature, volume, and frequency of operations already performed by the client in the securities market, as well as the period in which such operations were performed; and III – the client's academic background and professional experience.

§ 4. The provision of item III of § 3 does not apply to corporate clients.

§ 5. In fulfilling the duty provided for in the caput of art. 2, the persons referred to in art. 1 must consider the direct and indirect costs associated with the products, services, or operations, refraining from recommending those that, individually or collectively, imply excessive and inappropriate costs for the client's profile.

Art. 3. With the objective of meeting the obligations contained in art. 2, the persons referred to in art. 1 must evaluate and classify the client into previously established risk profile categories.

CHAPTER III – PRODUCT CATEGORIES

Art. 4. With the objective of meeting the obligations contained in art. 2, the persons referred to in art. 1 must analyze and classify the categories of products with which they operate, identifying the characteristics that may affect their suitability to the client's profile.

Sole Paragraph. In the analysis and classification of product categories, the following must be considered, at a minimum:
I – the risks associated with the product and its underlying assets; II – the profile of the issuers and service providers associated with the product; III – the existence of guarantees; and IV – the lock-up periods.

CHAPTER IV – PROHIBITIONS AND OBLIGATIONS

Art. 5. It is prohibited for the persons referred to in art. 1 to recommend products or services to the client when:
I – the client's profile is not suitable for the product or service; II – the information allowing the identification of the client's profile is not obtained; or III – the information regarding the client's profile is not up to date.

Art. 6. When the client orders the execution of operations in the situations provided for in items I to III of art. 5, the persons referred to in art. 1 must, before the first operation with the securities category:
I – alert the client regarding the absence or outdated nature of the profile or its unsuitability, indicating the causes of the divergence; and II – obtain an express declaration from the client stating that they are aware of the absence, outdated nature, or unsuitability of the profile.

Sole Paragraph. The measures required in the caput are waived when the client is, demonstrably, implementing recommendations provided by a securities consultant authorized by the CVM.

• Sole paragraph added by CVM Instruction No. 593, of November 17, 2017.

CHAPTER V – RULES, PROCEDURES, AND INTERNAL CONTROLS

Art. 7. The persons mentioned in art. 1 of this Instruction that are organized in the form of a legal entity are obliged to:
I – establish written rules and procedures, as well as verifiable internal controls, that allow full compliance with the duty to verify suitability referred to in art. 1; II – adopt specific internal policies related to the recommendation of complex products, highlighting:
a) the risks of the structure compared to that of traditional products; and b) the difficulty in determining their value, including due to their low liquidity; and III – indicate a statutory director responsible for compliance with the standards established by this Instruction.

§ 1. The appointment or replacement of the director must be reported to the CVM within 7 (seven) business days.

§ 2. The director referred to in item III of the caput must submit to the administrative bodies of the persons referred to in art. 1, by the last business day of the month of April, a report relating to the previous calendar year to the date of delivery, containing:

• § 2 with wording given by CVM Instruction No. 604, of December 13, 2018.
  I – an evaluation of the legal entity's compliance with the rules, procedures, and internal controls referred to in item I of the caput; and II – recommendations regarding any deficiencies, with the establishment of remediation schedules.

§ 3. Without prejudice to the responsibility of the director referred to in item III of the caput, the administrative bodies of the persons referred to in art. 1 are responsible for:
I – approving the rules and procedures referred to in item I of the caput; and II – supervising the compliance and effectiveness of the internal procedures and controls.

CHAPTER VI – UPDATES

Art. 8. The persons referred to in art. 1 are obliged to:
I – diligently update the information regarding their clients' profiles at intervals not exceeding 24 (twenty-four) months; and II – perform a new analysis and classification of securities categories at intervals not exceeding 24 (twenty-four) months.

CHAPTER VII – WAIVER OF THE DUTY TO VERIFY THE SUITABILITY OF PRODUCTS, SERVICES, AND OPERATIONS TO THE CLIENT'S PROFILE

Art. 9. The obligation to verify the suitability of the product, service, or operation does not apply when the client belongs to one of the following categories:
I – persons authorized to act as members of the distribution system; II – insurance companies and capitalization societies; III – open and closed complementary pension entities; IV – investment funds; V – non-resident investors; VI – corporate entities that are considered qualified investors, according to specific regulation; and VII – analysts, portfolio managers, and securities consultants authorized by the CVM, regarding their own resources.

Art. 9. The obligation to verify the suitability of the product, service, or operation does not apply when:
I – the client is a qualified investor, with the exception of natural persons mentioned in item IV of art. 9-A and in items II and III of art. 9-B; II – the client is a legal entity of public law;

• Item II with wording given by CVM Instruction No. 593, of November 17, 2017.
  III – the client has their securities portfolio managed discretely by a portfolio manager authorized by the CVM;
• Item III with wording given by CVM Instruction No. 593, of November 17, 2017.
  IV – the client already has their profile defined by a securities consultant authorized by the CVM and is implementing the recommendation provided by them.
• Item IV added by CVM Instruction No. 593, of November 17, 2017.

§ 1. In the case of item IV, persons authorized to act as members of the distribution system must require the client to provide the profile assessment made by the securities consultant.

• §1 added by CVM Instruction No. 593, of November 17, 2017.

§ 2. The waiver provided for in item IV does not extend to cases where the products, services, and operations commanded by the client do not relate directly to the implementation of recommendations from the consultant they hired.

• §2 added by CVM Instruction No. 593, of November 17, 2017.
• Art. 9 with wording given by CVM Instruction No. 554, of December 17, 2014.

CHAPTER VII-A – INVESTOR CATEGORIES

Art. 9-A. Professional investors are considered:
I – financial institutions and other institutions authorized to operate by the Central Bank of Brazil; II – insurance companies and capitalization societies; III – open and closed complementary pension entities; IV – natural or legal persons who possess financial investments in a value greater than R$ 10,000,000.00 (ten million reais) and who, additionally, attest in writing their status as professional investors through a specific term, according to Annex 9-A; V – investment funds; VI – investment clubs, provided that the portfolio is managed by a portfolio manager authorized by the CVM; VII – autonomous investment agents, portfolio managers, analysts, and securities consultants authorized by the CVM, regarding their own resources; VIII – non-resident investors.

Art. 9-B. Qualified investors are considered:
I – professional investors;
II – natural or legal persons who possess financial investments in a value greater than R$ 1,000,000.00 (one million reais) and who, additionally, attest in writing their status as qualified investors through a specific term, according to Annex 9-B; III – natural persons who have passed technical qualification exams or hold certifications approved by the CVM as requirements for the registration of autonomous investment agents, portfolio managers, analysts, and securities consultants, regarding their own resources; and IV – investment clubs, provided that the portfolio is managed by one or more quota holders, who are qualified investors.

Art. 9-C. The own social security regimes established by the Union, the States, the Federal District, or Municipalities are considered professional investors or qualified investors only if recognized as such according to specific regulation of the Ministry of Social Security.

• Chapter VII-A and arts. 9-A, 9-B, and 9-C, added by CVM Instruction No. 554, of December 17, 2014.

CHAPTER VIII – MAINTENANCE OF RECORDS

Art. 10. The persons referred to in art. 1 must maintain, for a minimum period of 5 (five) years counted from the last recommendation provided to the client, or from the last operation performed by the client, as the case may be, or for a longer period as expressly determined by the CVM, in case of administrative process, all documents and declarations required by this Instruction.

Sole Paragraph. The documents and declarations referred to in the caput may be stored in physical or electronic media, allowing the substitution of documents by their digitized images.

CHAPTER IX – FINAL PROVISIONS

Art. 11. Self-regulatory entities may establish complementary operational rules and procedures aimed at compliance with the provisions of this Instruction by the persons regulated by them.

Art. 12. Non-compliance with the prohibitions and duties established in arts. 5 and 6 constitutes a serious offense, for the purposes of the provision of art. 11, § 3, of Law No. 6.385, of December 7, 1976.

Art. 13. This Instruction enters into force on July 1, 2015.

• Article 13 with wording given by CVM Instruction No. 554, of December 17, 2014.

Original signed by
OTAVIO YAZBEK
President
In exercise

ANNEX 9-A
DECLARATION OF PROFESSIONAL INVESTOR STATUS
By signing this term, I affirm my status as a professional investor and declare to possess knowledge about the financial market sufficient so that a set of legal and regulatory protections granted to other investors does not apply to me. As a professional investor, I attest that I am capable of understanding and weighing the financial risks related to the application of my resources in securities that can only be acquired by professional investors. I declare, under the penalties of the law, that I possess financial investments in a value greater than R$ 10,000,000.00 (ten million reais). Date and place, ______ [Insert name]

• Annex 9-A added by CVM Instruction No. 554, of December 17, 2014.

ANNEX 9-B
DECLARATION OF QUALIFIED INVESTOR STATUS
By signing this term, I affirm my status as a qualified investor and declare to possess knowledge about the financial market sufficient so that a set of legal and regulatory protections granted to investors who are not qualified does not apply to me. As a qualified investor, I attest that I am capable of understanding and weighing the financial risks related to the application of my resources in securities that can only be acquired by qualified investors. I declare, under the penalties of the law, that I possess financial investments in a value greater than R$ 1,000,000.00 (one million reais). Date and place, ______ [Insert name]

• Annex 9-B added by CVM Instruction No. 554, of December 17, 2014.