CVM Resolution No. 29 of May 11, 2021

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – ZIP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 29, OF MAY 11, 2021

Establishes rules for the constitution and functioning of an experimental regulatory environment (regulatory sandbox) and revokes CVM Instruction No. 626, of May 15, 2020.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION OF BRAZIL – CVM makes it public that the Board, in a meeting held on May 11, 2021, based on the provisions of arts. 8, item II, 16, 18, item I, 19, 21, 23 and 26, of Law No. 6.385, of December 7, 1976, APPROVED the following Resolution:

CHAPTER I – SCOPE AND PURPOSE

Art. 1. This Resolution regulates the constitution and functioning of an experimental regulatory environment (“regulatory sandbox”), in which participating legal entities may receive temporary authorizations to test innovative business models in activities in the securities market regulated by the Securities and Exchange Commission.

Sole Paragraph. The implementation of the regulatory sandbox aims to serve as an instrument to provide:
I – promotion of innovation in the capital market; II – guidance to participants on regulatory issues during the development of activities to increase legal certainty; III – reduction of costs and time to maturity to develop innovative products, services and business models; IV – increased visibility and traction of innovative business models, with possible positive impacts on their attractiveness to venture capital; V – increased competition among service providers and suppliers of financial products in the securities market; VI – financial inclusion resulting from the launch of less costly and more accessible financial products and services; and VII – improvement of the regulatory framework applicable to regulated activities.

Art. 2. For the purposes of this Resolution, the following are understood:

I – regulatory agencies: the Securities and Exchange Commission, the Central Bank of Brazil, the Private Insurance Superintendence and the National Superintendence of Complementary Pension, when not specified individually; II – temporary authorization: authorization granted on a temporary basis for the development of a specific regulated activity, under a regime different from that ordinarily provided for in the applicable regulation, through the waiver of regulatory requirements and by prior establishment of conditions, limits and safeguards aimed at protecting investors and the proper functioning of the securities market; III – Sandbox Committee: group responsible for conducting specific activities related to the regulatory sandbox provided for in this Resolution, whose composition and functioning are governed by a Presidential Ordinance of the CVM; and IV – innovative business model: activity that, cumulatively or not:
a) uses innovative technology or makes innovative use of technology; or b) develops a product or service that is not yet offered or with an arrangement different from that being offered in the securities market.

Sole Paragraph. The innovative business model referred to in item IV must have the potential to promote efficiency gains, cost reduction or expansion of access by the general public to products and services of the securities market.

CHAPTER II – RULES FOR ACCESS TO THE REGULATORY SANDBOX

Section I – Participant Admission Process

Art. 3. The participant admission process in the regulatory sandbox must begin with a market notice, published on the CVM website, which must indicate:
I – the schedule for receiving and analyzing proposals; and II – the eligibility criteria and the content required of the proposals to be presented, as well as the selection and prioritization criteria applicable, in accordance with art. 11.

§ 1. The notice referred to in the caput must be approved by the Board and:
I – must indicate the maximum number of proposers that can be selected to participate in the regulatory sandbox; and II – may restrict the admission of participants to those who carry out one or more regulated activities defined by the CVM.

§ 2. The Sandbox Committee may, exceptionally and with justification, exceed the limitation referred to in item I of § 1, when it verifies that it does not compromise the monitoring of activities by the CVM.

§ 3. The publication of the notice referred to in the caput does not generate any right or expectation of right to any of the participants, proposers or other interested parties in the regulatory sandbox, and the CVM may suspend it at any time before the granting of temporary authorizations.

Art. 4. The Sandbox Committee may establish complementary procedures for the participant admission process, aimed at:
I – analyzing participation proposals in the regulatory sandbox that involve activities regulated by more than one regulatory agency; and II – enabling joint tests of innovative business models in foreign jurisdictions, in partnership with regulatory authorities of countries that have similar or compatible experimental regulatory environments.

Section II – Eligibility Criteria

Art. 5. The minimum eligibility criteria for participation in the regulatory sandbox are:
I – the regulated activity must fit the concept of innovative business model; II – the proposer must demonstrate having sufficient technical and financial capacity to develop the intended activity in an experimental regulatory environment; III – the administrators and direct or indirect controlling partners of the proposer cannot:
a) be disqualified or suspended from holding office in financial institutions and other entities authorized to operate by the regulatory agencies; b) have been convicted of bankruptcy crime, malfeasance, corruption, extortion, embezzlement, money laundering or concealment of assets, rights and values, against the popular economy, the economic order, consumer relations, public faith or public property, the national financial system, or criminal penalty that prohibits, even temporarily, access to public office, by final decision, except in the case of rehabilitation; and c) be prevented from administering their assets or disposing of them due to judicial or administrative decision; IV – the proposer cannot be prohibited from:
a) contracting with official financial institutions; and b) participating in bidding processes whose object is acquisitions, alienations, execution of works and services and concessions of public services, within the scope of the federal, state, district and municipal public administration and indirect public administration entities; V – the proposer must demonstrate that it has the capacity to establish, at a minimum, mechanisms for:
a) protection against cyberattacks and unauthorized logical access to its systems; b) production and storage of records and information, including for the purpose of carrying out audits and inspections; and c) prevention of money laundering and terrorist financing; and VI – the innovative business model must have been preliminarily validated through means, such as proof of concept or prototypes, and cannot be in a purely conceptual development phase.

Sole Paragraph. Participation of foreign legal entities in the regulatory sandbox provided for in this Resolution is permitted, observing the eligibility criteria provided for in this art. 5.

Section III – Submission of Proposals

Art. 6. The proposer must submit a formal proposal to participate in the regulatory sandbox containing, at a minimum:
I – description of the activity to be developed and the aspects that characterize it as an innovative business model, necessarily including:
a) the market niche to be served by the service or product offered; b) the expected benefits in terms of efficiency gains, cost reduction or expansion of access by the general public to products and services of the securities market; c) the metrics planned for performance measurement and periodicity of assessment; and d) the preliminary validation of the innovative business model, in accordance with item VI of art. 5; II – indication of the regulatory requirement waivers intended and the reasons why, in its view, they are necessary for the development of the regulated activity subject to the requested temporary authorization; III – suggestions for conditions, limits and safeguards that may be established by the CVM, alone or together with another regulatory agency, for the purpose of mitigating risks arising from acting under waiver of regulatory requirements, for example:
a) limitations on the number of clients; b) maximum volume of operations; c) mechanisms to receive and respond to complaints from clients and investors; d) additional transparency measures regarding the communication rules provided for in this Resolution; and e) restriction of the securities that can be traded; IV – analysis of the main risks associated with its operation, including those related to:
a) cybersecurity; b) the treatment of personal data; and c) prevention of money laundering and terrorist financing; V – procedures necessary for going into operation, necessarily containing an indicative operational schedule; VI – contingency plan for the orderly discontinuation of the regulated activity, for any reason, including the treatment to be given to clients, investors or interested parties, as applicable; and VII – documents and information necessary to assess compliance with the eligibility criteria, as well as with the selection and prioritization criteria, as disclosed in the market notice referred to in the caput of art. 3.

§ 1. The suggestions for risk mitigation referred to in item III must present solutions and possible remedial measures for any damages caused to clients, investors and interested parties during the period of participation in the regulatory sandbox, including, if applicable, any insurance contracts.

§ 2. The proposer must:
I – indicate, in a justified manner, the information contained in the proposal whose disclosure may represent a competitive advantage to other economic agents, and which, therefore, must be treated by the CVM as confidential, protected under the legal hypotheses of confidentiality; and II – expressly manifest that it agrees with the possibility of the CVM sharing its information, including those that fall under item I, with any third parties who may assist the CVM in the analysis of the proposals, observing the terms provided for in art. 10.

Section IV – Analysis of Proposals

Art. 7. The proposals for participation in the regulatory sandbox received on time are analyzed by the Sandbox Committee.

§ 1. In the analysis of the received proposals, the Sandbox Committee may request additional information or clarifications to remedy any formal defects identified preliminarily and to support the analysis of the received proposals.

§ 2. The request for information referred to in § 1 must be formulated with specific requests, granting a reasonable period for the proposer's response.

§ 3. The receipt and analysis of proposals that come from admission processes of other regulatory agencies for their respective regulatory sandboxes are admitted, even if the period defined by the CVM for registrations has already ended.

Art. 8. Untimely proposals or those considered unfit for admission to the regulatory sandbox must be refused by the Sandbox Committee through presentation of a justification to the proposer.

Sole Paragraph. Proposals are considered unfit if they are ineligible or have not presented the necessary information for the analysis referred to in art. 7.

Art. 9. Proposals considered by the Sandbox Committee as fit for admission to the regulatory sandbox must be included in an analysis report to be presented to the Board, containing, for each proposal, at a minimum:
I – description of the innovative business model to be tested; II – temporary authorization to be granted; III – recommendation of regulatory requirement waivers deemed by the Sandbox Committee as necessary and sufficient for the development of the regulated activity; and IV – proposal of conditions, limits and safeguards to be imposed by the CVM to mitigate the identified risks.

Art. 10. The Sandbox Committee may interact with third parties, such as universities, researchers, representative entities and associations, with the objective of establishing partnerships, cooperation agreements or conventions, for the carrying out of the analysis referred to in art. 7 and the analysis report referred to in the caput of art. 9.

Sole Paragraph. The third parties referred to in the caput must observe the legal hypotheses of confidentiality of the information contained in the participation proposals to which they have access, and the confidential treatment must be provided for in the legal instruments referred to in the caput.

Art. 11. If the number of proposals considered fit for admission to the regulatory sandbox is greater than the maximum number of proposers that can be selected to participate in the regulatory sandbox, in accordance with item I of § 1 and § 2 of art. 3, the Sandbox Committee must include in the analysis report referred to in the caput of art. 9 motivated recommendations for selection and prioritization for acceptance of the proposals.

Sole Paragraph. Without prejudice to the observance of other selection and prioritization criteria, to be expressly informed in the market notice provided for in art. 3, caput, the eventual selection and prioritization for acceptance of proposals must observe the following criteria:
I – presence and relevance of technological innovation in the business model; II – stage of business development, privileging activities that are already in operation or ready to go into operation; III – magnitude of the expected benefit for clients and other interested parties; IV – potential impact or contribution to the development of the securities market; V – potential for financial inclusion considering, among other aspects, the expansion of public access or improvement in the quality of use of the product or service; and VI – conduct of the innovative business model primarily within the Brazilian securities market, even if the activities may also take place in other jurisdictions.

Art. 12. The Board must decide on the granting of the requested authorizations weighing, among other aspects, the institutional objectives of the CVM for development and protection of the capital market.

§ 1. Temporary authorizations are granted to approved proposals through a Deliberation issued by the CVM, which must contain, for each participant, at a minimum:
I – the name of the company or entity;
II – the authorized activity and regulatory waivers granted; III – the conditions, limits and safeguards associated with the exercise of the authorized activity; and IV – the start date of the temporary authorization.

§ 2. Temporary authorizations are granted for a period of up to 1 (one) year, renewable for up to 1 (one) more year.

§ 3. The request for extension must be submitted to the Sandbox Committee at least 90 (ninety) days before the end of the temporary authorization period, indicating a justified rationale on the need and relevance of the extension.

§ 4. The Board must decide on the request for extension of the temporary authorization at least 30 (thirty) days before the end of the granted authorization period.

§ 5. The request for extension must be considered automatically granted if not appreciated by the Board within the period indicated in § 4.

CHAPTER III – MONITORING

Art. 13. Once the temporary authorizations are granted by the Board, the Sandbox Committee must monitor the progress of the activities developed by the participant within the regulatory sandbox in accordance with § 2.

§ 1. The monitoring carried out by the Sandbox Committee, in accordance with the caput, does not waive or restrict the supervision of technical areas on the different activities regulated by the CVM, and all involved must observe a routine of exchanging information about the legal entity participating in the regulatory sandbox and the development of its activities.

§ 2. For the purposes of the Sandbox Committee's monitoring, the legal entity participating in the regulatory sandbox must:
I – make available representatives with managerial responsibilities to meet in person or remotely, periodically; II – grant access to relevant information, documents and other materials related to the business, including those related to its development and results achieved, whenever requested; III – cooperate in the discussion of solutions for the improvement of its regulation and supervision resulting from the monitoring of the activity developed under temporary authorization; IV – communicate the materialization of risks foreseen and unforeseen during the development of activities; V – communicate the intention to make relevant changes or readjustments to the innovative business model as a result of the progress of the tests; VI – periodically demonstrate compliance with the conditions, limits and safeguards established; and VII – inform occurrences of client complaints and present measures to handle frequent cases and cases of greater relevance.

§ 3. During the monitoring period, the participant may present to the Sandbox Committee a justified request for expansion or alteration of the regulatory requirement waivers granted, or for review of the conditions, limits and safeguards agreed upon, which must be submitted to the Board for appreciation.

§ 4. The Sandbox Committee may establish additional mechanisms for monitoring participants together with other regulatory agencies or with competent regulatory authorities of foreign jurisdictions.

CHAPTER IV – COMMUNICATION

Art. 14. All disclosure material prepared by the participant of the regulatory sandbox related to the approved project, as well as the respective section on the website, if any, must:

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September Street, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Cincinato Braga Street, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – CEP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 29, OF MAY 11, 2021

I – explain the meaning and functioning of the regulatory sandbox, as well as provide information regarding the temporary authorization of the participant, including its start and end dates; and II – contain the following notice, in a visible location and legible format: “The activities described in this material are carried out on an experimental basis under temporary authorization for the development of regulated activity in the Brazilian securities market.”

Art. 15. In the event that the activity to be developed includes the raising or administration of client resources, the participant must present a risk awareness term signed by the clients, in accordance with Annex A.

Sole Paragraph. The signature of the risk awareness term shall not be required in cases where the client is classified as a professional investor, as defined in specific regulation.

CHAPTER V – TERMINATION OF PARTICIPATION IN THE REGULATORY SANDBOX

Art. 16. Participation in the regulatory sandbox ends:
I – upon expiration of the period established for participation; II – at the request of the participant; III – as a result of the cancellation of the temporary authorization, in accordance with Art. 17; or IV – upon obtaining definitive registration with the CVM to carry out the respective regulated activity.

§ 1º In the cases of termination of participation provided for in items I to III, the participant must implement its contingency plan for the orderly discontinuation of the regulated activity, in accordance with item VI of Art. 6.

§ 2º To request definitive registration with the CVM, as provided for in item IV, the participant may formally manifest its intention to the Sandbox Committee, which must guide it in formulating the registration request and any requests for waiver of regulatory requirements to the CVM Superintendency responsible for granting the registration.

§ 3º The analysis of the registration request by the responsible Superintendency must take into account the experience obtained during the monitoring of the activity in the regulatory sandbox, especially regarding any waivers to be granted.

§ 4º The temporary authorization remains valid during the processing of the registration request analysis, provided it was submitted by the last day of the participation period in the regulatory sandbox.

Art. 17. The Collegiate Board may suspend or cancel the temporary authorization granted to the participant of the regulatory sandbox at any time, after hearing the recommendation of the Sandbox Committee, due to:
I – non-compliance with the duties established in Arts. 13, 14 and 15; II – existence or subsequent occurrence of serious operational failures in the implementation of the innovative business model, as determined or confirmed by the Sandbox Committee; III – understanding that the activity developed generates excessive risks or risks that were not previously foreseen; IV – finding that the participant:
a) failed to meet any eligibility criterion; b) presented false information; or c) began to develop a business model substantially different from the admitted one, without CVM approval; or V – existence of indications of irregularities.

§ 1º The suspension or cancellation of temporary authorizations based on the items of the caput does not preclude eventual:
I – imposition of an extraordinary coercive fine on the participant for non-compliance with an order issued by the CVM, in accordance with specific regulation; and II – initiation of an administrative process to determine liabilities.

§ 2º Prior to the recommendation to the Collegiate Board for suspension or cancellation of the temporary authorizations due to the identification of the hypotheses provided for in the items of the caput of this article, the Sandbox Committee:
I – may formulate requirements for the participant to have the opportunity to regularize conduct or adjust flaws and risks, if they are curable; and II – must inform the participant of the regulatory sandbox of the intention to suspend or cancel the temporary authorization, as the case may be, granting a period of 10 (ten) business days, counted from the date of receipt of the communication, renewable for an equal period, to present the reasons for defense of its stay in the sandbox.

CHAPTER VI – FINAL PROVISIONS

Art. 18. The CVM, through the Sandbox Committee, must make available on its website a section dedicated to the periodic disclosure of information regarding the admission processes of new participants and the progress of the regulatory sandbox, such as:
I – statistics on proposals received, approved participations, and rejected proposals; II – brief description of the innovative business models tested; and III – frequently asked questions.

Sole Paragraph. When carrying out the periodic disclosures referred to in the caput and items, the CVM must preserve the confidentiality of the information referred to in item I of § 2 of Art. 6.

Art. 19. For the purposes of Art. 11, § 3 of Law No. 6,385, of December 7, 1976, a serious offense is considered to be the exercise of activities under this Resolution by a person authorized based on false declarations or documents.

Art. 20. CVM Instruction No. 626, of May 15, 2020, is hereby revoked.

Art. 21. This Resolution enters into force on June 1, 2021.

Electronically signed by
MARCELO BARBOSA
President

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL (CVM) Seven of September Street, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Cincinato Braga Street, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Corporate Financial Center Building, S.404/4th Floor, Brasília/DF – CEP: 70712-900 – Brazil - Tel.: (61) 3327-2030/2031 www.cvm.gov.br

CVM RESOLUTION NO. 29, OF MAY 11, 2021

ANNEX A TO CVM RESOLUTION NO. 29, OF MAY 11, 2021
Risk Awareness Term (provided for in Art. 15)

By signing this term, I declare that I had full access to all necessary and sufficient information for the investment decision, notably that it is a company participating in a regulatory sandbox and that it develops, for a predetermined period, regulated activity without definitive registration with the regulatory body.

I further declare that I am aware that this is a project carried out on an experimental basis, for the development of regulated activity in the securities market.

[date and place]

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[Name and CPF or CNPJ]