CVM/SRE Circular Letter 01/2015

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
SUPERINTENDENCY OF SECURITIES REGISTRATION
CIRCULAR LETTER NO. 01/2015/CVM/SRE
Rio de Janeiro, November 6, 2015

To the Directors of the Participating Institutions, Intervenientes, and Issuers in Public Offerings for the Distribution of Audiovisual Investment Certificates (“CAV”)

SUBJECT: CVM Instruction No. 260/97 – CAV Distribution Contract – Intervenientes Scope Limits – Administrative and Financial Advisory

Dear Director,

1. This Circular Letter aims to inform the aforementioned institutions of the understanding of the Superintendency of Securities Registration - SRE, corroborated by the Specialized Federal Prosecutor’s Office at the CVM (PFE-CVM), regarding the scope limits of the so-called “Intervenientes” in Public Offerings for the Distribution of CAV.

2. After analyzing the current landscape of CAV distributions and their adequacy to the regulations governing such distributions, we have reached the following conclusions:

a. Since they are not part of the distribution system, and therefore are not authorized to perform any of the activities inherent to the public distribution of securities, there is no legal basis for the so-called Intervenientes to appear in the CAV distribution contract, which, as provided for in Article 9 of CVM Instruction No. 260/97, must be executed only between the issuer, the leader, and any consortium members;

b. The practice of activities exclusive to the members of the distribution system listed in Article 15 of Law 6.385/76 by Intervenientes is prohibited, in accordance with Article 35, III of CVM Instruction 505/2011; and

c. The provision set forth in Article 21, item ‘d’ of CVM Instruction No. 260/97, which, strictly speaking, does not involve the public distribution of securities, refers only to the possibility of hiring services for financial and administrative advisory and not to the assumption of any obligations incumbent upon the leaders or issuers, and even less so, those that are exclusive to persons authorized or registered with the CVM, as set forth in Article 16 of Law No. 6.385/76.

3. Based on these conclusions, the following activities are considered irregular, among others: performing acts to instruct the registration process of a public offering of CAV with the CVM, as if they were intermediaries; signing the reports provided for in Article 24 of the aforementioned CVM Instruction No. 260/97; requesting extensions of distribution deadlines, cancellations of registration, cancellations of CAV quotas, and changes in the terms of the offering; signing contracts, preparing distribution prospectuses, and signing receipts for investors, as well as managing the consortium leader’s account, which is the vehicle for the entry of investor subscriptions; and retaining the financial intermediation fee, in the manner of Article 10, VIII, of CVM Instruction No. 260/97.

4. Likewise, we understand that the obligations of the distribution leader, provided for in Article 10, as well as those of the issuing company, listed in Articles 21 to 26 of CVM Instruction No. 260/97, cannot be delegated (not even through a power of attorney granted to the Interveniente, its partners, or agents), and intermediaries and issuers may be held liable for the improper hiring of Intervenientes.

5. In this regard, it is further worth noting that the fees provided for in Article 9, § 3 of the same Instruction are inherent to public intermediation, from which Intervenientes are not authorized to participate, and therefore cannot be remunerated by them.

6. In light of the above, we inform that:

a. From this date, requests for registration of issuances and distributions of Audiovisual Investment Certificates in which the figure of the Interveniente appears, in the manner described in this Circular Letter, will not be approved;

b. Likewise, authorizations for the substitution of leaders of distributions of Audiovisual Investment Certificates in which the figure of the Interveniente appears will not be approved; and

c. Regarding issuances and distributions currently underway, which have already had their registration requests approved previously, a period of 180 (one hundred and eighty) days will be granted, starting from this date, to comply with the understanding set forth in this Circular Letter, including with regard to new requests for extensions of distribution deadlines, cancellations of registrations, cancellations of quotas, and changes in the terms of public offerings for the distribution of Audiovisual Investment Certificates.

Sincerely,

(signed original)
DOV RAWET
Superintendent of Securities Registration