Explanatory Note to CVM Instruction No. 92 of December 8, 1988

EXPLANATORY NOTE TO CVM INSTRUCTION NO. 92, OF DECEMBER 8, 1988.
REF: Instruction providing for the registration and oversight of beneficiary companies of resources originating from tax incentives and for the trading on stock exchanges of securities issued by these companies.

The CVM has long been examining the present regulation, which gives new dimensions to the market of incentivized companies and has a dual objective: to promote the economic development of regions and sectors that are relatively lacking, and to promote the strengthening of the securities market in those regions and sectors, through the capitalization and dispersion of the capital of beneficiary companies of resources originating from tax incentives.

However, in the past, the use of the market as a source of resource collection, due to the insufficiency of legislation and adequate oversight, was relegated to a secondary position. Indeed, according to the Statement of Reasons of Decree-Law No. 2,298, "the care existing today in the issuance of securities that rely on public savings, such as wide dissemination of information and full guarantee of the rights of new shareholders, ..., were not adequately addressed. On the contrary, the insufficiency of the applicable legislation ended up causing distortions of a structural nature that compromised the effectiveness of the system, especially with regard to the capital market."

And further on, the aforementioned Statement of Reasons reiterated that "the system adopted by these laws provides that only securities issued by open companies can be traded on stock exchanges or in the over-the-counter market. It happens that the vast majority of companies benefiting from incentivized resources are closed companies, to which only private trading is permitted."

As a consequence, the issue of the possibility of public trading of the titles issued by incentivized companies would be concretized from the classification of these companies as open, in accordance with Law No. 6,404/76, or by the creation of a new intermediate system, encompassing the so-called "semi-open companies", and constituting a true access market.

What the CVM intends with this set of rules is to create, for beneficiary companies of incentivized resources that are still closed companies, an initial integration into the securities market, avoiding, moreover, that these companies have to immediately bear the totality of the legal obligations specific to open companies.

The Instruction, by providing for the norms that must be adopted by the companies for their registration with the CVM, seeks to ensure to shareholders, investors, and other market participants broad transparency of information regarding the companies themselves.

On the other hand, the Instruction, by establishing the norms regarding trading on stock exchanges of the titles and securities issued by companies benefiting from tax incentives, aims to provide liquidity for the titles issued by them, while at the same time intending to stimulate the opening of capital of closed companies.

Concluding, it can be stated that this set of rules providing for the market of titles issued by beneficiary companies of incentivized resources will benefit all participants, direct or indirect, of the tax incentive system and consequently will expand the securities market as a whole, integrating more than 3,000 new companies into it.

Signed original by
ARNOLDO WALD
President