Implementation of an internal control system by consortium administrators

CIRCULAR No. 3.078

Provides for the implementation of an internal control system by consortium administrators.

The Collegiate Board of the Central Bank of Brazil, in a session held on 10 January 2002, based on art. 33 of Law 8.177, of 1 March 1991,

D E C I D E D :

Art. 1 To determine that consortium administrators implement internal controls focused on the activities they carry out, their financial, operational and managerial information systems and compliance with the legal and regulatory rules applicable to them.

§ 1 The internal controls must be effective and consistent with the nature and complexity of the operations carried out and the risk incurred by the administrators.

§ 2 The members of the board of directors or the managing partners of the administrator are responsible for:

I - the implementation of an effective internal control structure by defining control activities for all operational levels of the administrator;

II - the establishment of the objectives and procedures pertaining to them;

III- the systematic verification of the adoption and compliance with the procedures defined as a function of the provisions of item II.

Art. 2 The internal controls, whose provisions must be accessible to all employees of the administrator so as to ensure that the respective function in the process and the responsibilities assigned at the various levels of the organization are known, must provide for:

I - the definition of responsibilities within the administrator;

II - the segregation of the activities assigned to the members of the administrator so that conflicts of interest are avoided, as well as means of properly minimizing and monitoring areas identified as having potential conflicts of this kind;

III- means of identifying and evaluating internal and external factors that may adversely affect the achievement of the administrator's objectives;

IV - the existence of communication channels that ensure that employees, according to the corresponding level of activity, have timely access to reliable and understandable information considered relevant to their tasks and responsibilities;

V- the continuous evaluation of the various risks associated with the activities of the administrator;

VI - the systematic monitoring of the activities carried out, so that it can be assessed whether the administrator's objectives are being achieved, whether the limits established and the applicable laws and regulations are being complied with, as well as to ensure that any deviations can be promptly corrected;

VII - the existence of periodic security tests for the information systems, especially for those maintained in electronic media.

§ 1 The internal controls must be periodically reviewed and updated, so that measures related to new types of risks not previously foreseen are incorporated into them.

§ 2 The internal audit activity must be part of the internal control system and must be carried out:

I- by a specific unit of the administrator itself, subordinate to the members of its board of directors or its managing partners;

II - by the audit of the entity or class association or central body to which the administrator is affiliated, and the person responsible must report to the members of the board of directors or the managing partners thereof;

III- by an independent auditor duly registered with the Securities and Exchange Commission of Brazil, provided that it is not the one responsible for auditing the administrator's financial statements, and it must be observed that the same must report to the members of the board of directors or the managing partners of the administrator.

§ 3 The provisions of the previous paragraph apply only to consortium administrators that, from 31 December 2001, inclusive, have shareholders' equity greater than R$5,000,000.00 (five million reais).

Art. 3 The systematic monitoring of activities related to the internal control system must be the subject of reports, at least semiannual, containing:

I - the conclusions of the examinations carried out;

II - the recommendations regarding any deficiencies, such as the establishment of a timetable for remedying them, where applicable;

III - the statement of the persons responsible for the corresponding areas regarding the deficiencies found without previous verifications and the measures effectively adopted to remedy them.

Sole paragraph. The conclusions, recommendations and statement referred to in items I, II and III of this article:

Circular No. 3.078, of 10 January 2002
3

I- must be submitted to the members of the board of directors or the managing partners of the administrator, as well as to its external audit;

II- must remain at the disposal of the Central Bank of Brazil for a period of five years.

Art. 4 It is incumbent upon the members of the board of directors or the managing partners of the administrator, in addition to the responsibilities listed in art. 1, § 2, to promote high ethical and integrity standards and an organizational culture that demonstrates and emphasizes, to all employees, the importance of internal controls and the role of each one in the process.

Art. 5 The internal control system must be implemented by 30 June 2003, in compliance with the following schedule:

I - definition of the internal structures that will make the corresponding implementation and monitoring effective - by 30 June 2002;

II - definition and making available of the pertinent procedures - by 31 December 2002.

Sole paragraph. The external audit of the administrator must make specific mention, in its opinions, of compliance with the schedule established in this article.

Art. 6 The Central Bank of Brazil may:

I - determine the adoption of additional controls in cases where inadequacy of the controls implemented by the administrator is found;

II- impose more restrictive operational limits on the administrator that fails to observe a determination under the terms of the previous item within the period established for that purpose.

Art. 7 This circular enters into force on the date of its publication.

Brasília, 10 January 2002

Sérgio Darcy da Silva Alves
Director

This text does not replace the one published in the DOU of 14/01/2002, Section 1, p. 23/24, and in Sisbacen.