Resolution CMN No. 1645 — Provisions on the Competence of Commodity and Futures Exchanges to Prevent or Correct Abnormal Market Situations

RESOLUTION NO. 001645

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the President of the MONETARY COUNCIL, by act of October 6, 1989, based on Article 2 of Decree No. 94,303 of May 1, 1987, "ad referendum" of that Council, having in view the provisions of Article 2 of Decree-Law No. 2,286 of July 23, 1986,

RESOLVES:

I - Commodity and futures exchanges must provide, in their operational rules, provisions that enable the prevention or correction of abnormal market situations that may constitute violations of legal or regulatory norms, or that embody unfair practices, types of fraud, or manipulation.

II - It shall be the responsibility of commodity and futures exchanges, when any of the occurrences provided for in the preceding item is detected, to adopt measures that restore the regular functioning of the respective market, and the Central Bank and the Securities and Exchange Commission (CVM) - the latter when the object of the occurrence is referenced in any of the securities subject to the regime of Law No. 6,385 of December 7, 1976 - must be immediately informed of the irregularities found and the corrective measures undertaken.

III - With a view to achieving their objectives, commodity and futures exchanges must promote direct and broad supervision of their members, and for this purpose may examine accounting books and records and other papers or documents related to their activities, keeping at the disposal of the Central Bank and the Securities and Exchange Commission the inspection reports prepared by their inspectors or auditors.

IV - Commodity and futures exchanges must, within 30 (thirty) days from the date of entry into force of this Resolution, forward to the Central Bank, together with the articles of association, their bylaws and other operational rules, as well as communicate, immediately, any changes introduced in these documents. The operational rules related to securities subject to the regime of Law No. 6,385 of December 7, 1976, and respective changes, must be forwarded to the Securities and Exchange Commission, observing the same time limits provided for in this item.

V - Regardless of the provisions of items III of Resolution No. 1,190 of September 17, 1986, and II of this Resolution, the Central Bank and the Securities and Exchange Commission, within the scope of their respective competencies, may:

a) suspend the execution of norms adopted by commodity and futures exchanges, judged inadequate to their regular functioning, and determine the adoption of those that they consider necessary;

b) stay the application of decisions of commodity and futures exchanges, in whole or in part;

c) decree the recess of commodity and futures exchanges, with the aim of preventing or correcting abnormal market situations, defined in current regulation;

d) adopt other measures that they deem necessary for the good functioning of the market.

VI - It is determined that the fiscal year of commodity and futures exchanges must coincide with the calendar year, and the preparation of monthly balance sheets and financial statements, the latter on December 31 of each year, comprising the balance sheet, the statement of changes in shareholders' equity, the statement of the result of the fiscal year, and the statement of sources and applications of funds, and respective explanatory notes, is mandatory, observing the following:

a) the financial statements must be certified by an independent auditor registered with the Securities and Exchange Commission;

b) the independent auditor, based on the examination of books, documents, and accounting records, will present to the audited exchange:

• an audit opinion regarding the financial position and the result of the fiscal year;

• a detailed report of its observations regarding deficiencies or ineffectiveness of internal accounting controls exercised; and

• a detailed report regarding the non-compliance with legal and regulatory norms;

c) the balance sheets, financial statements, and reports and opinions of independent auditors must be forwarded to the Central Bank and the Securities and Exchange Commission within the time limits of 15 (fifteen) days after the closing of each month, 25 (twenty-five) days, and 90 (ninety) days after the closing of each period, respectively.

VII - Commodity and futures exchanges and their members are obliged to provide the information, including that of a confidential nature, necessary for the control and monitoring of the markets administered by them, as requested by the Central Bank, the Securities and Exchange Commission, and entities authorized by law to have access to this information.

VIII - The Central Bank of Brazil and the Securities and Exchange Commission, each within its sphere of competence, may issue norms and adopt measures that are necessary for the execution of the provisions of this Resolution.

IX - This Resolution enters into force on the date of its publication.

Brasília-DF, October 6, 1989

Wadico Waldir Bucchi
Interim President