Resolution CMN No. 3170 — Amending Resolution 3.081 of 2003 Regarding Independent Audit Services for Financial Institutions and Clearing/Settlement Providers

RESOLUTION NO. 3170

Amending Resolution 3.081, of 2003, which regulates the provision of independent audit services for financial institutions, other institutions authorized to operate by the Central Bank of Brazil, and for clearing and settlement service providers.

THE CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4.595, of December 31, 1964, makes public that the NATIONAL MONETARY COUNCIL, in a session held on January 29, 2004, considering the provisions of Article 3, item VI, and based on Articles 4, items VIII and XII, and 10, item XI, of the aforementioned law, with the wording given by Articles 19 and 20 of Law No. 7.730, of January 31, 1989, Article 2 of Law No. 4.728, of July 14, 1965, and Article 22, paragraph 2, and Article 26, paragraph 3, of Law No. 6.385, of December 7, 1976, with the wordings given, respectively, by Article 1 of Decree No. 3.995, of October 31, 2001, and Article 14 of Law No. 9.447, of March 14, 1997,

RESOLVES:

Article 1. Amend Articles 1, 5, 10, 11, 12, and 14, and include Articles 10-A and 12-A in the Regulation annexed to Resolution No. 3.081, of May 29, 2003, which shall enter into force with the following wording:

"Article 1. ...

I - the financial statements, including explanatory notes:

a) of financial institutions and other institutions authorized to operate by the Central Bank of Brazil, except for microentrepreneur credit societies;

b) of clearing houses and settlement service providers;

......" (NR)

"Article 5. The institutions, clearing houses, and service providers referred to in Article 1 must designate a technically qualified director to answer, before the Central Bank of Brazil, for the monitoring, supervision, and compliance with the accounting standards and procedures established in the current regulation.

§ 1. In institutions that do not have an audit committee constituted in accordance with this regulation, as well as in clearing houses and service providers, the director must also answer for the monitoring, supervision, and compliance with the independent audit standards and procedures established in the current regulation.

§ 2. The designated director shall be held responsible for the information provided and for the occurrence of situations indicating fraud, negligence, imprudence, or incompetence in the exercise of their functions, without prejudice to the application of penalties provided for in the current legislation." (NR)

"Article 10. The institutions referred to in Article 1, item I, subsection 'a', which have presented, at the close of the two most recent fiscal years:

I - Reference Equity (PR) equal to or greater than R$1,000,000,000.00 (one billion reais); or

II - management of third-party resources in an amount equal to or greater than R$1,000,000,000.00 (one billion reais); or

III - sum of deposit captures and management of third-party resources in an amount equal to or greater than R$5,000,000,000.00 (five billion reais),

must constitute a statutory body called the audit committee.

§ 1. Leading institutions responsible for preparing the consolidated financial statements of financial conglomerates that fall under the provisions established in the main text must constitute an audit committee to fulfill the duties and responsibilities provided for in this regulation, with respect to the institutions belonging to such conglomerates that do not have the individual obligation to constitute the aforementioned committee.

§ 2. The use of the term 'audit committee' is restricted to the statutory body constituted in accordance with this regulation.

§ 3. Institutions must create adequate conditions for the functioning of the audit committee.

§ 4. Institutions must have the audit committee fully operational by March 31 of the subsequent fiscal year to the years specified in the main text, fulfilling its duties, including with respect to the financial statements as of that date.

§ 5. For institutions falling under the provisions of the main text or § 1, with respect to the fiscal years 2002 and 2003, the audit committee must be installed and fully operational by July 1, 2004.

§ 6. The extinction of the audit committee:

I - may only occur if the institution no longer presents the conditions contained in the main text or § 1, for the period specified therein;

II - depends on prior authorization from the Central Bank of Brazil;

III - is conditioned upon the fulfillment of its duties with respect to the fiscal years in which its operation is required." (NR)

"Article 10-A. Financial conglomerates, alternatively to the provisions of Article 10, may constitute a single audit committee, through the leading institutions, to fulfill the duties and responsibilities provided for in this regulation, with respect to the institutions that comprise it.

Sole paragraph. The use of the option provided for in this article must be expressly established in the decision of the assembly of each institution belonging to the conglomerate." (NR)

"Article 11. The audit committee must be composed of at least three members, observing that the maximum term of office must be five years for institutions with shares traded on a stock exchange, and without a fixed term for those with closed capital.

......

§ 5. Revoked.

§ 6. In the event of a term shorter than that provided in the main text, it may be renewed up to a limit of five years with prior authorization from the Central Bank of Brazil." (NR)

"Article 12. In addition to the provisions of Resolution No. 3.041, of November 28, 2002, which establishes conditions for the exercise of positions in statutory bodies of financial institutions and other institutions authorized to operate by the Central Bank of Brazil, the basic conditions for the exercise of a member of the audit committee in institutions with shares traded on a stock exchange are:

I - ...

a) director of the institution or its affiliates;

b) employee of the institution or its affiliates;

c) technical manager, director, manager, supervisor, or any other member, with a management function, of the team involved in the audit work at the institution;

d) member of the statutory audit board of the institution or its affiliates;

II - not be a spouse, or relative in the direct line, collateral line, or by affinity, up to the second degree, of the persons referred to in subsections 'a' and 'c' of item I;

III - not receive any other type of remuneration from the institution or its affiliates other than that related to their function as a member of the audit committee.

Sole paragraph. If a member of the audit committee is also a member of the board of directors of the institution or its affiliates, the option to receive remuneration for one of the positions is permitted." (NR)

"Article 12-A. The following additional conditions must also be observed for the exercise of a member of the audit committee:

I - for institutions with shares traded on a stock exchange and whose control is held by the Union, states, or Federal District, in addition to the provisions of Article 12:

a) not hold a licensed permanent position within the respective governments;

b) not have held, or held within the last twelve months, a permanent position or function within the respective governments;

II - for closed-capital institutions:

a) all members of the audit committee of the institution must also be directors of the same, with at least one year of effective service in the position;

b) the participation of the director referred to in Article 5 of this regulation is mandatory, waiving the requirement of effective service time in the position.

Sole paragraph. The Central Bank of Brazil is authorized, upon duly justified request from closed-capital institutions, to waive the requirement of minimum effective service time in the position provided for in item II, subsection 'a'." (NR)

"Article 14. ...

X - meet with the statutory audit board and board of directors, upon request by the same, to discuss policies, practices, and procedures identified within the scope of their respective competencies;

XI - other duties determined by the Central Bank of Brazil." (NR)

Article 2. This resolution enters into force on the date of its publication.

Article 3. Resolution No. 3.143, of November 27, 2003, is hereby revoked.

Rio de Janeiro, January 30, 2004.

Henrique de Campos Meirelles
President

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Note: Re-transmitted due to alterations in Article 1 (Articles 10 and 12 of Resolution 3.081).