By: André Jerusalem

On September 17, 2020, the Brazilian Securities and Exchange Commission (“CVM”) published public hearing No. 03/21 (“Public Hearing”) with a new proposed rules for BDRs (“Brazilian Depositary Receipts”). These new rules aim to revoke CVM Instruction No. 332 of April 4, 2000, as well as amend CVM Instruction No. 480 of December 7, 2009.

To contextualize: BDRs are securities issued and traded in Brazil that represent securities of publicly-held companies headquartered abroad, and are classified as “sponsored” and “non-sponsored”.

Sponsored BDRs are classified as such when the depository institution has a type of agreement with the company abroad (contracted by the company), and are divided into 3 levels depending on the registration with the CVM and the way in which the public offering was registered.

In the case of unsponsored BDRs, the depository institution is not a contractor of the foreign company, acting independently.

Regarding the Public Hearing, the main changes under analysis are the following:

Provide greater clarity on the expected role of foreign regulators of securities traded in Brazil;

provide for requirements for obtaining registration as a foreign issuer with the CVM, standardizing them so that they are effective and common to all issuers;

redefine the prerogatives and requirements applicable to Levels I, II and III of BDR programs so that their public offering in Brazil is more compliant with investor protection measures;

replace the concept of “publicly held or similar company”, established by CVM instruction 332;

And finally, establish a system for providing information by investment entities, bringing greater clarity to the parties involved in the process.

The public hearing will be open for comments until July 30, 2021 and comments can be sent via email to audpublicaSDM0321@cvm.gov.br.