Put: André Jerusalem and Fernanda Lazzarini
On May 11, 2021, the Brazilian Securities and Exchange Commission (“CVM”) issued two new resolutions, namely, CVM Resolution 29 and CVM Resolution 30, which will come into effect on June 1, 2021 and did not undergo a public hearing as they do not entail changes in the merits of existing obligations.
CVM Resolution 29 revokes CVM Instruction No. 626, of May 15, 2020, and deals with the rules for the establishment and operation of an experimental regulatory environment, known as a “regulatory sandbox”, which, in short, is where participating legal entities can receive temporary authorizations to test innovative business models in activities in the securities market regulated by the CVM.
The investment in the regulatory sandbox by the CVM is intended to foster innovation in the capital market, increase legal certainty for participants on regulatory issues during the development of their activities, reduce the costs and time of developing innovative businesses, increase their visibility and competition, in addition to enabling financial inclusion resulting from the launch of less costly and more accessible financial products and services and improving the regulatory structure applicable to regulatory activities.
In order for a market participant to join the sandbox, it is necessary to receive prior authorization from the CVM Sandbox Committee, which will analyze the proposals and decide whether or not the legal entity will participate in this experimental environment, based on the eligibility criteria set out in article 11 of CVM Resolution 29.
In turn, CVM Resolution 30 aims to verify the suitability of products, services and transactions to the client's profile (“suitability”), and revokes CVM Instruction No. 539, of November 13, 2013. In other words, it is a personalized investment recommendation to the client and should no longer be generalized. It is important to note, however, that persons authorized to act as members of the distribution system and securities consultants cannot recommend products, carry out transactions or provide services without verifying their suitability to the client's profile.
This requirement for personalized recommendations under CVM Resolution 30 is waived only in cases where the client is a qualified investor, with the exception of individuals who (i) have financial investments exceeding R$10 million and are professional investors, (ii) are individuals or legal entities with investments exceeding R$1 million and who attest to their status as qualified investors, and (iii) have CVM certificates of technical qualification (such as that of an independent investment agent) in relation to their own resources. The suitability analysis is also waived if the client is a legal entity under public law, has its securities portfolio managed at the discretion of a securities portfolio manager authorized by the CVM, or if its profile has been defined by a securities consultant authorized by the CVM and is implementing the recommendation provided by the latter.