CVM Board Approves Amendments to the Regulations for Listing of Issuers and B3 Issuer’s Manual

On October 20, 2020, the proposal submitted by B3 SA (Brasil, Bolsa, Balcão – “B3”) for amendments to the Regulations for Listing of Issuers and Admission to the Trading of Securities of B3 (“Regulation for Listing”) was approved, as well as changes in the B3 Issuer Manual (“Issuer Manual”), aiming at adapting to the provisions of CVM Resolution No. 3/2020 and the regulation of index fund deposit certificates traded abroad.

B3 submitted an initial proposal to the Brazilian Securities and Exchange Commission (“CVM”) and, after requesting clarifications and additional corrections made by the CVM’s technical areas through Official Letter 96/2020/CVM/SMI (“Official Letter 96”), B3 confirmed that it had made the changes requested by the CVM, except for the requirements concerning Brazilian Depositary Receipts (“BDRs”) backed by debt securities. The reason for the exclusion, at this time, of the possibility of trading BDRs backed by debt securities in an environment managed by B3 is the lack of an adequate structure for the admission of such certificates. The inclusion of the possibility of admitting BDRs backed by debt securities in their regulations may occur at a later time, when the issues presented have been adequately addressed.

In summary, the changes made were: (i) in the Regulations for Listing, (a) the inclusion of the definition of BDR; and (b) the inclusion of the definition of “recognized market”, for the purposes of regulation issued by the CVM, as well as the classification of NYSE (New York Stock Exchange) and Nasdaq Stock Market (“Nasdaq”) as “recognized markets”; (ii) in the Issuer’s Manual, (a) the replacement of the expression “share” with “securities” in provisions related to BDR backing; (b) adjustments to references of CVM regulations related to investment funds; and (c) provision for admission to BDR trading of quotas of index funds traded abroad under the BDR Level I Unsponsored Program.

Regarding the definition of the NYSE and NASDAQ as “recognized markets”, the justification was presented in an analysis report prepared by the B3 Issuers Board. Also, in response to Letter 96, B3 presented quantitative data that support the classification of the NYSE and Nasdaq as “recognized markets”. The technical areas considered, in Memorandum No. 37/2020-CVM/SMI, that “NYSE and NASDAQ are the main trading environments of the main securities market in the world, which has solid regulation and consistent performance by the regulator and self-regulatory bodies, which justifies its election as the first ‘recognized markets’”. They also emphasized the existence of analyses that will allow the indication of other markets in this category.

The amendments to the Regulations for Listing and the Issuer Manual will take effect from October 22, 2020.

Demarest’s Capital Markets team is available to provide further information or clarification on this and other related matters.