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Listed Companies Newsletter No. 8 – October and November 2023
December 20th, 2023
The Listed Companies Newsletter provides information on the main regulations, decisions and news concerning listed companies and capital markets. This material is for informative purposes only, and should not be used for decision-making. Specific legal counseling may be provided by one of our associates.
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BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (“CVM”)
REGULATORY FRAMEWORK
Brazil becomes first country to adopt ISSB report on sustainability-related financial information
On October 20, 2023, the CVM published CVM Resolution 193, authorizing the voluntary reporting of financial information concerning sustainability, in line with international standards for listed companies, investment funds and securitizers.
This initiative is part of the CVM’s 2023-2024 Sustainable Finance Action Plan, which attests to the CVM’s commitment to developing sustainable finance and contributing towards the UN Sustainable Development Goals.
CVM President, João Pedro Nascimento, highlighted this resolution as an international landmark that enables voluntary disclosure of sustainable matters in a more transparent and standardized form.
Nathalie Vidual, CVM Superintendent of Investor Protection and Guidance, emphasized the importance of aligning Brazilian practices with international standards for disclosing sustainability-related information, in order to protect investors and foster information transparency and comparability.
The resolution requires that reports on sustainability-related financial information comply with International Sustainability Standards Board (ISSB) standards, and be clearly identified and differentiated from other information and financial statements of the entity. Listed companies, securitizers and investment funds that opt for this document must draft and publish their yearly reports based on fiscal years starting on January 01, 2024.
Paulo Roberto Ferreira, CVM Superintendent of Accounting and Auditing Standards, highlighted that aligning with ISSB standards will improve Brazil’s regulation and capital markets security, given that the International Organization of Securities Commissions (IOSCO) strongly recommends that these standards be implemented worldwide.
The president of the CVM has stated that CVM Resolution 193 demonstrates the CVM’s commitment to staying up to date with developments of the capital markets and to fostering the development of sustainable finance, which is essential to secure a more inclusive economic development in Brazil.
The resolution entered into force on December 01, 2023.
CVM 2023 REGULATORY AGENDA
CVM proposes new transferability regulation
On October 03, 2023, the CVM opened a public consultation concerning a proposed resolution that seeks to resolve issues faced by investors when transferring securities.
This public consultation is part of the CVM’s 2023 Regulatory Agenda and seeks to improve investors’ experience in the capital market. The main proposals include:
- Increased number of channels to request transferability, which can be done through the source account, the destination account or with the depository.
- Mandatory digital platform that investors can access to request, monitor or cancel portability procedures.
- Steps and deadlines for the processing of portability requests, providing for denial based on a reasonable justification.
- Antifraud measures.
- Agent conduct parameters regarding requests that involve ownership transfer.
The new regulation is expected to establish a simpler, more inclusive and competitive investment landscape that benefits investors. The CVM seeks to expand access to the regulated market and simplify the portability of securities investments. Interested parties can submit contributions via email by December 08, 2023. Find out more in the CVM Public Consultation Notice.
CVM publishes 2023-2024 Sustainable Finance Action Plan
On October 06, 2023, CVM published its 2023-2024 Sustainable Finance Action Plan.
This plan is an extension of CVM’s Sustainable Finance Policy, released in early 2023, and establishes targets to foster sustainable practices within Brazilian capital markets. The plan provides for 17 sustainable initiatives, including the monitoring of ESG governance risks in publicly-held corporations, specific regulations on the Investment Fund in Agroindustrial Productive Chains (Fiagro), and guidelines to mixed funding, among others.
The CVM is committed to fostering sustainable finance, given that sustainability and green economy matters represent major opportunities for the capital markets. The plan also establishes deadlines for each initiative, and some will expire by the end of 2023.
In this regard, the CVM has progressively implemented sustainability principles within its regulations in order to foster responsible practices within the financial market in Brazil.
Ministry of Finance and CVM collaborate to develop sustainable finance in Brazil
On October 20, 2023, the Minister of Finance, Fernando Haddad, and the President of the CVM, João Pedro Nascimento, presented CVM Resolution 193 and the initiatives of the Sustainable Finance Agenda at a press conference held in São Paulo.
CVM Resolution 193 is the first item of CVM’s 2023-2024 Sustainable Finance Action Plan to be completed and is part of the Ministry of Finance’s ecological transformation plan.
The resolution authorizes the voluntary development and publication of sustainability reports by companies and investment funds, and is expected to become mandatory by 2026, after a public consultation. The goal is to foster transparency and commitment to sustainable finance, ultimately placing Brazil at the forefront of international regulations, and consequently attracting investments focused on inclusive economic growth within the Brazilian capital markets.
CVM hosts event on public and private “enforcement” in the capital market
On November 09, 2023, the CVM hosted the “Public and Private Enforcement in the Capital Markets” event, in partnership with the Institute of Applied Corporate Law (IDSA).
Representatives of the CVM, IDSA, Public Prosecutor’s Office and other government agencies attended the meeting.
The president of the CVM, João Pedro Nascimento, highlighted Bill 2925/2023, which addresses transparency in arbitral proceedings and the private protection of investor rights. The debate is aimed at strengthening the capital markets regulation in Brazil.
REGULATIONS
Public consultation addresses regulation that requires listed companies to use technical statement revision document
On October 09, 2023, the CVM issued four regulations that oblige listed companies to use documents issued by the Accounting Statements Committee (“CPC”).
CVM Resolutions 188, 189 and 190 approve revisions in documents issued by the CPC that do not match international regulations, while CVM Resolution 191 approves changes to adjust CPC documents in line with the International Accounting Standards Board.
The resolutions will enter into force on specific dates from November 01, 2023 to January 01, 2024. The first three resolutions were not subject to a regulatory impact analysis, and CVM Resolution 191 must be aligned with international regulations in order to be exempted from such analysis as well.
CVM RESOLUTIONS 188, 189, 190 and 191.
NOTICE TO THE MARKET
CVM cancels Fontaine Ville Participações S.A. listing
On October 14, 2023, through the Superintendence of Business Relations (SEP), the CVM canceled the listed company registration of Fontaine Ville Participações S.A. after more than 12 months of suspension.
This prevents the company from trading securities in regulated markets. Additionally, the company remains liable for any violations that may have occurred prior to the cancellation.
Find out more in the notice published by the SEP/CVM.
First year in the market sees upward trend for BDRs in terms of volume and interest from investors
October 30, 2023, marked the first year of purchase and sale agreements for Brazilian Depositary Receipts (BDRs) within B3, with substantial results.
Since the launch of this product in September 2022, there has been a significant increase in trading volume. The Average Daily Trading Volume (ADTV) in BDRs by September 2023 was BRL 727,200 (compared to BRL 25,900 at the end of 2022). In addition, the daily average of negotiated agreements increased from 8,491 in 2022 to 224,000 in 2023.
This is the result of growing interest from investors in this product, which creates new opportunities to diversify portfolios through internationalization. BDRs enable investors to purchase or sell underlying assets on a specific date at a predetermined price. In addition to the listed contracts, investors can also opt for operations with flexible BDRs within B3.
These listed options include companies such as Apple, Amazon, Alphabet, Meta, Microsoft, Netflix, Nubank, Tesla and XP, and can be operated similarly to listed shares. The availability of BDRs provides investors with a simples and more diverse option to enter the international market.
B3 announces three solutions for trading large lots of assets
On October 31, 2023, B3 announced the launch of three solutions aimed at the trading of large lots of assets from November 2023.
These solutions seek to provide market players with more efficient means of trading large lots of assets. Large-block negotiations involve significant volumes of assets and are usually executed by institutional investors.
The three solutions offered by B3 are:
- The Midpoint Order Book, in which the trade execution price will be the average between the best bid and the best ask prices in the central order book.
- The Book of Block Trade (BBT), which enables execution prices with premium or discount in relation to the central order book.
- The Request for Quote (RFQ), through which investors can request quotes for purchasing or selling specific assets.
All offers have post-trade transparency and are guaranteed by Clearing B3, which ensures more certainty and security for investors.
These solutions seek to optimize the execution of large operations and minimize their impact on the market. In order to benefit from these solutions, investors must use new trading codes and operate in multiple quantities of the minimum size established by the CVM for large lots.
The launch of these solutions reinforces B3’s commitment to modernizing its platforms and improving its products, seeking to meet the needs of institutional investors and offer greater efficiency in the trading of large lots of assets.
Diversity in the Brazilian capital markets: B3 aims for the future
In 2022, B3 proposed amendments to listing regulations, creating an ESG Annex to address diversity gaps in Brazilian listed companies.
The initiative was based on international benchmarking of practices from institutions such as Nasdaq, FCA and ASX, to adopt the “comply or explain” principle. The ESG Annex has been in force since August 19, 2023, and aims to foster diversity of gender and minorities among listed companies, through measures such as electing women and minority representatives for executive boards, in addition to establishing diversified appointment criteria and ESG indicators in the remuneration of managers.
Companies have until 2025/2026 to adjust to the new regulation. B3 seeks to stimulate good corporate governance practices, thus reinforcing its commitment to diversity and inclusion within the Brazilian capital market. Effective results will be assessed in the future.
NEWS
Brazilian Financial and Capital Markets Association (“ANBIMA”)
Offering new pricing in the market, financial notes receive first reference rates
On October 10, 2023, ANBIMA included financial notes in its list of priced assets, with reference rates published daily on ANBIMA Data.
This initiative aims to mature the fixed income market, ensuring price transparency for both institutions and investors. 14 institutions were selected to submit daily data, taking key criteria into consideration.
Rates have been classified by class and maturity, encompassing senior notes, supplementary notes and subordinate notes. These rates are already available and have recorded amounts that ranged from 0.4% to 2.9% on their first day of calculation.
In addition to financial notes, other fixed-income assets have also been priced. This expansion of priced assets is part of “ANBIMA em Ação”, a set of priority initiatives for 2023-2024.
CEMIG (“CMIG4”) completes sale of stakes in Baguari Energia for BRL 421 million
Companhia Energética de Minas Gerais (“CEMIG”) concluded, on October 07, 2023, the sale of its 34% indirect stakes in the Baguari Consortium (“Consortium”) to Furnas Centrais Elétricas S.A.
Stakes in the consortium were previously owned by CEMIG’s whole-owned subsidiary, Cemig Geração e Transmissão S.A., and represented 69.39% of the share capital of Baguari Energia S.A.
The final acquisition price was BRL 421.2 million.
READ THE MATERIAL FACT IN FULL.
Eletrobras (“ELET3”) completes acquisition of Baguari hydroelectric plant
On October 17, 2023, Centrais Elétricas Brasileiras S.A. (“Eletrobras”) concluded the full acquisition of the Baguari Hydroelectric Plant (“UHE Baguari”).
As a result, Eletrobras now owns 100% of the share capital of Baguari I Geração de Energia S.A. and Baguari Energia S.A., which together form the Baguari Consortium.
The acquisition is the second stage of the transaction, whose first step was the acquisition of the stakes owned by Cemig Geração e Transmissão S.A. in Baguari Energia. The final amount of the transaction was BRL 875 million.
READ THE FULL NOTICE TO THE MARKET
CEMIG (“CMIG3”) completes transfer of Retiro Baixo equity for BRL 223.4 million
On November 22, 2023, Companhia Energética de Minas Gerais (“CEMIG”) completed, through its whole-owned subsidiary CEMIG Geração e Transmissão S.A., the transfer of its 49.9% holding of the share capital of Retiro Baixo Energia S.A. to Furnas Centrais Elétrica S.A.
The total amount involved in the operation was BRL 223.4 million. Of this amount, a BRL 5.9million dividend was discounted, which had been collected on June 28, 2023, resulting in a final net amount of BRL 217.5 million.
READ THE MATERIAL FACT IN FULL.
TOTSV (“TOTS3”) acquires full share capital of Ahgora for BRL 380 million
On November 30, 2023, Soluções em Software e Serviços TTS Ltda., a subsidiary of TOTVS S.A. (“TOTSV”), entered into a purchase and sale agreement for the full acquisition of issued shares owned by Ahgora HCM S.A. and issued fund quotas owned by Webtraining Ltda. (jointly, “Aghora”) for BRL 380 million, subject to adjustments until the closing of the transaction.
The Aghora portfolio is 100% Software as a Service (SaaS) and provides HR services, with emphasis on AI-validated facial recognition solutions for employee time clock systems.
The closing of this transaction depends on the approval of the competent competition authorities, as well as on the completion of the corporate restructuring mentioned above and the assessment of other usual conditions for this type of transaction.
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