Brazil’s securities commission, the CVM, has simplified the procedures for making securities offerings to qualified investors, a move welcomed by the country's capital markets lawyers.
The move brings Brazil’s securities regulations into line with corresponding rules in the US, by exempting restricted offerings of some securities to qualified investors from registration with the CVM.
Alexandre Bertoldi of Pinheiro Neto Advogados says,"This new amendment, if approved, will provide for better disclosure practices for Brazil’s publicly traded companies, which will in turn enhance the market and create a more secure investment environment for investors."
All the lawyers LATINLAWYER spoke to agree issuers will see their costs cut by the reduction in administration the rule change affords them. Daniel de Miranda Facó, a partner with Machado, Meyer, Sendacz e Opice Advogados, adds,"Besides the cost reduction, there will also be a gain in the system’s flexibility."
Marcello Lutz Vidigal, of TozziniFreire Advogados, explains, "The softening of these public offering rules may stimulate new issuers to access alternative funding sources in the market as in the past they were not keen or able to meet all obligations under previous CVM rules, or to bear the related costs," he adds.
Qualified investors under the rules are financial institutions, insurance companies, closed and opened-end pension funds, and individuals and legal entities with investments over 1 million reais.
The exemption from registration will only apply to offerings to 50 or fewer qualified investors, with an uptake of no more than 20. Public marketing of these offerings through the press, radio, television and internet will be banned, with issuers restricted to direct communication with potential investors.
Secondary trading of securities issued under the new rule will only be permitted 90 days after the original issuance, and will also be restricted to qualified investors unless the issuer completes the full CVM registration process.
Facó believes the new regulations will give his practice a boost, saying,"We hope to have a larger number of smaller issuances and therefore a more constant flow of transactions."
He adds,"Due diligence should remain a major issue because underwriters should keep focused on avoiding liability for information disclosed to investors, in a the same way as they do in other issuances."
But both Lutz and Facó see the new rule as limited in its scope.
Lutz says,"We are not sure why the ruling left the offering of shares out of the exemption," though some sources indicate the CVM intends to test the new rules on securities, and extend them to cover equity offerings if they prove a success.
The CVM is looking into consolidating all rules and regulations covering issuers’ and securities registration and disclosure, in the hope of speeding up its procedure for administering public offering requests.
Facó is supportive of the idea."The extension of the exemption to equity and other offerings would allow smaller companies to familiarise themselves with capital markets regulation, and to establish a relationship with investors, preparing them for an eventual initial public offering," he says.
Says Lutz,"One of the most significant proposals is the possibility of having a single shelf document containing all necessary information on the relevant issuer, which will be used as basis for the issue of its securities in the Brazilian market. This mechanism would allow issuers faster and cheaper access to Brazil’s capital markets."
DT
(LATINLAWYER 28.01.2009)
(Notícia na Íntegra)