On August 11, 2020, the Brazilian Securities Commission (CVM) issued Resolution 3, to update the rules on the issuance, circulation and investment in Brazilian Depositary Receipts (BDRs).

BDRs are securities issued in Brazil representing securities issued abroad, allowing investors in Brazil to assume positions similar to what would be the case had they invested directly in the foreign asset. Besides this, they are an important alternative for companies to obtain equity financing.

In this respect, to improve the efficiency of this investment mechanism, the CVM Resolution contains important regulatory innovations, among which the following stand out:

·       The possibility of any investor to buy and sell Level 1 BDRs (not sponsored), depending on the market where the underlying securities are listed for trading. Previously only “qualified” investors could trade BDRs (parties with financial investments greater than R$1,000,000.00);

·       The possibility that BDRs can be underpinned by: (i) shares issued by foreign companies with assets or revenues in Brazil; or (ii) debt securities, including bonds issued by listed Brazilian companies. Beforehand, only shares issued by listed companies with headquarters and preponderant assets held abroad could serve as the basis BDRs; and

·       Permission for the issuance of BDRs backed by the shares of exchange traded funds traded abroad.

CVM Resolution 3 took effect on September 1, 2020 and the corporate team of CGV Advogados will remain abreast of any new measures and their impacts. We are available to clarify any doubts at: cec.societario@cgvadvogados.com.br.