Adriano Schnur, Alessandra de Souza Pinto and Renan Valverde Granja   On October 14, 2015, CVM issued Ruling No. 569, which regulates the public offering of Structured Operations Certificate (Certificado de Operações Estruturadas  - COE), with a registration exemption by the said agency.

Adriano Schnur, Alessandra de Souza Pinto and Renan Valverde Granja

On October 14, 2015, CVM issued Ruling No. 569, which regulates the public offering of Structured Operations Certificate (Certificado de Operações Estruturadas  - COE), with a registration exemption by the said agency.

The new Ruling was expected by the market once it was issued to balance the speed required in the process of issue and placement of COEs and the protection to the investor during the selling process of the financial product. Before the new Ruling, the COEs could be distributed either publicly (CVM Ruling No. 400, of December 29, 2003) or with restricted placement efforts (CVM Ruling No. 476, of January 16, 2009). However, there was still no regulation addressing the matter of speed.

The COE

The COE was created by Law No. 12,249 of June 11, 2010, and was regulated by the National Monetary Council through Resolution No. 4,263, of September 5, 2013, and by the Central Bank through Circulars Nos. 3,684 and 3,685, both of November 20, 2013.

 

In short, the COE is a certificate issued by an authorized financial institution against initial investment, representing a single and indivisible set of rights and obligations, with a profitability structure that has characteristics of derivative financial instruments. If the future scenario stipulated in the financial instrument is reached, the investor will receive a pre-established percentage of the revenue. This is similar to the instruments offered abroad under the name of Structured Notes.

The COE may be issued as an investment whose minimum payment value stipulated for the investor is equal to, or greater than, the initial investment, known as Protected Investment. Or yet, it can be issued as an investment with a total value of minimum payments stipulated for the investor being equal to, or greater than, a pre-defined portion of the initial investment, also known as Investment at Risk.

The COE is a simple option for the investor who seeks to index the yield of his investments abroad, since there is no need to send money out of the country, and there is no minimum value determined.

Before the sale of COEs to the investor, the financial institution must verify the suitability of the product to the customer′s profile, in accordance with the rules provided for both in Article 11 of Central Bank Resolution No 4,263 and in Resolution No. 14 of the Brazilian Association of Financial and Capital Markets Entities (ANBIMA).

Today, the main clients of COEs are individuals. However, a change in this scenario is expected with the increase in the number of corporate investors due to the legal certainty and the speed that the new Resolution may bring to the market. The financial product became expeditious due to the exemption from registration by CVM, provided that the offer is made by member institutions of the Securities Distribution System.

The investor must also receive the Essential Information Document (Documento de Informações Essenciais - DIE) with the specifications established in the Ruling itself. In addition, the investor must sign the adhesion and risk awareness form. According to CVM Ruling No. 569, such DIE must (i) contain true, complete, consistent and not misleading information, (ii) be written in simple, clear, objective and concise language, as appropriate to its nature and complexity; and (iii) be useful to the assessment of whether to invest in a COE or not.

From now on, with the regulation for public offerings of COE without registration with the CVM, the issue of COEs with several different indexes are expected to increase due to the easiness brought by the new Ruling.