Resolution modifies rules for trading with securities and disclosure of material acts and facts


Alessandra de Souza PintoClarissa FreitasRaphael ZonoGiuliana Pescarolli Spadoni, Gabrielle Pelegrini and Helena Avanzi Leonardi


The Brazilian Securities and Exchange Commission (CVM) published, on August 23, CVM Resolution No. 44, replacing CVM Instruction No. 358/02, which deals with the rules for disclosure of information on material acts or facts, restrictions on trading in securities, and disclosure of information on securities trading.

CVM Resolution 44, which is expected to become effective on September 1, 2021, is the result of analysis of proposals sent by market participants, as well as of discussions promoted by the CVM itself on the matter within the scope of Public Hearing No. 06/20.

The main novelty brought in by the resolution was the inclusion of an exclusive chapter to regulate the illicit use of privileged information, promoting an alignment between the regulations and the case law of the panel, so that the presumptions that have been used in trials of cases involving insider trading are clearly provided for in the regulations.

Supported by Decree No. 10,139/19, CVM chairman Marcelo Barbosa found that the creation of a new resolution and changes to the rule would be more efficient: "The change brings about more clarity and predictability for market agents. The scope and interpretation of the standard become less dependent on the knowledge of a body of decisions handed down in concrete cases over time and more directly accessible from the reading of its content".[1]

To establish the practice of illicit misuse of privileged information, article 13 of CVM Resolution 44 provides for a number of presumptions. The main ones are:

  • The person who traded securities possessing material information not yet disclosed made use of such information in said trading.
  • Controlling shareholders (direct or indirect), directors, and members of the Board of Directors and audit committee have access to all relevant information not yet disclosed. In addition, these persons, as well as those who have a commercial, professional, or trust relationship with the company, when accessing undisclosed material information, know that it is privileged information.
  • An officer who leaves the company with material, undisclosed information is entitled to use such information if he trades in securities issued by the company within three months from the time he leaves the company (under the previous rule, former officers were prohibited from trading for six months).
  • From the moment studies or analyses are initiated, the information on any transactions of corporate reorganization, business combination, change in control, cancellation of registration as a publicly-held company, and change in the environment or trading segment of the shares issued by the company, as well as on requests for judicial or extrajudicial reorganization and bankruptcy made by the company itself are relevant.

However, these presumptions are relative, which means that they admit evidence to the contrary, and may be used in combination, as the case may be. They must be analyzed in conjunction with other elements that indicate whether or not the illicit use of privileged information was in fact committed.

These presumptions do not apply:

  • to cases of private trading of treasury shares, in the context of share-based compensation to which the company's officers and directors, employees, or service providers are entitled;
  • trades involving repoed fixed income securities, under the conditions set forth in CVM Resolution 44; and
  • the subscriptions of new securities issued by the company, without prejudice to the application of the rules on disclosure of information in the context of the issuance and offer of such securities.

The inclusion of the presumptions that had already been applied in the new resolution, addressing both their respective contents and the applicable subjects, provides a clearer picture for their application in concrete cases. Thus, the consolidation of CVM's own understanding and case law on the new resolution is beneficial, as it provides more transparency and clarity to market players.

Among the other changes brought about by CVM Resolution 44, the following stand out:


Trading by exclusive investment funds


The new standard also provides that trades of exclusive investment funds are presumed to have been decided under the influence of the shareholder, admitting evidence to the contrary. This presumption does not apply to exclusive investment funds whose unitholders are insurers or open-ended supplementary pension entities and have as their objective investment of funds in free benefit generating plans (PGBL) and free life benefit generating plans (VGBL) during the grant period.


Autonomous blackout period


CVM Resolution 44 maintained the prohibition against the company, controlling shareholders, officers, members of the board of directors, and audit committee from trading in securities issued by the company during the 15 days preceding the disclosure of quarterly financial information and annual financial statements.

However, the rule now makes it clear how the 15-day period is to be calculated (excluding the day of disclosure, with trading permitted on that day only after disclosure of the financial statements) and that the prohibition applies regardless of knowledge of the contents of the quarterly financial information and annual financial statements by such persons. In other words, this is now an objective prohibition, which does not depend on proof of whether or not such persons held relevant information not yet disclosed to the market.

The members of technical and advisory committees were excluded from the prohibition, although the general restriction on trading in securities issued by the company remains in place in the event of knowledge of material information not yet disclosed to the market.

The prohibition does not apply in cases of:

  • trading involving repoed fixed income securities, under the conditions set forth in CVM Resolution 44;
  • transactions aimed at fulfilling obligations assumed before the blackout period arising from securities lending and exercise of put or call options by third parties and forward sale and purchase agreements; and
  • trades carried out by financial institutions and legal entities that are members of its economic group, if performed in accordance with the company's trading policy and in the normal course of business.


Disclosure policy


The policy for disclosure of material acts or facts, the adoption of which was mandatory for all publicly-held companies, will now be mandatory only for companies that, cumulatively:

  • are registered with the CVM under category "A";
  • are authorized by a market operator to trade securities on a stock exchange; and
  • have outstanding shares (free float) issued by the company, understood as all shares that are not held by the controlling shareholder and persons related to it, as well as those held by company officers and directors and those held in treasury.

Thus, under the new standard, companies registered in category "B" or registered in category "A" without shares admitted for trading and free float are not required to approve a formal disclosure policy.


[1] Ministry of Economy. "CVM updates rule on material facts".