The first day of the year was also the first day that CVM Instruction 480 applied to security issuer registration. The new rule supersedes Instruction 202 and brings a series of innovations regarding public companies, especially when it comes to transparency. Starting in May, five months after year-end closing for most companies, an outpouring of new information will be available to investors and analysts.

The final wording of Instruction 480 carries some modifications to the proposal submitted for public consultation. The main one is the number of categories in which issuers will be classified. There are now only two options, instead of the three initially proposed. Category “A" will include all those that issued securities traded on regulated markets. Category “B” will encompass all securities other than stocks, stock certificates or convertible assets. To eliminate any doubts on the group where each issuer fits, the CVM's corporate relations oversight office (SEP) will disclose a list of all companies and their respective categories this month.

The draft of the part of the instruction that characterizes foreign issuers underwent deeper modifications. Companies that have 50% or more of their assets in Brazil will not be allowed to issue Brazilian Depositary Receipts (BDRs). The goal is to prevent Brazilian companies from issuing securities using their overseas offices and thereby evading Brazil’s corporate laws. In the initial proposal, the CVM was considering using the source of revenues as an additional criterion for defining foreigners, but later discarded the idea. Nothing will change for companies that already issued BDRs under the now-banned terms – eight of the ten current issuers – or for their future issues. “We didn’t establish a transition rule because we think this would harm the investors”, says Luciana Dias, the CVM’s market development overseer.

Instruction 480 prescribes transitional rules in only two cases. As regards quarterly information delivery deadlines, the initial target was to shortened them from 45 to 30 days starting this year. However, given the ongoing convergence with the international financial reporting standards, the new deadline will apply only as of 2012. The requirement that category “A” issuers maintain a website for information disclosure to the market was also loosened, and will be in effect as of January 1 next year.

SUBTLE SUGGESTIONS — The instruction innovates when it uses the structure of the Reference Form (the document that will replace the Annual Information Form – IAN this year) to point out practices that companies should adopt, but are not obliged to. One such practice is live broadcasts of shareholders’ meetings.

The document requests that if a company chooses to broadcast its meetings, then it should describe the pertinent rules, policies and practices. With this, the CVM will help to answer the market’s questions. “The regulator conveyed a message. It said yes, companies are allowed to use the live broadcast tool”, assesses Renato Chavez, formerly the shareholding director at the Previ pension fund.

The form also asks if a company allows its shareholders to propose subjects for votes and the manner in which this is established. “Companies that give a vague or standard response will be evaluated for it”, says Chaves.