In line with the regulation of Law 14,286/21, which resulted in the current regulatory apparatus of the foreign exchange market, the Central Bank of Brazil (BCB), together with the Brazilian Securities and Exchange Commission (CVM), published, on August 30, the BCB-CVM Joint Social Participation Public Notice 103/24.

The objective is to obtain contributions and information from the general public on proposals to consolidate and improve the regulation of non-resident investments in the Brazilian financial market and capital markets (investments by non-residents in portfolios), in addition to putting the requirements currently in force under public discussion.

The intention is to simplify and modernize the current regulatory treatment given to the capital of non-residents in the financial and capital markets in Brazil. This is an important advance for the regulation of the provisions introduced by Law 14,286/21, such as the one that establishes equal treatment for the capital of foreigners and Brazilians.

The public consultation is another step towards the consolidation of this provision. With the initiative, BCB and CVM seek to improve and facilitate the access of non-residents to the business environment in Brazil and ensure that the investment of non-residents in the financial market and in the capital market can be carried out in the same modalities and with the same instruments provided to the resident investor, with equivalent registration requirements and operational limits.

It should be noted that some limitations imposed on non-residents, expressed in the regulations in force, will still be observed.

Among the main points addressed by the authorities in the public consultation, the following stand out:

  • Expansion of the possibility for non-residents to invest more easily in financial assets, made from their non-resident accounts in reais maintained in Brazil;
  • end of the Electronic Declaratory Registration, Portfolio Module (RDE-Portfolio);
  • end of the need of simultaneous foreign exchange operations and international transfers in reais on a mandatory basis;
  • simplified regime for individuals, including explicitly bringing the normative provision for flows directed to the Direct Treasury Program (Programa Tesouro Direto), paving the way for the prospect of expanding such flows, in the manner to be defined in the respective regulation;
  • possibility of using the criteria of the representative, the custodian and the institution that carries out the financial transactions to define information and supporting documents to be requested, considering the client's evaluation and the characteristics of the operation, according to criteria formally established in internal policy;
  • extension of the period for maintaining information and supporting documents from five to ten years;
  • exclusion of the command regarding the limit of foreign participation in financial institutions and other institutions authorized to operate by the Central Bank of Brazil, when issuing Depositary Receipts backed by voting shares or debt instruments convertible into voting shares;
  • expansion of the list of entities able to act as representatives of non-residents, with the inclusion of clearing and settlement chambers and service providers, making it possible to consolidate, in the new regulation, the carrying out of operations with forward, future, and options contracts for agricultural products; and
  • expansion of assets eligible for Depositary Receipts, with the inclusion of securities issued by securitization companies, investment funds or other entities supervised by the CVM.

In addition, the public consultation seeks to reinforce legal certainty on the subject and converges with the priorities chosen by the federal government to be debated in the G20 International Financial Architecture Working Group. In particular, it aims to ensure legal certainty regarding the attraction and maintenance of portfolio investment flows in emerging markets. 

Unlike previous notices, the municipalities did not publish a normative draft, but rather general elements that must be considered when taking subsidies. The BCB and CVM will receive suggestions through a specific form in spreadsheet format provided by the BCB. Suggestions and comments can be sent until September 30. The new regulation will come into force on January 1, 2025.