Analysis

Brazilian financial and capital market (portfolio investment) - Resolution 4,373/14

How to invest in Brazil

Foreign investors may also invest in the Brazilian capital and financial market which are regulated by Resolution 4,373/14 from the Brazilian Central Bank and Instruction 560 of March 2015 of the Brazilian Securities and Exchange Commission (CVM). To access the Resolution 4,373/14., the foreign investor must appoint a legal representative in Brazil, who will be co-responsible for any compliance, registration with the Brazilian Securities Exchange Commission - CVM, and any liabilities that may arise thereon. Resolution 4,373/14 replaced Resolution 2,689 as from 30 March 2015.

The transactions performed by the nonresidents must be carried out inside the stock market, electronic systems, or a registered over-the-counter market, organized by entities duly authorized by the CVM. Under Resolution 4,373/14, such securities must be kept in custody by entities authorized by the CVM or by the Brazilian Central Bank, or registered, if applicable, with the Special Settlement and Custody System (SELIC), or with a registration and financial settlement system supervised by the Central Agency for Custody and Financial Settlement of Securities (CETIP).

Generally, investments by foreigners must be made under Resolution 4,373/14 to benefit from preferential tax rates applicable to Brazilian shares held through nontax haven structures.

The main changes brought by Resolution 4,373/14 in comparison with Resolution 2,689 are:

  • The legal representative in Brazil must be an institution licensed by the Brazilian Central Bank (BACEN) and it will be fully liable before administrative, judicial and regulatory transaction;
  • Investments through Brazilian funds held in Brazilian accounts in Reais are now permitted. Under Resolution 2,689 it was required an inflow of cash and a correspondent exchange transaction;
  • Further rules on specific investments such as: Real estate investment funds and depositary receipts;
  • Guidance on investments that does not result in any flow of cash, through simultaneous exchange transactions.
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