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What are the relevant statutes and which government authorities are responsible for investigating and enforcing them?

The current regulatory framework of the Brazilian capital markets was established with the adoption of Law 4,595 of 31 December 1964,[2] which created the National Monetary Council (CMN), and Law 4,728 of 14 July 1965,[3] which ‘establishes measures for its development’. Subsequently, and in light of the development of the capital markets in Brazil, Decree-Law 2,627 of 26 September 1940, which regulated Brazilian corporations, was superseded by Law 6,404 of 15 December 1976 (the Corporations Law). In the same year, Law 6,385 of 7 December 1976 (the Capital Markets Law) was published, creating the Brazilian Securities and Exchange Commission (CVM) and regulating the securities market.

This federal legal framework is complemented by a large number of rules issued by the CVM, a federal agency subordinated to the Ministry of Economy, which benefits from financial and budgetary autonomy. The purpose of the CVM is to issue rules for, supervise and develop the securities market. The CVM issues regulations covering a broad range of matters, including issues relating to publicly held companies, investment funds, fiduciary agents and accounting standards, among others.

In addition to its rule-making activity,[4] the CVM has the authority to permanently monitor the activities and services of the capital markets, the disclosure of market-related information, the persons participating in the markets and the securities traded on the markets, as well as to supervise and inspect publicly held companies.

Thus, even though the CMN is responsible for producing the general guidelines for the national financial system, the CVM, exercising its supervisory function, is the main entity of the Brazilian capital markets.

There are also self-regulating bodies of the capital markets that have guiding, normative and sanctioning functions. Self-regulation is a form of regulation exercised by market players in which they organise themselves with the aim of protecting themselves, ensuring greater legal certainty and developing the capital markets. Through the CVM, the CMN is responsible for ensuring that the powers granted to private regulators are exercised strictly, as outlined, within the limits of the law and with regard to public interest.

The Capital Markets Law provides for self-regulation, which applies to, for example, stock exchanges.[5] Through CVM Instruction No. 461 of 23 October 2007, the CVM regulates the parameters of such self-regulation. The most significant agent of self-regulation in the capital markets is B3 SA – Brasil, Bolsa, Balcão, a Brazilian publicly held company that operates the São Paulo stock exchange and the over-the-counter market.

What conduct is most commonly the subject of securities enforcement?

The CVM has the power to investigate and apply sanctions for violations of the rules applicable to the capital markets. It has the authority to investigate, through administrative proceedings, illegal acts and unfair practices of management, members of the Fiscal Council, shareholders of publicly held companies, intermediaries and other market participants. It also sanctions violators. Further to sanctions imposed by the CVM, infractions of capital markets regulations may also lead to sanctions imposed by self-regulated entities, such as the BM&FBOVESPA Market Supervision, civil liability (i.e., class actions) and criminal liability of those involved.

Through administrative inquiries and proceedings, the CVM may investigate conduct that is considered illegal under the Capital Markets Law, the Corporations Law, the rules of the CVM and other regulations, and impose penalties.

A recent study developed by the Brazilian Association of Jurimetry analysed the CVM’s sanctioning administrative proceedings from January 2000 to March 2019.[6] In that period, the Association reported that 960 cases were tried, of which 47.1 per cent were acquitted. Each case took an average of one year and eight months to conclude and, on average, 100,000 reais was imposed in fines.

The most common causes of prosecution were:

  • breach of fiduciary duty of diligence by management (9.6 per cent);[7]
  • failure to provide up-to-date information on books and records (8.3 per cent);
  • issues related to financial statements (8 per cent);
  • irregularities in general meetings (6.5 per cent); and
  • failure to provide up-to-date company registry information (5.2 per cent).

Cases related to insider trading corresponded to only 2.5 per cent of the sanctions applied, while cases related to market manipulation by creating artificial business conditions corresponded to 2 per cent.

In 20 per cent of the cases, corporate entities were the subject of the CVM’s investigation. Of the remainder, in which individuals were accused, 39.6 per cent were officers and 21.2 per cent were members of the board of directors. In the case of violations of publicly held companies, the CVM only has the authority to punish the officers of these companies, who are defined by law as the members of the board of directors and the board of executive officers.

According to the report ‘Beyond CVM numbers – Brazilian enforcement in the Brazilian Capital Markets’, prepared by the Nucleus for Financial and Capital Market Studies of the Getulio Vargas Foundation (São Paulo),[8] the pace of investigations slowed down in 2020 compared with 2019. The report observed that between 2019 and 2020 there was a decrease in the total amount of fines imposed as a result of administrative proceedings, of approximately 16 per cent (from 1.04 billion reais in 2019 to 880 million reais in 2020). According to the report, there was also a decrease in the number of proposals for administrative settlement. The agency analysed 274 proposals in 2019, compared with 178 in 2020, a decrease of 35 per cent. Although it is not possible to state the causes of this decrease, it seems natural to assume that the covid-19 pandemic was a major factor.

What legal issues commonly arise in enforcement investigations?

As previously mentioned, the CVM is responsible for investigating the facts that may lead to violations of the regulations applicable to the capital markets, in accordance with the procedures established by the agency.

The investigation may be initiated ex officio or on the basis of a complaint, and must be completed within 120 days of the date the administrative inquiry began, which may be extended if there are justifiable grounds to do so. There is no legal or financial benefit available to whistleblowers except in cases of voluntary disclosure. There are also no minimum criteria or parameters established for the opening of an investigation; the CVM has broad discretion to make such a decision, as long as there is an indication of irregular conduct and non-compliance with the legal principles governing the CVM’s public administration and the administrative proceeding.

The administrative inquiry can be confidential, which means the subject of the investigation may be denied access to the inquiry. This decision may be appealed to the CVM Board.

In the context of its supervisory and investigative activities, the CVM is allowed to search for information by analysing books and other accounting documents, by subpoenaing individuals or legal entities to present documents or to provide statements, or by requesting information from public bodies. The CVM may also request search warrants from the judiciary. It is not unusual for the CVM to designate an ‘inspector’, namely one of its agents who will act to analyse and obtain information and documents at the company’s headquarters that may be relevant to the investigation of the facts.

If summoned to submit documents, the investigated or accused individual must comply with the request, even if the documents are confidential or commercially sensitive. However, it is possible to request that the CVM classify documents as confidential. In the case of a deposition, the investigated or accused individual must attend, but has the right to remain silent in compliance with the constitutional guarantee to non-self-incrimination.

The CVM can also obtain documents through requests for information from other public bodies and even through international cooperation. The agency has cooperation agreements with several Brazilian public bodies, including the Federal Prosecutor’s Office (MPF),[9 to strengthen institutional ties and facilitate the exchange of information. The CVM has also entered into international bilateral agreements with regulators from many countries, including with the US Securities and Exchange Commission (SEC), with a view to facilitating the exchange of information for investigations.10]

The investigated or accused individual is entitled to present a prior statement even during the pre-sanctioning or defence phase after the opening of the sanctioning administrative proceeding, as the case may be. The accused is also allowed to present statements if new documents or elements are produced in the administrative proceeding. In addition, the counsel is allowed an oral statement before the judgment by the CVM Board.

While the aforementioned statements are being given (if the individual opts to do so), and even during the negotiation of any administrative settlement or oversight agreement, it is possible to produce the results of an internal investigation as a defence argument or documentary and investigative leverage to the CVM.

The CVM will consider the results of an internal investigation as long as the procedures followed internationally recognised best practices and the Brazilian legislation currently in effect.[11]

With regard to the statute of limitations, the state has the right to take punitive action within a certain time frame and it will lose this right if the period expires and it has not acted. Accordingly, the CVM’s claim is limited, in time and in exceptional circumstances, by the statute of limitations. It is important to note that the lapse of the statute of limitations (which would bar a CVM action) does not exonerate the individual or company under investigation from criminal action or civil liability.

As a general rule, according to Article 1 of Law 9,873/99, the statute of limitations for the exercise of punitive action by the CVM is five years. The statute of limitations begins on the date the unlawful act happened or, in cases of permanent or continuous infraction, the day on which the acts ceased.

In addition to the statute of limitations, Paragraph 1, Article 1 of Law 9,873/99 also provides for an interim statute of limitations. This is applicable in administrative proceedings that have been paused for more than three years, pending a judgment or an order. In the case of an interim statute of limitations, the records must be filed ex officio or upon the request of the interested party.

It is important to highlight the challenges that individuals and companies and their counsel face as a result of the existence of various public authorities with jurisdiction to investigate and punish similar offences. Before the adoption of Law 12,846 of 1 August 2013 on anti-corruption and Law 12,850 of 2 August 2013 on criminal organisations, the MPF had been entering into leniency agreements with companies involved in corruption schemes. After Law 12,846 came into force, the Office of the Comptroller General (CGU) and the Attorney General’s Office (AGU) began to act in parallel, and without coordination with the MPF, when negotiating leniency agreements. Upon the publication of Law 13,506 of 13 November 2017 (Law 13,506/2017), the CVM and the Brazilian Central Bank (BACEN) also became competent bodies to enter into agreements, including the oversight agreement.

In this sense, an individual or a legal entity that has committed an offence should always consider cooperating with these authorities together or in parallel to negotiate a consensual solution that is definitive and guarantees legal certainty and a predictable outcome. Further, certain violations may be subject to the jurisdiction of foreign authorities, such as the US Department of Justice and the SEC.

Currently, there is greater coordination between the Brazilian authorities. The CGU and the AGU have been working together with the MPF, and agreements have been concluded with parties in all cases since 2019. The CVM has also become more open in the exchange of information with the MPF and, on a smaller scale, with the CGU and the AGU. Nevertheless, there is still a degree of uncertainty as a result of the overlapping jurisdictions of these entities, especially as there is no hierarchy among them.

What remedies and sanctions are available to government authorities?

CVM Instruction No. 607 of 17 June 2019 (CVM Instruction No. 607) provides the procedures for the CVM’s sanctioning activity. This instruction was issued a few months after the publication of Law 13,506/2017, which updated the provisions on the subject and introduced important innovations with respect to the CVM’s sanctioning activity.

In summary, the recently updated regulatory framework creates a pre-sanctioning phase in which the CVM is dedicated to finding facts to identify possible administrative infractions. The pre-sanctioning phase may result in (1) the dismissal of the accusation, (2) the establishment of an administrative inquiry (if there is a need to further investigate) or (3) the filing of charges, if the responsible body considers that there are sufficient elements of authorship and materiality.

The dismissal of the accusation may occur in cases where the agency understands that the conduct is unlikely to cause serious harm. Accordingly, CVM Instruction No. 607 requires that the following parameters be considered:

  • the degree of reproach or of the repercussion of the conduct;
  • the materiality of the amounts associated with the conduct;
  • the materiality of the damage caused to investors and other market participants;
  • the impact of the conduct on the credibility of the capital market;
  • the background of the individuals involved;
  • the good faith of the individuals involved;
  • the remedial measures adopted by management; and
  • the payment of indemnities to the affected investors.

In circumstances where the administrative procedure moves forward, the individual being investigated may have the opportunity to present a prior clarification. If a formal accusation is submitted, the accused may present a defence within 30 working days. During this period, the individual or entity may express an intention to enter into an administrative settlement, as detailed below.

If the CVM submits a formal accusation, the agency must notify the MPF and other public authorities and entities if there is evidence of crimes within the jurisdiction of these authorities.

Administrative procedures are judged by the CVM Board and decisions are taken by majority. In the event of conviction, it is possible to appeal to the Council of Appeals of the National Financial System. This is the highest administrative body to judge sanctions applied by the BACEN and the CVM.

Administrative penalties are provided for in Article 11 of the Capital Markets Law. They range from a warning to a fine, or prohibition or temporary disqualification from carrying out activities in the securities market or the management of publicly held companies.

In addition to the penalties imposed by the CVM, the agency may, in accordance with Article 69 of CVM Instruction No. 607, in the event of serious violations and in compliance with the principles of reasonableness and proportionality:

prohibit convicted individuals from being hired, for up to five years, by official financial institutions and from participating in bidding processes for procurement, sales, works services and public concessions within the federal, state public administration, district and municipal and indirect public administration entities.

Following the adoption of Law 13,506/2017, Article 11, Paragraphs 1 and 2 of the Capital Markets Law were amended. Paragraph 1 provides that a fine shall not exceed the greatest of the following amounts: (1) 50 million reais; (2) double the value of the issuance or irregular operation; (3) three times the amount of the economic advantage obtained or the loss avoided as a result of the illicit conduct; or (4) double the cost of the damage caused to investors as a result of the illicit conduct. Paragraph 2 provides that, in the event of recurrence, a fine of up to three times the amounts set out in Paragraph 1 will be imposed.

The application of the penalty must consider the provisions of Article 62 of CVM Instruction No. 607. Accordingly, unless a warning penalty is applied, the CVM Board must initially set the base penalty, then subsequently apply the aggravating and mitigating circumstances and, finally, the cause of reduction of the penalty.[12] Other sanctions related to the same facts applied by other authorities should also be considered.

Articles 65 and 66 of CVM Instruction No. 607 establish the aggravating and mitigating circumstances considered by the CVM. In the event of a fine, there will be an increase of up to 25 per cent on the base penalty for each aggravating factor. The same percentage is applied for each mitigating factor.

It is important to note that the fines that can be imposed by the CVM were considerably increased, effective from 2017, as a result of the conversion of Provisional Measure No. 784/2017 into Law 13,506/2017. However, it is well established that the penalties provided for in Article 11, Paragraph 1 of the Capital Markets Law must not be applied for administrative infractions committed while Law 9,457/97, the previous statute that regulated penalties applied by the CVM, was in effect. This is because, according to Article 5(XL) of the Federal Constitution, ‘criminal law will not be retroactive, except to benefit the defendant’.

The precedents of the Brazilian Supreme Court hold that the principle of retroactive application of the law that is more favourable to the defendant applies.[13] This is in line with the stance of the Superior Court of Justice.[14]

Further, in the CVM Sanctioning Activity Report covering July to September 2019,[15] the agency highlighted the application of the highest penalties in relation to infractions committed after Law 13,506/2017 was enacted, as follows:

The legislative changes brought about by Law No. 13.506/2017 are already in force. However, with regard to the aggravation of penalties, they will only be applied to faits accomplis after the respective effectiveness, according to the understanding already well established in the Superior Courts and in view of the respect for the Constitutional Principle of the Law’s non-retroactivity.

More recently, on 31 August 2021, the CVM introduced eight new resolutions[16] that, according to the agency, review and consolidate normative acts, but do not result in substantive changes to its sanctioning activity. The resolutions address certain procedures of the agency’s sanctioning activity, the processing of non-sanctioning administrative proceedings and fines imposed by the CVM, among other things.

Administrative settlement and oversight agreement

CVM Instruction No. 607 regulates the administrative settlement. In addition, it regulates the oversight agreement introduced by Law 13,506/2017, which aligned with the strengthening of the anti-corruption agenda in Brazil following a period of social upheaval in 2013.

The administrative settlement under the CVM was established on the basis of Law 9,457 of 5 May 1997, which amended Article 11 of the Capital Markets Law, and resembles the Consent Decree employed by the SEC. This allows the CVM to stay any administrative proceeding against an investigated individual, provided that certain conditions are met and as long as the person investigated (1) ceases to carry out activities or acts considered to be illegal and (2) corrects (or compensates for) the irregularities identified, including indemnifying losses. The administrative settlement does not require acknowledgment of guilt.

The execution of an oversight agreement, however, requires an admission of guilt, as well as effective, full and permanent cooperation of the offender to investigate the facts. The proposal to execute an oversight agreement is analysed by the Supervisory Agreement Committee and must be negotiated within 180 days of its submission. If the oversight agreement has not been decided on at the end of this process, it will not imply a confession or an admission of the illegality of the conduct being negotiated.

Further details on each of the agreements are given in the table below.

Documents and commercially sensitive information will be kept confidential.
The agreement will be published in the 'Diário Eletrônico' section on the CVM's website, after its execution, without information on the identity of the parties.

 Administrative settlementOversight agreement
RequirementsThe CVM analyses the convenience, opportunity, nature and severity of the infraction, along with the defendant's background or its good faith collaboration, and the possibility of punishment in the case.The CVM analyses (1) the opportunity, and convenience of the agreement's execution; (2) the nature and severity of the informed infraction; (3) the interruption of involvement in the reported infraction or those undergoing investigation, counted from the filing date; (4) the amount and quality of the information produced that corroborates the infraction and identifies other individuals involved; and (5) the lack of sufficient evidence to secure a conviction of the defendant.
Timing of proposal and executing the agreementThis can take place at any phase of the administrative proceeding before the CVM Board's decision.
The proposal must be presented before or during the preliminary investigation of facts. The defence must be informed of the intention to enter into the agreement, and the full commitment term proposal must be filed within 30 days after that.
This can take place until the beginning of the judgment by the CVM Board.
Status of the investigation or of the administrative proceedingThe CVM does not start, or else it stays, the administrative procedure that investigates the respective infraction.CVM Instruction No. 607 is unclear on this matter.
Statute of limitationsThis is not included in CVM Instruction No. 607.This is suspended with respect to the party that executed the agreement.
Consideration/ penaltyThe following will be considered: (1) stopping the illegal practices; (2) correcting the irregularities; and (3) negotiating the eventual payment amount, including damages, if any.The CVM may consider taking no punitive action or reducing the applicable penalty by 2/3 rather than 1/3. The CVM will take into account: (1) the importance of information, documents and evidence produced by the party executing the agreement; (2) the moment at which the proposal was presented; and (3) the cooperation of each of the parties.
If the party is not the first to qualify regarding the reported infraction or once under investigation, the penalty will be reduced by 1/3.
ObligationsThe party is obliged to: (1) stop the illegal activities; or (2) correct the irregularities, including payment of damages.The party is obliged to: (1) produce all and any information and documents to prove the reported infraction under investigation, as well as any other information and documents that are relevant to the investigation; (2) fully cooperate with the investigation and the administrative proceeding related to the infraction, to be guided by the CVM; and (3) comply with other conditions the CVM may impose.
ConfidentialityThe settlement is published in the 'Diário Eletrônico' section of the CVM's website.If the agreement is not executed, the information produced cannot be used.
Until a judgment by the CVM, the content of the agreement, the statement of facts, the identity of the parties, the documents produced and any other specific information will remain confidential.
Admission and recognition of unlawful conductA confession or admission of the unlawfulness of the conduct is not implied.A rejected supervisory agreement proposal does not imply a confession as to the matter of fact or admission of the conduct.
If an agreement is executed, there will be an admission of the practice of the wrongdoing and identification of the others involved in the infraction, when applicable.

Despite the slowdown observed during the covid-19 pandemic, the CVM’s sanctioning activity has been growing in recent years in the context of developments to Brazilian capital markets legislation and the strengthening of anti-corruption efforts.

The CVM is making its actions more focused on the supervision and punishment of more serious infractions. The changes in the rules governing the administrative proceedings combined with the possibility of entering into an oversight agreement also demonstrate the intention of the CVM to take the same approach as foreign regulatory bodies and Brazilian anti-corruption bodies.


1 Rodrigo de Campos Maia is a partner at Wielewicki, Maia & Trovo Advogados.

4 See Article 4 of the Capital Markets Law on the powers of the CMN and the CVM.

5 Article 17. Securities exchanges, commodity exchanges and futures, organised over-the-counter market entities and securities clearing and settlement entities will have administrative, financial and asset autonomy, operating under the supervision of the CVM.

Paragraph 1. Securities exchanges, commodity exchanges and futures, organised over-the-counter market entities, and securities clearing and settlement entities shall be responsible, as ancillary bodies of the Securities Commission, for overseeing their members and the securities transactions carried out by them.

6 accessed 21 September 2021.

7 According to Article 153 of the Corporations Law, the duty of diligence consists of the employment, exercise of functions, and care and diligence that every active and probate person usually exercises in the management of its business. Based on this legal definition, it can be inferred that management must adopt, with a view to achieving its corporate purpose, the care and caution that could reasonably be expected of another professional manager. This is a standard of conduct to be followed and verified, in each situation, on the basis of the interest of society. This standard has no absolute character or fixed content, but expresses an average standard of social conduct, indicating models or elements accepted by professional managers depending on each situation, according to the understanding established by the CVM.

11 With respect to lawyers, the Federal Council of the Brazilian Bar Association issued Provision No. 188 of 31 December 2018, which regulates the practice of lawyers when conducting investigations. The provision sets forth greater security to those who carry out investigations and can be used by individuals and companies as a tool to support legal strategy and complex decision-making.

12 In accordance with Article 68, this procedure does not apply to the penalties imposed for warning or on the basis of Article 61, Paragraphs II, III and IV of CVM Instruction No. 607 (penalty of a fine equivalent to, at most, (1) twice the value of the issue or irregular operation; (2) three times the amount of the economic advantage obtained or the loss avoided as a result of the illicit conduct; or (3) twice the amount of the damage caused to investors as a result of the illicit conduct.

13 STF, re 395269 agr / AL – ALAGOAS; Rapporteur: Minister Gilmar Mendes; Judgment on 10 February 2004.

14 STJ; RMS 37031 / SP; Rapporteur: Minister Regina Helena Costa; Judgment on 8 February 2018.

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