On December 20 2013, the Brazilian Securities Commission (CVM) published CVM Instructions 541, 542 and 543, which regulate the roles and responsibilities of depositaries, custodians and registrar agents respectively, replacing CVM Instruction 89. This is being rolled out in two phases. The first phase applies only to new custodians or agents without a license from the CVM. The second phase will begin December 2015; by this deadline, all custodians that have already been granted a licence by the CVM will be required to adhere to the new rules.

Particularly pertinent is CVM Instruction 542, according to Danilo Christófaro Barbieri, country manager at Santander Securities Services (S3). It establishes that the custodian must: i) Obtain special authorisation from CVM to be able to provide custodial services ii) Maintain operational and technological infrastructure and iii) Ensure the accuracy of information and procedures, especially related to processing and the registry of securities, among other subjects.

The action by the CVM aims to ensure the actual existence of the assets traded in the Brazilian capital markets as well as the priority rights of each investor.

“These regulations set a new standard in the infrastructure of the Brazilian capital markets and are driving the institutions involved in such activities to review and enhance their operations,” says Sergio Mello, head of HSBC Securities Services, Brazil.

On February 5 2014 the Brazilian Central Bank held a public hearing to discuss a draft resolution created to update and ease the rules applicable to foreign investment in Brazil. 

The draft turned into Resolution 4.373 and will enter into force in March 2015. The set of proposals makes some concepts clearer, especially regarding rules for equity and fixed income investments. The new resolution also introduced new mechanisms in order to increase foreign investment in Brazil, such as the possibility of issuing depositary receipts using different types of securities.

São Paulo-based stock exchange BM&FBovespa has launched new, consolidated clearing operations. The Post-Trade Integration Project (IPN) combined four existing clearinghouses into a single entity. 

The first phase of the clearing integration was concluded on August 18 2014 and, since then, exchangetraded and OTC derivatives transactions have been settled in this new environment, replacing the former Derivatives Clearinghouse. The second phase of implementation, which will introduce equities into the new system, is planned for the end of 2015, according to Lai Ling, head of international securities services at Itaú Unibanco. Fixed income and FX markets are expected to be integrated at a future date.

On June 19 2014 Santander announced its agreement with a group led by Warburg Pincus, including Temasek, for the creation of new custody business, Santander Securities Services (S3). The group acquired 50% of the new holding company that will integrate Santander Spain, Mexico and Brazil’s current custody and depositary bank business lines. Santander will continue to hold the remaining 50% of the business.