Introduction to CVM
Among the four major regulatory agencies for the Financial Market, the one in charge of the securities market in Brazil is CVM, which has executive functions, such as inspections, and standard-setting responsibilities. In this article, we will take a look at how CVM works.
Overview
The Comissão de Valores Mobiliários, Portuguese for Securities and Exchange Commission, CVM, is an autonomous government agency linked to the Ministry of Finance. As a regulatory agency of the Brazilian financial system specializing in the securities market, it has the function to discipline, supervise and develop the securities market and follow up on the operation of publicly traded companies, investors and traders.
CVM was created on 7 December 1976. Since its creation, CVM’s powers and responsibilities have been expanded several times, in 1977, 1997, 2001 and 2002. In order to strengthen its autonomy and its inspections, in 2002 the CVM became a special independent agency, subject to a special regime, linked to the Ministry of Finance, with its own assets, independent administrative authority, under no hierarchical subordination, with fixed term and stability of its board, and financial and budgetary autonomy.
Numbers
There were, as of the end of 2013, 647 registered companies in CVM, with 75% of those offering publicly traded shares and 25% of those offering publicly traded securities, but not shares. As for investment funds, more than 14.000 were registered in 2014.
Responsibilities
The CVM has the following responsibilities:
- Ensure that stock exchanges, commodities and futures exchanges and OTC markets operate in a proper and efficient manner
- Protect investors against irregular issuance of securities and illegal actions by public company management and by portfolio managers
- Combat fraud or manipulation schemes that create artificial demand, supply or securities price conditions
- Make sure that markets are transparent and companies disclose all relevant information
- Make sure that all market participants adopt fair trading practices
- Promote investment in financial markets and increase the capitalization of Brazilian publicly held companies
- Ensure proper access of the public to information on the trading of securities and on its issuers
- Supervise and inspect publicly held companies and investment funds, enforcing applicable regulation
- Investigate, through administrative inquiries, illegal actions and non-equitable practices by public company management and other market participants, applying the penalties set forth in the law
- Register and inspect independent auditors, portfolio managers, tied agents, consultants and securities analysts, among others, enforcing applicable regulation
Structure
The CVM is managed by one Chairman and four Commissioners, who are directly appointed by the President of the Republic and approved by the Federal Senate. The Chairman and the Board of Commissioners make up the Collegiate, which sets policies and establishes practices to be implemented and developed by a Board of Directors, the executive authority of the CVM.
Its members serve a five-year mandate, from which they may only be removed due to renunciation, legal conviction or disciplinary administrative procedure. There is also a seat for a CVM representative on the National Private Insurance Council.
CVM is headquartered in Rio de Janeiro and there are regional offices in São Paulo and in Brasília.