Brazil's CVM turns down settlements in three cases and spells out its test

Brazil's securities regulator rejected settlement proposals in three of the four cases at its board meeting on 27 October and accepted the proposal in the fourth, worth BRL 180,000, the Comissão de Valores Mobiliários (CVM) said. The reasons it gave set out how the test works.

What a settlement is under Resolution 45

The settlement, the termo de compromisso, is governed by Articles 80 to 91 of CVM Resolution 45, the rulebook for the regulator's sanctioning procedure. A settlement is not a confession of the facts or an admission that the conduct was unlawful. The person proposing it must commit to stop the conduct, if it continues, and to correct the irregularities, including compensating losses. The proponent must signal its intention within the deadline for its defence and send the full offer within 30 days after the defence, or it can offer earlier, before or during the preliminary inquiry.

The specialised federal attorney's office at the CVM (PFE-CVM) first gives an opinion on legality. A settlement committee led by the Superintendent General, with at least five superintendents, then advises the board within 30 days of that opinion, and may negotiate terms with the proponent for up to 120 days. The board weighs the opportunity and convenience of a deal, the nature and gravity of the alleged breaches, the proponent's record and good-faith cooperation, and whether punishment is effectively possible in the case.

An accepted settlement suspends the proceeding for the period set for compliance, or means no sanctioning proceeding is opened at all. If the obligations are not met in full, the case starts or resumes. Every settlement is published in the CVM's electronic gazette and can be enforced as an extrajudicial title.

Four cases, four reasons

The first case concerned Riza Securitizadora, formerly Virgo Companhia de Securitização, and three of its officers at the time, who offered to settle before any sanctioning proceeding opened. The inquiry by the securitisation superintendence looks at the possible use of the resources of 76 separate estates in breach of their securitisation terms, a possible breach of Article 17 of CVM Resolution 60 on securitisation companies, and at possible fraudulent operations under CVM Resolution 62, all of which the CVM describes as supposed irregularities. The attorney's office found no legal bar. The committee still advised rejection, citing the superintendence's view on the importance of a ruling, that a deal would not deter similar conduct, and that the best outcome was a judgment on the merits and on each proponent's responsibility. The board agreed. The CVM release carries no statement from the company.

A former employee of a listed company offered to settle a case on the possible use of undisclosed material information to trade. The attorney's office found a legal bar, and the committee cited the gravity of the alleged conduct and the absence of any money offered for diffuse damage to the market.

Two investors in a proceeding over possible price manipulation through layering in live cattle and corn futures from 1 October 2024 to 31 January 2025 were also turned down. The committee placed their conduct, in theory, in Group V of Annex A to Resolution 45, the offer did not include returning the benefit gained, which the attorney's office treated as a legal bar, and there was a gap between the amount offered and the benchmark the committee uses and the board has accepted in similar cases.

The one accepted offer came from a board member of a listed company in a proceeding over supposed irregularities: a sale of shares on 12 March 2025 that the CVM places within the 15-day blackout before the company's 2024 financial statements were published on 17 March. The board member agreed to pay the CVM BRL 180,000.

Read together, the reasons the board gave for its three rejections were legal bars raised by the attorney's office, the gravity of the alleged conduct, offers that returned no gains or paid nothing for diffuse damage, and, in the Riza case, the value the committee saw in a ruling on the merits. The same regulator is consulting on the future of its corporate governance report, and Brazil's competition authority published its own enforcement tally for the election period.