BM&F Bovespa : Sponsored BDRs

Brazilians will soon have new opportunities for trading and portfolio diversification in securities issued by foreign companies. On April 5, the Securities and Exchange Commission of Brazil (CVM) released Instruction 585 authorizing restricted-effort public offerings of Level I and Level II Sponsored BDRs.

Until now this type of offering was allowed only for Level III Sponsored BDRs. It is important to note that the new ruling does not apply to unrestricted offerings, which are open to individual investors and not restricted to professional and qualified investors. Permission for unrestricted offerings remains limited to Level III BDRs.

What else has changed?

• Automatic waiver of proof by the BDR issuer, on announcing a subsequent public offering, that the percentage of its securities located in Brazil does not exceed 65%;
• Inclusion of BDRs in the list of securities that can be included in investment club portfolios provided they do not exceed 33% of a portfolio's net asset value;
• Clarification that information about Level I BDR Programs may be published in Portuguese or in the language of the issuer's home country;
• BDR Programs may be transferred from one depository institution to another without having to be cancelled;
• The 90-day lock-up period following a public offering no longer applies to BDRs, which in this regard are now equal to shares and other equity instruments.