On June 8 2017, the Brazilian Federal Government issued
Provisional Measure 784/2017 (PM 784), which establishes new
rules applicable to punitive administrative proceedings taking
place at Bacen (the Brazilian Central Bank) and the CVM (the
Brazilian Securities and Exchange Commission).
One of the most debated innovations introduced by PM 784
relates to the new limits on pecuniary penalties which the CVM
and Bacen may apply to entities in the scope of their
Accordingly, the CVM can now apply fines of up to: (i)
BRL500 million ($155.7 million), as opposed to the previous
limit of BRL500,000; (ii) twice the amount of the issue or
irregular transaction (instead of the previous limit of 50%);
(iii) three times the amount of the economic advantage obtained
or the loss avoided as a result of the wrongful act; or (iv)
20% of the total or individual consolidated turnover of the
economic group, obtained in the year before the initiation of
the sanctioning process, in the case of a legal entity (the
latter is an alternative introduced by PM 784). In the case of
recidivism, the limits may triple.
Similarly, Bacen may now fine regulated entities up to (i)
0.5% of revenues from services and financial products
calculated in the year before the consummation of the
infringement or, in the case of a continued wrongful action, of
the consummation of the last infringement; or (ii) BRL2 billion
(as opposed to the previous BRL250,000 limit).
In regard to non-pecuniary penalties, MP 784 introduced the
possibility for CVM to sanction regulated entities by
preventing them from (i) engaging in contracts with state-owned
financial institutions; or (ii) participating in public bids,
for up to five years.
PM 784 states that the application of the incremented system
of penalties should take into account certain elements. These
include the advantage received or intended by the violator,
their economic capacity, the severity of the violation and the
degree of damage caused to the national financial system, to
the Brazilian payment system, to the infringing institution
itself or to third parties.
The new fine limits under PM 784 will only be applicable to
events occurring after the publication of PM 784. Thus, acts
that occurred before July 7 2017, remain subject to the
applicable limits then in effect.
Another novelty introduced by PM 784 relates to leniency
agreements. Bacen and the CVM are now allowed to enter into
agreements with either individuals or legal entities, to obtain
information on violations of legal or regulatory norms in
exchange for lighter sentences or full acquittal. Leniency
agreements entered into by Cade (the Brazilian antitrust
authority) have shown that these instruments may be effective
in revealing accomplices and additional information during
investigations, and now the tool has been extended to the
purview of Bacen and the CVM.
Given that leniency is a procedural matter, leniency
agreements may be proposed and concluded in administrative
proceedings that were in course before the enactment of PM 784,
including cases that were already actually in progress.
PM 784 also allows both the CVM and Bacen to cumulate
penalties applied to regulated entities found guilty in
sanctioning proceedings. Thus, under the new rule, CVM and
Bacen may apply pecuniary penalties along with a suspension,
for instance, to entities found simultaneously guilty under
competences of both regulators.
Congress has 60 days to approve the provisional measure into
law, after which it loses its validity.
||Carlos Augusto Junqueira
Souza Cescon Barrieu & Flesch
Praia de Botafogo, 228 - 15º andar - Ala A
22250-040 - Rio de Janeiro - RJ - Brazil
T: +55 21 2196-9200