The very first step to start the operations in the Brazilian Financial and Capital Markets is to open a 2689 Account. It is a mandatory requirement issued by the Brazilian Monetary Council in the year 2000 and allows nonresident investors (1) to trade and invest in the same portfolio products available for resident investors in Brazil.
1. Choose the Representatives:
1
Appoint a legal representative in Brazil to fill out the forms required by the Brazilian authorities. The role of legal representative can be done by any financial institution authorized by the Central Bank;
2
Name the tax representative (who is usually their legal representative);
3
Hire custodial services in Brazil.
The Custodian is responsible to keep physical record of all investor documents and must present them to the Brazilian authorities whenever required. This set of documents include Statues of the investor, minutes of meetings that nominated the responsible for trading, registry documents of the company and of the responsible for the trading, among others according to the Custodian compliance rules.
2. Send the documents to the Brazilian Securities Commission:
Contracts with the legal representative, the tax representative and the custodian bank must be signed and submitted to the Brazilian Securities Commission (CVM). Your legal representative is able to handle this process. The registration with the CVM is made electronically and it will provide the legal representative with a tax code (CNPJ) within 24 hours after the request.
3. Choose a local broker:
Finally, the nonresident investors must register with a local brokerage house in Brazil for execution services.
Attention: one single institution may perform all the roles required by the Brazilian rules. Furthermore, many Brokerage Houses in Brazil may also offer legal and tax representative services.
Types of Accounts
The nonresident investor may operate through the following types of accounts:
- as the Account Holder of his/her own account;
- or as an Account Holder of an Omnibus Account (Collective);
- and/or as a Participant (passenger) in an Omnibus Account.
Adding clients as passengers to an existing omnibus accounts (2) involves a simplified process that can usually be accomplished within 24 to 48 hours if some conditions are met.
Notes:
(1) According to the relevant regulations, nonresident investors, whether individual or collective, private bodies or legal entities, funds or other collective investment entities are those with residence, principal place of business or domicile abroad.
(2) Please, note the term “omnibus account” is used differently in Brazil than in North-American and European markets. The principal advantage of a 2689 omnibus account is the time saved in setting up the account, not in the ability to transact business or multiple parties without disclosing individual identities and positions. A foreign intermediary is still required to identify the final beneficiary of each executed trade at BM&FBOVESPA on a T+0 basis.
In 2005, the CVM has issued the RULE 419, allowing a simplified registration for non-resident investors. This simplification will allow the filing of a registration without recording all the documents supporting the process in Brazil. The CVM allows this as long as the clients representatives in Brazil have a formal relationship with the representatives overseas, and only for participants of countries whose securities commission have signed the MMOU
Please access here to see the specific regulation, and to see the minimum content suggestion for contract to be set between Brazilian and foreign brokerage houses and for contract between local and global custodians. It is important to address that this is a minimum content suggested contract, and brokers may add additional clauses and items according to their internal compliance rules.
1
Choose a Broker
Nonresident investors should first choose one of the authorized Brokerage Houses and supply the documents required.
2
Register with the Central Bank of Brazil
BM&FBOVESPA will register him/her with the Central Bank of Brazil in accordance with the Brazilian legislation.
- Intermediation Agreement for Nonresident Customers´Operations on the Cash and Future Delivery Markets.
This instrument describes the obligations and rights of customers and their brokers, the regulation and operational aspects with regard to the settlement of transactions and the risks involved. After reading the terms and conditions of the agreement, customers must sign an “Adhesion Contract Form” and forward it to their Brokerage House in Brazil.
- The entire registration process is carried out through the brokerage house chosen by the investors to be their BM&FBOVESPA representative. The Adhesion Contract Form contains the investor´s personal and financial data, the order transmission method chosen, and all the information necessary for the Derivatives Clearinghouse to perform the settlement of their transactions
3
Register with BM&FBOVESPA
The brokerage house forwards the customers’ Adhesion Contract Form and a letter of introduction requesting their registration with BM&FBOVESPA. After analyzing the Adhesion Contract Form, BM&FBOVESPA will authorize the nonresident investor to trade agricultural contracts through the brokerage house chosen.
Note: a simplification of the registration procedure can be used by investors domiciled in jurisdictions whose market regulators have agreements with the CVM, as long as the local custodian in Brazil has agreements with the investor global custodian, and the Brokerage House in Brazil has agreements with investor local broker in its domicile country. Please refer to CVM rule 419 for details on that.
