Regulation of the financial and capital markets in Brazil is the responsibility of three institutions: The National Monetary Council (CMN), the Central Bank of Brazil (Banco Central) and the Securities Commission (CVM). The function of each is explained as follows:
National Monetary Council (CMN)
This is the senior entity in the National Financial System. Its primary responsibility is the formulation of monetary and credit policies, seeking a stable currency and the economic and social development of the country, in addition to overseeing financial institutions.
Constituted by the Minister of Finance, the Minister of Planning, Budgets and Administration and the President of the Central Bank of Brazil, the Council establishes the rules and guidelines that must be followed both by the Central Bank and the Securities Commission (CVM) relating to the activities of audit, control and regulation of capital markets and financial institutions operating in Brazil.
Some of the functions of the CMN directly affect the population. This includes the establishment of bank charges as a method of stimulating competition among banks, the choice of the characteristics of banknotes and coins and the authorization granted to bakeries and lottery outlets permitting them to act as correspondent banking agencies. Another important function of the CMN is to define the desired rate of inflation that should be pursued by the Central Bank.
For more information on the National Monetary Council refer to the website of the Ministry of Finance (contents in Portuguese).
Securities Commission (CVM)
Capital markets in Brazil are monitored and regulated by the CVM, a Federal agency that is part of the Ministry of Finance. Among its principal responsibilities are the monitoring of organized over-the-counter markets (assets traded outside the Stock Exchange), publicly traded companies, stock exchange and futures markets, fund and equity administrators, among other functions.
The Commission also regulates the issue of shares on the BM&FBovespa, the Brazilian Stock Exchange. The CVM has the duty of protecting the interests of investors and ensuring dissemination of information concerning securities that are traded and the companies that issue them.
CVM’s role includes the detection of possible illegal acts committed by shareholders and controllers of publicly traded companies, and to oversee frauds and manipulation that can generate extreme fluctuations in stock prices and apply sanctions in the case of proven irregularities.
When a company decides to offer part of its shares on the Stock Exchange, is the Securities Commission that authorizes public trading of its shares and also the issue of the shares. On the CVM website it is possible to access a guidance manual for companies that have an interest in opening their capital and trading shares publicly on the BM&FBovespa.
The Central Bank of Brazil is responsible for implementing the policies established by the National Monetary Council (CMN). It is the duty of the entity to monitor the behavior of brokers and banks that operate in Brazil, supervise existing financial institutions, and to authorize the admission of new financial companies and monitor their financial transactions, both in the public and the private sector.
For more information read ‘Central Bank’, or visit the Central Bank of Brazil website