New CVM’s regulation favors the reparation of damages to minority shareholders

The payment of damages to investors is one of the priorities of the Instruction 607, published by the Brazilian Securities and Exchange Commission (CVM) on June 17. The regulation also addresses the punishment of illegal activities and the possible reduction of penalties or even the extinction of proceedings against individuals and corporations.
The regulation establishes that the CVM is allowed to apply fines that should not exceed: twice the value of the issue or the value of the irregular transaction; three times the value of the benefit obtained by the individual/corporation that committed the illegal act; twice the loss caused to investors; or $50 million reais. Such punishment can be reduced if the companies or individuals compensate investors for the damages.
According to Mauro Rodrigues da Cunha, the new CVM Instruction 607 should be celebrated. “Amec has been advocating for the creation of conditions for the adequate reparation of damages to minority shareholders for many years. Now, these conditions are a reality and do not depend on legal struggles,” said Amec’s CEO, who intends to promote debates about the new rules.
The new CVM Instruction regulates the changes provided in the Law 13,506 of 2017, which deals with Administrative Sanctioning Processes (PAS) within the scope of the Central Bank and the CVM. The regulation is effective as of September 1.