BRAZIL Trends and Developments Contributed by: Ralph Melles Sticca, Passos e Sticca Advogados Associados
investment funds quotas, futures, options and other derivatives, including the carbon-credit market. This places the Brazilian stock, commodities and futures exchange among the most reliable, liquid and sought-after by domestic and foreign investors. This is in addition to the extensive regulation and protec - tion afforded by Bacen to the latter, who benefit from a differentiated regime for promoting direct invest - ment, whether through the incorporation of a new legal entity or the capital increase of an existing one, or through the financial and capital markets, with tax benefits related to the Tax on Financial Transactions ( Imposto sobre Operações Financeiras – IOF) in for - eign-exchange operations, and income tax ( Imposto de Renda Retido na Fonte – IRRF) on gains earned in certain exchange and over-the-counter market trans - actions. Compliance and the responsibilities of the board However, even with the evolution of compliance standards and rules, corporate governance in Brazil still has significant room for improvement. Evidence lies in the negative repercussions of accounting and financial frauds reported in recent years, including cases that attracted international attention. The Americanas Case In January 2023, Americanas SA – a traditional Bra - zilian retail group founded in 1929 and currently con - trolled by the founders of 3G Capital – disclosed to the market, by means of a material fact notice, the iden - tification of inconsistencies in the accounting entries of its balance sheet in the amount of BRL20 billion. Days later, the company filed for judicial reorganisa - tion (Brazilian Chapter 11), in which it reported debts totalling BRL43 billion, owed to approximately 16,300 creditors. In June 2023, the company reported that the improper entries and fraud uncovered in its financial statements amounted, on a preliminary and unaudited basis, to more than BRL40 billion, indicating the involvement of its former CEO, as well as three former directors and three former executives. The shortfall led B³, the São Paulo stock exchange, to auction Americanas’ common shares, and the com -
pany’s stock was placed under review by major finan - cial institutions. On the day following the announce - ment of the shortfall, Americanas lost BRL8.37 billion in market value, and its shares fell by nearly 80%, harming its investors. The company is currently still undergoing judicial reor - ganisation, while the CVM has created a task force to identify, investigate and examine potential irregulari - ties. Three administrative inquiries, three sanctioning administrative proceedings (allegations of violations punishable by fines and disqualification, subject to defence and decision by the board, which may result in convictions), and one administrative proceeding (to investigate the conduct of the independent auditor) The most recent case of fraud against the national financial system, perhaps the largest in history, involved Banco Master SA, a financial institution inves - tigated by the Brazilian federal police on suspicion of having caused potential losses of BRL40 billion, with its controlling shareholder, Daniel Vorcaro, as the prin - cipal target – he is currently in pre-trial detention. Beyond the involvement of politicians and high-rank - ing public officials – including, allegedly, individuals from the supervisory authority (Bacen), which is still under investigation – the complex corporate structure created to conceal assets and the origin of funds is striking, as are the indications of the fabrication of credit portfolios lacking financial backing in order to inflate assets and, consequently, the collateral sup - porting the issuance of private securities ( Certifica - dos de Depósitos Bancários – CDB) and the raising of funds from investors in general. In this case, the regulator appears to have been effec - tive in blocking an acquisition transaction involving a public bank, Banco de Brasília (BRB), which would have concealed the insufficiency of assets needed to support the institution’s liquidity as required by Bacen regulations. Bacen subsequently formalised the extra - judicial liquidation of financial institutions within the conglomerate, such as the bank itself, Letsbank and Will Bank. are currently under way. The Banco Master Case
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