BRAZIL Law and Practice Contributed by: Eduardo Castro, Pedro Nasi and Gabriel Libanori, Machado, Meyer, Sendacz e Opice
Insider Trading Under the Brazilian justice system, insider trading is a criminal, administrative and civil infraction. Article 155, paragraph 1 of the Brazilian Corporations Law prevents the use of privileged information by the man - agement of publicly traded companies, and paragraph 4 establishes that the unlawful use of such informa - tion by any person is also prohibited. Classification as “criminal” tends to be based on the CVM’s evaluation. Market Manipulation CVM Resolution No 62 prohibits the creation of artifi - cial conditions of supply, demand or price, as well as price manipulation, fraudulent operations and the use of unequal practices in the securities market. These activities are considered serious offences and are punished harshly by the CVM. Risk-Based Approach to Financial Crimes Within its sphere of competence, the BCB uses regu - lated market players as gatekeepers to ensure that the national financial system and the SPB are not used to facilitate financial crimes, mainly by establishing mini - mum internal controls for regulated players and allow - ing them do adopt a risk-based approach in obtaining information from clients to prevent financial crimes. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations High-frequency trading (HFT) and algorithmic trad - ing are not regulated by the Brazilian capital markets, since the usage of algorithms therein is incipient. However, in its Orientation Notice No 40 of 11 October 2022, the CVM informed the market that it is receptive to new technologies that lawfully contribute and posi - tively influence the evolution of the capital markets. In 2022, B3 also informed the market that it had begun using HFT technology to monitor transactions.
ticipants, which can be either full trading participants or trading participants acting under the responsibility of full trading participants; these can act as interme - diaries for some institutions and conduct operations on their own behalf. 6.6 Rise of Peer-to-Peer Trading Platforms The Brazilian financial and capital markets are high - ly regulated. There are no direct P2P trading plat - forms, but there are P2P loan platforms ( sociedade de empréstimo entre pessoas ), which are treated like “lighter” financial institutions for regulatory purposes. P2P loan platforms can issue a credit instrument link - ing debtors and investors, allowing investors to fund loans and earn a spread. There are also crowdfunding platforms through which investors can invest small amounts in entrepreneurial endeavours; these are regulated by CVM Resolution No 88. Investors are able to sell their securities in Brazilian secondary capital markets – usually via P2P plat - forms, but always through a securities intermediary. 6.7 Rules of Payment for Order Flow Intermediaries of securities may charge fees for plac - ing orders on behalf of investors, observing guidelines established by self-regulatory bodies such as ANBI - MA, although there are also rules to be followed based on the regulations issued by the CMN and the CVM. For example, CMN Resolution No 5008/22 establish - es that CTVMs and DTVMs cannot charge fees for the negotiation of securities during the term of their primary issuance. ANBIMA’s guidelines provide that securities distributors may seek transparency in the provision of information to investors about the fees charged for placing orders. The CVM’s rules establish that securities intermediaries must inform investors of compensation charges and potential conflicts of interests. 6.8 Market Integrity Principles The CVM and self-regulatory bodies such as ANBIMA promote the market integrity principles followed by securities intermediaries and investors. In the Brazil - ian financial market, integrity principles are laid out by the BCB and followed by regulated market players through a risk-based approach.
7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
The activity of market makers is governed by CVM Resolution No 133, and by B3’s guidelines, which require institutions to be registered with B3 to con -
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