Protecting those who invest in the future of Brazil
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  • TYPES OF PRODUCTS THAT ARE REGULATED INCLUDE: PE/VC FUNDS – IN FACT, THIS TYPE OF CLOSED END FUND CAN STRUCTURE ALSO OTHER STRATEGIES, LIKE MEZZANINE FINANCE, LBOS, ETC HEDGE FUNDS MUST BE REGISTERED WITH THE CVM AND HAVE DISCLOSURE OBLIGATIONS.
  • I want to present to you some figures on the recent level of activity in our market. Here you have the total amount of public offerings of securities registerd with the commission. Apart from the period of the privatization, between 96 and 99, we did not see anything like we can see now. But more than that, never before the capital market in Brazil was used by so many investors and issuers as today. These good times have been nurtured along the years, as I will try to coment later on.
  • Now only in equities you can see that were placed around 14 billion last year, and this year is going to surpass that. There were 42 equity offerings, being 26 IPOs. as usually happens in a cicle (and this one started in 2004, now the proportion of primary shares – money to the company – is starting to become predominant. This can be confirmed in this years’ offerings.
  • this one is only to tell you about the overwhelming importance of the foreign investors in the successfull share offerings of the Brazilian companies. around 70% of the total have been acquired by foreigners and here we have a very significant fact. from the 63 Brazilian companies that went public since 2004, only 2 have registered in a foreign market – in the case, the American market. So these investors have bought shares relying solely on the listing and on the trading of these stocks in the Brazilian market – its marketplace, its infrastructure, and we like to believe, its regulatory environment.
  • This evolution has to do not only with recovery of the market and the price levels, but with the entrance of new lisitngs.
  • These are products that were regulated a few years ago and that recently went through a revision of their rules, our learning curve. But they already represent a good alternative available for the companies financing, specially SMEs.
  • CVM’S AUTHORITY INCLUDES THE Registration and SUPERVISION of ….. IN THE CASE OF PUBLIC COMPANIES, NOT ONLY IN SECURITIES LAW ISSUES BUT ALSO CORPORATE LAW. BUT broker dealers ONLY WHEN intermediating securities transactions or acting in regulated securities markets. I WILL NOW HIGHLIGHT THE MOST RELEVANT FEATURES OF OUR REGULATION PER TYPE OF PARTICIPANT.

Protecting those who invest in the future of Brazil Protecting those who invest in the future of Brazil Presentation Transcript

  • Protecting those who invest in the future of Brazil José Alexandre Cavalcanti Vasco Head, Education and Investor Assistance October 2007
  • Snapshot of the Brazilian Market
  • BM&F Daily Average Traded Volume
  • BOVESPA Daily Average Traded Value US$ bi
  • Securities Offerings US$ bi
  • Equity Offerings US$ bi
  • Number of Equity Offerings
  • Equity Offerings Allocation 71% in average to foreign investors Foreign Local
  • Evolution of market capitalization US$ 1,106.76 bi August
  • Market capitalization as % of GDP 2007 GDP: US$ 2,427 bi (Forecast IPEA) August
  • Corporate Bond Offerings US$ bi
  • Securitization US$ bi
  • Private Pension Funds Net Asset as percentage of Brazilian GDP
  • Capital Markets in General
    • “Social” Function of the KM:
    • to form prices and returns of available instruments within a risk/ return rationale, offering market participants the possibility of risk diversification
    • to reduce the economy´s and the system´s aggregate risk
  • Risk/ Return in the USA (1926-1996)
  • Average annual real return and risk in the brazilian capital market in US$
  • Returns Fixed Income X BOVESPA
  • The 1990s
    • The majority of the listed companies in Brazil were family-owned and highly concentrated:
    • Total Capital Ownership
    • Brazil: 52% X 10% US
    • (families tipically owning two thirds of voting capital and 50% of total capital)
  • Corporate Governance Nº of Companies Level 1, Level 2 & Novo Mercado
  • Market Value Level 1, Level 2 & Novo Mercado % of BOVESPA
  • Dispersed Controled Structure Nº of Companies
  • Investment Funds August/07 * Forecast IPEA 7.3 thousand funds net asset value US$ 543 bi (44% of 2007* GDP) 11.3 mm shareholders
  • Individual investors
  • Investor Education in Brazilian Market
  • Investor Education and Assistance
    • In 1998:
      • creation of the Department of Investor Education and Assistance
      • launch of Program on Investor Education and Assistance (PRODIN).
    • Investor Assistance:
      • The CVM’s Query Centers: Rio de Janeiro and São Paulo. The Query Center is in charge of providing a large variety of information to the general public.
      • Toll free line.
      • Serviço de Atendimento ao Investidor (complaints, consultations, suggestions and denunciations) – through CVM’s website ( www. cvm . gov . br ).
      • Administrative proceedings to deal with investor’s complaints.
  • INVESTORS’ REQUESTS
  • INVESTORS’ REQUESTS
  • INVESTORS’ REQUESTS
  • Investor Education CVM’s routine activities
    • Investors Orientation and Education Program (PRODIN)
      • Town meetings
      • Lectures in universities (University circle)
      • Monograph Contest and Prize (8th year) with BOVESPA
      • Educational Publications (8 “Cadernos CVM” - with 120 mil freely distributed last year) – Caderno #9: The Commodities and Futures Exchange.
      • Toll free line
    • Investors’ Website including e-learning tools (launched in May/07)
  • Investor Education CVM’s routine activities
    • University circle (2002-2006). Free lectures to universities and, as of 2006, also to high-school colleges, all over the country. 8,600 students were reached in 2006.
  • Investor Education CVM’s routine activities
    • Town Meetings with investors. CVM’s Chairperson or comissioners answer questions from investors. Last one in March 2006, city of Porto Alegre (south of Brazil) reached 400 investors. Since 2006, a joint initiative of CVM and other institutions of the market (exchanges, investment bank association etc.).
  • Investor Education CVM’s routine activities
    • Educational Publications
      • Educational guides
      • 8 booklets (“Cadernos CVM”), e.g.:
        • Caderno #1: The CVM.
        • Caderno #3: Investment funds.
        • Caderno #8: Rights of minority shareholders.
        • In 2007: Caderno #9: The Commodities and Futures Exchange (as a response to the increase in the deals carried out by individual investors through BM&F’s home-broker: the “webtrading” plataform). BM&F also has just launched a “simulator” (with a virtual grant of R$ 150 mil or US$ 80 mil) to small firms and individual investors.
    • From Jan 1997 to Aug 2007: 498,394 educational publications freely distributed.
    • Education Advisory Committee (Jan 2006). Joint initiative of CVM and Abrasca (publicly traded companies), Anbid (investment banks), Andima (market institutions), Apimec (analysts), IBRI (investor’s relations), INI (individual investors and investment clubs), and also the exchanges Bovespa and BM&F.
    • Main achievements in 2006 and 2007:
      • “ Top Program” (training the trainers philosophy) and “Press Award” (recognize best quality news in terms of investor education): 3 groups trained in the teacher´s program – one week immersion for universities’ professors of Brazil (circa 150 trained since July 2006). Next edition: Jan 14-18 2008.
      • Press Award (Prêmio Imprensa de Educação ao Investidor) – (recognize best quality news in terms of investor education) grants 3 MBA scholarships /year and a travel to USA.
    • Next steps:
      • Training judges (through a 72-hour program): on the law of capital markets (beginning March 2008).
      • Training the legislative branch of the government (in 2007).
    Investor Education New projects
  • Investor Education New projects
    • Center of Study in Capital Markets. Created in 2006 to provide administrative and technical support to researches and students, as well as to organize and facilitate access of researchers to non-qualified information held by the CVM’s staff.
    • Agreements with universities (Rio de Janeiro State University, Catholic University, IBMEC) to launch local centers of studies in capital markets.
    • 2 Seminars per year since (2006: Investment Funds and consumer’s protection plus 30 years of CVM. 2007: The carbon market and the capital market, The risk-based supervision, both international) and workshops.
    • Support to researchers, students and professors (CVM’s library).
  • Investor Education New projects
    • Investors website. A new website aimed at fostering investor education (user-friendly language, challenges, e-learning tools and kids educational material).
    • Four areas: investors, lawyers, students and foreign investors (both english/spanish languages).
  • Special Investor site: www.portaldoinvestidor.gov.br
  • CVM x Investor website
  • Investor’s website Tool to compare investment funds
  • Investor Education – New projects National Strategy for Financial Literacy
    • COREMEC: a joint committee that comprises regulation and supervision entities of Brazilian Financial System (SFN). Launched in 2006 (Administrative Decree # 5685):
      • Central Bank of Brazil (BCB).
      • Securities and Exchange Commission of Brazil (CVM).
      • Private Insurance Superintendence (SUSEP) –insurance companies, private open pension funds, capitalization companies.
      • Complementary Pension Secretariat (SPC) – private closed pension funds.
    • Main objectives:
      • Coordinated action of regulation and supervision.
      • Exchange of information among regulators.
  • Investor Education – New projects National Strategy for Financial Literacy
    • The number and complexity of choices increased dramatically over the last 17 years.
    • Number of investors in capital markets is growing and also the appetite for risky investments, in search of bigger returns (as a response to the basic interest rate decline): home-broker (including derivatives) and transfers from conservative investment funds (which invested in government bonds) to hedge-funds (fundos “multimercado”).
    • Debt is growing, thanks to special lending schemes (employers and civil servants).
    • The unbanked: large part of population do not maintain transaction, credit, saving, or investment accounts.
    • The growing need to build retirement savings (a shift from defined benefit plans to defined contribution plans).
  • Investor Education – New projects National Strategy for Financial Literacy
    • Deliberação # 3, May 2007: COREMEC forms workgroup to provide advice on a Brazilian national strategy for financial literacy in 6 months beginning at the first meeting (October 2007).
    • Representatives from Central Bank, SUSEP, SPC and CVM were appointed during September 2007 (plus 15 auxiliary members -> private sector representatives from Exchanges, associations of brokers/dealers and publicly traded companies, National Association of Investment Banks etc.).
    • Next steps: to launch a national survey on Brazilian's financial capability, to catalog local initiatives aiming to improve personal financial skills, to launch a website (disclosure the process of getting the plan built).
    • +55-0800-7260802
    • Websites:
    • www.cvm.gov.br
    • www.portaldoinvestidor.gov.br
    • E-mail (Sup. Prot. Orientação aos Investidores) :
    • [email_address]
    • Thank you!