The Superintendence of Securitization Supervision (SSE) of the Brazilian Securities and Exchange Commission (CVM) published, on July 5, Circular Letter 6/2023/CVM/SSE (OC 6), with the objective of complementing the manifestations contained in Circular Letter 4/2023/CVM/SSE (OC 4) on the possible characterization of tokens of receivables and fixed income tokens (together TR) as securities,  either because they can characterize securitization operations (according to Law 14,430/22) or be considered collective investment contracts (according to Law 6,385/76).

OC 6 also brings new explanations about OC 4 and points out how the previous understanding can directly or indirectly affect the tokenization of some sorts of cinancial assets – such as Bank Credit Notes (CCB), Bank Credit Notes Certificates (CCCB) or Real Estate Credit Notes (CCI). It also clarifies aspects of a crowdfundingin Brazil.

Below, we make a brief summary on the main points covered in OC 6 and how these topics can affect tokenization in Brazil.

Differences between securitization operation and collective investment agreement

 SSE clarifies that it is possible that a certain type of TR is considered a collective investment contract, without necessarily being included as a securitization operation

In this case, the offeror of the TR would not exempt  from complying with the applicable rules on the public offering of securities, but would be exempt from the need to make the offer via securitization company.

SSE clarifies that this can happen when, cumulatively:

  • there is a public offering of a single credit right, via an instrument of assignment or other modality, without co-obligation or other form of risk retention by the assignor or by a third party;
  • the cash flow of the credit right flows directly to investors, with minimal interference from the assignor or third parties to enable the transfer of the flow;
  • there are no predetermined mechanisms for the replacement, repurchase or reversal of the credit right assigned, nor any co-obligation for the implementation of the collective investment agreement offered;
  • there are no previously contracted service providers, such as those equivalent to custody, bookkeeping, depositary, fiduciary agent, ordinary collection of the credit right offered or monitoring or follow-up service; that is, there is no "packaging" of the credit right with services, but the direct sale; and
  • In case of default, it is up to the investor to adopt judicial or extrajudicial measures, case in which the investor may, directly at his expense, hire collection agents.

In this sense, the perfect and finished sale of a single asset (true sale) can mischaracterize the securitization operation. It is necessary, however, to assesswhether the other characteristics of the TR make it a collective investment contract – in which case the rules on the public offering of securities should  apply.

SSE's considerations about the possible characterization of a securitization operation are quite positive for the tokenization market in Brazil, as they bring strongerpredictability and legal certainty to the offerors of tokens backed by credits or credit rights. From now on, the offerors will be able to orient themselves on a more solid basis on the need or not to support their operations through a securitization entity.

Some sorts of financial assetsAdvancing in the discussion of OC 4, the SSE clarifies that the understanding expressed therein does not apply to some sorts of financial assets such as CCB, CCCB and CCI, when the requirements of article 45-A of Law 10,931/04 are met.

By express legal provision, the issuance and marketing of such financial assets are outside the regulatory perimeter of the CVM. However, SSE clarifies that, if an investment opportunity is backed by a basket of some of these asssets, it is possible that the operation is characterized as a collective investment contract or securitization operation, both subject to the jurisdiction of the CVM.

SSE clarifies that the basket may correspond to the public offer of a single asset that represents or corresponds to  more than one CCB, a CCCB or a CCI. In these cases,  SSE points out that it is possible to have a mismatch between the cash flow derived from the assets and the value corresponding to the collective investment contract, causing the contract offered not to correspond to the assets themselves, but to the investment that is backed by those assets.

SSE's considerations on the tokenization of financial assets is positive for the market, as they bring predictability and legal certainty to those interested in offering tokens backed by theseassets.

Simplification of the public offering of receivables tokens in the crowdfunding  model

By issuing OC 4, SSE advised that, up to the volume of R$ 15 million, securities issued by securitization companies can be tokenized and publicly offered through crowdfunding platforms, under the terms of CVM Resolution 88/22 – crowdfunding regulation  – thus making use of a simpler regulatory regime for public offerings compared to that provided for in CVM Resolution 160/22.

To enable these securitization operations to comply with the regulatory limits of the issuer's annual gross revenue (applicable, in general, to the small business company in the scope of crowdfunding, under the terms set forth in article 2, item VII and paragraph 2, of CVM Resolution 88/22), the SSE clarified that, in securitization operations involving tokens, these limits could be based on separate equity.

This separate equity would be constituted through the institution of the fiduciary regime by the securitizing company, and not necessarily the securitizing company in the condition of issuer of the  security. That is, the issuer, for the purposes of CVM Resolution 88/22, would be the separate equity of the issuance of the tokens.

However, in the edition of OC 4, SSE had understood that this guidance would not apply to issuances concentrated in only one debtor or debtors that are related parties to each other – including debtors of the assets backing the securitization operation.

This understanding, however, has  been amended by OC 6. SSE now admits that the separate equity can be considered as an issuer for the purposes of CVM Resolution 88/22, including in concentrated issuances.

This means that the separate equity, and not the securitizing company or the debtor(s), is equated with the issuer, when it comes to meeting the requirements of crowdfunding regulation, among which the following stand out:

  • annual gross revenue limit of R$ 40 million or, in relation to the economic group, R$ 80 million;
  • maximum amount of funding of R$ 15 million;
  • sum of total uptake; and
  • 120-day interval between public offerings.

In addition, the limitations regarding the maintenance and transit of investor funds in crowdfunding  offerings provided for in article 5, paragraph 1, items (i) to (iii),[1] of CVM Resolution 88/22, in a direct interpretation, create a prohibition for the crowdfunding platform  and its partners to constitute a securitization company to issue the tokens and offer them on this platform.

SSE brings an alternative to remove this restriction on token securitization operations carried out through a crowdfunding platform. The CVM department makes it clear that securitization companies can be constituted by the platform itself, provided that the issues are carried out with the constitution of separate equity in accordance with the legislation and regulations applicable to securitization operations.

The regulator's interpretive effort translates into simplification of the public offering procedure of  tokens of receivables to enable and stimulate the use of crowdfunding regulation  for this purpose. The norm was not designed for tokens of receivables, but it is currently being put forward as a legal alternative to facilitate the distribution of these tokens in the Brazilian market.

 

[1] Art. 5, § 1, of CVM Resolution 88/22: "The amounts transferred by investors may not be transferred through current accounts: I – maintained in the name of the platform; II – maintained in the name of partners, administrators, and persons linked to the platform; III – maintained in the name of companies controlled by the persons mentioned in items I and II of this paragraph; (...)"