Last Thursday, April 26th, the Brazilian National Monetary Council (CMN) published the Resolution 4,656 (“Resolution“), which regulates lending and financing transactions among individuals through electronic platforms, as well as the requirements and procedures for the operation, corporate reorganization and closure of the institutions authorized to carry out such transactions.
Background
By means of the Resolution, the CMN, meeting the growing market demand and the operational reality of fintechs in Brazil, created and regulated the direct credit company (sociedade de crédito direto – SCD) and the peer-to-peer lending company (sociedade de empréstimo entre pessoas – SEP). Therefore, the CMN attributed to these companies the status, prerogatives and responsibilities of autonomous financial institutions, regulating them specifically, so that the fintechs no longer need to rely on the status of bank correspondents (correspondentes bancários) and, consequently, on existing financial institutions authorized to operate in Brazil, to develop their business in the country.
Direct Credit Companies – SCD
According to the Resolution, the SCD is a financial institution whose purpose is to carry out transactions of lending, financing and acquisition of credit rights exclusively through an electronic platform and always utilizing SCD’s own financial resources.
Among the duties of SCD, there is the obligation to select potential clients based on consistent criteria, contemplating aspects relevant to credit risk assessment being the SCD forbidden to raise funds from the public (except by issuing shares).
Peer-to-peer lending companies – SEP
The SEP, in turn, is defined as a financial institution whose purpose is to provide loans and financing between persons exclusively through an electronic platform.
The activity developed by a SEP is considered as financial intermediation, through which the financial resources collected from the creditors are directed to the debtors after negotiating in an electronic platform maintained by the SEP. Debtors may only be natural or legal persons resident and domiciled in Brazil. The range of creditors can be broader, being inclusively allowed financial institutions and investment funds in credit rights whose quotas are exclusively reserved to qualified investors (as defined by the Brazilian Securities and Exchange Commission – CVM) to participate as creditors in these platforms.
The loan and financing transactions must meet different requirements and formalities established by the Resolution, among them, the issuance and conclusion of instruments representative of the credit (with debtors) and the instruments linked to them (with creditors), with SEP as a party, issuer or beneficiary, which must also contain mandatory minimum clauses, as established in the Resolution. The SEP shall also have the responsibility to carry out the debtors risk assessment and to provide plentiful information to the clients regarding the nature and complexity of the operations, in a clear and objective language, which includes interest rates, taxes, charges and average default rate of the transactions carried out on the platform.
Among the prohibitions brought by the Resolution, the SEP will not be able to carry out loan and financing transactions with its own resources nor to co-sign or provide any guarantee related to said operations.
In addition, the creditor of the loan or financing may not contract with a same debtor, in the same SEP, operations whose value exceeds the maximum limit of BRL 15,000.00 (fifteen thousand reais), unless such creditor is a qualified investor, in accordance with the regulations of the CVM.
General provisions – operation, change and closure of SCDs and SEPs
Both the SCD and the SEP may provide other services exhaustively set forth in the Resolution, among them, the analysis and collection of credits and the issuance of cryptocurrencies.
Pursuant to the constitution and operating requirements, the SCDs and the SEPs must be incorporated as corporations (sociedades anônimas) and permanently have minimum paid-up corporate capital and net equity of BRL 1,000,000.00 (one million reais). Investment funds may participate in the control group of SCDs and SEPs, in which case the Brazilian Central Bank may impose an additional minimum paid-up corporate and net equity.
Furthermore, the operation, transfer of control, corporate reorganization and the closure of the SCDs and SEPs will depend on prior authorization of the Brazilian Central Bank and must meet the requirements established in the Resolution. For instance, in the case of authorization to operate, members of the control group of the SCD or SEP or holders of qualified participation must authorize the Internal Revenue Service (Receita Federal do Brasil) to provide their information to the Brazilian Central Bank regarding the last 03 fiscal years, as well as the Brazilian Central Bank to access all information contained in public and private information systems, including administrative and judicial processes and procedures of any nature.
It is expected that the Resolution, by creating a sandbox (a soft regulatory environment) aimed at favoring the exercise of the activities of the Brazilian fintechs, will not only enhance the activities of said fintechs and the market competition, but also contribute to the improvement of access and credit conditions to the general public in Brazil.
For further information about the contents of this newsletter, please contact the following Lawyers:
[vc_row][vc_column width=”1/4″]Tomás Neiva
tomas.neiva@nbfa.com.br
(11) 3707-8370
Marcela Figueiró
marcela.figueiro@nbfa.com.br
(11) 3707-8370
Bruno Cunha
bruno.cunha@nbfa.com.br
(11) 3707-8370
Cindy Takahashi
cindy.takahashi@nbfa.com.br
(11) 3707-8370
