> For the complete documentation index, see [llms.txt](https://www.opensourcelaw.com.br/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://www.opensourcelaw.com.br/en/legislation/5.-securities-law.md).

# 5. Securities Law

The following activities shall be regulated and supervised by the CVM:

* the issuance and distribution of securities;
* the trading and intermediation of securities;
* the trading and intermediation of derivatives;
* the organization, operation, and activities of Stock Exchanges;
* the organization, operation, and activities of Commodities and Futures Exchanges;
* <mark style="background-color:purple;">the management of portfolios and custody</mark> of securities;
* the auditing of publicly held companies;
* <mark style="background-color:purple;">the services of securities consultants and analysts</mark> of securities.

{% hint style="warning" %}
The professional practice of portfolio management and the provision of securities custody services depend on prior authorization from the CVM.
{% endhint %}

## Definitions:

The following are securities:

* shares, debentures, and subscription warrants;
* coupons, rights, subscription receipts, and split certificates relating to securities;
* securities deposit certificates;
* debenture certificates;
* units of securities investment funds or investment clubs in any assets;
* commercial notes;
* futures, options, and other derivative contracts whose underlying assets are securities;
* other derivative contracts, regardless of the underlying assets; and
* <mark style="background-color:purple;">when publicly offered</mark>, any other securities or collective investment contracts that confer rights to participation, partnership, or remuneration, including those resulting from the provision of services, <mark style="background-color:purple;">whose returns arise from the efforts of the entrepreneur or of third parties</mark>.

{% hint style="info" %}
The last provision reflects the understanding expressed in the [Howey Test](https://conteudos.bloxs.com.br/teste-de-howey#:~:text=O%20Teste%20de%20Howey%20%C3%A9%20uma%20regra%20bastante%20utilizada%20pelo,regras%20aplic%C3%A1veis%20aos%20valores%20mobili%C3%A1rios.), which is the test used by the U.S. Securities and Exchange Commission to determine whether a given crypto asset may be considered a security or not.
{% endhint %}

**The following are not securities:**

* public debt securities; and
* exchange notes issued by financial institutions, except debentures.

## Obligations:

* incorporation as a corporation;
* auditing by an independent auditor registered with the CVM;
* keep for <mark style="background-color:purple;">a minimum period of 5 (five) years</mark> copies of accounting records, books, or documents, including electronic programs and magnetic, optical, or any other type of files, as well as working papers of independent auditors.

## Penalties:

* warning;
* a fine of up to R$ 50,000,000.00 (fifty million reais), twice the amount of the issuance or irregular transaction, 3 (three) times the amount of the economic advantage obtained or the loss avoided as a result of the unlawful act; or twice the harm caused to investors as a result of the unlawful act;
* temporary disqualification, for up to 20 (twenty) years, from holding the position of officer or fiscal board member of a publicly held company, of an entity in the distribution system, or of other entities that require authorization or registration with the CVM;
* suspension of authorization or registration to operate;
* temporary disqualification, for up to 20 (twenty) years, from carrying out the activities covered by this Law;
* temporary prohibition, for up to twenty years, from carrying out certain activities or transactions, for members of the distribution system or other entities that depend on authorization or registration with the Securities and Exchange Commission;
* temporary prohibition, for up to ten years, from acting, directly or indirectly, in one or more types of transactions in the securities market;
* prohibition for the accused to contract, for up to 5 (five) years, with official financial institutions and to participate in bidding processes whose purpose is the acquisition, sale, execution of works and services, and concessions of public services, within the federal, state, district, and municipal public administration and the entities of indirect public administration.

{% hint style="danger" %}
In cases of recidivism, a fine of up to three times the amounts may be imposed.
{% endhint %}

## Crimes:

<details>

<summary><strong>Market Manipulation</strong></summary>

To carry out simulated transactions or perform other fraudulent maneuvers intended to raise, maintain, or lower the quotation, price, or traded volume of a security, in order to obtain undue advantage or profit, for oneself or another, or to cause harm to third parties:

Penalty – imprisonment from 1 (one) to 8 (eight) years, and a fine of up to 3 (three) times the amount of the unlawful advantage obtained as a result of the crime.

</details>

<details>

<summary><strong>Misuse of Insider Information</strong></summary>

To use material information known to the person, not yet disclosed to the market, capable of providing, for oneself or another, undue advantage, by trading, in one's own name or in the name of third parties, in securities:

Penalty – imprisonment from 1 (one) to 5 (five) years, and a fine of up to 3 (three) times the amount of the unlawful advantage obtained as a result of the crime.

The same penalty applies to anyone who passes on confidential information relating to a material fact to which they gained access by virtue of the position they hold in a securities issuer or by virtue of a commercial, professional, or trust relationship with the issuer.

The penalty is increased by 1/3 (one third) if the offender commits the crime using material information known to them and which they are bound to keep confidential.

</details>

<details>

<summary><strong>Irregular Exercise of Office, Profession, Activity, or Function</strong></summary>

To engage, even on a gratuitous basis, in the securities market, in the activity of portfolio manager, investment advisor, independent auditor, securities analyst, fiduciary agent, or any other office, profession, activity, or function, <mark style="background-color:purple;">without being, for this purpose, authorized or registered with the competent administrative authority</mark>, when required by law or regulation:

Penalty – detention from 6 (six) months to 2 (two) years, and a fine.

</details>