What is a Memorandum of Understanding

Memorandum of Understanding are agreements for cooperation and exchange of information signed between securities regulator entities of various countries of the world, whose nature varies from the exchange of public information (regulatory aspects, company information) to the exchange of confidential information, for investigative purposes.

The CVM is seeking to increase the number of such agreements, for the growth of crossborder transactions involving securities provokes a growing need to augment the ties with equivalent authorities, purposing to ensure an adequate level of protection to investors and of preservation of the markets' integrity.

One of the practices deriving from the MOUs is the possibility of a joint monitoring of registered companies for simulteneous public exchanges in Brazil and in other countries.

Legal Base
 
Below are the following precepts in our legislation that regulate the MOUs:
1. Complementary Law 105/01: Article 2 (...)

§ 4 The Central Bank of Brazil and the Securities and Exchange Commission, in their areas of jurisdiction, may sign agreements: (...)

II - with central banks and inspection entities from other countries, purposing:

a) the inspection of branch offices and subsidiaries of foreign financial institutions operating in Brazil and inspection of branch offices and subsidiaries from Brazilian financial institutions abroad;

b) the mutual cooperation and the exchange of information for investigation of activities or operations that implicate application, negotiation, concealment or transference of financial assets and of securities related to the practice of illicit conducts.
2. Law No. 6385/76 (text provided by Law No. 10.303/01) Article 10. The Securities and Exchange Commission may sign agreements with similar agencies from other countries, or with international entities, for the assistance and cooperation in investigations to verify transgressions to the rules pertaining to the securities market occurred inside the Country or abroad.

§ 1 The Securities and Exchange Commission may refuse to provide the referred assistance in the caput of this article whenever there would be the need to protect the public interest.

§ 2 The text of this article is applied even to the information that, due to legal precept, would be submitted to secrecy.
3. Internal Regiment (Ministry of Finance Ordinance 327/77) Article 10 - Observing the precept in article 15, paragraph 2 of Law No. 6.385, dated December 7th, 1976, the CVM, exercising its legal attributions, will be allowed to:

(...)

VIII - establish relationships with any entity of public and private law, in Brazil or abroad, purposing the exchange of experiences and the exchange of information, for which it may sign agreements.

 

Basic Structure of a Memorandum of Understanding (MOU)
 

Memorandum of Understanding are usually structured as showed below
1. Introduction Description of the entities that are undersigning the M.O.U.
3. Definitions Glossary of the terms used in the text
4. Principles Basic principles that guide the M.O.U.
4. Scope Cases in which the M.O.U. will be able to be used
5. Request for assistance or information Formal aspects of a request
6. Spontaneous information Exchange of information outside the M.O.U. (usually public information in nature)
7. Permissible use of the information Defines the purposes for the use of the information
8. Confidentiality Prohibition of dissemination of non-public information to third parties
9. Investigation or assistance costs Possibility for charging when the surveying of information involves substantial costs
10. Duration Usually, starting from the date it is signed for an undetermined expiration date
11. Contact persons People to be contacted in case of effectiveness of some pertinent request under the M.O.U.