Download Reorganizing and Evolving Corporate Structures of

Reorganizing and Evolving
Corporate Structures of Market
Infrastructures: Case Studies
within ACSDA
Amarílis Prado Sardenberg
CBLC Chief Operating Officer
The Reasons for Demutualization
 Strengthening before the international competition
and adjusting to an integrated markets
 Higher flexibility and response velocity to the
changes in the domestic and international scenario
 Capital raising to new investments
 Liquidity and valorization of the brokerage
houses’ (members) investments
 Strengthening the commercial focus
Demutualization Stages
 1st. stage: Mutual Structure
Non-Mutual Structure
 2nd. stage: Corporation
(optional)
Public Corporation
 3rd. stage: Listing in the Stock Exchange (optional)
BOVESPA and CBLC Demutualization
BOVESPA e CBLC announced studies to the demutualization
and IPO in June 2006
The whole process, which culminated in BOVESPA Holding’s
IPO, was concluded in 16 months
BOVESPA and CBLC Demutualization
Steps taken

Approval by the regulatory bodies
•

Corporate Restructuring
•
•

Future of the current projects
Preparation to IPO
•


Restructuring of the supervision activity
Social Responsibility
•

Rules definition
Self-Regulation
•

Rules definition, licenses etc
CBLC Participants Access
•

Approval by the members for the creation of a for-profit organization
Bylaws and contracts review
Bovespa Trading Access
•

Brazilian Securities and Exchange Commission and the Central Bank
Adjustment to the financial statements standards and corporate governance
improvements
Demutualization: August 2007
IPO: October 2007
Results from the Demutualization
 Separation between the BOVESPA “trading access” and the “decision making
power”
 The trading access and the others services provided by the Stock Exchange were separated
 The decision-making power now belongs to the shareholders (that will not be, necessarily, the
former brokerage houses or the former members)
 Issue of trading access licenses
• Automatically granted to the former owners of the membership certificates
• Entrance possibility to the new intermediaries, since they are properly qualified for that
• Transition period of 1 year
 BVSP rules and procedures had to be modified and approved by the Brazilian Securities
Commission
 Corporate governance reinforcement and strategy
 For-profit corporation
 Adoption of a “Business Model”
 Regulation
 Changes in the self-regulation model after the demutualization
 Jurisdiction conflicts in the merger process
 Self Regulation
 The business units kept the self-regulatory function
 The BSM (Bovespa Market Supervision) is an additional layer of market supervision
Results from the Demutualization
 Separation between the ownership and CBLC “services access”
 Automatically granted to the former owners of the membership certificates
 Others requirements as:
• Deposit of collateral
• Capital requirements
• Expertise
Did not change
 New requirements for custodians
 Transition period of 1 year
 CBLC rules and procedures had to be modified and approved by the Brazilian
Central Bank
 Although the risk management procedures remained unchanged, the Brazilian
Central Bank was concerned that the risk related decisions were taken from risk
management experts – Risk Committee
 Self Regulation
 The business units kept the self-regulatory function
Regulation
Issues in discussion at IOSCO
 Self-Regulation Function of the Stock Exchange and of
the CCP/CSD/SSS
As commercials entities, for profit organizations, can a Stock
Exchange and a CCP/CSD/SSS keep satisfactorily their selfregulatory function?
Profits maximization
X
Fair market operating
Self-Regulation
Dissociation between the commercial
activities and the regulatory activities inside
the demutualized stock exchange and
CCP/CSD/SSS
• Launch of a non-for-profit entity – BSM (Bovespa
Market Supervision) to take care of the regulation
activities, under the same holding, but constituted
by an independent board and an independent
management
Corporate Structure Before Demutualization
Brokers/Dealers
Shareholders
100%
80%
Not-for-profit
100%
Bovespa
Services
20%
Current Corporate Structure
Current Shareholders
(Financial Institutions /
Others)
New Shareholders
59%
41%¹
100%
BVSP
•
100%
BSM
50%
Exchange
1 Pro-forma after the offering, assuming exercise of greenshoe
•
Market Surveillance
& Monitoring
50%
•
•
Clearing & Settlement
Central Securities
Depository
Corporate Governance – Best Practices
NOVO MERCADO
– Shareholders’ rights
• Only one class of shares, with full voting rights: one
share, one vote
• Full tag along rights
– Higher disclosure Standards
• Annual financial statements in IFRS or US GAAP
• Improved Quarterly Reports (ITRs), including an
English version, consolidated financial statements
and cash flow statements
• Related party transactions
• Trading and ownership of the company's shares by
the management and the controlling shareholders
– Other listing requirements
• Delisting: tender offer at a price based, at least, on
the economic value
• Board of directors: a minimum of 5 members,
maximum two years terms
• 25% minimum free-float and adoption of special
procedures in public offerings to enhance the
dispersion of the company's shares
• Adhesion to an arbitration panel (dispute resolution)
SPECIAL LEVELS OF
CORPORATE GOVERNANCE
– Nível 1 (level 1)
• Higher disclosure standards of Novo
Mercado
– Nível 2 (level 2)
• Higher disclosure standards of Novo
Mercado
• Must comply with all the
requirements of the Novo Mercado
• Exception:
– May continue to issue nonvoting, «preferred» shares (PN),
but these «preferred» shares will
have voting rights in some
circumstances
Corporate Governance After the
Demutualization
• All common shares with equal voting rights
• Full tag-along rights
• Majority of board of directors composed of independent
members. Very strict definition of independence including:
– No commercial relationship with Bovespa / CBLC
– Cannot be a controlling shareholder of any company
listed on the Bovespa
– If a board member of any listed company, must be an
independent director of that entity
• All board members are non-executives
Vertically Integrated Model
• Bovespa Holding offers a complete array of services for trading, settlement
and custody of securities
CBLC
 Trading
 Central Securities Depository
 Index Licensing
 Securities Lending
 Listing
 Clearing
 Product
Development
 Settlement
 Market Data
 Risk Management
 Front, Middle and Back
Office Software Licensing
 Custody Services for
Clubs and Funds
BVSP
THANK YOU!
Amarílis Prado Sardenberg
[email protected]