Any type of investor can buy shares of companies listed abroad through unsponsored BDRs traded on B3, Brazil’s exchange. The flexibilization of this rule, which was recently approved by the Brazilian Securities & Exchange Commission (CVM), also opens the possibility for Brazilian companies that are publicly traded outside Brazil to trade their shares here.
Formerly, due to regulatory restrictions, only financial institutions, investment funds and individuals or legal entities with financial investments in excess of BRL 1 million (accredited investors) could make this type of investment. With the flexibilization of the rule, individuals will now have access to this product and B3 will work to operationalize the product’s availability to final investors through brokerage houses.
"B3 is committed to helping develop Brazil’s capital markets. We believe that the release of unsponsored BDRs by making them accessible to all investor classes is an important step towards market regulation", explains Felipe Paiva, Customer Relations director at B3.
Since 2019, B3 has worked on adaptations to the product when it reduced the round lot of 100 BDRs to 10 BDRs. It also listed more than 500 programs backed by shares of Latin American, North American, European and Asian companies. These changes took into account precisely the retail market, which has shown great interest in the product. “In our view, this is a major step as it expands our investors’ ability to diversify their portfolio and provides increasing depth to our market”, Paiva points out.
According to the CVM rule, investors can now have access to BDRs backed by shares traded on exchanges in large markets with rules similar to Brazilian rules.
B3 will now work to operationalize the product for the retail investor by submitting the regulations for CVM approval and, thus, enabling the execution of the trade. “This is the next step in a sequence of events that needed to happen. Throughout this process, we worked in partnership with CVM and participated in all discussions on the topic. This led to the final publication of the rule”, says Mario Palhares, director of Listed Products at B3.
Unsponsored BDR is a certificate issued by Brazilian institutions that allows access to shares of the largest global companies. BDRs are an alternative for portfolio diversification, since they can be accessed in a simple way through the brokerage house systems without the need to send money abroad and without worrying about exchange rate conversion.
As well as enabling investment diversification, retail investor access to the product is not subject to Tax on Financial Transactions (IOF) and to the costs of funds remittance abroad, such as exchange rates and bank account maintenance fees.
Furthermore, the release of unsponsored BDRs for individual investors allows them to carry out securities lending transactions with BDRs and use the product as collateral at B3, providing greater flexibility in executing trades in other segments.