The Brazilian National Monetary Council (Conselho Monetário Nacional – CMN) issued Resolution No. 4,656, on April 26, 2018, regulating the authorization to operate, the transfer of corporate control, corporate reorganization and the liquidation of fintechs specialized in loan and financing transactions through an electronic platform.
The Resolution introduces the Direct Credit Company (Sociedade de Crédito Direto – "SCD") and the Peer-to-Peer Lending Company (Sociedade de Empréstimo entre Pessoas – "SEP").
The main goal of the Resolution is to create an environment of diversification among the economic agents that operate in the credit segment and, thus, to promote greater competitiveness and higher degree of innovation within the sector. For this purpose, it seeks to confer legal certainty to credit transactions intermediated by worldwide spread electronic platforms also present in Brazil.
The credit transactions formalized through electronic platforms in Brazil, as operated by fintechs, used to be structured by market experts and legal advisors grounded on regulation addressed to the traditional financial market, which entailed the need for the involvement of traditional banks and equivalent financial institutions.
Under the terms of the Resolution, the purpose of the SCD is to carry out loan and financing transactions and to acquire credit rights exclusively through an electronic platform. The SCD may only transact out of its own equity.
Among other attributions granted to SCD, it is allowed to (i) do credit analysis for third parties; (ii) collect credits from third parties; (iii) act as an insurance representative in the distribution of insurance related to the operations carried out through the electronic platform, in accordance with the regulation enacted by the National Council of Private Insurance (Conselho Nacional de Seguros Privados - "CNSP"); and (iv) the issuance of electronic currency, also in accordance with the regulation in force.
On the other hand, SEP is used to intermediate lending and financing transactions between parties, known as P2P (peer-to-peer) operations, also exclusively through an electronic platform. SEP will collect financial resources from creditors and, after negotiating within an electronic platform, it will direct such funds to the respective debtors.
In no event shall SEP be able to use its own resources to carry out credit operations. In this sense, SEP will execute certain instruments that will link the funds made available by the creditors to SEP and the corresponding credit operation with the debtor.
SEP is also authorized to provide services related to (i) credit analysis for customers and third parties; (ii) collection of credits from customers and third parties; (iii) acting as an insurance representative in the distribution of insurance related to the credit operations, in accordance with CNSP regulation and (iv) issuance of electronic currency, in accordance with the regulation in force.
The Resolution permits that certain persons be qualified as creditors out of operations intermediated by an SEP. Such persons are, namely, individuals, financial institutions, receivable investment funds — whose quotas are exclusively destined to qualified investors — securitization companies that distribute the securitized assets exclusively to qualified investors and non-financial entities. Conversely, only natural or legal persons resident and domiciled in Brazil may be qualified as creditors in operations intermediated by an SEP. Creditors, except those who are qualified investors, may not contract, with a single debtor in the same SEP, operations whose nominal value exceeds the maximum limit of R$15,000.00.
In addition to other requirements applicable to SCD and SEP, the Resolution determines that both must be incorporated in the form of a corporation, with a minimum amount of paid-in capital stock and shareholders' equity of R$1,000,000.00. However, if an investment fund participates in the control group of a SCD or of a SEP, the Brazilian Central Bank may require additional capital infusion. Finally, it is worth noting that the operation of SCD and SEP depends on prior authorization of Brazilian Central Bank, under the terms of the new Resolution.
The Demarest Banking and Restructuring Practice Group closely monitors the regulatory developments of this issue, remaining available to provide advice and clarify any doubts about this matter and others relevant to the National Financial System.