Rules for entering into a Conduct Adjustment Agreement (“TAC”) within the scope of supplementary private pension operated by closed supplementary private pension entities.
The Brazilian National Superintendence of Supplementary Private Pension (“PREVIC”) published PREVIC Resolution No. 006/2022, which provides for Conduct Adjustment Agreements within the scope of supplementary private pension operated by Closed Supplementary Private Pension (“EFPC”) entities. The purpose of the TAC is to correct irregularities and appropriately adjust conduct to the legislation applicable to the pension system.
Below, we highlight the main aspects and requirements for entering into a TAC:
- PROMISEES TO THE TAC
In addition to the EFPC, those that can be deemed TAC promisees include the members of the executive board, the fiscal council or deliberative council of the EFPC, the sponsor or settlor administrators, or intervenor, liquidator, and special administrator.
- TAC EXECUTION
A TAC can only be entered into (i) in the absence of financial loss to the EFPC or the benefit plan managed by it, unless the proposal includes coverage of full compensation of such loss; (ii) if it is possible to correct the irregularity; (iii) if there is no violation, within the previous five years of a different TAC entered into by the same promisee.
- PROCEDURE FOR SUBMISSION OF PROPOSALS
The TAC proposal must be submitted by the interested party before the issuance of an infraction notice related to the conduct under analysis or before the deadline for correction of the irregularity to PREVIC’s Regional Unit. Final approval of the Agreement must be granted by the Chief Prosecutor.
Responsibility for controlling and monitoring the enforcement of the TAC rests with the Regional Unit. After its entry into force, the TAC’s abstract must be published in the Brazilian Official Gazette.
- PROPORTIONALITY OF THE PROPOSAL
The assessment of the proposal must verify whether the TAC proposal is the appropriate way to achieve public interest in an efficient and effective manner, by evaluating the proposal according to the proportionality of the seriousness of the conduct under analysis, the existence of reasons that justify the adjustment of the reputed irregular conduct, and the power to discourage the reoccurrence of such conduct.
- ELEMENTS OF THE TAC
The TAC must contain:
(i) a detailed description of the facts and conduct that motivated the proposal;
(ii) a detailed proposal regarding the correction of the irregularities;
(iii) the schedule of implementation and entry into force of the measures proposed, including the goals to be achieved;
(iv) suspension of ongoing administrative processes and procedures regarding the conducts within the scope of PREVIC.
(v) the penalty established in the event of total or partial non-compliance with the TAC;
(vi) duration of the effective term;
(vii) identification and signature of parties involved;
(viii) provision for the responsibility of successors to comply with the TAC;
(ix) the competent jurisdiction to resolve any dispute between the parties.
- ACCESS TO INFORMATION
The EFPC must make available all data regarding the TAC in an easily accessible location on its website
- SUSPENSION AND PERIODS OF LIMITATION
Ongoing administrative processes and procedures related to the conduct encompassed by the TAC will be suspended for the duration that it is in force. In addition, from the date of its entry into force, the TAC suspends the period of limitation.
- DETAILED REPORT
The promisee must submit a detailed report to PREVIC regarding measures carried out during the period stipulated in the TAC.
- TOTAL OR PARTIAL NON-COMPLIANCE
The Board of Directors is responsible for decisions regarding the total or partial non-compliance with the TAC, and the pecuniary penalty must be collected within a maximum period of fifteen days commencing from the notification date of the final decision. Such penalty varies, according to each promisee, from BRL 60,000.00 (sixty thousand reais) to BRL 5,000,000.00 (five million reais), depending on (i) the seriousness of the misconduct; (ii) the number of people affected or potentially affected; (iii) the size of the EFPC and the amounts involved, without prejudice to any compensation of financial loss regarding the conduct under analysis.
- MOTION FOR REHEARING
A motion for rehearing can be filed regarding the decision of the Board of Directors within fifteen days from the date of notification to the promisee, with suspensive effect.
- NOTIFICATION BY THE PROMISEE FOR NON-COMPLIANCE WITH THE TAC
The promisees must keep their addresses updated at PREVIC. They must be notified of the non-compliance via (a) electronic means; (b) postal service, for which a return receipt or similar document must be issued by the postal service; (c) signature of the violator or his attorney, or, in the event of refusal, an official statement of refusal; or (d) public notice published in the Brazilian Official Gazette. In the case that attempts to notify the promisee are unsuccessful or it is found that the promisee is based in an inaccessible, unknown or unreported location, the public notice must specify the commencement date of the deadline to file the motion for rehearing.
- AMENDMENTS TO THE PROPOSAL
The conditions in the TAC can be modified through an amendment, upon justified request made by the EFPC or the promisee.
The new Resolution will come into force on May 02, 2022.
Demarest’s Insurance and Reinsurance team is available to provide more information on this and other related topics.