SUSEP publishes Public Consultation Notice No. 24/2020, which establishes complementary rules on the initiation of Administrative Sanction Procedures and regulates serious violations

On July 12, 2020, the Superintendence of Private Insurance (SUSEP) put for Public Consultation the Public Notice No. 24/2020, presenting a draft of a new Circular that will establish complementary rules on the initiation of administrative sanction procedures (PAS) as well as regulation of serious violations, for the purpose of applying the penalties of suspension from the exercise of activity or profession and in some cases a ban on exercise of activities.

The Circular defines that the PAS will be initiated by the responsible body when evidence of materiality and authorship of an administrative infraction is found, by means of a summons to the natural and legal persons appointed as liable, or those jointly and severally liable, to present a defense.

Also, the responsible body has the power to (i) opt not to initiate the PAS, if it considers the injury to the protected legal interest to be low, and may also propose or use other supervisory instruments and measures that it deems effective in the specific case; and (ii) propose or use, besides the establishment of the PAS, other supervisory instruments and measures that it also deems effective in the case.

In addition, the Circular provides that the responsible body may initiate the PAS even when it considers the injury to the protected interest to be low, if it understands that such option is more effective for the public interest and the protection of the protected legal interest, and may consider the background of the accused, as well as his or her history in complying with the supervision measures.

In the case that the responsible body opts not to initiate the PAS, a communication will be sent to the liable parties with the purpose of alerting them to the finding of alleged irregular conduct and the need for definitive abstention from the practice of such conduct.

For the purpose of initiating the PAS, the new Circular defines the legal assets protected as all those protected by the current rules that SUSEP supervises, listing:

  • the stability and soundness of the National Private Insurance System, the National Capitalization System and the Supplementary Pension Policy;
  • the regular operation of the legal entities supervised by SUSEP; and
  • the adequate relationship between the agents supervised by SUSEP and the clients, beneficiaries and users of the products and services subject to the supervision of SUSEP.

Another important innovation refers to the eleven scenarios in which the responsible body is prohibited from opting not to initiate the PAS, even if the alleged conduct is circumstantially based, which must be carried out when the following irregularities are identified:

I. performing operations without SUSEP authorization;

II. fraudulent or reckless management;

III. falsification of documents or provision of false information;

IV. fraud related to supervision or misleading the supervisory activities;

V. willful impediment or making difficult the exercising of the administrative policing power of SUSEP;

VI. practice of conduct that can be classified as a crime;

VII. practice of administrative infringement that has already been subject to an instrument or measure of supervision that SUSEP considers not to have been complied with;

VIII. infractor or liable party that has been party to a commitment term for adjustment of conduct deemed by SUSEP as not complied with for less than five years;

IX. practice of conduct considered an infringement, in theory, of Laws No. 12,846, of August 1, 2013, No. 9,613, of March 3, 1998, No. 13,260, of March 16, 2016 or No. 13,810, of March 8, 2019;

X. conduct involving injury to public resources; and

XI. willful injury to the protected legal interest.

Such cases will also be considered serious violations for the purpose of applying the penalties of suspension of the exercise of activity, the exercise of profession or of a ban on exercise of activities, as well as those that cause serious injury to the protected legal interest.

The new Circular will come into force on January 4, 2021.

Interested parties may send suggestions to SUSEP until the deadline of December 22, 2020, through the e-mail address, using the specific standardized framework.

Demarest’s Insurance and Reinsurance team will continue to monitor news related to Public Consultation Notice No. 24/2020 and is available to provide any additional clarifications that may be necessary.