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Registration of security in Brazil

Alexei Bonamin
The way in which a security interest is perfected may have a significant impact on the ability of the borrower to raise finance. A security perfected with the minimum delay and cost and the maximum of certainty and flexibility brings enormous advantages for borrowers and creditors.

In 2011, the Brazilian congress approved a bill that, among other things, aimed to simplify the creation of security over securities and financial assets. The bill was signed into Law 12,543, but to produce its complete effects the law had to be regulated by the government.

Recently, in February 2013, President Dilma Rousseff enacted Decree 7,897 that regulated Law 12,543 and altered the way in which the security over financial assets and securities is registered. Under the new rules, security over financial assets and securities in transactions conducted within the Brazilian payment system or securities market must be registered with entities or systems authorised by the Central Bank of Brazil or the Brazilian Securities Commission to hold securities and financial assets accounts.

This authorisation for the registration of security will be conditional on the approval, by the Central Bank of Brazil or the Brazilian Securities Commission, of the internal regulations and registration systems to be developed by entities holding securities and financial assets accounts. In essence, the purpose is to replace the existing registration procedure with an electronic system.

Wisely, the new rules do not provide a list of registrable assets. Over the years the types of financial assets have increased steadily and a list could impair the electronic registration of security over financial assets created after Law 12,543. Therefore, it is envisaged that any type of financial assets and securities capable of being registered with authorised entities and systems may benefit from the advantages of the new rules.

It is expected that the new registration procedure should be capable of simplifying the creation of security over financial assets and securities within the Brazilian payment system and securities market. The advantages will be realised by creditors and debtors, which will receive important economic benefits from the increase in the number of secured transactions in the Brazilian market.

Alexei Bonamin

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