After many months of work and research by the regulatory authorities into the Portuguese capital markets, Decree Law 486/99 of November 13 was published, implementing the new Portuguese Capital Markets Code (Código de Valores Mobiliários or CVM).
Decree Law 486/99 revoked the Código do Mercado de Valores Mobiliários (the previous Capital Markets Code) which was in force for almost 10 years, and eliminated a number of its rules which made its interpretation and application quite complex. Effectively, the previous code aimed to be as comprehensive as possible and as such regulated all aspects of the Portuguese capital markets in detail. However, such an approach proved too inflexible, creating difficulties and barriers in the development of the capital markets.
The CVM was prepared on the basis of the five principles listed below.
Codification – the CVM retains the basic rules applicable to the capital markets but removes various rules regarding, for example, the statute of the regulatory entities and the statute of the stock exchange and other regulated markets management entities, which will be published in autonomous legislation.
Simplification – the articles of the CVM were reduced to less than one-third of the previous code, and the remissions/references to other articles of the CVM were reduced to an absolute minimum, with double remissions being totally removed.
Flexibility – the CVM establishes basic principles and leaves regulation/ implementation to the regulatory authorities, in particular to the Stock Market Commission (Comissão do Mercado de Valores Mobiliários or CMVM). This allows regulations to be updated to respond to market needs.
Modernization – the CVM has taken into account the most recent developments in other jurisdictions. As an example, the regime applicable to public offerings was amended to the effect that: (i) international public offerings have their own prospectus rules (a prospectus approved by the regulatory authority of the country of the issuer, ifsuch country is an EU member state, will be automatically recognized in Portugal with no further requirements other than a translation into Portuguese and a note setting out the differences between the law applicable in the country of the issuer and Portuguese law); (ii) the requirement for two years of corporate existence for the purposes of proceeding with a public offering was eliminated and replaced with the need to present a business plan; (iii) price stabilization within the ambit of a public offering is allowed (in general, such mechanisms were forbidden under the previous code); (iv) "green-shoe" is allowed within the ambit of a public offering; (v) the obligation to effect a partial public offering of acquisition was removed; and (vi) the thresholds for the total public offering of an acquisition were changed to one-third and half of voting rights.
Additionally, the amendments to the legal regime applicable to financial intermediary activities should be noted, as the CVM: (i) allows individuals to provide financial consultancy services if such individuals are duly authorized and registered with the CMVM (under the previous code such services could only be provided by financial intermediaries); (ii) regulates the contents of financial intermediary contracts; (iii) distinguishes between institutional investors and non-institutional investors, and grants to the latter special protection; and (iv) provides autonomous rules regarding negotiation by financial intermediaries for their own account.
Internationalization – the CVM sets out rules that allow and stimulate the negotiation in Portugal of securities issued by foreign entities (for example, the CVM contains special rules applicable to: (i) public offerings in the Portuguese market of securities issued by foreign entities; (ii) the prospectus of a foreign issuer; and (iii) the listing of foreign securities on the Portuguese stock exchange).
The CVM entered into force as of March 1 2000.
William Smithson and Alexandra Maia de Loureiro