On March 16 2017 the Brazilian Insurance Agency (SUSEP) published Circular 547, providing regulated companies (ie, insurers, reinsurers and private pension companies) with the possibility of entering into a commitment agreement for a change in conduct (known under the acronym 'TCAC' in Portuguese) with SUSEP.
While TCACs are not a new instrument, the circular allows the parties (ie, SUSEP and the regulated company) to enter into an agreement establishing a reasonable period in which to change or adjust the company's conduct so that it complies with the applicable legislation.
Pursuant to the circular, a TCAC can be entered into in order to:
- stop and correct acts and situations which SUSEP considers irregular; or
- meet obligations which SUSEP deems necessary.
A TCAC may impose a fine on the company and will determine the behavioural changes that the company must implement within a defined period. Failure to comply will result in additional fines being imposed on the company.
Once SUSEP starts an administrative proceeding against a regulated company, the company may either present a defence or propose to enter into a TCAC. Once negotiations are concluded and SUSEP and the company enter into the TCAC, the agreement will be published on SUSEP's website, and it will suspend the administrative proceeding relating to the regulated behaviour.
The existence of a TCAC does not imply the regulated company's guilt, nor does it prevent SUSEP from starting new proceedings against behaviours which are not covered by the TCAC.
Instead of coming up with a list of facts or situations that can be subject to a TCAC, the circular lists those that cannot be subject to an agreement with SUSEP:
- fast-tracked administrative proceedings;
- facts that are already the subject of an ongoing TCAC;
- behaviours that were the subject of a TCAC less than two years previously;
- a TCAC involving a party which did not comply with a TCAC within the past five years;
- facts which have twice been the subject of proposals without a TCAC being concluded;
- situations that affect the solvency of the company;
- allegations of fraud affecting the company's shareholders or third parties;
- allegations of reckless mismanagement of the company, jeopardising its financial solvency;
- allegations of mismanagement of personal injury caused by road vehicle funds (DPVATs), in violation to the legislation;
- allegations of fraud in the management of DPVAT funds;
- improper use of company or third-party funds;
- failing to offer local reinsurers, or not contracting in Brazil, the legal quota of reinsurance operations reserved for local reinsurers;
- violation of reinsurance operations by a person or entity that has no authority to operate as a reinsurance brokerage company;
- lack of legal representative in the country;
- allegations of bribery or money laundering; and
- violations in a company's liquidation procedure.
All other situations may be subject to a TCAC. However, the circular provides that SUSEP may reasonably reject a TCAC proposal if it considers there to be no public interest in entering into a TCAC in relation to that particular irregular fact or situation, even if all of the requirements set out in the circular are satisfied.
For further information on this topic please contact Marcio Mello Silva Baptista or Barbara Bassani de Souza at TozziniFreire Advogados by telephone (+55 11 50 86 50 00) or email ([email protected] or [email protected]). The TozziniFreire Advogados website can be accessed at www.tozzinifreire.com.br.