The chairman of the Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM) recently announced that the federal government is drafting a bill to expand use of leniency agreements. These agreements are already used in enforcing the Brazilian Antitrust Act and the Clean Company Act.
In entering into a leniency agreement, a company or individual provides information and documents to the authorities, helping then reach other persons or entities involved in the wrongdoing. In exchange, the defendant receives a considerable reduction of penalties, much like the U.S. practice.
Though the Clean Company Act and the Antitrust Act already allow leniency agreements in cases of corruption and/or antitrust violations, there isn’t a legal provision for agreements in cases of other types of wrongdoings such as insider trading, tax frauds, or civil, administrative and regulatory infractions. These are regulated by other laws and overseen by different Brazilian regulatory agencies (such as CVM and the Brazilian Central Bank). The bill tries to fill this gap.
“This matter will be fundamental for the development of the Brazilian capital markets,” declared CVM Chairman Leonardo Pereira. Regulators expect the expanded use of leniency agreements to strengthen the rule of law and increase confidence among foreign investors. Notably, Chairman Pereira avoiding mentioning which federal agencies will be included in the bill.
In Brazil, the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Economica – CADE), the national antitrust regulator, is the most successful and experienced federal agency with respect to leniency agreements. Since 2003, CADE has successfully negotiated more than 40 leniency agreements. In many of those cases, the investigations were initiated and the corporations that committed antitrust violations were punished only because of evidence based on a leniency agreement.
Most recently, CADE has entered into leniency agreements regarding potential antitrust violations with companies involved in Operation Carwash (Operação Lava-Jato), which involves both corruption and cartel formation in Petrobras, the Brazilian state-controlled oil conglomerate. (Cade’s press release of March 20, 2015 is available in Portuguese only.)
We will provide a detailed analysis of this important bill once it becomes publicly available.
Luiz Phillip Guarani Moreira is a final year student at the Pontifícia Universidade Católica de São Paulo law school, where is a member of the academic research group ‘Law and Corruption Combat’, and a Trainee of the Antitrust, Compliance and Anti-corruption practice of Souza, Cescon, Barrieu & Flesch Advogados in São Paulo, Brazil.
Andy Spalding is a Senior Editor of the FCPA Blog and Assistant Professor at the University of Richmond School of Law.