One of the broad legal and corporate governance pillars of the Capital Market is the principle of full and fair disclosure, considered to be the ethical regulator for the protection of the great substantive value of this segment: Popular Savings.
In its primordial format, the Capital Market operates from a scarce source of funding, the Popular Savings, which translates into an asset of an immaterial nature, without a specific owner and without a prior dimensioning. As an asset in itself, Popular Savings has a sui generis character. It doesn’t fit into the traditional classifications derived from civil law, since it can’t be considered as a good for the common use of the people, nor as a property or a good for the private use of the state, firstly because it isn’t a public good in itself.
At the same time, it is not a private good, since it cannot be seized by specific private individuals.
It is similar to the environment, the biome, the Historical and Artistic Heritage. They are value goods, which transcend mere economicity in their nature, but whose violation generates economic and financial consequences for a very large number of people, indeterminable at first. There are those who classify them as diffuse goods, but this is a classification which, although useful from the point of view of this article, is ultimately insufficient to specify the elements under classification.
Given the fluidity of these specific goods, protection involves a set of structures and public policies, generally based on administrative police powers, capable of generating a certain degree of security and predictability of results and conduct, based on the data and information controlled in the present.
Not without reason, these public policies demand maximum information for all those potentially involved in the protected values, adopting as a rule the principle of full and fair disclosure, loosely translated as ample and adequate information to enable diffuse control.
The capital market is the structure in which the principle is most widely applied and has the greatest regulatory burden. One of the most important regulations for the capital markets is the emblematic and constantly revised CVM Instruction 358.
Considered one of the most important regulations in the Brazilian Capital Market, CVM Instruction 358 embodies a set of rules that are extremely important for the perfect administrative policing of the Capital Market, generating a sense of informational isonomy for investors and preventing Popular Savings from being undermined in any way by illicit conduct, such as insider trading.
The idea of a material fact, disclosed to the market, gives the impression that the collective of investors and potential investors, the Poupança Popular from a subjective point of view, is duly protected, allowing everyone equal access and investment opportunities.
There is no theoretical consensus on what constitutes a material fact. As is often the case with capital market regulatory instruments, the rule usually lists cases, conducts, legal types, creating an extensive list of cases that do not, in principle, have a specific ontological substrate that allows for conceptual generalization. This, for example, is the exact model of regulation with securities, the basis of the Capital Markets, whose first normative lines, in the Securities and Indentures Act, listed a significant number of securities. It was only after a long time that scholars and the courts managed to come up with a generic, abstract and universally applicable concept.
Also with regard to what is a material fact, the normative technique is repeated, with no a priori concept for its conformation. Also as is the nature of this normative technique, the legal lists usually have an open-ended closing clause. In this specific case, a material fact, in addition to the list of conducts, is also any event which, by its nature, function or particular circumstance, can create an information asymmetry for potential investors, generating an undesirable imbalance in the market.
A dispute can and should be taken as a material fact, which can be communicated to anyone who may have invested in the listed company or to potential investors. Especially when the litigation may involve a high value and issues of great importance to the company’s business.
In practice, these highly sensitive disputes are not usually decided by the courts, but by arbitration. This is because, as a rule, it is considered that the arbitrable object and the specialization of the Arbitration Panel are more in line with the relevance of the issue for the company.
At this point, a paradox opens up, an antinomy: arbitration, as a rule, is confidential. From its submission to the formation of the Panel, to the composition of the Tribunal, the rules of the Arbitration Agreement, the progress and procedural acts, as well as the decisions of the arbitrators are covered by confidentiality.
Confidentiality is the standard rule and the main rules of the most important Chambers operating in the country choose confidentiality as a value to be observed.
With this in mind, the confidentiality of arbitration proceedings seems to clash, in cases where one of the parties is a publicly traded company and the arbitrable matter may constitute a material fact, with full and fair disclosure, which is a fundamental value of the Capital Markets.
So much so that CVM Instruction 358 was recently amended to include the obligation to disclose ongoing arbitration proceedings, despite the open clause.
Despite the regulatory provision that always seeks to preserve Popular Savings through disclosure, we believe that there are a number of sensitive legal questions that the antinomy presented raises:
a) Can the CVM subjugate an available right of a party that is not subject to its regulation, altering the obligatory objective? In other words, can a disputant opposed to a public company, an arbitration procedure, who has not agreed to the withdrawal of confidentiality, see this confidentiality violated as a result of an administrative act, contrary to the legal rule of private autonomy?
b) Can an administrative act create a derogatory effect on the performance of obligations in an ancillary contract, as understood by the arbitration agreement?
c) From another point of view, can confidentiality be invoked against the market by a public company subject to arbitration proceedings, refusing to disclose a material fact?
The initiative to list arbitration as a material fact was praiseworthy, but it did not take into account the possible antinomian issues mentioned above, which will remain without an effective solution as long as the instruction does not have a judicial review of its legality or even its constitutionality, given the possible overstepping of jurisdiction by the CVM.
This is an issue that continues to challenge legal understanding and deserves to be monitored by specialists, which Marcos Martins Advogados offers its clients and partners with excellence and commitment to the services contracted.
