On October 29, 2025, Brazil’s House of Representatives passed a bill amending both the Brazilian Securities Act and the Brazilian Securities and Exchange Act. The legislation aims at strengthening protections for securities investors in response to a series of supposed corporate fraud scandals involving publicly listed companies in recent years.
The bill introduces a new cause of action against the following stakeholders:
- Officers and directors of listed corporations in cases where information is improperly disclosed to the market, provided that such individuals acted with willful misconduct or breached their duty of diligence.
- The controlling shareholders, if they violate a specific legal obligation, are complicit in the officers’ or directors’ misconduct, or become aware of the wrongdoing and fail to take action to prevent it.
- The listed corporation itself, in case of primary offerings with misleading information.
- Coordinators of public offerings of securities, as well as the intermediary institution in public tender offers for shares, if they fail to comply with their duty of diligence regarding the information provided by the listed corporation. Such liability shall be proportional to their participation in the respective offerings, without joint liability among them.
Liability will depend on evidence of willful misconduct or negligence, as well as a causal link between the defendant’s act or omission and the actual damages the investors suffer. The judge or arbitrator may equitably reduce the amount of indemnification in case of a disproportionality between the defendant’s degree of fault and the amount of the damages.
The claim can be filed by:
- The Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM) and the Public Prosecutor’s Office;
- Investors who have been damaged and who hold securities representing at least five percent of the securities of the same type or class (but CVM can reduce this threshold). This minimum threshold shall be ascertained from the date of the damage took place; and
- In case of debentures, fiduciary agent of the debenture holders.
The listed corporation shall disclose a statement of material fact to the market upon the filing of such claim. Any party with standing may join the claim as a co-plaintiff within 60 days from the date of publication of the statement of material fact. After the 60-day period, any potential plaintiff can only join the claim as an interested third party (assistente).
The filing of the class action does prevent the investors from bringing individual claims against the defendants, provided that they are not co-plaintiffs or interested third parties in the class action.
If the class action is dismissed, the co-plaintiffs shall be required to pay attorneys’ fees (sucumbência) to the defendant’s counsel, amounting to 10% to 20% of the value claimed.
If the class action is granted:
- The judgment may be generic, acknowledging the defendants’ liability for the damages and establishing clear and precise parameters for the calculation of individual indemnifications.
- The judge might request that the defendants deposit the whole indemnification amount in an escrow account and then each investor will quality to withdraw its respective pro rata amount.
- The judgment shall have res judicata effect with respect to all holders of securities of the same type and class, except for those investors who have opted to pursue individual claims.
- The defendants shall pay the plaintiffs in the class action a success award of up to twenty percent of the indemnification, from which court-awarded attorneys’ fees (honorários de sucumbência) shall be deducted. The judge shall determine the applicable percentage of the award in each case, based on the circumstances of the matter. In cases involving multiple plaintiffs or co-litigants in the class action, the judge shall allocate the success award among them in proportion to their contribution to the outcome of the proceedings.
- The award may not specify the amount owed to each investor, in which case the investor must file a separate claim to quantify and enforce their respective entitlement.
The limitation period for the class claim is 2 years counted from the alleged misconduct of the officer, director, controlling shareholder and/or the listed corporation.
The bill explicitly authorizes class claims through arbitration, contingent upon the proceedings being public. The arbitral venue depends on the corporation’s by-laws choosing arbitration as the dispute resolution method. This is a landmark, as it is the first statute in Brazil to expressly recognize the possibility of class arbitrations.
In addition to class arbitrations, arbitral proceedings of listed corporations shall also be public (according to rules yet to be enacted by Brazilian Securities Exchange Commission – CVM) when they: (i) aim to hold directors, members of the fiscal council, or shareholders liable for damages caused to the corporation; (ii) due to its nature, the issue must be decided uniformly for all shareholders; or (iii) it might otherwise affect the rights of shareholders who are not parties to the proceeding.
Regardless of whether the corporate arbitration is public, the listed corporation shall public a statement of material fact to the market regarding the existence and/or the main decisions of such arbitral proceeding, if required under the applicable law and/or CVM regulation. In addition, the arbitral institutions shall make public their precedents related to corporate disputes involving listed companies and shall publish them on their websites, organized by the legal issue decided.
The bill will now come before the Senate for consideration and approval. It is subject to some criticism, as it imposes greater responsibilities without fully streamlining the proceeding for corporate actions. As such, the actual passing of the bill is uncertain.
