Friday, 23 January 2009

Brazil Regulator Orders 11 Companies to Restate Earnings on Confusion Over Their Reporting of Derivatives Transactions


The CVM, Brazil's regulatory body for the securities industry, will force Cia. Siderurgica Nacional (the piggy bank, sorry, the steel company of the Steinbruch family,) Votorantim Celulose (the acquirer party in the most outrageous merger transaction seen in Brazil for years,) and another nine other companies to restate third-quarter results to detail their reporting of financial-derivatives operations (click on the link for the CVM release.) Out of a sample of 148 firms, the CVM spotted flaws in the derivatives position reporting of 11 companies and urged them to ''offer quantitative and qualitative information of each and every derivative instrument they own, be them included in their balance sheets or not.´´

The list of companies is also comprised of Companhia Energetica de Sao Paulo, Klabin Segall SA, Inpar SA, Lojas Americanas SA, Sao Paulo Alpargatas SA, Sao Martinho SA, and Fabrica de Produtos Alimenticios Vigor. Securities law enforcement is badly needed, especially now that opaque BNDES lending is beginning to flush many of these companies with cash. Abuses can be committed by the management without the due care and oversight.

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