By Brazil Stock Guide – Brazil’s securities regulator approved a settlement of about $130,000 with Leonardo George de Magalhães, former head of investor relations at Companhia Energética de Minas Gerais, closing an investigation into the handling of market-sensitive information at the state-controlled utility.
The agreement was accepted by the board of the Comissão de Valores Mobiliários, ending an administrative proceeding that examined whether investors in Cemig (CMIG4 BZ) received timely and adequate disclosure after reports surfaced about a possible federal takeover of the company.
The case traces back to Saturday (18) in November 2023, when media reports said Senate President Rodrigo Pacheco was discussing the federalization of Cemig as a way to offset debts owed by the state of Minas Gerais. The reports circulated without an immediate statement from the company, contributing to price volatility in the stock.
Following the initial coverage, the CVM sent a series of formal requests to Cemig seeking clarification. As additional reports appeared in the press, the utility released a market notice on Wednesday (22) and published a material fact the following day, Thursday (23).
In those disclosures, Cemig said any plan to federalize state-owned utilities would still require detailed analysis by both the federal and state governments. The company added that there had been no formal expression of interest or approval from the Minas Gerais government at that time.
CVM technical staff concluded that the company’s response did not meet disclosure standards required of publicly traded firms. According to the regulator, the investor relations director only released a market notice after being prompted by the CVM and after trading hours, despite significant price movements earlier in the week.
“The IR director chose to release a market notice only after being prompted by the CVM and after the close of trading, at 10:12 p.m. on Nov. 22, 2023, disregarding the price fluctuations identified on Nov. 20 and Nov. 22, and moving away from the principle of broad disclosure that should guide the conduct of publicly held companies and their executives,” the technical staff said.
By entering into the settlement, valued at roughly $130,000, the former executive avoids a ruling on the merits of the case, in line with the regulator’s framework for negotiated resolutions in enforcement actions.