Historical Notes: Servico Nacional de Investimentos Ltda. and John Oswin Schroy Brazilian Capital Market History: John Oswin Schroy

Historical Notes (Continued)

Servišo Nacional de Investimentos Ltda.

Serviço National de Investimentos Ltda. : This pioneer securities research firm in the Brazilian capital market, modeled after Standard & Poor's, was founded in 1959 by an American expatriate and 26-year-old ex-City-banker, John Oswin Schroy.

Serviço Nacional de Investimentos was founded by the 26-year-old, ex-City-banker, John Oswin Schroy, in 1959.

The firm's first statistical service, published in 1960, was the "Manual de Títulos Particulares"  and the weekly bulletin, "Resenha S-N", was sold on an annual subscription basis.

At the time, all Brazilian corporations were required to publish minutes of shareholder meetings and annual financial statements in the official gazette, "Diário Oficial".  However, this information was not indexed or presented in a manner convenient for investment analysis.

The stock exchanges, other than a daily quote sheet, did not publish information on stocks traded — not even graphs of price trends.

In 1959, stock trading was restricted to official brokers and all transfers of corporate ownership, even private sales, were required to be registered on the stock exchange. Since almost all Brazilian corporations were privately held, trading on the stock exchange did not reflect a true public market.

The official brokers could not make a living on commissions from trading stocks and had successfully lobbied the government for a monopoly as intermediaries in foreign exchange trading. Actual trading in foreign exchange was handled by commercial banks, but the official brokers got a cut on each transaction.

They maintained small offices in the stock exchange building to sign the official documents on foreign exchange transactions, making a handsome living with little work.

Statistical publishing before the age of computers. Technical staff of Serviço Nacional de Investimentos about 1962

Most official brokers rarely handled stock transactions and other than vigorously defending their monopoly rights, had little interest in developing the stock market.

For over a generation, none had published any substantial statistical information on publicly traded equities and most passed on to potential investors the common belief that Brazilian stocks were not good investments.

The statistical service published by Serviço National de Investimentos Ltda. presented balance sheets and income statements for all actively traded Brazilian securities going back ten years, with dividends, stock bonuses, ownership information, adjusted price graphs, price-earnings ratios, names of directors and auditors, and a description of line of business.

The first edition of this "Private Securities Manual" had information collated by hand from 40,000 sources, involving over 50,000 calculations in presentation. This work was completed in six months without the benefit of word processors or electronic spreadsheets.

Advertising brochure for the 'Manual de Titulos Particulares', in 1962.

What the S-N service revealed was that for some years Brazilian stocks had been an excellent investment, often increasing in value more than 30% a year.

Furthermore, most stocks were exceedingly cheap. Banco do Brasil, which was quite profitable and accounted for half the banking business in Brasil, sold for less than one times earnings. Actively traded stocks of Cervejaria Brahma, the leading brewery, traded at five times earnings throughout the 1950s.

The information published by Serviço National de Investimentos Ltda. was instrumental in stimulating trading in equities on the Brazilian stock exchanges and led to reform of the capital market. The firm worked to popularize the concept of investment in equities, publishing "Como Investir Em Ações"  (How to Invest in Shares).

John Schroy, the managing partner, wrote magazine articles promoting stock investment and gave speeches before professional groups and at universities. (Because of his active interest and efforts in promoting the stock market during the early 1960s he was sometimes introduced as 'o pai do mercado de capitais brasileiro'.)

Schroy's firm contributed to capital market growth by publishing the Média S-N .

On the recommendation of Finance Minister Octávio Gouvêia de Bulhões, John Schroy was hired by the Rio de Janeiro Stock Exchange to prepare a plan for modernization in 1965. His firm was also contracted by the government to present suggestions for development of the government bond market.

In 1964, two S-N partners, John Schroy and Geoffrey Langlands, were asked by Senator Aliomar Baleeiro to submit a draft law for reform of the capital market. Throughout 1964, this draft was discussed in committees of the Finance Association (ADECIF).

In 1964, two S-N partners, John Schroy and Geoffrey Langlands, were asked to submit a draft for a new capital market law.

In 1960, Schroders Limited, of London, joined as a partner. After 1964, the firm name was changed to Organizção S-N S.A.

By 1969, the company had over one hundred employees, offices in Rio de Janeiro and São Paulo, seven thousand clients in a dozen countries, and publications covering the entire Brazilian financial and equity markets.

The founder, John Schroy, was managing partner until 1965 and sold his interest in the company in 1970.

After changing ownership two times, the company was closed during the economic hard times of the 1980s, many of its statistical reporting functions having been assumed by the securities exchanges.

This company was awarded the ABAMEC Prize in 1975 for its pioneering contribution to the development of the Brazilian capital market.


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