The Superintendence of Institutional Investor Relations (SIN) of the Brazilian Securities and Exchange Commission (CVM) released, on 11.30.18, Circular Letter CVM/SIN 12/2018, which clarifies the segregation between the activities of administration or portfolio management and other activities performed by the legal entity.
SIN reinforced that the legal obligation of segregation of securities portfolio management activities should be reflected:
- in the business model, in order to avoid favoring companies from the manager's or administrator's group; and
- in the organisational structure, so that in management, decision-making processes and reporting lines, no undue level of confusion persists between administration and management activities.
The Letter lists some segregation failures identified by SIN, such as:
- atypical and unjustified concentration of fund transactions with brokers linked to the manager and/or administrator,
- existence of structures, in the intermediary, exclusively dedicated to operations for funds managed and/or administered by connected persons, and/or
- sharing of structures (people, systems, files, facilities, among others) between areas of different activities.
Failure to comply with the segregation rules may result in cancellation of the portfolio manager's registration.
To access the full CVM/SIN Circular Letter 12/2018, click here.
