The Brazilian Securities and Exchange Commission ("CVM") submitted, on 12.02.2020, for suggestions and comments in a public hearing, the draft resolution that will replace the current regulation of investment funds in general, especially Instruction no. 555/14 ("ICVM 555") and Instruction no. 356/01 ("ICVM 356") ("Draft"). The purpose of the Minute is to modernize the regulation of Brazilian investment funds, as well as to implement and regulate the innovations of Law no. 13,874/19 ("Economic Freedom Law").
The Draft proposes convenient and timely changes for the fund industry, such as the revision of the general regime of the so-called "555 funds", which are now called financial investment funds ("FIF") and the reform of the rules for receivables investment funds ("FIDC"), currently regulated by ICVM 356. The Draft consists of three parts, namely:
(i) main structure, containing the provisions applicable to all categories of funds, including private equity investment funds ("FIP") and real estate investment funds ("FII") ("Resolution");
(ii) specific annex on equity, foreign exchange, multi-market and fixed income investment funds; and
(iii) specific annex on FIDC.
FII and FIP will initially be impacted only by the general part of the new rule, but, according to CVM, they will soon be revised and inserted in the Resolution as annexes.
Thus, soon the regulation of Brazilian investment funds will be consolidated in a single rule.
The Resolution has a broad scope, with matters common to all investment funds in its main structure, highlighting the matters below, for which CVM considers that public comments are especially welcome:
(i) adjustment of the roles of director and manager, with some equalization of relevance;
(ii) possibility of classes of shares with segregated equity;
(iii) possibility of limiting the liability of shareholders to the value of their shares;
(iv) limitation of liability of service providers;
(v) clearer rules on the supervision to be exercised by the administrator over the other providers, including the manager;
(vi) distribution of quotas by the administrator and manager;
(vii) subscription of quotas by account and order;
(viii) digital shareholder meetings (in whole or in part);
(ix) management of liquidity of open share classes; and
(x) rules of conduct of service providers.
The regime applicable to stock, exchange-traded, multimarket and fixed-income investment funds, currently governed by ICVM 555, will be substantially modified, starting with the nomenclature of such funds, which will now be called Financial Investment Funds ("FIF"). Among the proposals for specific changes, we highlight the following:
(i) investment in financial assets abroad for funds aimed at the general public up to the totality of the fund's assets;
(ii) exposure to capital risk (leverage);
(iii) identification of assets, with the proposal that all assets in the portfolio be identified by an ISIN code - International Securities Identification Number; and
(iv) exemption of the participation of intermediary in the acquisition of open class shares by other funds, provided that the administrator of the invested class is responsible for the activities of prevention of money laundering and financing of terrorism - PLDFT.
With respect to the reform of the FiDC, the Draft contains various proposals, among which are worth highlighting:
(i) possibility of FIDC quotas being distributed to the general public (retail);
(ii) elimination of the category of investment funds in non-standardized credit rights - FIDC-NP, but not of the possibility of acquiring non-standardized credit rights;
(iii) the possibility that, provided certain requirements are met, federal precatórios are not considered non-standard credit rights;
(iv) alteration of the minimum percentage of net assets allocated to shares of FIDC necessary for classification as a FIC-FIDC;
(v) requirements for labeling FIDCs as originators of positive socio-environmental impact;
(vi) requirement to obtain a credit risk rating only for FIDC aimed at the general public;
(vii) end of the obligation to communicate and open dissidence for senior quota holders in case of redemption of subordinated quotas, without prejudice to the maintenance of the subordination index;
(viii) redistribution of attributions and responsibility for hiring on behalf of the fund;
(ix) registration of credit rights in a registration entity regulated by the Central Bank of Brazil;
(x) verification of the backing of the credit rights by the manager;
(xi) safekeeping of the backing of the credit rights by the originator or assignor; and
(xii) requirements to allow the administrator, manager, specialized consultants and parties related to these agents to be assignors of credit rights.
Although the preparation of the Draft has been supported by different views and sources of information, CVM requests that suggestions and comments be sent, in writing, until April 2, 2021, to the Superintendence of Market Development, at [email protected].
Click here to access the full content of the Draft. For further information, please contact our Capital Markets team ([email protected]).
