Guilherme Bueno Malouf and João Guilherme Soggio Gomes de Oliveira

Ruling No. 554, issued by the Brazilian Securities Commission, which introduces the concept of "Professional Investor" and modifies the definition of "Qualified Investor", becomes effective on October 1.

Professional Investors shall be (i) individuals or legal entities with financial investments above R$10 million, (ii) financial institutions and other institutions authorized to operate by the Central Bank, (iii) insurance and capitalization companies, (iv) open and closed supplementary pension plan entities, (v) investment funds, (vi) investment clubs with a portfolio managed by a securities portfolio manager, (vii) independent investment agents, portfolio managers, securities analysts and consultants, in relation to their own resources, and (viii) non-resident investors.

Qualified Investors will now be defined as (i) Professional Investors, (ii) individuals or legal entities with financial investments over R$1 million (the value required before was R$300 thousand), (iii) individuals approved in technical qualification exams or certified by CVM in relation to their own resources, and (iv) investment clubs with portfolio managed by unit holders who are Qualified Investors.

In addition, CVM Ruling 554 amended other rules. Here is a summary of the main changes:

·                     CVM Ruling 476: The biggest impact on the Professional Investor definition relates to public offerings of securities with limited distribution efforts ("Restricted Offers"), governed by CVM Ruling 476. From the entry into force of CVM Ruling 554, the Restricted Offers will be geared only to Professional Investors, restricting their scope before investors.

·                     CVM Ruling 356: The minimum amount of R$25 thousand to be used in receivables investment funds (FIDC) will be eliminated. Business companies may be responsible for over 20% of the FIDC′s credit rights/receivables, provided that the FIDC is intended for Professional Investors.

·                     CVM Ruling 391: Equity investment funds (FIP) will continue to receive investments from Qualified Investors, as defined by the new Ruling, but the minimum subscription amount of R$100 thousand will be eliminated.

·                     CVM Ruling 414: Business companies may be responsible for over 20% of the mortgage loans underlying the issuance of mortgage-backed securities (CRI), provided the CRI are the object of a public offering intended for Professional Investors. The occasions on which CVM Ruling 414 refers to public offerings of CRI with a par value (i) lower than R$300 thousand, will now be referred to as aimed at non-qualified investors and (ii) greater than R$ 300 thousand, will now be referred to as aimed at Qualified Investors.

·                     CVM Ruling 444: Nonstandard receivables investment funds (FIDC-NP) will receive investments and have their units traded on the secondary market, only by Professional Investors. The unit value of at least R$ 1 million will be eliminated.

·                     CVM Ruling 472: There will be an express provision to the effect that qualified unit holders, according to the previous rule, and that do not fit into the new requirements of CVM Ruling 554 may remain and make new investments in real estate investment funds (FII) intended exclusively for Qualified Investors.