On December 13, the Brazilian Securities and Exchange Commission (CVM) published Joint Circular Letter 2/2024/CVM/SIN/SSE, with the objective of disclosing additional interpretations of the technical areas on the application of the general part of CVM Resolution 175 and its annexes, complementing the previous circular letters.
The guidance seeks to clarify article 48 of the General Part of CVM Resolution 175, articles 41, 42 and 43 of Normative Annex I of CVM Resolution 175 and complement the following documents: Circular Letter 2/2024/CVM/SIN, Circular Letter 3/2024/CVM/SIN and Circular Letter 6/2024/CVM/SIN.
Get to know the main points of the letter.
- No distribution fee – joint management and distribution
When the manager acts in the distribution of fund quotas under its own management, that is, as an ancillary activity to the management of its funds, the maximum distribution rate stipulated in CVM Resolution 175 is not applicable.
In this case, distribution is considered an inherent part of resource management. This action follows the provisions of article 33 of CVM Resolution 21, which waives the need for physical segregation between the management and distribution areas, in addition to allowing a single statutory officer to be responsible for both activities (management and distribution).
Even so, the requirement for segregation of management and fiduciary administration fees is maintained, which can be defined in the regulation or by means of a global fee.
- Organization into classes and subclasses
- Classes
Funds regulated by rules prior to CVM Resolution 175 may be adapted to provide for multiple classes of quotas by unilateral act of essential service providers.
For funds already adapted or constituted according to the new resolution, if the regulation allows multiple classes, new classes can be created without requiring a meeting of the quotaholders. The condition is that they are intended only for new investments and do not involve the transfer of existing quotaholders, assets or obligations.
If the regulation provides for a single-class structure, the change to multiple classes will require approval at a general meeting of shareholders.
- Subclasses
The creation of subclasses can also be carried out by unilateral act, in new or adapted funds, provided that:
- the original investment conditions are maintained (e.g., investment policy, application and redemption terms); and
- there is no increase in fees for quota holders.
The reorganization of feeder funds – FICs or FIs that invest at least 95% of the shareholders' equity (PL) in another fund – can be carried out in subclasses without the need for a meeting. This reorganization cannot change the investment policy of the class and must respect the original conditions agreed.
- International ETFs
They are considered differentiated assets by CVM Resolution 175. They do not have to comply with requirements required for overseas investment vehicles.
The classes of quotas intended for the general public or qualified investors, with authorization to invest up to 100% abroad, must follow only articles 41 and 43, paragraph 1, I and II, of the resolution, and the requirements of article 43, paragraph 1, III, and paragraph 2 of Normative Annex I of CVM Resolution 175 are not applicable.
Therefore, classes aimed at the general public or qualified investors can invest up to 100% in international ETFs.
- Temporary operating procedures
During the process of adapting to the new system, the CVM establishes the following procedures:
- Closure of classes transformed into the Investment Fund Management System (SGF) in cases of total spin-off, incorporation or merger;
- Inter-fund class transfers must be recorded and single-fund classes must be terminated;
- Operations must be reported through an Excel spreadsheet in CSV format and sent according to the guidance of the letter; and
- The types of transformations accepted are:
- total spin-off;
- partial spin-off;
- incorporation; and
Reforms brought about by the regulatory framework for investment funds
CVM Resolution 175 entered into force on October 2, 2023, except in relation to specific topics, such as the existence of different classes of quotas, which came into force later.
The rule updates the regulations governing the constitution, operation and disclosure of information of investment funds, as well as the rules on the provision of services to the funds – applicable, in general, to all types of funds. The specific rules for each modality were provided for in normative annexes.
Normative Annex VI was recently issued with the definitive regulation of Investment Funds in Agribusiness Production Chains (Fiagro), which can bring the capital market even closer to the financing of Brazilian agribusiness.
The CVM's clarifications presented in Joint Circular Letter 2/2024/CVM/SIN/SSE reinforce the correct implementation of the provisions of CVM Resolution 175 by bringing more clarity to administrators and managers to comply with regulatory requirements.
To learn more about the regulatory framework for investment funds, access our ebook:
The details of the new CVM regulation on investment funds
See also our articles that address other CVM guidelines on the regulatory framework for investment funds:
Adaptation to the regulatory framework of the funds extended
Regulatory framework for investment funds: new CVM guidelines
CVM discloses normative annexes for investment funds
Regulatory framework for funds: new CVM guidelines
Regulatory framework for investment funds comes into force
CVM modernizes regulation of investment funds
Investment funds: CVM publishes new guidelines
CVM provides guidance to administrators and managers of FII and FIDC
For more information about Fiagro, visit our articles:
New CVM regulation allows structuring Fiagros as of August
Fiagro: new private financing alternative for Brazilian agribusiness
