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Brazil: Securities portfolio changes

Following a period of public consultations dating back to November 2011, the Brazilian Securities Commission (CVM) issued a new ruling dealing with the professional management and administration of securities portfolios

Alexei BonaminRodrigo de Campos Vieira
Following a period of public consultations dating back to November 2011, the Brazilian Securities Commission (CVM) issued a new ruling dealing with the professional management and administration of securities portfolios (CVM Ruling 558).

CVM Ruling 558 provides for two separate activities, with the corresponding registration categories: portfolio manager and fiduciary administrator. This will allow the CVM to adequately allocate attributions and obligations associated with the services rendered by each category.

Registration as a portfolio manager authorises the management of investment portfolios, including the selection of investments on behalf of the investor, and the rendering on consulting services related to securities.

Registration as a fiduciary administrator authorises the exercise of any activities related to the functioning and maintenance of a securities portfolio, including the custody of assets and, generally speaking, overseeing management performance. Only financial institutions and other legal entities that meet certain conditions established in the regulations are allowed to register as fiduciary administrators.

CVM Ruling 558 has also modified the requirements that applicants must meet to obtain their registration. In relation to individuals, the major change was the creation of a certification exam. In most cases, applicants will have to pass this exam instead of using the old method of demonstrating past experience in asset management.

In relation to legal entities, the major change is the obligation to appoint an officer to serve as compliance officer for the purposes of CVM Ruling 558, including the supervision of internal rules, policies, procedures and controls to be implemented in connection with CVM Ruling 558.

CVM Ruling 558 has also broadened the range of information to be disclosed periodically by securities managers to the CVM and to the market. A new standardised form for disclosure of information, which was inspired by the reference form (formulário de referência) applicable to publicly-held corporations in Brazil, will have to be delivered by securities managers to the CVM until March 31 of each year.

CVM Ruling 558 will become effective on January 4 2016. Securities managers already registered with the CVM prior to such date: (i) must take the necessary measures to comply with the provisions of CVM Ruling 558 by June 30 2016; and (ii) will be allocated under the new registration categories in accordance with a classification report to be issued by the CVM.

Alexei Bonamin and Rodrigo de Campos Vieira

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