Through CVM Resolution No. 175 of December 23rd, 2022, the Brazilian Securities and Exchange Commission (CVM) established the new regulatory framework for investment funds in Brazil, which will come into force on October 2nd, 2023.

The Resolution consolidates general rules about investment funds, bringing norms applicable to all categories of funds and annexes that specifically regulate Financial Investment Funds (FIF) and Receivables Investment Funds (FIDC).

A) Check out four predictions applicable to all fund categories:

1. Limited liability of shareholders
The Resolution allows the fund’s regulations to limit the liability of the shareholders to the amount they subscribed (Article 6, paragraph 3), as already authorized by article 1.368-D of the Brazilian Civil Code, introduced by the Economic Freedom Law No. 13.874/2019.

2. Funds with distinct share classes and segregated assets
Regulating another change resulting from the Economic Freedom Law, the Resolution allows funds to establish classes of shares with distinct rights and obligations, with the possibility of constituting segregated assets (article 5, §2).

3. Application of the Civil Insolvency Regime
The Resolution applies the civil insolvency regime when the assets of a specific class of shares are insufficient to meet the obligations contracted (Article 123).

4. Essential Service Providers
Trustees and fund managers are considered essential service providers.

B) Specifically, about the FIDC, the Resolution brought the following novelties:

1. Opening to public investors in general
The FIDC share may be distributed to the investing public in general, observing the requirements outlined in Article 13 of Annex II of the Resolution, among which are a schedule for amortization of shares or distribution of income and the impediment of acquiring subordinated shares.

2. Non-standardized credit rights (FICD-NP)
Share with an investment policy focused on the acquisition of non-standard credit rights may be created, with subscription reserved for professional investors defined by CVM Instruction No. 554 of 2014, as (i) individuals or legal entities that hold financial investments in an amount higher than BRL and attest in writing their condition of a professional investor; (ii) financial institutions and other institutions authorized to operate by the Central Bank of Brazil; (iii) insurance companies and capitalization companies; (iv) open and closed supplementary pension fund entities; (v) investment funds; (vi) investment clubs with portfolio managed by a securities portfolio manager authorized by the CVM; (vii) autonomous investment agents, portfolio managers, analysts, and securities consultants authorized by the CVM, concerning their own resources; (viii) non-resident investors. (Article 15 of Annex II of the Resolution)

3. Registration of Credit Rights
The fund administrator is obliged to contract, on behalf of the fund, entities qualified and authorized by the Central Bank to book the shares (article 83, II).

C) As for the innovations brought to the FIF, we highlight:

1. Flexibilization of investment rules
The Resolution increased the concentration limits per financial asset category, extending this limit to 100% for classes categorized as Fixed Income – Foreign Debt and exclusively for professional investors (Article 43, I).

2. Investment in environmental assets and crypto-activities
Annex I of the Resolution authorizes the opening of FIF (Equities, Foreign Exchange, Multimarket, and Fixed Income) for investment in environmental assets (including carbon credit) and cryptoassets.

3. Foreign asset concentration limits
The concentration of assets abroad was limited to 40% of the net worth for classes destined exclusively for qualified investors and 20% for classes for the general public (Article 43, II And III).

Investment funds in operation have until December 31st, 2024, to fully adapt to the Resolution, except for FIDC, which must do so by April 1st, 2024 (Article 134).

Fraga, Bekierman & Cristiano Advogados’ teams are prepared to clarify any aspects of the new regulatory framework for investment funds.

Newsletter updated after the publication of CVM Resolution 181, of 03.28.2023.