Capital Markets | The #1 Obligation of Brazilian Fund Managers to Protect Portfolio Assets

Fundraising for Brazilian investment funds broke a record in the first quarter, with Receivables Investment Funds (FIDCs) raising BR$ 14.8 billion and Real Estate Investment Funds (FIIs) BR$ 14 billion, 29% above the same period in 2020, according to the capital markets association Anbima.

Despite the prospect of an economic recovery, the pandemic has placed fund managers on alert for compliance, with their main fiduciary obligation being to “act” to protect the funds’ portfolio assets, in view of the risk of accountability to investors and regulators.

The Brazilian Securities and Exchange Commission (CVM) issued Circular Letter N.06 in 2020 which, together with the specific CVM regulations of the funds, listed the obligations of managers in the event of default and asset depreciation, one of the main being obligation “to do/act ”.

We list below the fiduciary duties of 3 of the main categories of funds in the Brazilian market:

1. Equity Investment Funds (FIPs): according to CVM Regulation 578, FIP managers must “exercise, and endeavor to exercise, all rights related to the fund’s assets and activities”.

In addition, they need to “maintain effective influence on the definition of strategic policy and the management of the invested company”.

2. Receivables Investment Funds (FIDCs): according to CVM Regulation 356, FIDC managers must “exercise, and ensure that all rights related to the fund’s assets and activities” are exercised ”.

3. Real Estate Investment Funds (FIIs): according to CVM Regulation 472, FII managers are obliged to “exercise, and make efforts to exercise, all rights related to the fund’s assets and activities”, which constitutes “(…) breach of the duty of loyalty of the manager (…)” “omitting to exercise or protect the fund’s rights (…)”.

Applicable to all categories of funds, including FIPs, FIDCs and FIIs, Circular Letter 06 provides that the CVM will assess whether measures taken in the course of fund management activities “were compatible with the requirements of the circumstances and in compliance with your duty of care ”.

Fund managers must pay attention to their fiduciary duties to act and document their actions in the exercise of the funds’ rights to avoid the risk of compliance and accountability.


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