In a recent decision, the Brazilian Securities and Exchange Commission (CVM) analyzed the relevance of the duty of diligence in the management of financial assets by condemning the fund manager, its partners and directors to pay fines that, combined, exceed BRL 750,000.
The duty of diligence in Brazil, despite being an abstract concept, has increasingly been the subject of discussion in cases involving the management of companies, investment funds and other financial operations.
The concept, in general, determines that every manager/administrator must use, in the exercise of their functions, the care and diligence that they employ in the administration of their own businesses and resources.
In the case judged by the CVM, a lack of due diligence was found due to the fact that a credit note was acquired not in accordance with the investment fund’s investment policy. Furthermore, the lack of the necessary analysis on the quality of credits and guarantees was verified, which aggravated the detected failures and the risk exposure to the investment fund.
For the CVM, it is not only a matter of the assets given as collateral “materially existing in the world, but also, necessarily, that they are legally linked to the operation”. In other words, the duty goes far beyond a mere investigation of existence but involves confirming the legal validity of what is analyzed.
Given the facilities brought by technology for the purposes of determining and verifying liabilities or inconsistencies in the execution of acts and investments, the increased responsibility of those responsible for decision-making is increasingly evident. Therefore, carrying out careful analyzes before any decision-making is increasingly necessary, under penalty of managers, directly in their natural persons, being held responsible, as occurred in this case.
The CVM’s most recent decisions confirm this growing responsibility of managers and administrators for the actions carried out, with an increase in convictions and the application of increasingly heavy fines. Carrying out complete due diligence, using technology tools, followed by analyzing the liabilities and history of companies issuing securities is essential, being the only tool capable of proving that all preventive measures have been adopted, avoiding this growing risk of liability. of those involved in decision making.
