PEF regulation in the Republic of Brazil is the exclusive prerogative of the CVM. There’s also Anbima, a self-regulatory body that only has jurisdiction over members of this organization. The rights vested in the CVM are quite broad & include auditing & inspecting all CVM-controlled organizations. Managing a PEF (or FIP) requires obtaining an investment manager license with the CVM. Also, PEFs have to comply with filing & disclosure requirements, including codes of conduct, guidelines & AML.
Brazilian PEFs must also provide access to reports related to their activities by posting them on PEF managers’ websites.
Registering PEFs in Brazil
Normally, PEFs in Brazil are registered for a term of five to ten years, with the possibility of extending registration for 12 or 24 months. However, there’s several exceptions to that rule related to a particular sector & fund structure. If, for instance, a fund focuses on investing in Brazil’s infrastructure sector, the duration of its registration will depend on the duration of respective agreements signed by portfolio companies with local authorities. In some cases, these contracts can be valid for up to thirty five years.
PEFs’ organizational documents provide for an investment period of three to five years within which portfolio managers can seek investment opportunities.
Brazil: Licensing Investment Advisors
Pursuant to local legislation, PEF managers must be registered as investment advisors with the CVM. Doing so requires appointing no fewer than 1 director responsible for managing portfolio activities & registered with the CVM.
Being licensed as a PEF manager requires:
- living in Brazil;
- having a university degree;
- passing a CVM-approved certification exam;
- having an irreproachable reputation;
- holding an administrative position at CVM-regulated institutions (e.g. banks, insurance agencies or pension funds);
- having no previous criminal record;
- being allowed to manage PEF property on the basis of administrative or judicial decision.
Obtaining a PEF manager license in the Republic of Brazil requires:
- being headquartered in Brazil;
- having a goal of managing portfolios of securities;
- entrusting portfolio activities to 1 or more CVM-authorized directors;
- having a director(s) ensure regulatory compliance.
Those interested in setting up a Brazilian PEF should keep in mind that the country has no specific legal mechanisms regulating contributions from political parties. However, they should also remember that raising funding from political entities has been disallowed since 2015. Only contributions amounting to ten percent of an individuals’ annual net income are permitted.
Brazil: PEF Investing
Under the 1964 federal law, private banks considering participating in companies are required to obtain written permission from BACEN.
Considering establishing a PEF in the Republic of Brazil? Need advice on PEF regulation in the Republic of Brazil? Please consider contacting IQ Decision UK.