Circular Letter CVM/SIN 04/2020: Acquisition of Financial Assets Abroad and Disclosure of Investment Fund Advertising Information

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
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Circular Letter No. 4/2020/CVM/SIN
Rio de Janeiro, February 27, 2020

To
Administrators of investment funds regulated by CVM Instruction No. 555

Subject: Acquisition of financial assets abroad and Disclosure of advertising information of investment funds

We refer to the rules applicable to investment fund disclosure materials, provided for in Articles 49 to 54, and to the rules that enable investment funds to invest in financial assets abroad, in accordance with Articles 98 to 101 c/c Article 2, VI, all of CVM Instruction No. 555.

As a result of inquiries made by market participants, we inform you that, in the interpretation of this technical area regarding such provisions, the acquisition by open-ended investment funds governed by CVM Instruction No. 555 of financial assets abroad that are in the process of a public offering in other jurisdictions is permitted, including the fund's participation during the book-building period and even if they have been structured with the specific objective of participating in said public offering process.

However, especially in the case of funds constituted for the purpose of participating in these public offerings1, we clarify that the language used in the fund's advertising material must make clear that:

1) the eventual participation of investors in the offering will be through a vehicle (the investment fund), so that its unitholders will not be shareholders of the company invested in by the fund for any purposes;

2) the fund's performance may not correspond to the performance of the shares or other financial assets issued by the invested company due to various factors, such as costs associated with maintaining the fund (management fee, custody, independent audit, among other charges or expenses) or strategies associated with the fund's portfolio management (currency hedging, maximum exposure levels applicable to that issuer, among others). Thus, eventual price fluctuations of the shares or other financial assets issued by the invested company may affect the fund's profitability in different ways;

3) there is no guarantee that the fund will effectively participate in the public offering, due to the different set of rules that may govern public offerings depending on the jurisdiction involved (for example, criteria in discretionary allocation, proration dynamics, eventual limitations on the target audience that can access the offering), and, for the same reason, the fund may

1 This same rationale also applies to funds that may be structured to participate in public offerings in Brazil.

SECURITIES AND EXCHANGE COMMISSION OF BRAZIL
Rua Sete de Setembro, 111/2-5th and 23-34th Floors – Center – Rio de Janeiro - RJ – ZIP: 20050-901 – Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br

be obliged to purchase the shares or other financial assets subject to the public offering under different conditions, which may also impact the fund's profitability.

Thus, it is worth reiterating that any disclosure material used by investment funds with these characteristics cannot induce investors to believe that they are directly participating in the public offering process of shares or other financial assets of the issuing company, nor that they will be entitled to the same performance, or even that they will enjoy rights and prerogatives specific to shareholders or holders of other financial assets issued by the company.

Sincerely,

Digitally signed by
DANIEL WALTER MAEDA BERNARDO
Superintendent of Institutional Investor Relations