Circular Letter CVM/SIN 10/2015: Clarifications on Provisions of CVM Instruction No. 558/15

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To
Securities Portfolio Administrators
Subject: Clarifications on provisions of CVM Instruction No. 558/15.

Dear Sir/Madam,

1. This Circular Letter presents clarifications on provisions of CVM Instruction No. 558/15 (“ICVM 558” or “Instruction”), with the objective of guiding on the best way to comply with the aforementioned regulation. Observance of the recommendations listed below will contribute to minimizing eventual deviations and, consequently, to reducing the need for the formulation of requirements by the Superintendence of Institutional Investor Relations (SIN), as well as to allowing the market participants' activities to be carried out in an agile manner, in favor of investor protection and market integrity.

2. It is noted, opportunistically, that much of the content addressed in this Circular Letter is the result of questions made to the SIN by ANBIMA. Furthermore, it is important to mention that the understandings and interpretations of this Superintendence may not necessarily represent the final interpretation of the Board of Directors of the Securities Commission in concrete cases.

3. The SIN received questions on other matters, including the need for securities portfolio administrators who distribute their own funds to retail investors to establish an ombudsman department in compliance with the determinations of Instruction 529. On this subject, it was decided to consult the Superintendence of Investor Guidance (SOI) and the Specialized Federal Attorney’s Office (PFE). Thus, a new circular letter will be released soon addressing these issues.

4. Instruction 558 differentiated the activities of fiduciary administrator and resource manager, thus allowing three possibilities in the registration of the legal entity securities portfolio administrator, namely, registration (i) as fiduciary administrator and portfolio manager, (ii) only as fiduciary administrator, and (iii) only as portfolio manager. Throughout this circular letter, for didactic reasons, reference will be made to administrators registered in each of these categories as (i) “full administrators”, (ii) “fiduciary administrators”, and (iii) “resource managers”, respectively. In cases where there is no intention to differentiate between these possibilities, and in the case of natural persons, reference will be made to “securities portfolio administrators” or simply “administrators”.

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5. The SIN received a question regarding the need for registration of administrators and managers of Credit Rights Investment Funds (FIDC), investment clubs, and Individual Programmed Retirement Funds (FAPI), and full compliance with the provisions of Instruction 558, given that art. 1, §3, of the Instruction, when dealing with its applicability, mentions only the exception provided for in the regulation of real estate investment funds. On this matter, the Superintendence consulted the PFE on the correct interpretation of the device vis-à-vis determinations of other applicable regulations, in particular Instructions 356/01, 423/05, and 494/11, Law 6.385/76, and CMN Resolution 2.907/01.

6. The conclusion reached in the case of FIDC was that the amendment of Instruction 356, with the issuance of Instruction 510/2011, resulted in the mandatory registration of the FIDC portfolio manager, regardless of the assets in which the fund invests, and therefore the full applicability of Instruction 558 to these professionals.

7. On the other hand, regarding the administrators of FIDC, the need for registration exists only when there is no hiring of a manager duly authorized by the CVM, that is, when the administrator accumulates the function of manager. In any case, administration can only be exercised by the institutions listed in art. 32 of Instruction 356.

8. Regarding investment clubs, it is concluded that the Instruction applies to all club managers, except in the case of the shareholder-manager, elected in the form of art. 19, III, of CVM Instruction No. 494/11, as in this case it is the management of own resources, done in a non-professional manner.

9. Finally, in the case of FAPI, there is no reason to alter the understanding manifested in Deliberation 475/04. Thus, Instruction 558 is applicable in its entirety to administrators and managers of FAPI, with the exception of the provision in art. 4, II (obligation to state in its corporate object the exercise of securities portfolio administration).

Acting of portfolio administrator as consultant

10. Instruction 558 innovated by allowing the resource manager to also act as a securities consultant. The justification for the permission, mentioned in the public hearing report SDM 14/11, is that the intelligence behind resource management and securities consulting services is quite similar and, therefore, it would not make sense to require different qualifications or structures for managers and consultants.

11. It is worth highlighting that the regulation is clear in art. 2, §2, that the activity that attracts the permission to act as a consultant is the activity of management. Thus, administrators registered exclusively in the category of fiduciary administrator are not entitled to the prerogative.

12. Thus, the permission given by art. 4, §2, of accumulating the function of director responsible for the consulting activity is valid only in the case of directors responsible for resource managers and directors responsible for the management of full administrators, as the Instruction did not allow fiduciary administrators to act as consultants. This conclusion also applies in the hypothetical case of a fiduciary administrator who also has registration as a consultant obtained due to specific regulation (currently CVM Instruction No. 43).

13. Opportunistically, it is worth remembering the obligation, also mentioned in the public hearing report SDM 04/11, that the securities portfolio administrator must, when providing securities consulting, fully respect the provisions of the specific CVM regulation applicable to the activity.

14. Furthermore, regarding the theme, it is important to remember the obligation, explicit in art. 2, §4, that the administrator's acting as a consultant must be guided by the relationship of trust and loyalty towards its clients, to whom he must always warn in advance about the existence of potential conflicts of interest.

15. It is worth mentioning that the understanding of the SIN, based on the opinion of the PFE, is that, as the consulting activity subsists autonomously from resource management, it is necessary that it be stated in the corporate object of the manager who intends to exercise it.

Accumulation of directorships

16. Art. 10 of Instruction 301 requires administrators to indicate a director responsible for compliance with regulations related to money laundering prevention (PLD). This director can be the same person indicated in compliance with items IV (responsible for compliance with rules, policies, procedures, and internal controls, or compliance director) and, in the case of managers or full administrators, V (risk management director), of art. 4 of Instruction 558. In cases where compliance and risk directors are different persons and there is no exclusive director for PLD, the SIN believes that, due to the nature of the activities to be developed, the PLD activity is more related to the compliance director. It is emphasized, however, that the Instruction does not prevent the designation from falling on the risk management director.

17. The SIN was questioned about the harmonization between the rules of the sole paragraph of art. 27 and art. 24 of Instruction 558. On this matter, the understanding of the Superintendence is that the Instruction was explicit in determining that the segregation request provided for in art. 24, I, only ceases to exist in the case of the distribution of own funds, in line with the provision of the sole paragraph of art. 24. Thus, if there is distribution of other securities, despite the possibility (valid only in the case of an administrator registered solely in the category of fiduciary administrator) of accumulating director responsibilities, given by art. 27, sole paragraph, the obligation of physical segregation imposed by art. 24, I, remains.

18. It is also worth mentioning that the director responsible under CVM Instruction 505 can only be indicated as director responsible by an administrator registered as a resource manager or as a full administrator when the intermediary only acts in the distribution of funds administered or managed by the administrator, in accordance with art. 30 of Instruction 558.

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19. To facilitate the understanding of accumulation prohibitions, the GIR prepared the tables below that illustrate the possibilities of accumulating directorships and the minimum number of directors necessary in each of the registration possibilities.

Category Manager Director 1 Director 2
Mandatory
Management Director (A) x
Compliance Director x
Risk Director x
PLD Director x
Elective
Consulting Director (B) x
Suitability Director (C) x
Distribution Director x
Table 1 – Possibilities of accumulating directorships - manager

20. As seen in the table above, in the case of the manager, the minimum structure is two directors, one responsible for the management activity (art. 4, III) and another for compliance (art. 4, IV), this one being able to accumulate the responsibility for risk management (art. 4, V) and money laundering prevention. The management director must be a natural person authorized to act as a securities portfolio administrator. More than one director can be indicated, in accordance with art. 4, §5. The designation of a consulting director (B) is only mandatory if there is an intention to act in this activity. The person designated must be registered as an administrator or as a consultant. Similarly, the indication of a distribution director is only mandatory if the manager intends to act in distribution.

21. Instruction 558 created the possibility that in certain situations the portfolio administrator acts as a consultant or as a distributor of quotas of its own funds. It is worth alerting that acting in these activities generates the need to respect the rules related to suitability, in obedience to art. 1 of CVM Instruction No. 539/13, including the obligation to indicate a responsible director (C) as required by art. 7, item III, of that Instruction. This director can be the same consulting or distribution director, as illustrated in the table above.

Category Fid. Adm. PF 1 PF 2
Mandatory
Fid. Adm. Director (D) x
Compliance Director x
PLD Director x
Elective
Suitability Director x
Distribution Director (E) x
Table 2 – Possibilities of accumulating directorships - fiduciary administrator

22. In the case of the fiduciary administrator, the minimum structure is also two directors, one responsible for the fiduciary administration activity and another for compliance, this one also being able to be responsible for money laundering prevention. The person responsible for administration (D) must be a registered administrator. The distribution director (E) is elective for companies that are not DTVM, but if indicated, a suitability director must also be indicated, who can be the same person.

Category Full Adm. PF 1 PF 2 PF 3
Mandatory
Management Director (F) x
Fid. Adm. Director (G) x
Compliance Director x
Risk Director x
PLD Director x
Elective
Consulting Director (B) x
Suitability Director (C) x x
Distribution Director x x
Table 3 – Possibilities of accumulating directorships - full administrator

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23. In the case of the full administrator, at least three directors are required, one responsible for fiduciary administration, another for resource management, and the third for compliance. The management (F) and fiduciary administration (G) directors must be registered as administrators. Similarly to the previous situations, if a distribution or consulting director is indicated, a suitability director must be indicated, who can be the same person.

Accumulation of activities by director responsible by fiduciary administrator

24. Article 15, sole paragraph, of Instruction 306 allowed the director responsible for the legal entity administrator to accumulate other functions, except the management of the institution's own resources, in cases where all resource management activity was outsourced, that is, when the administrator acted solely as a fiduciary administrator.

25. Article 27, sole paragraph, of Instruction 558 sought to reproduce such command. The rationale of the device is clearly the same as art. 15, sole paragraph, of Instruction 306, namely, the fact that fiduciary administration and resource management imply different conflicts of interest. The understanding of the CVM was that the conflicts existing in the case of management justify the prohibition of accumulation, whereas those arising in the course of the fiduciary administration activity do not.

26. However, the new Instruction brought an important innovation by creating a clear distinction between the two activities (resource management and fiduciary administration) and by requiring segregation between them, including the designation of directors responsible for each. As well explained in the public hearing report SDM 14/11, if the administrator accumulates the registrations of fiduciary administrator and resource manager, it would not be appropriate for a director to act, simultaneously, in management and back office, because the activities of custody and control of assets and liabilities must be totally segregated from resource management activities. Furthermore, in accordance with art. 29 of Instruction 558 and art. 90, X, of Instruction 555, the administrator is responsible for supervising the activities of the manager, for which it is absolutely necessary that there is independence between the two functions. Thus, the designation of two responsible directors is mandatory, one for fiduciary administration and another for management, if the administrator is registered in both categories.

27. It is in this context that the sole paragraph of article 27 must be interpreted. The intention of the regulation is to allow that, in situations where there is no resource management, due to the non-existence of certain conflicts of interest, the responsible director can also be responsible for other activities, with the exception of the administration of the institution's own resources.

28. Thus, in accordance with art. 27, sole paragraph, only in the case of an administrator registered exclusively in the category of fiduciary administrator would there be conditions to allow that a person who has a link with other activities be named responsible for the administration activity. That is, the permission is not valid in the case of the director responsible for the fiduciary administration of a full administrator.

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29. It is worth emphasizing, however, that the accumulation permission can only be considered valid in situations where there is adequate treatment of existing conflicts of interest, in line with the whole of the Instruction, in particular, with the fiduciary duty of the securities portfolio administrator.

30. It is worth mentioning that, naturally, the explicit prohibition, given by the sole paragraph of article 27, regarding the administration of the institution's own resources remains, regardless of the administrator's registration category.

Independence of risk management

31. Instruction 558 assigns risk management a fundamental role, in line with the best regulatory practices verified in other jurisdictions. In accordance with the provisions of the Instruction, it is essential that there is autonomy in the acting of the director responsible for risk management. Thus, in response to a received question, the SIN informs that it understands that, as long as the existing structure guarantees adequate functional and hierarchical independence, it is indifferent whether the director responds exclusively for the administrator or if he concentrates the receipt of reports from several entities within a conglomerate. In both cases, it is also important that the administrator develops an organizational culture that values risk management. Notwithstanding, special attention should be given to situations where transactions occur between the funds administered and managed and companies that are part of the administrator's and/or manager's conglomerate.

32. The SIN received a specific consultation on the regularity of the risk management director appearing as a person authorized to issue orders to brokers. The Superintendence understands that, in theory, this is a regular procedure, as it would allow the director, in an emergency situation, to make the necessary operations to adjust the portfolios or funds to risk limits. Naturally, however, the effective use of the prerogative would only be admissible in exceptional situations.

Maintenance of the fund in extreme events

33. Under the regime of Instruction 306, all securities portfolio administrators were authorized to act both in fiduciary administration and in resource management. Instruction 558, however, allows that an administrator may only be authorized to act as a fiduciary administrator. The SIN received a question regarding the treatment that will be adopted in the hypothetical situation where the manager of an investment fund resigns or is decertified or dismissed and the fund administrator only has authorization to act as a fiduciary administrator, as in this case, in theory, the administrator could not assume the manager's functions.

34. On this matter, the SIN understands that it is part of the fiduciary administrator's duties to prepare a contingency plan that predicts how his action will be in such a situation. Additionally, the Superintendence understands that, in this exceptional situation, the fiduciary administrator, despite not having authorization to act as a resource manager, must assume the manager's functions provisionally until it is possible to designate a new manager in assembly or until the fund liquidation is completed.

35. It is worth mentioning that, in accordance with art. 4, III, the director responsible for the fiduciary administrator will always be an individual authorized to act as a securities portfolio administrator. Thus, being in accordance with the requirements of art. 3, it is certain that he will have the technical capacity to act in the management of the fund until a definitive solution is reached.

Registration update and registration suspension

36. Regarding changes in registration data, the methodology currently used remains valid, namely, sending an Informe through the restricted area of CVMWeb, in the item “Sending documents via form”, option “Registration Informe”, type of informe “Eventual”, function “Send documents”. It is worth remembering that, in accordance with art. 1, I, of Instruction 510, the update must be provided within seven business days of the occurrence of the registration change.

37. Opportunistically, it is worth mentioning that the procedure for updating in the case of change of social denomination or substitution of the director responsible for the administration of securities portfolios by a legal entity administrator is different. In these cases, the registration change request must be sent to the Registration and Authorizations Management (GIR) via the email gircadastro@cvm.gov.br. It must be signed by the responsible director (by the new director in the case of substitution) and accompanied by a copy of the corporate instrument proving the change, registered in the competent notary office, and, furthermore, when it is a financial institution, proof of registration and homologation of the change at the Central Bank of Brazil. It is also worth mentioning that, in the case of substitution of the responsible director, a declaration from the new responsible person stating that he is aware of the restrictions imposed by art. 4, §2, of Instruction 558 must also be sent.

38. In addition to the eventual update of registration information, Instruction 510/11 determines that all portfolio administrators must confirm, by May 31 of each year, that their registration data remains valid. Within the validity of Instruction 306 and in accordance with the descriptions in Circular Letter CVM/SIN 5/14, the confirmation was made by sending the Annual Information Report of Portfolio Administrators (ICAC). Instruction 558, however, ceases to require the sending of the ICAC, so that the annual update required by Instruction 510 is required again. The data confirmation page will be available on the CVM portal during the month of May of each year. Administrators must verify the presented data and inform if they are correct or, in case of error, correct them in the specific link that will be presented. Failure to confirm will result in the application of a fine, in accordance with the provisions of Instruction 510.

39. It is also important to mention that, both at the beginning of activities and in eventual subsequent changes, the corporate instruments mentioned in art. 4, §7, must be duly registered in the competent notary offices.

40. Instruction 558 allows, in its art. 8, that administrators request the suspension of registration. The suspension request must be made to the GIR via the email gir-cadastro@cvm.gov.br.

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It is also possible to request the early termination of the suspension. It is important to note that with the termination of the suspension, all obligations provided for in the regulation automatically come back into force, including the duty to send periodic and occasional reports and to pay the supervision fee.

Requirements for directors responsible for management and/or fiduciary administration
41. Similar to what Instruction 306 provided, Instruction 558 requires that legal entity administrators assign statutory directors the responsibility for the activity of managing securities portfolios. The designated responsible directors must, by virtue of art. 4, III, be authorized by the CVM to exercise the activity of managing securities portfolios. This authorization is made in the manner of art. 3, with no differentiation in the case of responsible directors for full administrators, fiduciary administrators, or managers.

Possibility of hiring a technical department
42. Regarding the requirement presented in art. 4, VII, the SIN understands that, similar to what already occurred during the validity of Instruction 306 (art. 7, III, §1), it is possible for the legal entity administrator to hire a specialized technical department. In this case, it is necessary to prove, at the time of the authorization request (or eventual substitution of the department), the technical capacity of the contracted company in the area in which the securities portfolio administrator intends to operate. It should also be mentioned that the hiring must be considered in the preparation of the descriptions regarding item 8 (particularly with respect to the sub-items 8.8) of the reference form.

Unblemished reputation of the administrator's partners
43. The integrity of market participants is essential for the proper functioning of the market. Instruction 306 already presented unblemished reputation as a requirement for the authorization of the natural person portfolio administrator. Instruction 558 not only maintained the requirement for natural person administrators (art. 3, IV) but also extended its requirement to controlling partners, direct or indirect, in the case of legal entity administrators (art. 4, VI). It is worth remembering that this is a requirement applicable not only at the time of obtaining the authorization but also for its maintenance, as determined by the caput of art. 4.
44. The SIN emphasizes the importance of this command and informs that it will include checks regarding it in its risk-based supervision procedures, taking into account, among other things, precedents and rulings of the Collegiate on the subject. It is worth noting that the Instruction is clear in determining, in its art. 9, that the SIN will cancel the authorization of the administrator who, due to a supervening fact, ceases to meet the requirements and conditions for the granting of the authorization.

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45. Article 14 of the Instruction determines that the legal entity securities portfolio administrator must maintain a webpage with various updated information, including its risk management policy. Article 23, on the other hand, provides that the resource manager must implement and maintain a written risk management policy. Unlike article 14, article 23 is valid for all managers, even if some specific subsections of §1 are applicable only to legal entities.
46. Thus, the natural person resource manager must have a written risk management policy, even if it is not necessary to keep it on a webpage on the world wide web. In addition, the aforementioned policy must meet only the aspects applicable to natural persons of art. 23, §1, with no need, for example, to include the organizational chart mentioned in subsection IV.

Pricing manual
47. Art. 14, subsection VI, of the Instruction determines that the legal entity securities portfolio administrator must maintain on its webpage the pricing manual of the assets of the portfolios it manages, even if such manual was developed by third parties. That is, there is no impediment for the manual to be prepared by a contracted asset controller, but it is necessary that its disclosure occurs on the administrator's page.
48. In addition, naturally, the responsibility for pricing remains always with the administrator (fiduciary or full), who, for this reason, must diligently evaluate and approve manuals that have been prepared by third parties. In view of this unequivocal responsibility of the administrator for the pricing of the assets of the portfolios it manages, the CVM explained, in item 3.150 of the public hearing report SDM 14/11, that the intention of art. 14, VI, is to determine that the mark-to-market manual actually used be disclosed, being, in this sense, irrelevant whether it was prepared by the administrator itself or by the contracted third party.
49. In the same item of the public hearing report, there is the statement that “the administrator can only present one mark-to-market manual”. It is necessary to perceive, however, that the statement is inserted in a context of eventual outsourcing of the pricing activity and that its intention is to prevent the administrator from disclosing two manuals (its own and that of the contracted third party), making it difficult for the public to understand which of the two would actually be used. The intention, therefore, was not to prevent more than one third party from being hired nor for pricing to be done by the administrator itself (fiduciary or full) in some cases and outsourced in others.
50. In light of the above, the SIN understands that, in situations where the administrator uses services of more than one asset controller, it must make available on its webpage all mark-to-market manuals used. That is, the administrator's page may contain several asset pricing manuals, as long as it is clear to the public which manual is used for each portfolio or investment fund.

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51. Article 17 of the Instruction prohibits a securities portfolio administrator from contracting or making loans in the name of its clients. However, an exception presented in paragraph 3 allows the assets of the portfolios to be used to provide guarantees for operations of the portfolios themselves.
52. With regard to this, there is an apparent conflict with the provisions of CVM Instruction 555. Article 89, subsection III, of ICVM 555 also prohibits the administrator and the managers of the funds from providing bail, guarantee, acceptance, or co-obligating themselves in any way. However, article 125, V, opens an exception to the prohibition that is broader than that provided in Instruction 558. This is a permission applicable to funds intended exclusively for qualified investors, regarding operations directly or indirectly related to the portfolios of the funds. The possibility of providing guarantees relative to operations indirectly related to the portfolios of the funds, provided for in ICVM 555, would not be covered by ICVM 558 since there is no specific mention in this sense.
53. The SIN understands that, for investment funds, ICVM 555 brings a more specific norm in this point, thus allowing the assets of the portfolio to be used to provide guarantees also for operations indirectly related to the portfolio, provided that the requirements of art. 125, V, of that Instruction are met.

Policies, practices, and internal controls for risk and liquidity management
54. The wording given to art. 23, §4, II, of the new Instruction settled the understanding already expressed by the SIN in circular letter CVM/SIN 2/15 that liquidity risk management must be done jointly by the administrator and the manager. The motivation for the responsibility being imposed on both the administrator and the manager is the fact that the administrator has more affinity with matters related to the profile of the unitholders and redemption expectations, whereas the manager has deeper knowledge of the fund's portfolio, as explained in the public hearing report SDM 4/14.
55. However, item 10.5 of the reference form, which deals with the description of policies, practices, and internal controls for liquidity risk management, contains the expression “FG”, indicating that the aforementioned description would be optional for resource managers. Obviously, this does not mean that the manager does not need to maintain policies, practices, and internal controls for liquidity risk management. What happens is that, given that liquidity management must be done jointly with the administrator, it is to be expected that the policies, practices, and controls are contemplated in the policy described by the administrator.
56. With regard to this, it is also worth remembering that item 8.10 of the reference form is mandatory for resource managers and that liquidity management is one of the components of risk management. Thus, the descriptions regarding the liquidity risk management system that are not presented in item 10.15 by the managers must be duly presented in a highlighted manner in item 8.10.

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57. One of the obligations imposed by the Instruction on the portfolio administrator is to properly care for the documentation related to the operations of the administered portfolios, in accordance with article 16, subsection IV. The sole paragraph of article 16 exempts the resource manager, in the exercise of the function in investment funds, from complying with the aforementioned obligation.
58. The SIN understands that the intention of the sole paragraph was simply to give greater clarity to the obligation provided for in subsection IV, reinforcing that subsection IV refers to the documentation of administered portfolios and is therefore not applicable to the manager in its activity in investment funds.
59. Clearly, however, the obligations imposed on managers by CVM Instruction 555 continue to be applicable. In particular, the manager has the duty to keep updated and in perfect order the documentation related to the operations of the fund, in accordance with article 90, I, f of Instruction 555.
60. It is also important to clarify that subsection IV of art. 16 deals specifically with the administered portfolios and it is with regard to them that the device determines that the documents be made available to the client. The documentation related to investment fund operations must be treated according to the determinations of Instruction 555, including with respect to their availability to unitholders.
61. The examinations mentioned in art. 22, I, deal with the administrator's legal risk and, therefore, must take into account not only compliance with the provisions of Instruction 558, but also respect for all legislation applicable to the administrator, not limited to norms issued by the CVM.

Periodic information
62. With regard to the reference form, the SIN understands that, in the collection of data on the profile of investment fund investors requested regarding the number of investors and resources under administration (items 6.3.b and 6.3.f), securities portfolio administrators must consider only one level of depth of the information. That is, the values reported must be those referring to immediate investors, disregarding indirect investors. The layout of the reference form in the text of the Instruction already brings a footnote to this effect, instructing that only the investors of feeder funds and not of master funds be reported. This logic must be followed by each administrator that sends the form, even in cases where there is a corporate link between administrators. For example, suppose the hypothetical case where a manager “A” holds a relevant participation in another manager “B” and that a fund managed by “A” is a unitholder of a fund managed by “B”. In this case, “B” must consider as an investor for filling out its form the fund managed by “A” itself and not the base of unitholders of this fund.
63. Still with regard to section 6 of the reference form, the SIN received a question about the need to inform the values under administration and number of investors in the case of investments made outside the country for foreign investors (“offshore investments”). With regard to this, the Superintendence understands that there is no obligation to inform the values, as the activity of the administrators in these cases would be outside the legal competence of the CVM. Nevertheless, it seems that there is interest from the investing public in the information, and therefore it is recommended that it be disclosed. However, to avoid distortions in the data, the SIN advises that the aforementioned values be reported in item 6.6 of the reference form with the level of detail that the administrator deems adequate, in order to segregate them from the amounts listed in item 6.3.
64. The report referred to in art. 22 (compliance report) must be delivered for the first time by the last day of January 2017 with considerations regarding the calendar year of 2016. Similarly, the documents required by the subsections of art. 1, §5 (audited financial statements and report on maintenance of minimum net asset values) must be delivered for the first time by March 31, 2017, with data relating to the year 2016.
65. The SIN alerts that for the natural person administrator to be entitled to the exemption provided for in the sole paragraph of art. 15 (waiver of sending reference form when the natural person administrator acts exclusively as an agent or employee of a legal entity administrator), the legal entity administrator with whom it has a relationship must inform its name and CPF in item 3.1.d of the reference form (list of natural persons who are registered with the CVM as securities portfolio administrators and who act exclusively as agents or employees of the company).
66. With regard to the reference form, the caput of art. 14 is explicit in determining that the document be kept updated on the administrator's webpage on the internet. Thus, the SIN informs that the frequency of sending the form to the CVM provided for in art. 15 is the minimum necessary, being mandatory to send the form also whenever it undergoes alterations so that there are no discrepancies between the document sent to the CVM and the one made available on the administrator's page.

Distribution of its own funds by the manager and by the administrator
67. The SIN received a question about the possibility of outsourcing activities related to the distribution of its own funds by the manager and by the administrator (art. 30 of the Instruction). With regard to this, the understanding of the Superintendence is that outsourcing is possible, but that the administrator or manager who outsources the activity retains administrative responsibility for any damages caused. In the specific case of outsourcing to a service provider authorized by the CVM, this provider is responsible for the acts it performs inadequately with respect to the norms applicable to it, but the responsibility of the delegator remains for the diligence in selecting the service provider and for monitoring the adequate fulfillment of the delegated activities.

COMMISSION OF SECURITIES AND EXCHANGE COMMISSION Rua Sete de Setembro, 111/2-5th and 23-34th Floors – Center – Rio de Janeiro - RJ – CEP: 20050-901 – Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br Procedures for adaptation to Instruction 558
68. The sending of the reference form is one of the requirements for adaptation to Instruction 558. The SIN informs that it will consider the sending of the form, through the tool that will be made available on CVMWeb, as a signal that the administrator is fully adapted to the Instruction. Thus, administrators must ensure that they are in full compliance with the new rules before sending, which must occur by June 30, 2016, the final term of the adaptation period according to art. 34 of the norm.
69. It is also worth remembering that until adaptation, administrators must fully respect the provisions of Instruction 306. Thus, administrators who do not adapt by May 31, 2016, must send the ICAC (Administrator Registration Report), as provided for in art. 12 of Instruction 306, under penalty of a coercive fine. With regard to the applicability of Instruction 306 for participants not yet adapted, it is worth citing as a precedent the decision of the Collegiate, taken on October 27, 2015, regarding the validity of Instruction 409 for funds not yet adapted to Instruction 555.
70. In line with the provisions above, since during the adaptation period the rules of Instruction 306 apply, the distribution of its own funds by administrators and managers under art. 30 of Instruction 558 can only happen after adaptation.

Sincerely,
Original signed by
FRANCISCO JOSÉ BASTOS SANTOS
Superintendent of Institutional Investor Relations