CIRCULAR LETTER/CVM/SIN No. 02/2009

Rio de Janeiro, June 19, 2009

To Portfolio Administrators, Securities Consultants and Analysts, Directors Responsible for the Administration of Portfolios and Investment Funds regulated by CVM Instruction No. 409/04, and Representatives of Non-Resident Investors.

Subject: Guidelines on procedures related to the operation of investment funds, registration of non-resident investors, and portfolio administration, consulting, and securities analysis activities.

Dear Sir,

The publication of this Circular Letter aims primarily to clarify doubts regarding the best way to comply with the regulations governing investment funds, the registration of non-resident investors, and the activities of portfolio administration, consulting, and securities analysis, as well as to present the understanding of regulatory provisions and, consequently, the manner of their application adopted by the Superintendence of Institutional Investor Relations (SIN).

Observance of the recommendations listed below will contribute to minimizing eventual deviations and, consequently, reducing the need for the technical area of this Commission to formulate requirements, thereby allowing the registration and supervision process of the aforementioned participants to proceed swiftly, in the pursuit of guaranteeing investor protection and market integrity.

We emphasize, at this juncture, that some positions and interpretations of this Superintendence regarding certain aspects of the regulation presented here do not necessarily represent the final interpretation of the Securities and Exchange Commission (CVM) on the subject.

Thus, we present below understandings manifested by this Superintendence as a result of consultations and complaints made by market participants.

We highlight that this circular was prepared taking Circular Letter/CVM/SIN No. 003 of 2008 as a basis. The changes and additions made are in blue and bold.

1. CVM Instruction No. 409/04 – Investment Funds

1.1 Shares of Closed Companies in Portfolio – Art. 2, VII and Art. 64, VI

It is prohibited for an investment fund administrator to voluntarily acquire shares issued by a closed company, as these are assets that do not meet the requirement set forth in Article 2, § 3 of the Instruction, according to the decision of the CVM Collegiate Body of 12/16/2008.

The above does not prevent, however, that the administrator faces the possibility of these assets arising in the fund's portfolio for reasons unrelated to its discretionary management powers, which may occur, for example, when the fund holds shares issued by an open company that proceeds to cancel its registration with the CVM, in accordance with Article 2, I, of CVM Instruction No. 361/02.

In such cases, the issue must be treated as a passive disqualification, in the manner provided for in Article 89 of the Instruction, and any intention to alienate these assets must, in accordance with Article 64, VI, be submitted to prior CVM approval.

1.2 Investment in Privately Issued Debentures – Art. 2, VIII

Investment of fund resources in privately issued debentures, i.e., those that have not been subject to public offering registration for distribution with the CVM, is permitted, under the provisions of Article 2, item VIII.

We remind you that such assets must be registered in a registration, custody, or financial settlement system duly authorized by the Central Bank of Brazil (BACEN) or by the CVM, within their respective areas of competence, as established by § 3 of the cited Article.

It is also necessary for the administrator to verify, upon investment and even during the maintenance of these debentures in the fund's portfolio, compliance with the limits established in Articles 86 and 87, relating respectively to concentration by issuer and by asset class.

However, we alert that if the issuers of the debentures are not open companies registered with the CVM, the administrator must have procedures for accessing the information and documents necessary for pricing and evaluating the debentures, prior to their acquisition, and also during their maintenance in the fund's portfolio, employing in the analysis and evaluation of this information the care and diligence that any active and honest person usually dispenses in the administration of their own business.

1.3 Hiring Third Parties for Provision of Asset Custody Services Abroad for Investment Funds – Art. 2, §5

Article 2, § 5, II, provides that, for the acquisition of assets traded abroad, the fund's custodian must ensure their existence, and must specifically hire third parties duly authorized to exercise the custody activity in other jurisdictions and supervised by a recognized local authority.

However, if the institution responsible for the fund's custody can perform the custody of the assets acquired abroad, it will not be necessary to hire a third party to perform this activity, as the principles of the regulation are met.

In the event of hiring third parties to ensure the existence of assets abroad, the criteria adopted by the contracted institution must be verified by the fund's custodian, to ensure that it meets its own control criteria and those established in the legislation in force in Brazil.

We draw attention to the fact that, notwithstanding the requirement attributed to the custodian hired abroad to limit itself to ensuring the existence of the fund's portfolio assets, when they are shares of funds constituted abroad, whose shares are not admitted to trading in markets supervised by a recognized authority, the fund administrator must, in attention to its duties of diligence, employ all the effort required by the circumstances so that this guarantee also extends to the underlying assets held by the invested fund.

Finally, regarding Article 2, § 5, I, we judge that the obligation of existence of a cooperation agreement with the CVM, which is imposed on the jurisdiction where the registration, custody, and financial settlement system used is located, does not extend to the jurisdiction where the institution responsible for registering the assets in those systems is headquartered.

1.4 Extension of Distribution Period for Closed Funds – Art. 9

The Instruction allows the CVM to extend the distribution period of shares of closed investment funds for a maximum period of 180 days.

The reading of item II of Article 9 of the Instruction may lead to the understanding that extension requests will only be reviewed by the CVM if the minimum number of shares representative of the initial net asset value of the closed fund is not subscribed within the 180-day period from the registration of the offering.

In reality, the device for compulsory cancellation of closed funds that do not reach a minimum number of subscribed shares aims to avoid burdening shareholders with the operating costs of a fund that does not have a minimum scale for such.

Thus, it should not be generally prevented that funds seek to reach the number of shares enabled by their structurers in the offering, by obtaining a longer distribution period for public share distribution, as one could be acting against the interests of investors in such a financial asset modality.

In this way, this technical area considers broad the prerogative to request the CVM to extend the distribution period of closed fund shares, even in cases where the minimum number of shares has already been subscribed.

Such understanding is supported by the content of § 4 of Article 28, which requires the return to subscribers of the amounts paid, "... if the predicted number of shares is not subscribed within 180 (one hundred and eighty) days, extendable by an equal period..."

The request must be made with some advance notice before the end of the placement period, so that the CVM has sufficient time to adopt a careful decision by that date, and must be justified in a reasoned manner, ensuring the absence of prejudice to the share subscribers up to the moment of the request.

To this end, it is necessary that the request include the expression of agreement from all these subscribers, given the mandatory application of the paid amounts, during the distribution process, in federal public bonds or in shares of investment funds classified as "Short Term".

1.5 Fiduciary Assignment of Investment Fund Shares – Art. 12

The Collegiate Body expressed the understanding, in a meeting on 07/03/08, that the constitution of guarantees of open fund shares through fiduciary assignment operations is regular, in accordance with Article 66B of Law No. 4,728, of July 14, 1965.

This decision took as grounds the possibility that such a guarantee enables the granting of credits under more favorable conditions to the assigning shareholders, which would stimulate greater wealth circulation; and also, it is a practice already adopted in the market – based on a legitimate interpretation of the norm – so that a new CVM orientation would shake the legal security of the market and impose restrictions, without an apparent benefit to justify it.

Without prejudice to the above, the Commission will prepare studies aimed at creating rules that address the relevant aspects related to the use of this mechanism, such as, for example, the information flow appropriate between the fund administrator, assigning debtors, and assigning creditors, and the definition of the duties of administrators and shareholders regarding redemption, voting, and other events related to encumbered shares.

1.6 Establishment of Fixed Dates for Share Conversion – Art. 15, I

It is regular the establishment of fixed and determined dates for share conversion, as referred to in Article 15, I, provided that the fund's bylaws dispose on the matter with clarity and objectivity, and the prospectus alerts regarding the special liquidity condition of the shares of this fund, in attention to what is required by Article 39.

We highlight that this freedom to stipulate deadlines in share conversion does not confuse with the maximum deadline, also applicable, of five business days for the payment of redemption requests, as provided in Article 15, III, since this is a deadline that must be counted only from the realization of the cited share conversion.

1.7 Fund Closure for Redemptions – Art. 16

The closure of the fund for the purpose of redemptions in exceptional cases of illiquidity of its assets, treated in Article 16, encompasses both the redemptions requested by shareholders and not yet converted into shares at the time of the fund's closure, as well as redemptions already converted into shares and not yet paid, according to the decision of the Collegiate Meeting of 01/16/2009.

Shareholders who requested the partial or total redemption of their shares and who, for this reason, already had their redemptions converted by a certain share value, are to be considered creditors of the fund, and as such must be treated.

In this sense, the administrator must ensure that the payments to these creditors are made in a manner that respects the chronological order of the redemption requests, as well as the share value used for the conversion.

1.8 Redemption Payment After Banking Business Hours – Art. 15, III

It is common market practice to adopt the closing share price methodology as a parameter for the daily calculation of values due for redemption requests.

However, for specific cases, where the redemption payment occurs on the same day as the request, it is certain that this calculation can only be performed after the closure of the markets in which the fund operates, which will impose the payment of this redemption at a time when it may no longer be possible for the shareholder to perform, for example, various banking movements with the paid resources, in the case of payment with credit to a checking account.

Thus, for a fund that trades its assets on the São Paulo Stock Exchange, for example, the redemption payment can only occur after 5:00 PM, i.e., at a time when Electronic Available Transfers – TED – can no longer be performed.

In this way, in cases where the fund provides for redemption payment on the same day as the request, and also adopts calculation based on the closing share price, it is important that investors and shareholders be specifically alerted, through a specific mention in the prospectus, of the particular liquidity restrictions to which they may be subjected by the payment of the redemption at a time that will no longer allow the realization of various banking movements with their resources.

1.9 Distinct Limits for Investment, Movement, and Holding – Art. 40

There is no irregularity in the adoption of distinct initial minimum investment limits in the same investment fund, which vary according to different segments of the target audience to which it is intended. As an example, we cite the use of lower initial investment limits for investors who already have other investments with the same administrator.

In this sense, as the minimum investment rules of the fund are made public in the prospectus, we do not identify in the adoption of differentiated limits any information asymmetry or breach of fiduciary duty by the administrator. In this way, this differentiation – provided it is in accordance with reasonable and non-arbitrary criteria – does not offend the Principle of Equality among Shareholders, or any other provision of the Instruction.

The aforementioned principle aims to prevent differentiations that cause damage to the investor, a hypothesis that does not apply to the case, as no negative effects are foreseen for those who invested a larger or smaller amount to enter the fund.

On the other hand, in conformity with the decision in Collegiate Meeting No. 47, of December 9, 2008, it is also worth noting that this possibility is not restricted only to initial minimum investment limits, but also to movement limits, as well as to the minimum holding limit of the fund.

We highlight, however, that these criteria must always appear clearly and objectively in the fund's prospectus, in conformity with what is required by Article 40, I and VI.

1.10 Means of Document Availability – Art. 48

As is known to all, it is the administrator's duty to ensure that the disclosure of any information related to the fund is given on equal terms to all its shareholders, in attention, especially, to what is determined by Article 40, XIII.

In this context, considering the great reach that certain funds have in the distribution of their shares in the Brazilian market, we understand that the availability of documents related to proposals submitted to general assemblies, as provided in Article 48, § 4, must be done in a manner compatible with the dispersion of the fund's investors and with the means used by the investor to access fund information and make their investment decision. Thus, for example, it is recommended that the availability be done through the maintenance of a specific access to these documents on the administrator's website on the worldwide computer network.

1.11 Shared Management in Investment Funds – Art. 56

In a decision taken in a meeting on 5/6/2008, the CVM Collegiate Body considered regular the constitution of an investment fund that has the hiring of more than one manager, as it does not go against any regulatory norm, and is a natural consequence of the growing specialization of third-party resource administration markets.

On the other hand, in that specific case, it was also verified that the hiring of two managers for the fund was the subject of deliberation in a general assembly of shareholders convened for this purpose, in conformity with Article 47, II, of the cited Instruction, and that the responsibility for management acts was fully assumed, in a regime of contractual solidarity, by both service providers.

Thus, by recognizing the regularity of shared management in an investment fund, that decision required that the following conditions be respected, however:

(i) execution of a contract in accordance with Article 56, § 1, which (1) ensures the joint liability of managers for shared management acts; (2) grants authorization for orders, before the fund's custodian, limited to the specific market of operation of each manager, in attention to Article 59, Sole Paragraph, I; and (3) authorizes the administrator to intervene as an arbitrator in case of eventual conflicts in investment decisions.

(ii) alert to investors, through the bylaws and prospectus, that management will be exercised by more than one service provider, in order to inform, with emphasis, the specific attribution of each; and

(iii) information, in the prospectus, on (a) the benefits and risks resulting from the shared management structure; (b) the condition of joint operation of managers in conducting the fund's investment policy, including with regard to the joint liability provided in Article 57, § 2; and (c) the role of the administrator as an arbitrator for the resolution of conflicting investment decisions.

At the time of publication of this circular letter, the CVM is endeavoring to adapt its electronic information reception system, in order to allow the inclusion of more than one manager in an investment fund.

Thus, while not available on CVMWeb, the sending of information about more than one manager, the administrator must highlight the fund's condition to the market and its investors, through the sending of a relevant fact about it, as provided in Article 72 of the Instruction.

1.12 Promise of Minimum Profitability – Art. 64, V

The Collegiate Body, in a meeting on 2/14/2008, within the scope of process CVM RJ200710500, emphasized that the promise of predetermined profitability, referred to in Article 64, item V, of the Instruction, is that considered frivolous and illusory, i.e., that may induce the investor to judge that the investment is exempt from risks of not remunerating it as promised.

Thus, a perspective of profitability measurable by strictly objective and previously known parameters, when accompanied by the necessary alerts that this profitability may not be obtained, does not characterize a "promise of predetermined yield", which would remove the prohibition under analysis.

It is important to say that objective and previously known parameters do not confuse with the mere expectation, opinion, or desire of the administrator, even if theoretically founded. In this sense, mechanisms are required, such as: sale options, insurance contracts, etc., that allow ensuring the achievement of the desired profitability, despite typical market fluctuations.

In this way, whatever the guarantee adopted, its nature and extent must always be clarified, with the inclusion of a warning that its adoption does not completely exclude the risk that the desired profitability may not be reached. The same logic also applies to the disclosure of information in the sale or distribution of fund shares, as regulated by Article 74 of the Instruction.

1.13 Restructuring of Investment Fund Families – Art. 64, VI

In decisions taken in the Meeting of 06/17/08, the CVM Collegiate Body established the guidelines and parameters that must be observed in requests for approval or exemption from compliance with requirements provided in the Instruction for restructuring of investment fund families, with requests for trading of shares, open fund shares, and other assets outside the stock or over-the-counter market, and thus, in exemption from prohibitions contained in Articles 12, 64, VI, and 110, I of the Instruction.

With the aim of making the procedure of such operations more agile, the CVM delegated competence to this Superintendence to authorize the transfer of assets of investment funds privately, through the issuance of CVM Deliberation No. 546, of August 4, 2008.

As a rule, these operations involve the constitution of a fund that begins to concentrate an investment policy already adopted in a dispersed manner by several existing investment funds. On the other hand, these funds are transformed into share funds that begin to have as their objective to invest, exclusively, in that fund.

The need for consultation will exist when these operations involve funds that are not destined exclusively to qualified investors, because, otherwise, the operation between the funds can occur based on Article 110, I, of the Instruction.

Preliminarily, it is worth observing that the examination of these consultations is limited to the verification, by the technical area, of the feasibility, convenience, and opportunity of exemption from the requirement contained in the cited norm, for which reason we reiterate that, in these cases, no judgment of value is issued on the operations presented.

We highlight that, if the aforementioned funds have shares of other open investment funds in their portfolio, it must also be detailed, in the request, what treatment the administrator intends to give to these assets, considering the prohibition for transfer of ownership imposed by Article 12 of the Instruction.

Furthermore, we observe that the prohibition treated by Article 64, VI is limited to the specific trading of shares outside the stock exchange or over-the-counter market, for which reason operations involving funds that do not have shares or open fund shares in their portfolio are exempt from prior evaluation by this Autarchy.

We remind you that, in the aforementioned operations, it must be demonstrated by the administrator that there will be no prejudice to shareholders as a result of the operation, such as alteration of the investment policy to which investors will be exposed; modification of tax treatment; changes in total administration and performance fees charged; or changes in redemption conditions.

On the other hand, as these processes involve the alteration of bylaws, it is a requirement for their approval that the restructuring, with all the appropriate detailing of advantages and risks to shareholders, be submitted to the appreciation of the involved shareholders in a general assembly convened for this purpose.

Furthermore, sufficient homogeneity between the portfolios must be demonstrated, which can evidence a similarity between the funds that justifies the consolidation of the portfolios into a single Master fund, and also to prove that there is no mixing, in the operation, of funds with investors of distinct risk profiles.

Also in this aspect, it is up to the administrator to demonstrate that the portfolio contains only assets of reliable pricing, so as to guarantee that some funds are not prejudiced in relation to others in the verification of assets, which must always be performed at market value.

It should be noted that this structure allows some funds within the same family to present differences in relevant aspects, such as the period for redemption subscription, which implies a risk that, in scenarios of significant redemption demands, the fund with the longer period to meet them may be prejudiced relative to the others.

In these cases, we emphasize the need for this risk to be highlighted in the call for the general meeting that will deliberate on the restructuring of the fund with the longer redemption period, and also that a specific warning regarding this particular risk be included in the prospectus of that fund.

Finally, it is a condition for the regularity of the operation that the funds that will be transformed into fund of funds comply with the provisions of Article 102 of the Instruction. The accounting statements and the independent audit report related to the operation must be filed by the administrator and kept available to the CVM.

1.14 Application in Shares of Stock Index Funds – Art. 87, I, f)

Instruction CVM No. 359/02 regulated the constitution and functioning of Index Funds with shares traded on a stock exchange or organized over-the-counter market.

Index Fund shares representing a stock portfolio are securities with characteristics similar to investment fund shares, and may be acquired by investment funds and fund of funds.

Due to these peculiar characteristics, doubts arose among market participants regarding the classification of these securities under the provisions of the Instruction, which is why we understand it is necessary to provide the following clarifications:

a) Index Fund shares may be subject to lending operations in accordance with current legislation, under the terms of CVM Deliberation No. 471/04; b) Regardless of the securities held in the portfolio, the Index Fund must be considered as the issuer for the purpose of meeting the limit established in Article 86, as well as its issued shares must be considered as financial assets, for the purpose of the limit provided for in Article 87; c) Stock Index Fund shares must be considered, together with the other securities listed in § 1, item I, of Article 95B, for the purpose of classifying the investment fund as a stock fund; d) Provided that it is stipulated in its bylaws, a Fund of Funds of Stock Investment Funds or a Fund of Funds of Multimarket Investment Funds may apply up to 100% of its net equity in Stock Index Fund shares, given the provisions of Article 112, § 4.

1.15 Minimum Net Equity – Art. 105

Article 105 of the Instruction explicitly states that, after 90 days from the start of activities, an open fund that maintains, at any time, a daily average net equity lower than R$ 300,000.00 for a period of 90 consecutive days must be immediately liquidated or incorporated into another fund.

Thus, for the purposes of such rule, the calculation of daily average net equities must be performed only after the 90-day period from the start of the fund's activities has elapsed, which occurs upon the first subscription of fund shares.

For this reason, it is recorded that the obligation to liquidate or incorporate into another fund, required by Article 105, can only occur, in the most unfavorable scenario, after 180 days from the first subscription of fund shares.

1.16 Cancellation of Investment Fund Registration – Art. 107

The cancellation of an investment fund's registration requires the sending of documents to the CVM that prove the closure of the fund and the request for deregistration of the fund in the National Registry of Legal Entities – CNPJ.

Under certain circumstances, an investment fund that has already had its closure deliberated by a general meeting of unitholders or determined by the total redemption of its shares is unable to effectuate it, due to exogenous reasons unrelated to the will of its administrator and unitholders.

Examples of reasons that prevent the regular closure of the funds in these cases are: (1) judicial decisions that determine the maintenance of the fund in operation; (2) assets in the portfolio with no liquidity; and (3) dividends and other benefits declared in favor of the fund, but which have not yet been paid.

These funds, given the particular situation they are in, also tend to present net equities lower than R$ 300,000.00, which would subject them, in principle, to immediate liquidation or incorporation into another fund, in accordance with Article 105.

Thus, under the terms of CVM Deliberation No. 571, of 3/31/2009, it was defined that, in these exceptional cases, the administrator of the investment fund may request this Superintendence to waive the obligation of liquidation or its incorporation into another fund, together or not with the cancellation of its registration at the CVM, provided the following requirements are met:

a. The waiver and cancellation requests must be detailed; b. The waiver and cancellation must be approved by all unitholders of the fund assembled in a general meeting;
c. Proof of an exceptional situation that prevents the liquidation of all remaining assets in the fund's portfolio; and
d. Declaration by the administrator that it remains responsible for the administration of the fund and that the shares will no longer be offered publicly. The contracted distributors must attest that they will no longer offer such shares.

1.17 Qualified Investors – Art. 109

By virtue of inquiries from market participants in this regard, we wish to remind that Article 109, § 2, of the Instruction is a provision of a transitional nature, which only had the objective of regulating the situation of unitholders who, at the time of the entry into force of the Instruction, met the qualification requirements then in force, but who did not fit into those provided by the new regulation.

Thus, we remind the understanding of the Collegiate Body on the matter, manifested on 04/19/05 through a Market Communication, that investment funds already adapted to Instruction 409/04 that come to become funds for qualified investors will not be able to maintain unitholders who, at the time of the alteration, do not meet the qualification requirements of the Instruction.

Still under the terms of that communication, we remind that the transitional permission contained in the provision only extends to unitholders that are retail funds (not intended exclusively for qualified investors) if, alternatively, these funds (a) are transformed into funds for qualified investors, in which case their former unitholders, even if not qualified investors, may remain in them; or (b) do not admit new unitholders, which, in practical terms, will mean their closure for applications, in accordance with Article 17 of the Instruction.

1.18 Initial Application of R$ 1,000,000.00 – Art. 110B

As is known, funds intended for qualified investors, whose bylaws require a minimum investment per investor of one million reais, do not need to comply with the concentration limits by issuer and by type of financial asset established in Articles 86 and 87.

Thus, based on Article 110B, their bylaws may provide for greater freedom for their investment policies, reflected in concentration limits by issuer and by type of financial assets, generally more flexible than those constant for other investment funds.

In this sense, it is important to emphasize that the minimum investment required by the regulation is a limit to be considered when verifying the suitability of the product offered to the investment objective, risk profile, and financial capacity to tolerate losses of the investor (suitability rule).

Thus, the verification of the minimum application requirement must occur when the investor enters the fund. For this reason, there is no legal requirement for the investor to maintain any minimum value in the fund, nor predetermined minimum values for additional applications. Nevertheless, rules establishing minimum values for the maintenance of resources applied in shares may be established in the bylaws.

However, situations of partial redemptions in a short period after the initial application, such that unitholders may remain in the fund with values lower than the initial investment, may constitute for the technical area the hypothesis of an attempt to circumvent the objective of the regulation.

2. CVM Instruction No. 306/99 – Portfolio Administration

2.1 Affiliated Companies – Art. 7, §§ 5 and 6

The exception rule of the aforementioned provision allows the director, delegated manager, or partner responsible for the administration of securities portfolios in the company to exercise this same activity in other companies, provided they are affiliated, "as defined by law" (last part of Article 7, § 6 of the Instruction).

In the absence of a law – in the strict sense – that defines the concept of affiliated companies, this technical area has supported its understanding based on other norms issued by the CVM that also possess the same foundation, namely, the prevention of conflict of interest scenarios.

Thus, we cite the concepts brought by the provision in Article 3 of CVM Instruction No. 149/91 and Article 86, § 2, of CVM Instruction No. 302/99, which consider two companies as affiliated when (1) one of them or its administrators, and their respective spouses, partners, or relatives up to the 2nd degree, hold a participation greater than 10% of the share capital of the other, or, when (2) they share administrators or partners with a participation greater than 10% of both share capitals.

In the same sense, we refer to the provision in Article 29, Sole Paragraph, of CVM Instruction No. 359/02, which considers two companies as affiliated when (1) one of them – or its controllers and administrators – holds an administrative position, or, individually or jointly, holds a participation greater than 10% of the share capital of the other; or when (2) one is controlled by the other.

Finally, it is worth noting that – despite being expressly revoked – we consider CVM Instructions No. 149/91 and 302/99 as reliable and adequate sources for the conclusions exposed, since they are limited to serving as support for the better interpretation of the concept of affiliated companies.

2.2 Annual Report of Portfolio Administrators (ICAC) – Art. 12

Article 12 of the Instruction provides that the portfolio administrator accredited at the CVM must send, by May 31 of each year, information regarding the portfolios it administers, based on positions as of March 31 of the same year, in addition to updated registration information.

It is important to observe that this obligation must be fulfilled even if the administrator does not have resources under its administration, and that no alteration in the registries of this Autarchy is necessary.

The sending of the ICAC is also mandatory by an accredited portfolio administrator, a natural person, who is responsible for the administration of securities portfolios in a legal entity authorized by the CVM to exercise such activity.

The aforementioned annual update must be sent through the restricted access environment of the administrator available on CVMWeb, in the item "Sending Documents Via Form", option "Registration Report", type of report "Annual (Mandatory)", function "Send Documents".

After the report entry is made, it is possible and recommended to consult the system to verify if the information was accepted by the system. To do so, in the same way, the item "Sending Documents Via Form", option "Registration Report", function "Search Document" must be accessed. To consult, for example, the report sent by 5/31/2009, the year of search "2009" must also be informed.

Finally, we recall that the lack or delay in sending the aforementioned report may lead to the application of a coercive fine, in accordance with the provisions of Article 20 of the Instruction, and in conformity, still, with the requirements of Articles 3 and 11 of CVM Instruction No. 452/07.

2.3 Eventual Report for Portfolio Administrators' Registration Update (ICACE) – Art. 12

Without prejudice to the obligation described in item 2.1, whenever there is a need to update the registered data of the accredited entity, this must be done directly in the restricted access area available on CVMWeb, in the item "Sending Documents Via Form", option "Registration Report", type of report "Eventual", function "Send Documents".

The update must be provided within 15 days of the occurrence of the registration change, in accordance with the provisions of Article 12, Sole Paragraph.

We alert, however, to a distinct procedure that must be adopted when the update refers to the change of denomination or responsible person of the Portfolio Administrator Legal Entity.

In the first case, the update must be informed to the CVM through correspondence signed by the Responsible Director, accompanied by a copy of the corporate instrument proving the change of denomination of the legal entity, and, if it is a financial institution, registration and homologation by the Central Bank of Brazil.

In the second, the update must be informed to the CVM through correspondence signed by the new Responsible Director, accompanied by a copy of the corporate instrument proving their appointment, and, if it is a financial institution, homologation by the Central Bank of Brazil.

There is also a third hypothesis that requires a petition by correspondence, when there is a simultaneous forgetting of the CVMWeb access password by the user and a change of their email, without such fact having been the object of update in the Registration Report.

We finally remind the importance that the accredited entity always keeps its registration at the CVM updated, as the data contained therein are used as a proper means for any notifications to the interested party, including those that alert to the incidence of a coercive fine.

2.4 Segregation of Activities – Article 15

One of the most relevant aspects in the conduct of activities of a company accredited as a portfolio administrator of securities concerns the procedures for segregation of activities adopted, with the objective of guaranteeing an efficient policy for the administration of conflicts of interest inherent to its own activity.

Thus, in the understanding of this Superintendence, the establishment of adequate policies for the segregation of activities, without prejudice to other initiatives, can contribute to ensuring investment decision-making that always respects the best interest of the institution's clients.

In this context, the existence of written manuals is recommended, which detail the rules and procedures adopted by the administrator to comply with Article 15 of the Instruction, as well as documents that formalize the mentioned policies covering, at least, the content described below:

a. Segregation of Activities Policies (Article 15, item I) – presented only when the company develops more than one activity. It aims to demonstrate the total separation of areas or present the adopted segregation rules, with discrimination, at minimum, of those related to facilities and equipment, with detail, at least, of the computers used, networks, facsimiles, phones, and files; b. Confidentiality Policies (Article 15, item II) – define the confidentiality and conduct policies adopted, with detail of the requirements applicable, at minimum, to its partners, administrators, collaborators, and employees. Furthermore, these rules must identify holders of privileged information due to their position or assignment, in order to establish an Information Barrier with other employees;
c. Training Policies (Article 15, item III) – present the education policies for, at least, its partners, administrators, collaborators, and employees. Its purpose is to give everyone knowledge of the society's segregation policies, to guarantee their effectiveness. In addition to the specific Adhesion Term of this Policy, there may also be a declaration by the involved party stating that they were trained in accordance with the presented Training Policy, and their perfect understanding of the adopted Segregation Policies;
d. Security Policies (Article 15, item IV) – detail the policies for controlling access to confidential information, at least by its partners, administrators, collaborators, and employees who possess them. Furthermore, it must always be possible to identify the holders of this information, for liability in case of leakage; e. Personal Trading Policies (Article 15, item V) – express the policies of restriction for trading in securities, at minimum, by partners, administrators, collaborators, and employees, and especially, those who possess privileged information. It must specifically appear in the Individual Adhesion Term.

The aforementioned Manuals, thus, must provide, at least, provisions related to (1) policies adopted by the society, with clear, objective, and detailed description of the corporate criteria adopted, and that include a model of the Adhesion Term to be signed by the interested party; (2) compliance, which includes a description of how the monitoring of policies will be done, and the designation of the person responsible for this activity; and (3) enforcement, with provision of the sanctions applicable in case of non-compliance with the policies, and also of the person designated for this activity.

3. CMN Resolution No. 2.689/00 – Registration of Non-Resident Investors

3.1 Representation Contract – Art. 5

As is known, it is the obligation of the non-resident investor's representative to keep, and provide whenever requested, in accordance with Article 5 of CVM Instruction No. 325/00, the respective custody and representation contracts signed with the client, as well as the forms provided for in that Resolution.

In this sense, we remind that, within 15 days after the constitution of the portfolios of these investors, the number of the Electronic Declaratory Registry (RDE) of the constituted portfolios must be sent to the CVM, and it must contain a declaration by the representative in the following terms:

"I declare that I am in possession of the documentation proving the representation and custody contracts and the Form Annexed to CMN Resolution No. 2.689/00, for which I take responsibility."

Still regarding this, we record that any registration changes of non-resident investors, in accordance with § 5, II, of the Resolution, do not need to be accompanied by documentation proving the changes occurred, but only by a declaration by the representative that they are in possession of this documentation, and that they take responsibility for its custody and presentation to the CVM when requested.

Finally, we recall that registration maintenance at the CVM does not imply automatic update in registries of other bodies of the Public Administration, such as the Central Bank of Brazil and the Federal Revenue Service. Thus, these updates, when necessary, must be promoted, by its own means, by the non-resident investor's representative themselves.

4. CVM Instruction No. 388/03 – Securities Analysts

4.1. Graphical Analyses Published via the Internet – art. 2.

CVM Instruction No. 388/03 brings in its art. 2 the definition of the activity of securities analyst. This definition encompasses all those who, on a professional basis, prepare recommendations, monitoring reports, and studies for publication to the public, which assist in investment decision-making, regardless of the methodology used for such.

Therefore, there is no distinction between the technical analyst and the fundamental analyst.

Both must prove their technical qualification through accreditation at the accrediting entity and, subsequently, obtain registration at the CVM, so that they can exercise this activity.

In this sense, it is worth clarifying that graphical analyses and recommendations resulting from these analyses, published on sites, chats, or blogs specialized on the Internet, if carried out on a professional basis, must be prepared and published only by professionals accredited by the accrediting entity and registered at the CVM.

5. CVM Instruction No. 43/85 – Securities Consultants

5.1. Accreditation

The CVM Collegiate Body, in a meeting on 08/19/2008, established the requirements to be demanded for the purpose of granting accreditation of securities consultant for natural and legal persons, embodied in the documents that must accompany the accreditation requests.

The demanded documents are the following:

1. Natural persons:
   (i) request signed by the interested party that contains the reasons why they believe they are apt to exercise the activity; (ii) copy of the curriculum and proofs of the main courses mentioned therein; (iii) proof of registration in the CPF and copy of the identity card; (iv) documentation that proves their experience and details the nature of the activities exercised by the interested party, their professional experience in activity

who demonstrates aptitude for investment analysis for a minimum period of 3 years (this requirement is waived for those accredited as securities analysts, who must only prove this condition, in the manner provided for in the current regulation on the analyst activity);

(v) registration form containing their full name, CPF, address, telephone, fax, and email;

(vi) declaration signed by the applicant, informing:

(a) whether they are ineligible to hold positions in financial institutions and other entities authorized to operate by the CVM or BACEN, insurance companies, private pension entities, and publicly-held companies;

(b) whether they have been convicted of bankruptcy crimes, malfeasance, active or passive corruption, extortion, market manipulation, improper use of insider information, irregular exercise of office, profession, activity, or function within the securities market, embezzlement, against the popular economy, public faith, property, the National Financial System, or criminal penalty that bars, even temporarily, access to public offices;

(c) whether they are included in the Register of Issuers of Bounced Checks;

(d) whether there are titles protested against them;

(e) whether, in the last five years, they have suffered any punishment resulting from acting in the administration or on the fiscal council of an entity subject to the control and supervision of the CVM, BACEN, SPC, or SUSEP; and

(f) whether their assets, by virtue of a judicial decision or administrative authority, are unavailable.

2. Legal Entities:

(i) application signed by the legal representative of the legal entity;

(ii) copy of the duly consolidated constitutive acts;

(iii) proof of registration with the CNPJ;

(iv) information on the investor profile with which they intend to operate;

(v) document indicating the person responsible for the activity; and

(vi) registration form containing, at least, the corporate and trade name, CNPJ, mailing address, telephone, fax, email, and the person responsible for the activity.

The accreditation of the legal entity is conditioned on the designation of a responsible director, who must be accredited as a securities consultant – individual – with the CVM.

6. Parameters for Formulating Inquiries

This Superintendence frequently receives inquiries from market participants with doubts regarding the correct application of the regulatory norm applicable to the investment fund industry.

Below, we highlight some requirements that must be observed in these inquiries to ensure that the technical area has sufficient elements for the analysis of the issue presented.

A first point concerns the need for the inquiry to describe the concrete case with the greatest possible detail. However, if the doubt is not based specifically on any concrete case, the reasons that generated the raised doubt must be elaborated.

On the other hand, the inquirer must expose what they understand as the best interpretation of the norm regarding the proposed issue, without failing to provide all the legal foundation that supports this understanding.

We request that, as a rule, the inquiry be formulated by the responsible director of the administering institution.

If the inquiry refers to the application of accounting norms and procedures provided for in CVM Instruction No. 438, it must also be signed by the qualified professional responsible for accounting, in accordance with item 1.1.2.9 of the Investment Funds Accounting Plan – COFI.

Finally, as required by the aforementioned Instruction 438, the inquiry must be accompanied by the independent auditor's statement, when it concerns the change or adoption of new accounting practices or procedures.

Sincerely,

(Signed Original)

Carlos Alberto Rebello Sobrinho
Superintendent of Institutional Investor Relations