Circular Letter CVM/SIN/SRE 01/2016

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

Circular Letter No. 01/2016/CVM/SIN/SRE
Rio de Janeiro, May 16, 2016

To
Directors responsible for institutions administering and managing investment funds

Subject: Clarifications on provisions of CVM Instructions Nos. 476/09 and 555/14

Dear Sir/Madam,

1. This Circular Letter complements Circular Letters CVM/SIN 01 and 08/15, and presents additional clarifications on provisions of CVM Instruction No. 555/14, with the objective of guiding on the best way to observe them.

2. The recommendations listed below will contribute to minimizing possible deviations and, consequently, reducing the need for the SIN to formulate requirements, as well as allowing the activities of market participants to be carried out correctly and uniformly, in favor of investor protection and market integrity.

A) ARTS. 151 AND 152, OF CVM INSTRUCTION NO. 555/14, CVM INSTRUCTION NO. 554/14 AND ART. 2 OF CVM INSTRUCTION NO. 476/09

4. Article 151 of CVM Instruction No. 555/14 allows “the continuation and realization of additional applications, in funds for qualified investors, of unitholders who cease to fit into the category of qualified investor” established by CVM Instruction No. 554/14, provided that the conditions established therein are respected.

5. Similarly, Article 152 of that Instruction provides for a similar permission for unitholders of exclusive funds or “which require a minimum application per investor of R$ 1,000,000.00” and who have also adapted “to the rules applicable to the category of professional investor”, as defined, also, by CVM Instruction No. 554/14.

6. On the other hand, it is known that Article 2 of CVM Instruction No. 476/09 determines that the public offerings regulated by it are “exclusively intended for professional investors”.

7. Thus, the question arises as to whether investment funds that have unitholders meeting the conditions provided in the aforementioned provisions of CVM Instruction No. 555/14 are or are not obliged to admit only investors considered as professional by CVM regulation in public distributions with restricted efforts.

8. In this context, the interpretation of the technical areas is that unitholders of funds provided for in the conditions of Articles 151 and 152 of CVM Instruction No. 555/14 may participate in public offerings carried out based on CVM Instruction No. 476/09, even if they do not meet the qualification requirement required by that norm (as professional investors).

9. In the same sense, the quantitative limits provided for in items I and II of Article 3 of CVM Instruction No. 476/09 should not serve as a barrier to the participation of investors in public offerings with restricted efforts of shares of funds in which they already invest and that meet the provisions above. Thus, offerings under these conditions admit the search for more than 75 unitholders; or the acquisition of shares by more than 50 of these investors, to guarantee the right of priority in the acquisition of shares in order to maintain proportionally their participation in the fund.

10. This interpretation stems from the finding that (1) such investors, by already being unitholders of the fund, know the risks inherent to it, especially those associated with its investment policy; as well as (2) the fact that, in distributions of fund shares where eligible and non-eligible investors coexist, under the strict terms of CVM Instruction No. 476/09, a different interpretation would subject the non-eligible unitholders of this fund to a risk of unjustified dilution.

11. On the other hand, it is worth highlighting that the distribution of shares of new investment funds, or even distributions of shares of existing funds, but intended for new investors, must fully meet the requirement provided for in Article 2 of CVM Instruction No. 476/09, regarding the exclusive participation of professional investors.

12. It is worth informing, finally, the interpretation of the technical areas that, by virtue of the application of Article 1 of CVM Instruction No. 555/14, the transitional rules provided for in Articles 151 and 152 of that Instruction extend to investment funds regulated by other CVM Instructions.

Sincerely,

Signed Original
DOV RAWET
Superintendent of Registration of Securities

Signed Original
DANIEL WALTER MAEDA BERNARDO
Superintendent of Relations with Institutional Investors