Circular Letter CVM/SSE 06/24 — CVM — BR

COMMISSION OF SECURITIES
Rua Sete de Setembro, 111/2-5º and 23-34º Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2º, 3º and 4º Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4º Floor, Brasília/DF – ZIP: 70712-900 – Brazil -Tel.: (61) 3327-2030/2031 www.cvm.gov.br Circular Letter No. 6/2024/CVM/SSE São Paulo, October 30, 2024. To managers and administrators of Credit Rights Investment Funds - FIDC and Real Estate Investment Funds - FII Subject: Interpretation of provisions of Normative Annexes II and III to CVM Resolution No. 175. Dear Sir/Madam,

This Circular Letter aims to disclose the understanding of this Superintendence of Securitization and Agribusiness - SSE regarding topics that have been the subject of doubts from market participants concerning the application of provisions of Normative Annexes II and III, respectively, for FIDC or FII.
The issues are segregated by topics, as exposed below.

I - FII Management Fee
2. Article 5 of Normative Annex III to CVM Resolution No. 175 requires the participation of a manager as an essential service provider only in cases where the investment policy allows the application of a portion greater than 5% of the FII's net equity in securities.
3. Thus, the participation of a manager in an FII that holds less than 5% of its assets in securities is optional. In this case, if there is the participation of a manager, this Superintendence considers that the management fee may be regularly considered as an expense of the FII, as provided in Article 117, XVI, of the General Part of CVM Resolution No. 175.

II - Issuance of new FII shares
4. Article 15, item VIII, of CVM Instruction No. 472, revoked, provided that the FII regulations should stipulate the "possibility or not of future share issuances and, if applicable, authorization for the issuance of new shares at the administrator's discretion, regardless of approval in a general meeting and of amendment of the regulations." Furthermore, paragraph 1 of the same article provided that the "authorization for the issuance of shares at the administrator's discretion mentioned in item VIII must specify the maximum number of shares that can be issued or the total value to be issued, ensuring the right of preference to current shareholders."
5. However, a similar provision is set forth in Article 48, paragraph 2, item VII, of the General Part of CVM Resolution No. 175: "VII – the possibility or not of future issuances of closed-class shares and, if applicable, authorization and eventual conditions for the issuance of new shares at the manager's discretion, including regarding the existence or not of a preference right for shareholders, without the need for approval in a shareholders' meeting;"

That is, there was no change in the dynamics of prior authorizations for the issuance of new shares by FII, but the authorization now falls under the competence of the FII manager, when one exists. In situations where the administrator assumes management functions, the authorization belongs to the administrator.

III - Hiring of consulting and specialized company by FII
7. According to Article 27, II and III, of Normative Annex III to CVM Resolution No. 175, it is the administrator's responsibility to hire the consulting firm and the specialized company that aim to support the administrator in their activities related to the management of real estate assets.
8. In these terms, this SSE considers that there is no possibility or justification for this hiring to be carried out by the manager, because the manager of an FII can only have attributions regarding the invested securities, and not regarding the real estate, as provided in Article 5 and Article 26, paragraph 2, of Normative Annex III to CVM Resolution No. 175.

IV - Responsibility for FII classification
9. Article 89 of the General Part of CVM Resolution No. 175 provides for the manager's responsibility for observing the portfolio composition and concentration limits of funds in general. That is, the manager, in the capacity of essential service provider, has become responsible for the classification of the funds.
10. On the other hand, Normative Annex III to CVM Resolution No. 175, in its Article 40, paragraph 4, provides for the administrator's duties regarding the observation of the rules for classification and declassification of the securities portfolio.
11. This Superintendence understands that the duties attributed to the administrator in Article 40, paragraph 4, refer to cases where the FII invests less than 5% of its net equity and does not have a manager as an essential service provider, as per the option of Article 5 of the same Normative Annex III.
12. Therefore, in cases where the FII has the manager as an essential service provider, Article 89 of the General Part of Resolution No. 75 must be applied.

V - Responsibility of FIDC subordinate subclasses
13. According to Article 6 of the general part of CVM Resolution No. 175, if the regulations limit the liability of shareholders to the value subscribed by them, the class name must be added with the suffix "Limited Liability". Thus, the limitation of the fund occurs at the level of its class; that is, if the fund's class is of limited liability, all subclasses of the referred class will also be of limited liability.
14. However, the limitation of liability of the class and the shareholder does not prevent the provision in the FIDC regulations for a certain shareholder, if an investor of a subordinate subclass, to be called upon to contribute resources to restore the subordination index.
15. In this aspect, it is worth highlighting Article 3 of Normative Annex II to CVM Resolution No. 175, which allows FIDC subclasses to have distinct economic and political rights; and Article 20, II, of Normative Annex II to CVM Resolution No. 175, which provides that the regulations may stipulate the procedures applicable in the event of non-observance of the subordination index.
16. Thus, this SSE understands that the limited liability of shareholders is linked to the insolvency of the class and does not confuse or prevent the calling of additional capital from subordinate shareholders to restore the subordination index, provided it is stipulated in the regulations.
In addition, the restoration of the subordination index can prevent the situation of insolvency.
17. Therefore, a limited liability class may have in its structure investors of subordinate subclasses that, due to the dynamics of the product structure, may be called upon to contribute resources to restore subordination, provided this is stipulated in the regulations.

VI - Prohibition provided in Article 42 of Normative Annex II (FIDC)
18. Article 42 of Normative Annex II to CVM Resolution No. 175 prohibits the acquisition, by FIDC, of credit rights originated or assigned by the administrator, manager, specialized consulting, or parties related to them.

However, paragraph 1 of this same article removes the prohibition when: according to item I, the manager, the registering entity, and the custodian of credit rights are not related parties to each other; and, according to item II, the registering entity and the custodian are not related parties to the originator or assignor.
Although not qualified, this SSE considers that the custodian referred to in item II is the same one provided for in item I, that is, the entity responsible for the custody of credit rights.
It is worth noting that, according to Article 13, item IV, letter "b", of Normative Annex II to CVM Resolution No. 175, there is no exception to the prohibition of Article 42 when the shares of the FIDC class are destined for the general public.

VII - Deadline for registration of credit rights invested by FIDC
22. Article 134 of the General Part of CVM Resolution No. 175 determines that FIDC operating on October 2, 2023, the date of entry into force of CVM Resolution No. 175, must adapt to the provisions of Normative Annex II and the General Part of the Resolution by November 29, 2024.
23. The adaptation of existing FIDC as of October 2, 2023, requires, obviously, the full compliance with all provisions of Normative Annex II and the General Part, since CVM Instruction No. 356 was revoked and ceases to be applicable to these FIDC from November 30, 2024.
24. In these terms, this SSE reminds that the adaptation must be observed for both the regulations and for all assets and liabilities and operations of the funds, which includes, among others, the evaluation of which invested credit rights are subject to registration or not and the consequent segregation of these credit rights between the contracted registering entity and the custodian of credit rights. That is, Article 37 of Normative Annex II applies and the guidelines on registration contained in Circular Letter No. 8/2023/CVM/SSE and Circular Letter No. 2/2024/CVM/SSE apply.
25. Therefore, the date of November 29, 2024, is the deadline for the registration of credit rights that are subject to registration of funds existing on October 2, 2023, among other required adaptations, as per previously disclosed guidelines.
26. In addition, it is worth remembering that the adaptation period, originally scheduled for December 31, 2023, was postponed to April 1, 2024, and then postponed again by the CVM to November 29, 2024. Among the reasons for both postponements stands out the request of several participants in this industry regarding the complexities involved in hiring registering entities and evaluating credit rights subject to registration for the stock of existing FIDC as of October 2, 2023.
27. As exemplified in the Circular Letters cited in paragraph 24, the concept of "credit rights subject to registration" is dynamic and, therefore, for example, a credit right may become subject to registration at the moment when registering entities implement an interconnection model to check the uniqueness of a certain credit right.
28. In this context, the regulation does not define a deadline for credit rights to be registered from the moment they are recognized as "subject to registration," except for the deadline of November 29, 2024, for the registration of the stock existing on October 2, 2023. Thus, this SSE considers that, within the scope of the manager's and administrator's diligence, registration must be carried out in the shortest possible time and that these service providers must be able to demonstrate that they are acting to regularize the situation.
29. Similarly, Article 33, item III, of Normative Annex II to CVM Resolution No. 175, provides that it is the manager's responsibility to register the acquired credit rights, without, however, indicating a deadline for them to be registered, that is, whether at the time of acquisition or after acquisition by the FIDC; and, if after, in what timeframe it should occur.
30. This Superintendence considers that, strictly speaking, the regulation provides that registration must be immediate, that is, registration and settlement of the purchase must be part of the acquisition process simultaneously, not admitting that a credit right that is subject to registration enters the FIDC portfolio without the due registration.

However, concrete and exceptional situations may prove the impossibility of carrying out registration at the time of acquisition, and thus the manager must be able to evidence that, within the scope of their diligence, they are adopting all possible measures so that the registration of the acquired credit right occurs in the shortest possible time after its acquisition.

VIII - Registration of the stock of matured credit rights (FIDC)
32. As recalled in the previous item, FIDC operating on October 2, 2023, must register their credit rights subject to registration by November 29, 2024, a date postponed on two occasions by the CVM.
33. Based on the guidelines contained in Circular Letter No. 8/2023/CVM/SSE, this Superintendence considers that credit rights that are matured and unpaid at the time of assignment to the FIDC are not subject to registration. This SSE's understanding stems from the interpretation of Article 5 of CMN Resolution No. 4.593, as exemplified in that Circular Letter, because, among the benefits of registration is the mitigation of risks of non-existence of the credit right and lack of control over its payment flows.
34. Finally, considering the adaptation of existing FIDC as of October 2, 2023, and based on the interpretation of the previous paragraph, this technical area considers that, in addition to credit rights matured and unpaid at the time of their assignment to the FIDC, those rights that became delinquent until the deadline for FIDC adaptation, that is, until November 29, 2024, also cease to be considered subject to registration.
35. It is worth noting that matured credit rights cease to qualify as subject to registration only when all their installments are overdue. However, nothing prevents the manager from continuing to maintain such delinquent credit rights registered, instead of canceling the registration and submitting them to custody.

Sincerely,

Bruno de Freitas Gomes
Superintendent of Securitization and Agribusiness - SSE

Document electronically signed by Bruno de Freitas Gomes Condeixa Rodrigues, Superintendent, on 10/30/2024, at 10:46, based on Article 6 of Decree No. 8.539, of October 8, 2015.
The authenticity of the document can be verified on the site https://sei.cvm.gov.br/conferir_autenticidade, informing the verification code 2179934 and the CRC code A6949816.
This document's authenticity can be verified by accessing https://sei.cvm.gov.br/conferir_autenticidade, and typing the "Verification Code" 2179934 and the "CRC Code" A6949816.
Reference: Process No. 19957.009383/2021-43 SEI Document No. 2179934