Circular Letter CVM/SSE 08/23

27/09/23, 07:48 SEI/CVM - 1881465 - Circular Letter https://super.cvm.gov.br/sei/controlador.php?acao=documento_imprimir_web&acao_origem=arvore_visualizar&id_documento=1984616&infra_si… 1/6 SECURITIES AND EXCHANGE COMMISSION OF BRAZIL Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Centro, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000 SCN Q.02 – Bl. A – Ed. Corporate Financial Center, S.404/4th Floor, Brasília/DF – CEP: 70712-900 – Brazil - Tel.: (61) 3327- 2030/2031 www.cvm.gov.br Circular Letter No. 8/2023/CVM/SSE São Paulo, September 27, 2023. To the administrators, managers and custodians of Credit Rights Investment Funds - FIDC. Subject: Registration of credit rights and the functions of the manager, administrator and custodian. Dear Sir/Madam,

1. This Circular Letter aims to clarify the understanding of this Superintendence of Securitization and Agribusiness - SSE regarding the provisions of Annex Normative II of CVM Resolution No. 175, of December 23, 2022 ("AN-II of CVM Res. 175") that deal with the registration of credit rights and the function of the administrator, manager and custodian.

2. We list below the provisions subject to this Circular Letter:
   Art. 2.....
   XX – registration of credit rights: registration service provided under the support of the specific regulation of the National Monetary Council and the Central Bank of Brazil;

Art. 30. In addition to the services provided for in art. 83 of the general part of the Resolution, the administrator must hire, on behalf of the fund, the following services:
I – registration of credit rights in a registrar entity authorized by the Central Bank of Brazil, observing that the registrar entity cannot be a related party to the manager or to the specialized consultancy; II – custody, covering the services provided for in Section IV of this Chapter VIII;

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Art. 33. In addition to the other obligations provided for in the general part of the Resolution and in this Normative Annex II, the manager is responsible for the following activities:
...
III – register the credit rights in the registrar entity of the class or deliver them to the custodian or administrator, as the case may be;

Art. 36. Within the scope of the diligence related to the acquisition of credit rights, the manager must verify the existence, integrity and ownership of the collateral of the rights and credit representative instruments referred to in item “a” of item XII of art. 2. § 1st The verification provided for in the caput may be carried out individually or by sampling, using a consistent and verifiable statistical model, observing the parameters provided for in the regulation, in accordance with art. 20, item VII, of this Normative Annex II.

Art. 37. If the class invests in credit rights that are not eligible for registration in a registrar entity, the administrator must hire the custody service for the asset portfolio.
Sole paragraph. If the credit right is registered in an organized over-the-counter market authorized by the CVM or deposited in a central depository authorized by the CVM or by the Central Bank of Brazil, the registration referred to in the caput is waived.

Art. 38. Considering the total collateral, whether or not eligible for registration, quarterly or in a frequency compatible with the weighted average maturity of the credit rights in the portfolio, whichever is greater, the custodian of the credit rights must verify the existence, integrity and ownership of the collateral of the credit rights that entered the portfolio during the period as a replacement, as well as the collateral of the credit rights that matured and were not paid in the same period. § 1st The regulation may provide that the periodic verification of the collateral is the responsibility of the administrator, provided that it is not a related party to the manager and, if applicable, to the specialized consultancy. § 2nd The custodian or the administrator, as the case may be, may use information from the registrar entity, observing that it must verify whether such information is consistent and adequate for verification.

Art. 39. The custodian may be hired by the administrator to:
I – carry out the physical or electronic and financial settlement of the credit rights; II – collect and receive, on behalf of the class, payments, redemption of securities or any other income related to the assets in the portfolio, depositing the amounts received directly into an account owned by the class or, if applicable, into a restricted account; and III – carry out the safekeeping of the documentation related to the collateral of the credit rights.

I - CREDIT RIGHTS ELIGIBLE FOR REGISTRATION

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3. As provided for in art. 37 of AN-II of CVM Res. 175, this SSE understands that the registration of credit rights is mandatory for those that are eligible for registration in registrar entities authorized by the Central Bank of Brazil for the registration of financial assets referred to in National Monetary Council Resolution No. 4.593, of 2017 ("CMN Res. 4.593"). These entities must be hired by the administrators of the FIDCs, in accordance with art. 30, I, of AN-II of CVM Res. 175.

4. In this sense, this SSE understands that art. 37 exempts the hiring of the custodian for the credit rights subject to registration. Thus, if an FIDC invests exclusively in credit rights eligible for registration, this technical area considers that there is no obligation to hire the custodian referred to in art. 30, II, of AN-II of CVM Res. 175.

5. The regulation did not define the concept of eligible for registration. However, this SSE understands that the concept is self-explanatory and, also considering art. 2, XX, of AN-II of CVM Res. 175, clarifies that eligible are those credit rights for which there is a registrar entity authorized by the Central Bank of Brazil to carry out the registration of the corresponding type of credit right.

6. In the understanding of this SSE, the authorization of the Central Bank implies the possibility of registration of the financial assets provided for in CMN Res. 4.593 and, therefore, to be eligible for registration, the credit right must fit the concept of financial asset of that Resolution.

7. Art. 2 of CMN Res. 4.593 states the following:
   "Art. 2 For the purposes of this Resolution, the following are considered financial assets:
   I - credit instruments, credit rights and other financial instruments that are:
   a) payment obligations of the institutions mentioned in art. 1, including time deposit contracts; b) joint payment obligations of the institutions mentioned in art. 1, in operations such as acceptance and guarantee; c) admitted in the asset portfolios of the institutions mentioned in art. 1, except those subject to discount; d) subject to discount in credit operations, by institutions mentioned in art. 1 or delivered as collateral for these institutions in other operations of the financial system; e) book-entry in accordance with the regulation of the Central Bank of Brazil or custodied by institutions mentioned in art. 1; or f) issued by or owned by entities not authorized to operate by the Central Bank of Brazil, part of a prudential conglomerate, defined in accordance with the Accounting Plan of the Institutions of the National Financial System (Cosif); and II - assets, rights or financial instruments:
   a) whose specific legislation or regulation defines them as such or determines their registration or centralized deposit; or b) that, within the scope of a payment arrangement, are payment obligations of a payment institution to its customers.
   § 1st The financial assets referred to in the caput may originate from operations carried out in the financial, commercial, industrial, real estate, mortgage, leasing, service provision segments, among others, including in the case of future existence credit rights and unknown amount, as long as they are derived from already constituted relationships. § 2nd Securities are excluded from the definition of financial assets referred to in the caput."

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8. It is considered that CVM Res. 175, intentionally, did not list the different types of credit rights for the purpose of directing those that would or would not be eligible for registration, but sought a principled wording.

9. Thus, it is not for this SSE to exhaust, through this Circular Letter, the various possibilities and arrangements of credit rights for the purpose of classification as a financial asset and, consequently, eligible for registration.

10. However, considering the doubts of administrators and managers, it is necessary to clarify that, based on the definition of financial assets of CMN Res. 4.593, it is understood that credit rights arising from judicial actions, such as precatórios and others, are not eligible for registration, since art. 2 of CMN Res. 4.593, in the view of this SSE, does not cover such modalities, notably when considering § 1 of this article.

11. These rights arising from judicial actions are those provided for in art. 2, XIII, item "c" of AN-II of CVM Res. 175 and classified as non-standardized.

12. Another type of credit right that this SSE considers that registration does not apply is that provided for in item "a" of the same provision: "those that are overdue and pending payment at the time of assignment".

13. This understanding stems from the interpretation, by this SSE, of art. 5 of CMN Res. 4.593:
    "Art. 5 The information regarding the registration or centralized deposit referred to in arts. 3, 4 and 12 must include the characteristics of financial assets and securities and, when applicable:
    I - the yield structure and payment flows of financial assets and securities; II - early redemptions; III - subscription, lending and buy and sell negotiations of financial assets and securities; IV - acceptance operations; and V - the constitution of liens and encumbrances.

14. Based on the cited provision, it is understood, for example, that among the benefits of registration is the mitigation of the risks of non-existence of the credit right and of lack of control over its payment flows.

15. Notably, such risks are inherent to credit rights that are overdue and unpaid at the time of acquisition by the FIDC. In fact, the manager acquires such credit rights at a substantially lower value than face value, given the risk of non-existence of the collateral or impossibility of collection.

16. In these cases, it is understood that, for credit rights that are overdue and unpaid at the time of acquisition by the FIDC, compliance with art. 5, I, of CMN Res. 4.593 by the registrar entity is impaired and, therefore, such rights are not eligible for registration.

II - HIRING OF THE REGISTRAR

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17. Considering the above regarding the purpose of registration, this SSE understands that in hiring the registrar entity, the administrator must establish minimum governance standards for the relationship between the parties, so that it is possible to obtain and send periodic reports on the monitoring of credit rights, whether for the purpose of reconciliation of positions between the parties, identification of problems with the collateral or payment flow, yield or even issues involving existence.

18. Administrators must adopt reconciliation procedures to ensure that the information maintained in their controls on registered credit rights reflects the information stored in the registrar entities.

19. Considering the information regarding registration, provided for in art. 5 of CMN Res. 4.593, it is understood that in hiring the registrar, the administrator may establish that the entities carry out diligence before accepting the financial asset for registration and monitor the performance of the registered asset.

20. Furthermore, as part of the registrar hiring process, it is considered relevant that the administrator requires the maintenance, throughout the provision of services, of means for the interconnection or interoperability of the hired entity with other entities authorized to register the same type of credit right, in order to minimize the risk of double assignment within the FIDCs.

21. In the view of this SSE, the absence of a minimum checking mechanism between registrars that are authorized to register the same type of credit right disqualifies the credit right as "eligible for registration", remaining the hiring of a custodian required.

22. The understanding of this Superintendence is based on the justification for the adoption of registration, manifested in Public Hearing Notice 08/20: "The registration of credit rights in a registrar entity, which takes place in accordance with CMN Resolution No. 4.593, of 2017, has the potential to mitigate risks related to the non-existence and double assignment of assets...".

III - VERIFICATION AND SAFEKEEPING OF COLLATERAL, COLLECTION OF CREDIT RIGHTS AND SUBCONTRACTING OF SERVICE PROVIDERS

23. It is the manager's responsibility, in accordance with art. 36 of AN-II of CVM Res. 175, to verify the collateral for the purpose of certifying the existence, integrity and ownership of the collateral of the rights and credit representative instruments.

24. The regulation did not provide for the moment when this collateral verification must occur, whether pre- or post-acquisition of the collateral. Thus, the regulation provides that it must be carried out within the scope of the manager's diligence for the acquisition of credit rights, that is, considering its duty of diligence regarding the characteristics of the credit right.

25. In accordance with art. 33, III, of AN-II of CVM Res. 175, it is understood that, in the absence of hiring a custodian, when credit rights are eligible for registration, the manager must deliver the credit rights and respective collateral for safekeeping by the administrator.

26. Thus, this SSE understands that the activities of safekeeping of the collateral and ordinary collection of credit rights are the responsibility of the administrator, who, in accordance with art. 39, may subcontract the custodian for their performance. In the absence of a custodian, the activities listed in art. 39 become the responsibility of the administrator.

27. Likewise, it is understood that the administrator becomes responsible for the activities of art. 38 of AN-II of CVM Res. 175 if the credit rights are eligible for registration.

28. The administrator may subcontract other service providers to assist in its activities. In this case, for an FIDC that has the total of registered credit rights, this SSE understands that the administrator may hire an institution that can act as a custodian of an FIDC to perform the functions of art. 39, among others, without it being considered the custodian of the credit rights provided for in art. 30, II, and art. 37, of AN-II of CVM Res. 175.

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29. In this example, the hired institution would act as a service provider for the administrator and would not perform the role of custodian of the credit rights provided for in the regulation. The analogy is equally valid in the case where the manager hires the same institution, or another, to assist in the performance of its functions, such as, for example, analysis of eligibility criteria or verification of collateral.

30. It is worth highlighting that the hiring of third parties who may assist the administrator or the manager in the performance of their activities does not transfer the responsibility provided for in the regulation to such service providers, that is, the administrator and the manager remain responsible to the CVM.

31. Finally, in case of doubts, the Superintendence can be contacted by email at sse@cvm.gov.br.

Sincerely,

Bruno de Freitas Gomes
Superintendent of Securitization and Agribusiness - SSE

Document electronically signed by Bruno de Freitas Gomes Condeixa Rodrigues, Superintendent, on 09/27/2023, at 07:47, based on art. 6 of Decree No. 8.539, of October 8, 2015.
The authenticity of the document can be verified on the site https://super.cvm.gov.br/conferir_autenticidade, informing the verification code 1881465 and the CRC code EA04B6EB.
The authenticity of this document can be verified by accessing https://super.cvm.gov.br/conferir_autenticidade, and typing the "Verification Code" 1881465 and the "CRC Code" EA04B6EB.
Reference: Process No. 19957.009383/2021-43 SEI Document No. 1881465