Circular Letter No. 2/2024/CVM/SMI: Ancord Accreditation System Update and Interpretation of 'Equal Prominence'

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Circular Letter No. 2/2024/CVM/SMI
Rio de Janeiro, April 25, 2024.

To Investment Advisors

Subject: Changes to the Ancord accreditation system and interpretation of the expression “equal prominence” within the scope of Article 24, Paragraph 1 of CVM Resolution 178.

Dear Advisors,

1. This Circular Letter aims to inform about a new functionality made available in the investment advisor accreditation system maintained by Ancord, an entity accredited by the CVM, as described in CVM Resolution 178. This is a tool that enables a natural person investment advisor to inform that they have ceased to act for a specific legal person investment advisor of which they are a partner. This Circular Letter also presents the technical area's interpretation regarding the interpretation of the expression “with at least equal prominence,” provided for in Paragraph 1 of Article 24 of CVM Resolution No. 178/2023.

Changes for Inactive Partners

2. As is known, an investment advisor who is a natural person may, under the provisions of Article 5, items of CVM Resolution 178, act in two ways: hired directly by one or more intermediaries (item I) or be a partner, employee, or contractor of a legal person investment advisor (item II). In this second case, they act as an indirect contractor of the contracting intermediary(ies) and can only be linked to a single legal person investment advisor.

3. However, CVM Resolution 178 ceased to require that the advisor acting indirectly be a partner of the legal person investment advisor, admitting, in addition to the partner link, the link of contractor or employee. Furthermore, the new regulatory framework began to admit that investment advisor companies have capital partners who do not act in the advisory activity.

4. In view of these changes, Ancord has updated its accreditation system and has allowed, for some time, for companies to inform that some of their partners are inactive. From the moment an advisor appears as an inactive partner in the registry of the legal person investment advisor through which they formerly acted, they can then link and act through another legal person investment advisor, as a partner, contractor, or employee.

5. In addition, a new improvement of this functionality, which is now available as of this date, allows the advisor themselves to inform ANCORD that they are no longer acting in a specific company. Upon receiving such information, the entity will forward it to the company and its contracting intermediary(ies) and will wait three business days to confirm the change in the advisor's status to inactive partner. This period is necessary for the company and the intermediary(ies) to, if they have not already done so, terminate the access that the advisor may maintain in their systems.

6. It is worth noting that the tool described here aims solely to reflect the reality of the advisor's activity, with the simultaneous activity by two offices remaining prohibited.

7. Any contractual issues existing between a natural person advisor and the company fall outside the scope of CVM's action and must be resolved between the parties.

8. It is also important to highlight that the designation as an inactive partner has no relation to the cancellation of registration. In fact, appearing as inactive allows the advisor to link to another office. Thus, advisors who intend to cease acting permanently must also request, after confirmation of the inactive status, the cancellation of their registration.

9. Ancord itself may provide further clarification on the operational details of the new tool and the other functionalities of the accreditation system, via the email aai@ancord.org.br.

Interpretation of the expression “with at least equal prominence,” provided for in Article 24, Paragraph 1 of CVM Resolution 178

10. Article 24, Paragraph 1, of CVM Resolution 178 prohibits investment advisors from presenting themselves by logos or distinctive signs without the identification of the intermediary in whose name they are acting. Furthermore, the provision determines that this visual presentation of the intermediary receives, at minimum, equal prominence to the presentation of the advisor themselves.

11. As clarified in the Public Hearing Report SDM 05/21 (“Report”), “the possibility of AI activity outside an exclusivity regime does not remove its character as an agent of the intermediary nor the responsibilities of the intermediary for acts performed in their name by the AI,” and the provision seeks “to provide an immediate and clear visualization of this relationship between the AI and the intermediary for the external public” (emphasis added, p. 50 of the Report).

12. This is an important command, as the advisor acts, under the terms of the regulation, as an agent and under the responsibility of the intermediary that hires them. Thus, a presentation that did not make clear who this intermediary is would not be acceptable.

13. It is important that the image or advertising material clearly illustrates, in addition to the distinctive sign of the investment advisor, the logo of the intermediary to which the professional is linked. For this, the logos need to occupy visually notable spaces, but it is not required that they have the same size or dimensions.

14. In this regard, the SMI clarifies that it does not consider it mandatory for the intermediary's logo to be equal to or greater in dimensions than the advisor's logo. In the view of this Superintendence, provided that the “immediate” and “clear” verification of the link between the investment advisor and the intermediary is preserved, the image or advertising material is in accordance with Paragraph 1 of Article 24 of CVM Resolution No. 178/2023, regardless of detailed evaluations regarding the dimensional proportion of the logos or distinctive signs of these agents. What is expected is that the intermediary's logos are not hidden and/or relegated to positions of lesser “prominence.”

15. Finally, the CVM clarifies that it does not intend to interfere with the magnitude, dimension, extent, area, volume, length, height, width, thickness, and/or depth of the logo and distinctive signs, on one hand, of the intermediaries and, on the other hand, of the investment advisors. The CVM wishes to preserve the freedom of these economic agents in formulating their choices regarding the subject, but expects that such choices be made in good faith and honor the “immediate” and “clear” identification of the intermediary in the advertising materials of investment advisors, so that such an approach occurs for the benefit of the investor.

Sincerely,

André Francisco Luís de Alencar Passaro
Superintendent of Market and Intermediary Relations (SMI)

Document electronically signed by Andre Francisco Luiz de Alencar Passaro, Superintendent, on 04/25/2024, at 17:00, 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://super.cvm.gov.br/conferir_autenticidade, by informing the verification code 2023829 and the CRC Code 3DD6BB82.
This document's authenticity can be verified by accessing https://super.cvm.gov.br/conferir_autenticidade, and typing the "Verification Code" 2023829 and the "CRC Code" 3DD6BB82.
Reference: Process No. 19957.002774/2024-80 SEI Document No. 2023829