CMN Resolution No. 2406 on the Establishment and Operation of Foreign Capital Emerging Company Investment Funds

RESOLUTION NO. 002406

Dispenses on the establishment and operation of investment funds in emerging companies - foreign capital.

The CENTRAL BANK OF BRAZIL, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the MONETARY COUNCIL, in a session held on June 25, 1997, considering the provisions of Laws Nos. 4,728 of July 14, 1965, and 6,385 of December 7, 1976, Article 81, paragraph 6, of Law No. 8,981 of January 20, 1995, and Decree-Laws Nos. 1,986 of December 28, 1982, and 2,285 of July 23, 1986,

RESOLVED:

Article 1. Authorize the establishment and operation of investment funds in emerging companies - foreign capital, intended for the raising of external resources for application in a diversified portfolio of securities issued by emerging companies, headquartered in the Country.

Sole Paragraph. The acquisition of quotas of the funds referred to in this article is exclusive to individuals or legal entities, resident, domiciled, or with headquarters abroad, and foreign collective investment funds and other entities.

Article 2. The Securities and Exchange Commission - CVM must regulate the establishment, operation, and administration of investment funds in emerging companies - foreign capital.

Paragraph 1. The regulation referred to in this article shall include, at a minimum, the following:

I - mandatory constitution of the fund in the form of a closed condominium;

II - criteria for the exercise of fund administration;

III - requirements for the composition and diversification of fund investments;

IV - conditions for the issuance, placement, and negotiability of fund quotas;

V - maximum duration of the fund.

Paragraph 2. The establishment and operation of the funds referred to in this Resolution depend on prior authorization from the CVM.

Article 3. Resources entered into the Country with a view to carrying out investments in accordance with this Resolution are subject to registration with the Central Bank of Brazil, in accordance with Resolution No. 2,337 of November 28, 1996.

Article 4. As a consequence of the provision in the preceding article, item XI is added to paragraph 2 of Article 2 of Resolution No. 2,337 of November 28, 1996, with the following wording, renumbering the current item to item XII:

"XI - external investments in mutual investment funds in emerging companies - foreign capital, in accordance with Resolution No. 2,406 of June 26, 1997, and regulation issued by the Securities and Exchange Commission;".

Article 5. The tax treatment provided for in Article 81 of Law No. 8,981 of January 20, 1995, applies to investment funds in emerging companies - foreign capital, in accordance with the provisions of Article 2 of Decree-Law No. 2,285 of July 23, 1986.

Article 6. Establish that, for a period of 180 (one hundred and eighty) days counted from the date of entry into force of this Resolution, renewable for an equal period, at the discretion of the CVM, mutual investment funds in emerging companies, constituted in accordance with CVM Instruction No. 209 of March 25, 1994, and subsequent regulation, may be transformed or split into, incorporated into, or merged with investment funds in emerging companies - foreign capital, observing the provisions of this Resolution.

Article 7. The Central Bank of Brazil and the CVM are authorized, each within their sphere of competence, to adopt measures and issue complementary regulations necessary for the execution of the provisions of this Resolution.

Article 8. This Resolution enters into force on the date of its publication.

Brasília, June 26, 1997

Gustavo Jorge Laboissière Loyola
President