CVM Circular Letter CVM/SIN 05/22

SECURITIES COMMISSION OF BRAZIL
Seven of September Street, 111/2-5th and 23-34th Floors - Center - Rio de Janeiro - RJ - CEP: 20050-901 - Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br

CIRCULAR LETTER/CVM/SIN/No. 5/2022 Rio de Janeiro, May 18, 2022

To the administrators of investment funds regulated by CVM Instruction No. 555

Subject: Application by investment funds in BDRs backed by shares of index funds ("ETF") constituted in other jurisdictions ("BDR-ETF")

Dear Sirs,

1. CVM Instruction No. 555 provides, in its Article 2, VI, that financial assets abroad are considered those "traded abroad that have the same economic nature as financial assets in Brazil."

2. On the other hand, Article 100, II, of the same Instruction states that "BDRs classified as Level I are equivalent to financial assets abroad"; and Article 115, § 1º, I, "d", states that BDRs classified as Level II and III make up the minimum limit of 67% of domestic assets eligible to compose the portfolio of equity investment funds.

3. In this context, we remind you that CVM Resolution No. 3 began to regulate BDR-ETFs, without, however, specifying, for the exclusive purposes of the investment modalities allowed for investment funds regulated by CVM Instruction No. 555, whether such assets should be treated as domestic, as admitted for Levels II and III BDRs; or as assets abroad, to a similar extent as seen for Level I BDRs.

4. In this context, the interpretation of this technical area regarding BDR-ETFs is that they should be understood as domestic assets for the purposes of verifying the eligibility and limits of their acquisition by investment funds regulated by CVM Instruction No. 555.

5. As a basis for this interpretation, we verify that, since they are traded in the country, such assets would not fall under the concept of "financial assets abroad" provided for in Article 2, VI, of CVM Instruction No. 555, nor is there a specific provision in this same regulation that provides for their treatment as an asset abroad, as is the case, for example, for Level I BDRs.

6. Furthermore, we understand that this understanding follows in line with the interpretation published by this technical area, through CIRCULAR LETTER/CVM/SIN/No. 1/2021, for ETFs traded in Brazil that track foreign indices.

Sincerely,

Digitally signed by
DANIEL WALTER MAEDA BERNARDO
Superintendent of Institutional Investor Supervision