CVM Instruction 409 (Repealed) - Investment Funds

FULL TEXT OF CVM INSTRUCTION NO. 409, OF AUGUST 18, 2004, WITH CHANGES INTRODUCED BY CVM INSTRUCTIONS NOS. 411/04, 413/04, 450/07, 456/07, 465/08, 512/11, 522/12, 524/12, 536/13 AND 549/14.

CVM INSTRUCTION NO. 409, OF AUGUST 18, 2004.

Provides for the constitution, administration, operation and disclosure of information of investment funds.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Board, in a meeting held on this date, in view of the provisions of arts. 2 and 19 of Law No. 6,385, of December 7, 1976, resolved to issue the following Instruction:

CHAPTER I SCOPE AND PURPOSE

Art. 1 This Instruction provides for general norms governing the constitution, administration, operation and disclosure of information of investment funds and investment funds in investment fund shares defined and classified in this Instruction.

Sole Paragraph. The following funds, governed by their own regulation, are excluded from the discipline of this Instruction: I – Equity Investment Funds; II – Investment Funds in Shares of Equity Investment Funds; III – Credit Rights Investment Funds; IV – Credit Rights Investment Funds within the scope of the Program for Incentive to the Implementation of Projects of Social Interest; V – Investment Funds in Shares of Credit Rights Investment Funds; VI – National Cinematic Industry Financing Funds; VII – Privatization Mutual Funds – FGTS; VIII – Privatization Mutual Funds – FGTS – Free Portfolio; IX – Emerging Companies Investment Funds; X – Index Funds, with Shares Negotiable on a Stock Exchange or Organized Over-the-Counter Market; XI – Emerging Companies Investment Mutual Funds – Foreign Capital;

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XII – Conversion Funds; XIII – Real Estate Investment Funds; XIV – Privatization Fund – Foreign Capital; XV – Incentivized Stock Mutual Funds; XVI – Cultural and Artistic Investment Funds; XVII – Innovative Emerging Companies Investment Funds; XVIII – Individual Programmed Retirement Funds – FAPI; and XIX – Non-Standardized Credit Rights Investment Funds. • Items XVII, XVIII and XIX added by CVM Instruction No. 450, of March 30, 2007

CHAPTER II CHARACTERISTICS AND CONSTITUTION

Section I Characteristics

Art. 2 The investment fund is a pooling of resources, constituted in the form of a condominium, intended for investment in securities and other assets available in the financial and capital markets, observing the provisions of this Instruction.

Sole Paragraph. The application abroad of resources originating from investment funds regulated by this Instruction shall comply with the regulation issued by the National Monetary Council.

Art. 2. The investment fund is a pooling of resources, constituted in the form of a condominium, intended for investment in financial assets, observing the provisions of this Instruction.

§ 1º For the purposes of this Instruction, financial assets are considered: I – public debt securities; II – derivative contracts; III – shares, debentures, subscription warrants, their coupons, rights, subscription receipts and split certificates, securities deposit certificates, debenture receipts, investment fund shares, promissory notes, and any other securities, other than those referred to in item IV, whose issuance or negotiation has been subject to registration or authorization by the CVM;

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III – provided that the issuance or negotiation has been subject to registration or authorization by the CVM, shares, debentures, subscription warrants, their coupons, rights, subscription receipts and split certificates, securities deposit certificates, debenture receipts, investment fund shares, promissory notes, and any other securities, other than those referred to in item IV; • Item with wording given by Instruction 456, of June 22, 2007. IV – collective investment contracts or securities, registered with the CVM and publicly offered, that generate a right of participation, partnership or remuneration, including resulting from the provision of services, whose earnings derive from the effort of the entrepreneur or third parties; V – certificates or receipts of deposits issued abroad backed by securities issued by Brazilian open companies; VI – gold, a financial asset, provided it is traded in an internationally accepted standard; VII – any titles, contracts and operational modalities of obligation or co-obligation of financial institutions; and VIII – warrants, commercial contracts for the purchase and sale of products, goods or services for future delivery or provision, titles or certificates representing these contracts and any other credits, titles, contracts and operational modalities, provided they are expressly provided for in the regulation.

§ 2º Without prejudice to the provisions of Resolution No. 2,801, of December 7, 2000, of the National Monetary Council, the fund's investment in any of the assets referred to in items II, IV and VIII of § 1º shall have financial settlement, or be subject to a contract that ensures the fund the right to its alienation before maturity, with guarantee of a financial institution or insurance company, observing, in the latter case, specific regulation of the Superintendence of Private Insurance – SUSEP.

§ 2º Assets whose settlement may occur through the delivery of products, goods or services shall: § 2º Financial assets whose settlement may occur through the delivery of products, goods or services shall: • Paragraph with wording given by CVM Instruction No. 522, of May 8, 2012.

I – be traded on a commodities and futures exchange that guarantees its settlement, observing the provisions of §5º of art. 16; or II – be subject to a contract that ensures the fund the right to its alienation before maturity, with guarantee of a financial institution or insurance company, observing, in the latter case, the regulation of the Superintendence of Private Insurance – SUSEP.

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• Paragraph with wording given by Instruction 456, of June 22, 2007.

§ 3º Only financial assets admitted to trading on stock exchanges, commodities and futures exchanges, or registered in a registration, custody or financial settlement system duly authorized by the Central Bank of Brazil or by the CVM, within their respective areas of competence, may compose the fund's portfolio.

§ 4º The registration referred to in § 3º shall not be required for shares of open-end investment funds.

§ 5º The financial assets referred to in § 1º include financial assets of the same nature traded abroad, in the cases and limits admitted in this Instruction, provided that: I – the possibility of their acquisition is expressly provided for in the regulation; and II – they are admitted to trading on stock exchanges, commodities and futures exchanges, or registered in a registration, custody or financial settlement system duly authorized in countries signatory to the Treaty of Asunción, or in other jurisdictions, provided that, in the latter case, supervised by a recognized local authority.

§ 5º The financial assets referred to in § 1º include financial assets of the same nature traded abroad, in the cases and limits admitted in this Instruction, provided that the possibility of their acquisition is expressly provided for in the regulation, and: § 5º The financial assets referred to in § 1º include financial assets of the same economic nature traded abroad, in the cases and limits admitted in this Instruction, provided that the possibility of their acquisition is expressly provided for in the regulation and: I – they are admitted to trading on stock exchanges, commodities and futures exchanges, or registered in a registration, custody or financial settlement system duly authorized in their countries of origin and supervised by a recognized local authority; or II – their existence has been ensured by a custodian entity contracted by the fund administrator, which is duly authorized to exercise this activity in its country of origin and supervised by a recognized local authority. • Paragraph with wording given by Instruction 456, of June 22, 2007.

II – their existence has been ensured by the fund's custodian, which shall contract, specifically for this purpose, third parties duly authorized to exercise the custody activity in countries signatory to the Treaty of Asunción or in other jurisdictions, provided that, in the latter case, supervised by a recognized local authority. • § 5º with wording given by Instruction 465, of February 20, 2008.

§ 6º For the purposes of § 5º, an authority is considered recognized when the CVM has entered into a mutual cooperation agreement that allows for the exchange of information on operations carried out in the markets supervised by it, or that is a signatory to the multilateral memorandum of understanding of the International Organization of Securities Commissions – IOSCO.

§ 7º For the purposes of this Instruction, BDRs classified as Level I, in accordance with the provisions of art. 3º, §1º, item I of CVM Instruction No. 332, of April 4, 2000, are equated to financial assets abroad.

§ 7º For the purposes of this Instruction: I – financial assets traded in countries signatory to the Treaty of Asunción are equated to financial assets traded in the national market; and II – BDRs classified as Level I, in accordance with the provisions of art. 3º, § 1º, item I and § 2º, of CVM Instruction No. 332, of April 4, 2000, are equated to financial assets traded abroad. • Paragraph with wording given by Instruction 456, of June 22, 2007.

I – financial assets traded in countries signatory to the Treaty of Asunción are equated to financial assets traded in the national market; II – BDRs classified as Level I, in accordance with the provisions of art. 3º, § 1º, item I and § 2º, of CVM Instruction No. 332, of April 4, 2000, are equated to financial assets traded abroad, except when the fund meets the requirements of § 3º of art. 95-B; and • Items I and II with wording given by CVM Instruction No. 512, of December 20, 2011.

III – the shares of funds of the "Stocks – Level I BDR" class are equated to financial assets traded abroad, except when the investor fund meets the requirements of § 3º of art. 95-B. • Item III included by CVM Instruction No. 512, of December 20, 2011.

§ 8º The registrations referred to in §§ 3º and 5º, item II, of this article shall be carried out in specific deposit accounts, opened directly in the name of the fund. • Art. 2º and §§ with wording given by Instruction 450, of March 30, 2007.

Art. 3º The fund shall be constituted by the deliberation of an administrator who meets the requirements established in this Instruction, who is responsible for approving, in the same act, the fund's regulation.

Sole Paragraph. Legal entities authorized by the CVM to exercise the professional activity of portfolio administration, in accordance with art. 23 of Law No. 6,385, of December 7, 1976, may be administrators of investment funds.

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Art. 4 The fund's name shall contain the expression "Investment Fund", added with the reference to the fund class, according to the classification established in Section II of Chapter VIII.

§1º The fund's name shall not be added with terms or expressions that induce undue interpretation regarding its objectives, its investment policy, or its target audience.

§2º The fund's name may be added with expressions that indicate the eventual specific tax treatment to which the fund or its quota holders are subject.

Sole Paragraph. The fund's name shall not be added with terms or expressions that induce undue interpretation regarding its objectives, its investment policy, its target audience or the eventual specific tax treatment to which the fund or its quota holders are subject, observing the provisions of the paragraphs of art. 92. • Original §§1º and 2º transformed into a sole paragraph by CVM Instruction No. 450, of March 30, 2007.

Art. 5 The fund may be constituted in the form of an open-end condominium, in which quota holders may request the redemption of their shares at any time, or closed-end, in which shares are only redeemed at the end of the fund's duration period.

Sole Paragraph. Share amortization is admitted in both closed-end and open-end funds, through the uniform payment to all quota holders of a portion of the value of their shares without reducing the number of shares issued, carried out in accordance with what the regulation or the general meeting of quota holders provides regarding this matter.

Art. 6 The fund shall be governed by the regulation, and must disclose its main characteristics to the public through a prospectus prepared in accordance with the provisions of Section V of Chapter III, except as provided in art. 110, item II of this Instruction.

Section II Registration of Funds

Art. 7 The operation of the fund depends on prior registration with the CVM, which shall be carried out through the submission, by the administrator, of the documents provided for in art. 8, through the Document Submission System available on the CVM's website on the worldwide computer network, and shall be considered automatically granted on the date stated in the respective submission protocol.

Art. 8 The registration request must be accompanied by the following documents and information: I – fund regulation, prepared in accordance with the provisions of this Instruction; II – data relating to the registration of the regulation in the deeds and documents registry; III – prospectus, prepared in accordance with the provisions of Section V, Chapter III, except as provided in art. 110, item II;

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IV – declaration by the fund administrator that it has signed the contracts mentioned in art. 57, if applicable, and that they are available to the CVM; V – name of the independent auditor; VI – fund's CNPJ registration; and VII – standardized form with the fund's basic information, according to the model available on the CVM's website on the worldwide computer network, duly filled out. VI – fund's CNPJ registration; VII – standardized form with the fund's basic information, according to the model available on the CVM's website on the worldwide computer network, duly filled out; and • Items VI and VII with wording given by CVM Instruction No. 522, of May 8, 2012.

VIII – fund sheet prepared in accordance with Annex III of this Instruction, in the case of an open-end fund that is not intended exclusively for qualified investors. • Item VIII included by CVM Instruction No. 522, of May 8, 2012.

Sole Paragraph. Items 5, 7, 8 and 9 of Annex III of this Instruction are exempt from presentation in the instruction of the fund registration request until the fund completes 1 (one) year of operation. • Sole Paragraph included by CVM Instruction No. 522, of May 8, 2012.

Sole Paragraph. The "Total Expense Ratio" field of item 4 and items 5, 7, 8 and 9 of Annex III of this Instruction are exempt from presentation in the instruction of the fund registration request until the fund completes 1 (one) year of operation. • Sole Paragraph with wording given by CVM Instruction No. 524, of August 06, 2012.

Art. 9 The CVM shall cancel the registration: I – of the open-end fund that has not complied with the provisions of art. 105; II – of the closed-end fund, when the minimum number of shares representative of its initial patrimony is not subscribed, within a period of 180 (one hundred and eighty) days, as provided in Section II of Chapter III.

Sole Paragraph. The CVM, due to a reasoned request and at its exclusive discretion, may extend the period provided for in item II, only once, for a period no longer than the initial period.

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Section III Shares

Art. 10. The fund's shares correspond to ideal fractions of its patrimony, and shall be book-entry and registered.

§ 1º The value of the share of the day is the result of the division of the net asset value by the number of fund shares, both determined at the end of the day, understood for the purposes of this Instruction, as the closing time of the markets in which the fund operates.

§2º The fund's shares shall confer equal rights and obligations on the quota holders.

§1º The fund's shares shall confer equal rights and obligations on the quota holders.

§ 2º The value of the share of the day is the result of the division of the net asset value by the number of fund shares, both determined at the end of the day, understood for the purposes of this Instruction, as the closing time of the markets in which the fund operates. • §§1º and 2º renumbered by CVM Instruction No. 450, of March 30, 2007.

§3º When referring to the investment funds referred to in arts. 93, 94 and 95, the value of the share of the day may be calculated from the net asset value of the previous day, duly updated for one day. • §3º added by CVM Instruction No. 411, of November 26, 2004.

§ 3º The fund's regulation may establish that the value of the share of the day will be calculated from the net asset value of the previous day, duly updated for 1 (one) day, when referring to investment funds: I – classified, in the form of art. 92, as "Short Term", "Fixed Income" and "Referenced"; or II – registered as "Exclusive" or "Pension", in accordance with arts. 111-A and 116. • §3º with wording given by CVM Instruction No. 450, of March 30, 2007

§4º For the purposes of the provisions of § 3º, any adjustments resulting from movements occurring during the day shall be recorded against the applications or redemptions of quota holders who carried out these movements, or against the fund's patrimony, as provided in the regulation. • §4º added by CVM Instruction No. 411, of November 26, 2004.

§5º When referring to a fund that operates in markets abroad, the end of the day may be considered as the closing time of the market indicated in the regulation. • §5º added by CVM Instruction No. 450, of March 30, 2007

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Art. 11. The quality of quota holder is characterized by the registration of the holder's name in the fund's quota holder register.

Sole Paragraph. The fund administrator, the third party contracted for this purpose, in the form of art. 57 and the intermediary institution referred to in Section IV of Chapter III of this Instruction, are responsible, as applicable, for carrying out the registration referred to in the caput of this article.

Art. 12. The share of an open-end fund cannot be the object of assignment or transfer, except by judicial decision or universal succession.

Art. 12. The share of an open-end fund cannot be the object of assignment or transfer, except by judicial decision, execution of guarantee or universal succession. • Caput with wording given by CVM Instruction No. 411, of November 26, 2004.

§1º The share of a closed-end fund may be transferred, through an assignment and transfer term, signed by the assignor and the assignee, or through a stock exchange or organized over-the-counter entity in which the fund's shares are admitted to trading.

§2º The transfer of ownership of closed-end fund shares is conditioned on the administrator's verification of compliance with the formalities established in the regulation and in this Instruction.

Art. 12-A. The regulation of the Stock Fund – Access Market constituted in the form of a closed-end condominium may authorize the fund to buy back its own shares, in the organized market in which the shares are admitted to trading, provided that:

I – the buyback value of the share is lower than the book value of the share of the day immediately preceding the buyback; II – the repurchased shares are cancelled; and III – the volume of buybacks does not exceed, in a period of 12 (twelve) months, 10% (ten percent) of the total shares of the fund.

§ 1º For the purposes of the provisions of the caput, the fund administrator must announce the intention to buy back, through a market communication filed, at least 14 (fourteen) days in advance of the date on which it intends to start the buyback, with the entity administering the organized market in which the shares are admitted to trading.

§ 2º The communication referred to in § 1º of this article: I – shall be valid for 12 (twelve) months, counted from the date of its filing; and II – shall contain information on the existence of a buyback program and the quantity of shares effectively repurchased in the last 3 fiscal years.

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§ 3º The limit referred to in item III of the caput shall refer to the shares issued by the fund on the date of the communication referred to in § 1º of this article.

§ 4º The Stock Fund – Access Market is prohibited from buying back its own shares: I – whenever the administrator or manager has knowledge of information not yet disclosed to the market regarding its investments that could substantially alter the value of the share or influence the quota holder's decision to buy, sell or hold their shares; II – in a way that influences the regular functioning of the market; and III – with the exclusive purpose of obtaining financial gains from expected variations in the price of the shares. • Art. 12-A added by CVM Instruction 549, of June 24, 2014.

Art. 13. Quota holders shall be liable for any negative net asset value of the fund.

Sole Paragraph. Without prejudice to the provisions of the caput, the administrator and the manager, if any, shall be liable to the quota holders for non-compliance with the investment policy or the concentration limits provided for in the regulation.

Art. 13. Quota holders shall be liable for any negative net asset value of the fund, without prejudice to the liability of the administrator and the manager, if any, in case of non-compliance with the investment policy or the concentration limits provided for in the regulation and in this Instruction. • Art. 13 with wording given by CVM Instruction 450, of March 30, 2007

Section IV Issuance and Redemption of Shares

Art. 14. In the issuance of the fund's shares, the value of the share of the day or the day following the effective availability, by the administrator or intermediary, of the invested resources shall be used, according to the provisions of the regulation, except for the hypotheses of arts. 93, 94 and 95.

Art. 14. In the issuance of the fund's shares, the value of the share of the day or the day following the effective availability, by the administrator or intermediary, of the invested resources shall be used, according to the provisions of the regulation. • Caput with wording given by CVM Instruction No. 411, of November 26, 2004.

Sole Paragraph. The full payment of the value of the fund's shares must be made in national currency, except for the hypothesis of item I of art. 110.

Art. 15. The redemption of fund shares shall follow the following rules:

I – the regulation shall establish the period between the

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