CVM Instruction 450 (Revoked)

CVM INSTRUCTION NO. 450, OF MARCH 30, 2007, WITH THE CHANGES INTRODUCED BY CVM INSTRUCTION NO. 555/14.

Amends CVM Instructions No. 409, of August 18, 2004, No. 306, of May 5, 1999, No. 387, of April 28, 2003, and No. 391, of July 16, 2003, and revokes CVM Instructions No. 316, of October 15, 1999, No. 322, of January 14, 2000, No. 326, of February 11, 2000, No. 327, of February 18, 2000, No. 329, of March 17, 2000, No. 336, of May 15, 2000, and No. 338, of June 21, 2000.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Board, in a meeting held on March 2, 2007, 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:

Art. 1. Arts. 1, 2, 4, 10, 13, 15, and 16 of Instruction No. 409, of August 18, 2004, shall enter into force with the following wording:

“Art. 1. .........................................................................
........................................................................................
XVII – Investment Funds in Innovative Start-up Companies; XVIII – Individual Programmed Retirement Funds – FAPI; and XIX – Investment Funds in Non-Standardized Credit Rights.” (NR)

“Art. 2. An 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.

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

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

§ 3. Only financial assets admitted to trading on stock exchanges, commodity 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.

§ 4. Quotas of open-end investment funds shall not be subject to the registration referred to in § 3.

§ 5. The financial assets referred to in § 1 include financial assets of the same nature traded abroad, in the cases and limits admitted by this Instruction, provided that:
I – the possibility of their acquisition is expressly provided for in the regulations; and II – they are admitted to trading on stock exchanges, commodity 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.

§ 6. For the purposes of § 5, an authority is considered recognized with which the CVM has signed a mutual cooperation agreement allowing the exchange of information on transactions conducted in markets supervised by it, or that is a signatory to the Multilateral Memorandum of Understanding of the International Organization of Securities Commissions – IOSCO.

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

§ 8. The registrations referred to in §§ 3 and 5, item II of this article shall be carried out in specific deposit accounts, opened directly in the name of the fund.” (NR)

“Art. 4. .........................................................................

Sole paragraph. The fund's denomination 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.” (NR)

“Art. 10. .........................................................................

§1. The fund's quotas shall confer equal rights and obligations to the quota holders.

§ 2. The value of the day's quota results from the division of the net asset value by the number of fund quotas, both determined at the close of the day, understood for the purposes of this Instruction, the closing time of the markets in which the fund operates.

§ 3. The fund's regulations may establish that the value of the day's quota will be calculated from the previous day's net asset value, duly updated by 1 (one) day, when it comes 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 the form of Arts. 111-A and 116.
........................................................................................

§5. When it comes to a fund that operates in markets abroad, the value of the day's quota may be calculated at the closing time of the market indicated in the regulations.” (NR)

“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-observance of the investment policy or concentration limits provided for in the regulations and this Instruction.” (NR)

“Art. 15. .........................................................................
.........................................................................................
II – the conversion of quotas shall take place at the value of the day's quota on the date of conversion, observing, if applicable, the method of calculating the day's quota admitted by § 3 of Art. 10; III – the redemption payment shall be made by check, credit to a checking account, or payment order, within the period established in the regulations, which shall not exceed 5 (five) business days, counted from the date of quota conversion, except for the hypothesis of item IV of Art. 110; .......................................................................................” (NR)

“Art. 16. .........................................................................
.........................................................................................
§ 1. The administrator is responsible for the non-use of the powers conferred in the caput of this article, if its omission causes damage to the remaining quota holders.
........................................................................................” (NR)

Art. 2. Chapter III of Instruction 409/04 shall enter into force with the following wording:

“CHAPTER III
OF THE SUBSCRIPTION AND DISTRIBUTION OF QUOTAS
Section I
Of the Registration of Quota Distribution
Art. 19. ........................................................................
Art. 20. ........................................................................
Art. 21. ........................................................................
Section II
Of the Registration of Quota Distribution of Closed-End Funds
Art. 22. ..........................................................................
Art. 23. ..........................................................................
Art. 24. ..........................................................................
Art. 25. ..........................................................................
Art. 26. ..........................................................................
Art. 27. ..........................................................................
Art. 28. ..........................................................................
Art. 29. ..........................................................................
Section III
Of the Subscription of Quotas
Art. 30. ..........................................................................
........................................................................................
§ 2. The regulations and, if applicable, the prospectus shall be delivered by the administrator in their current and updated versions.
Art. 31. ..........................................................................
Art. 32. ..........................................................................
Section IV
Of the Subscription of Quotas on Behalf and Order Art. 33. The investment fund may contract, in writing, intermediary institutions that are part of the securities distribution system to carry out the distribution of quotas, authorizing them to carry out the subscription of quotas of the fund on behalf and order of their respective clients.

Art. 34. For the adoption of the procedure referred to in this section, the administrator and the intermediary institution shall establish, in writing, the obligation of the latter to create a complementary register of quota holders, specific for each fund in which such a mode of quota subscription occurs, in such a way that:
........................................................................................
Art. 35. ..........................................................................
Art. 36. ..........................................................................
Art. 37. ..........................................................................
Art. 38. ..........................................................................
Section V
Of the Prospectus
Art. 39. ..........................................................................
Art. 40. ..........................................................................
........................................................................................
X – information on the fund's risk administration policy, including with regard to the methods used for managing these risks;
........................................................................................
XIII – information disclosure policy, including portfolio composition, which shall be identical for all who request it;
........................................................................................
§4. If the administrator has contracted a risk rating agency, the prospectus shall contain a warning that the maintenance of this service is not mandatory, and may be discontinued, at the discretion of the fund administrator or the general meeting of quota holders.

§ 5. In the description of the risk administration policy, the prospectus shall contain a warning that the methods used by the administrator to manage the risks to which the fund is subject do not constitute a guarantee against potential asset losses that may be incurred by the fund.

§ 6. Funds that use the prerogative referred to in §3 of Art. 10 shall mention in the prospectus, as an indication of the risks assumed by the fund referred to in item IX of the caput of this article, the possibility of losses resulting from volatility in the prices of the assets that make up its portfolio.” (NR)

Art. 3. Arts. 41 and 44 of Instruction 409/04 shall enter into force with the following wording:

“Art. 41. .........................................................................
........................................................................................

VI – investment policy, in order to characterize the class of the fund, in accordance with the provisions of Art. 92;
........................................................................................
X – conditions for the application and redemption of quotas, including with regard to the provisions of Art. 10, §3;
........................................................................................
XV – information disclosure policy, including those related to portfolio composition;
........................................................................................
XVIII - risk administration policy, with the description of the methods used by the administrator to manage the risks to which the fund is subject.

§1. ..................................................................................
I – the maximum percentage of investment in securities and securities issued by the administrator, manager, or a company affiliated with them, observing the provisions of Art. 86 of this Instruction;
........................................................................................
III – the maximum percentage of investment in securities and securities of the same issuer, observing the limits of Art. 86 of this Instruction; and
........................................................................................

§2. The information disclosure policy referred to in item XV of the caput shall cover at least the following:
........................................................................................

§3. The disclosure policy shall be identical for all investment consultants, rating agencies, and other interested parties.
........................................................................................

§ 5. If the fund contracts a risk rating agency:
I – the remuneration of the rating agency shall constitute an expense of the administrator; II – the contract shall contain a clause obliging the risk rating agency to, immediately, disclose on its website and communicate to the CVM and the administrator any alteration of the fund's classification, or the termination of the contract; III – in the hypothesis referred to in item II, the administrator shall, immediately, disclose a relevant fact to the market; and IV - the information provided to it may include those provided to quota holders

§ 6. The termination of the contract signed with a risk rating agency shall only be admitted upon observance of a 180 (one hundred and eighty) day waiting period, and the presentation, at the end of this period, of a risk classification report prepared by the same agency is mandatory.

§7. If the hypothesis referred to in §6 is verified, the prospectus shall, from the date of termination, include a summary of the last report prepared by the rating agency, the history of the grades obtained by the fund, the indication of the electronic address where the full version of the report can be consulted, and the information that it is also available at the administrator's headquarters, observing, still, §§ 1 and 2 of Art. 39.

§ 8. The remuneration of a risk rating agency contracted by the fund may constitute an expense of the fund provided that:
I – it is deducted from the management fee; and II – such possibility is stated in the regulations.” (NR)

“Art. 44. The administrator shall send, through the Document Submission System available on the CVM's website, on the date of the start of validity of the changes deliberated in the assembly, the following documents:
........................................................................................” (NR)

Art. 4. Chapter VI of Instruction No. 409/04 shall enter into force with the following wording, also added Section IV-A and Art. 65-A:

“CHAPTER VI
OF THE ADMINISTRATION
Section I
Of General Provisions
Art. 56. .........................................................................

§1. The administrator may contract, in the name of the fund, with duly qualified and authorized third parties, the following services, excluding any others not listed:
........................................................................................

Art. 57. The hiring of duly qualified or authorized third parties to provide administration services, as mentioned in Art. 56, is a faculty of the fund, being mandatory the hiring of independent audit services (Art. 84) and, when the administrator is not duly authorized or accredited for its provision, the services provided for in items III, IV, V, and VI.
........................................................................................

Art. 58. .........................................................................
Art. 59. .........................................................................
Art. 60. .........................................................................

Section II
Of Remuneration
Art. 61. .........................................................................
........................................................................................

§ 6. In addition to the expenses with the services referred to in the caput, the management fee may cover expenses with the service indicated in item VII of § 1 of Art. 56, observing the provisions of §§ 5 and 7 of Art. 41.

Art. 62. .........................................................................
Art. 63. .........................................................................

Section III
Of Prohibitions
Art. 64. .........................................................................
........................................................................................

Sole paragraph. Investment funds may use their assets to provide guarantees for their own operations, as well as lend and borrow securities and securities in loans, provided that such loan transactions are conducted exclusively through a service authorized by the Central Bank of Brazil or by the CVM.

Section IV
Of the Obligations of the Fund Administrator
Art. 65. .........................................................................
........................................................................................
VII – keep updated with the CVM the list of service providers contracted by the fund, as well as other registration information;
........................................................................................

Section IV–A
Of Conduct Norms
Art. 65–A. The administrator and the manager are obliged to adopt the following conduct norms:
I – carry out their activities always seeking the best conditions for the fund, employing the care and diligence that every active and upright man usually dispenses to the administration of his own business, acting with loyalty towards the interests of the quota holders and the fund, avoiding practices that may harm the fiduciary relationship maintained with them, and being liable for any infractions or irregularities that may be committed under their administration or management;

II – exercise, or diligently ensure that they are exercised, all rights arising from the assets and activities of the fund, except as provided in the regulations regarding the policy on the exercise of the fund's voting rights; and

III – employ, in the defense of the quota holder's rights, the diligence required by the circumstances, practicing all acts necessary to ensure them, and adopting the appropriate judicial measures.

Sole paragraph. The administrator and the manager must transfer to the fund any benefit or advantage they may achieve as a result of their status, admitting, however, that the administrator and manager of a fund of funds are remunerated by the administrator of the invested fund.

Section V
Of the Substitution of the Administrator and the Manager
Art. 66. .........................................................................
........................................................................................

Art. 67. .........................................................................
........................................................................................” (NR)

Art. 5. Arts. 68, 71, 72, and 76 shall enter into force with the following wording:

“Art. 68. .........................................................................
........................................................................................

§ 2. The omitted operations based on the previous paragraph shall be disclosed in the form of item III of the caput within a maximum period of:
I – 30 (thirty) days, non-extendable, in funds of the “Short Term” and “Referenced” classes; and II – in other cases, 90 (ninety) days after the end of the month, this period may be extended once, on an exceptional basis, and based on a reasoned request submitted for CVM approval, up to a maximum period of 180 (one hundred and eighty days). ........................................................................................” (NR)

“Art. 71. .........................................................................
........................................................................................
IV – standardized form with the basic information of the fund, called “Fund Information Statement”, whenever there is a change in the regulations, on the date of the start of validity of the changes deliberated in the assembly. ........................................................................................” (NR)

“Art. 72. .........................................................................

§ 1. The relevant fact shall be immediately communicated through the Document Submission System available on the CVM's website, with the information disclosed on the CVM's address on that network

§ 2. Examples of relevant facts, without exclusion of others, are any modifications related to the matters dealt with in Arts. 40 and 41 of this Instruction.” (NR)

“Art. 76. .........................................................................
II – additionally contemplate the disclosed information, the monthly yield and the accumulated yield over the last 12 (twelve) months, not being mandatory”

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