CVM Instruction No. 537 of September 16, 2013 (Revoked)

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

Amends provisions of CVM Instruction No. 359, of January 22, 2002.

THE ACTING PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM makes public that the Collegiate Board, in a meeting held on August 7, 2013, in view of the provisions of Arts. 2, 4, I and 19 of Law No. 6,385, of December 7, 1976, APPROVED the following Instruction:

Art. 1. Arts. 2, 8, 11, 12, 14, 17 to 20, 29, 30, 35, 36, 39, 49, 55, 58 to 62, 65, 66, 70 and 76 of CVM Instruction No. 359, of January 22, 2002, shall enter into force with the following wording:

“Art. 2. The fund is a pooling of resources destined for investment in a portfolio of financial assets that seeks to reflect the variations and profitability of a reference index, for an indefinite term.

§1. For the purposes of this Instruction, a reference index is defined as a specific market index recognized by the Securities and Exchange Commission - CVM, to which the fund's investment policy is associated.

§2. The approval of the index considers, at a minimum, the following criteria:
I - indices whose complete calculation methodology is not made available free of charge and via the worldwide computer network, including its composition, the weights of each financial asset, the rebalancing criteria and its frequency, and other parameters necessary for its replication, are not accepted; II - indices whose calculation methodology does not include predetermined rules and objective criteria are not admitted; III - the frequency of index rebalancing cannot prevent investors from replicating it; IV - the index cannot be subject to retroactive adjustments; V - the chosen index must represent a clear and unique investment objective, without conditions;

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

VI - indices whose provider is a related party to the administrator or the manager are not accepted; VII - indices whose provider receives payments from potential issuers for their inclusion as components are not accepted; VIII - the index's performance must be public, have broad dissemination and easy access via the worldwide computer network; and IX - indices that represent multiples of other indices, the inverse of these indices, or multiples of their inverse will not be accepted;

§3. The weights mentioned in item I of §2 may be published retrospectively after each index rebalancing, with the deadline being the date of the subsequent rebalancing;

§4. For the purposes of item V, conditions are understood to be any clauses or rules that imply, under certain circumstances, that the index's performance does not reflect the return of the theoretical portfolio of assets.

§5. The formation of index funds is prohibited:
I - leveraged;
II - inverse, which seek to reflect a performance opposite to that of the reference index; or III - synthetic, which seek to reflect the performance of the reference index through derivative contracts, except through positions in futures markets provided for in this Instruction.” (NR)

“Art. 8. ...
...

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

§1. The declaration referred to in item VI may be sent directly to the CVM by the stock exchange or the organized over-the-counter market entity.

§2. After authorization for operation is granted by the CVM, and prior to the start of share distribution, the fund's constitution document and bylaws must be registered at a deeds and documents registry.” (NR)

“Art. 11. ...
§1. ...
...
V - provision of custody services for the financial assets comprising the fund's portfolio.
...” (NR)

“Art. 12. The fund's bylaws must establish its policy regarding the exercise of voting rights at meetings of holders of securities belonging to the portfolio, and this policy and the actual exercise of such rights must serve the objectives and interests of the fund itself. ... §2. The shareholder may directly exercise the voting right at a general meeting of holders of securities belonging to the fund's portfolio, and for this purpose, must manifest its intention to the administrator within the period established in the bylaws, with the minimum advance notice necessary for the operation to be carried out.

§3. In the case of the preceding paragraph, it is incumbent upon the administrator to provide the shareholder with a free loan, exempt from rental charges, of the securities necessary for the exercise of the voting right, promoting the transfer of the same with the entity responsible for their custody, through the pledge of the fund shares owned by the shareholder.

§4. The shares pledged in the manner of the preceding paragraph may simultaneously serve as collateral for more than one loan of securities.

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

§5. The quantity of securities to be lent, in the manner of § 3, must be calculated based on the proportion of shares held by the applicant relative to the assets owned by the fund at the end of the day of the manifestation of interest in exercising the voting right.

§6. The shareholder must return to the fund the lent securities within 1 (one) business day after the holding of the meeting, and may not alienate its shares given as collateral.

§7. The administrator may require the shareholder to reimburse any direct costs incurred on the loan, provided that these costs are previously disclosed, in the manner of item XI of Art. 39.

§8. The bylaws may provide that, in exceptional cases, and exclusively in the maximum period of 5 (five) business days preceding the alteration of the official composition of the theoretical portfolio of the reference index, the lending of securities referred to in this article may be partially restricted, provided that such restriction is limited to the portion of the securities owned by the fund whose lending may cause significant damage to its objective.

§9. In the case of the preceding paragraph, the administrator must disclose, in the manner provided for in Art. 40, a list with the identification and quantity of the securities owned by the fund that are not being made available for lending in the manner of this article, and must, moreover, justify the reasons why such securities will not be available, as provided in the preceding paragraph.” (NR)

“Art. 14. ...
IV - carry out operations with shares outside the stock exchange or organized over-the-counter market, except in the cases of:
... b) exercise of preemptive rights; and c) operations previously authorized by the CVM.

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

...” (NR)

“Art. 17. ...
...
§2. The rules in force for the lending of securities apply, where applicable, to the lending of fund shares.” (NR)

“Art. 18. Observed the fund's bylaws and the specific procedures provided for in this section, the portfolio established for the subscription or redemption of the fund's shares may contain:
I - financial assets that compose the reference index; II - national currency; III - a portion not exceeding 5% (five percent) of the amount involved in the operation, encompassing financial assets that are not part of the reference index; and IV - a portion not exceeding 20% (twenty percent) of the amount involved in the operation, encompassing financial assets that are not part of the reference index, but that are of the same nature as those, however of different issuances, only in the case of funds that seek to reflect the variations and profitability of fixed-income indices.

§1. Financial assets of the same nature are understood to be those that have the same level of risk for a similar return expectation by presenting similarities regarding remuneration, the issuer's credit risk, liquidity risk, and the date of maturity.

§2. In the subscription of fund shares, it is optional for the administrator to accept that more than 1 (one) investor delivers, simultaneously, portfolios of financial assets that, together, fit into the proportion established in the portfolio by the manager, in which case, the number of shares belonging to each investor must be calculated proportionally to the market value of the portfolios delivered to the fund.

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

§3. With the objective of adjusting the portfolio to the reference index, and in accordance with the provision in the fund's bylaws, the administrator may accept or deliver, in the subscription or redemption of the fund's shares, individual financial assets or national currency.

§4. In the case of the preceding paragraph, and if there are requests for subscription or redemption of shares that exceed the need to adjust the fund's portfolio, the acceptance or delivery of financial assets must be prorated among the shareholders, based on the quantity of the financial asset offered or demanded by each one.

§5. The hypothesis described in § 3 is only admitted if, for the financial assets object of the operation, a consistent mark-to-market is performed and verifiable according to the evaluation and accounting appropriation criteria and other requirements contained in the Investment Funds Accounting Plan - COFI, issued by the CVM.

§6. The subscription and redemption of shares must be carried out without the charging of any fee or expense, except for entry and exit fees, if applicable, and expenses provided for in §7 arising from operations in national currency.

§7. In the case of the provision of item II of the caput, the expenses arising from subscription or redemption in national currency must be:
I - calculated per subscription or redemption operation; and II - charged directly to the shareholder who made the resources available for subscription or who requested the redemption.

§8. The subscription and redemption of shares must be carried out within the respective periods set forth in the bylaws, which cannot be longer than necessary for the settlement of purchase and sale operations of the financial assets accepted in the subscription or redemption portfolios of the fund's shares.

§9. Changes in the composition of the portfolios accepted for subscription or redemption must be disclosed to the market in the manner of item X of Art. 39 before the opening of trading of the fund's shares, and changes are prohibited during trading hours.

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

§10 As established in the fund's bylaws, during the period of suspension of share subscription referred to in Art. 22, redemptions may be carried out based on the ideal fraction of the fund's portfolio.

§11 In the process of subscription or redemption of shares, coupons, rights, subscription receipts, and demutualization certificates related to those financial assets, if any, existing in the fund's portfolio at the time of the subscription or redemption request, may be added to the financial assets referenced in the caput, as established in the fund's bylaws.” (NR)

“Art. 19. The fund's bylaws may establish minimum and maximum lots of financial assets for the issuance or redemption of shares, based on the portfolio established by the manager.” (NR)

“Art. 20. Both in the issuance and redemption of shares, the net asset value calculated at the close of the day of its request must be used.” (NR)

“Art. 29. ...
...
VIII - other means of access to information by shareholders if any, such as telephone lines, administrator's address or electronic mail; ...” (NR)

“Art. 30. ...
...
§3. If after the third call for a general meeting there is no quorum for deliberation regarding the matters provided for in items I and VI, these shall be considered approved.” (NR)

“Art. 35. ...

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

I - if an adherence error is found, calculated as the population standard deviation of the differences between the fund's daily percentage variation and the percentage variation of the closing value of the reference index over the last 60 (sixty) trading days, exceeding 2 (two) percentage points, provided that such adherence error is not brought back within the limit of 2 (two) percentage points until the 15th (fifteenth) consecutive business day following the date of verification of the respective adherence error; II - if the difference between the accumulated profitability of the fund and the closing value of the reference index, over a period of 60 (sixty) trading days, exceeds 2 (two) percentage points, provided that such profitability difference is not brought back within the limit of 2 (two) percentage points until the 15th (fifteenth) consecutive business day following the date of verification of the respective profitability difference; or III - if the difference between the accumulated profitability of the fund and the closing value of the reference index over a period of 12 (twelve) months exceeds 4 (four) percentage points, provided that such profitability difference is not brought back within the limit of 4 (four) percentage points until the 30th (thirtieth) consecutive business day following the date of verification of the respective profitability difference.

§1. In the case of funds that seek to reflect the variations and profitability of fixed-income indices, the percentage limits referred to in items I to III of the caput shall be 1 (one) percentage point, 1 (one) percentage point and 2 (two) percentage points, respectively.

§2. The events referred to in the items of the caput must be disclosed immediately, with the first disclosure regarding items I and II being made after 60 (sixty) trading days have elapsed from the date of listing of the fund's shares on the stock exchange or organized over-the-counter market, while the first disclosure regarding item III must be made after 12 (twelve) months have elapsed from that date.

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

§3. The meeting referred to in the caput of this article must have the following items on its agenda:
I - explanations, by the administrator, of the reasons that, in its understanding, motivated the adherence error or the profitability difference, which must also be disclosed on the fund's address on the worldwide computer network, with a minimum advance notice of 15 (fifteen) days before the holding of the meeting, and kept for 30 (thirty) days after its holding; and

II - deliberation on the extinction or not of the fund and substitution or not of the administrator, an item on which persons linked to the administrator cannot vote.

§4. The meetings convened, due to the conditions provided for in the caput of this article, must have a minimum interval of 30 (thirty) days, in the case of the maintenance of the administrator, and of 90 (ninety) days, if the previous meeting decided on its substitution.” (NR)

“Art. 36. ...
§1. The matters provided for in items III, IV, V and VII of Art. 30 must be approved by the vote of the shareholders holding the absolute majority of the fund's shares, with persons linked to the administrator being barred from voting when it comes to deliberation on their dismissal. ... ” (NR)

“Art. 39. ...
I - investment policy, target audience, management goals and objectives of the fund, including specific information on how the fund tracks the variations and profitability of a reference index, whether by full replication of the index's portfolio composition or by portfolio composition optimization methods; II - description of factors that may affect the adherence of the fund's performance to that of the index; III - main rights and responsibilities of shareholders and the administrator; IV - presentation of the administrator and the manager, if any, including contact telephone and their experience; V - a section that allows the shareholder to register their electronic correspondence address to receive information about the fund, as well as the availability of an electronic correspondence address of the fund that allows communication between the administrator and the shareholders;

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

VI - full text of the contracts established between the fund and third parties in the manner of Art. 11 and, if applicable, in the manner of § 6 of Art. 58, the existence of which must be highlighted on the main page of the fund's portal on the worldwide computer network; VII - presentation of brokerage and stamp duties on an annual basis, in the form of the percentage of the total amount debited to the fund relative to the fund's average net asset value in the fiscal year; VIII - specification, in highlight and clearly, of the fees and other expenses of the fund; IX - the contact telephone and electronic correspondence address of the CVM; X - updated and detailed conditions for the subscription and redemption of shares, comprising minimum and maximum limits for investment or divestment, as well as minimum values for remaining in the fund; XI - in a prominent manner, the conditions for carrying out the lending of securities referred to in Art. 12, including information on deadlines and costs; XII - profit distribution policy, comprising the deadlines and conditions for payment; XIII - risks involved; XIV - if applicable, specification on payments of remuneration to the institution owning the index, according to § 3 of Art. 11, including a full copy of the contract; XV - taxation applicable to the fund and its shareholders; XVI - composition of the fund's portfolio, updated daily; XVII - methodology for calculating the underlying index, criteria for selection and exclusion of the assets that compose it, the frequency of rebalancing and its costs, changes in its methodology and composition previously established by the index provider, as well as its updated composition;

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

XVIII - a section containing the full text of this Instruction, the fund's bylaws and other pertinent legal norms; XIX - daily update of the quantity of securities object of lending operations, segregating the information related to Arts. 12 and 60, as well as the percentage of the value of the securities in lending expressed in relation to the fund's net asset value; XX - statement containing the non-identified list of shareholders who hold more than 5% (five percent) of the fund's shares, as well as the respective percentage held by each one, this table must have monthly updates, based on the position on the last business day of each month; XXI - percentage held jointly, reflecting the position on the last business day of each month, by:
a) domestic institutional investors; b) individuals residing or domiciled in the Country; c) financial institutions incorporated in the Country; d) non-financial legal entities incorporated in the Country; and e) foreign investors.
XXII - list of subscription and redemption operations of shares carried out in the last 30 (thirty) days that, individually, exceeded 20% (twenty percent) of the fund's net asset value, or that were carried out in the manner of §§ 3 or 4 of Art. 18; XXIII - information on secondary distributions in progress; XXIV - list of authorized market makers to operate with the fund's shares; and

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

XXV - a specific section for statistical data, accessible from the main page of the fund's portal on the worldwide computer network, which must contain, at a minimum:
... e) the information related to items I, II and III of the caput of Art. 35, including the number of business days elapsed since the beginning of the disqualification, indicating next to this information the possibility of holding a general meeting in case of excessive adherence error.

§1. ...
I - the following wording in a prominent manner: "The authorization for the sale and trading of the fund's shares does not imply, on the part of the CVM, guarantee of the veracity of the information provided or judgment on the quality of the fund or its administrator"; and ... ” (NR)

“Art. 49. ...
...
V - inform, if applicable, the incidence of entry or exit fees and expenses arising from subscription or redemption in national currency, clarifying regarding its method of calculation.” (NR)

“Art. 55. The fund's financial statements must observe the INVESTMENT FUNDS ACCOUNTING PLAN - COFI, issued by the CVM.” (NR)

“Art. 58. In order to reflect the variation and profitability of the reference index, and observed the provision of Art. 35, the fund must maintain 95% (ninety-five percent), at a minimum, of its assets applied in:
I - financial assets that integrate the reference index; and II - net long position in futures contracts.

---”

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

......

§2. When distributing benefits related to the financial assets underlying the fund's portfolio, the administrator must, whenever possible, follow the same policy used in calculating the reference index, and may, if applicable, redistribute these benefits or distribute yields directly to unitholders.

......

§9. For the purposes of this Instruction, the following financial assets shall be admitted:

I - securities or other financial assets whose public offering has been submitted for registration with the CVM or that have been distributed with restricted efforts; and

II - public bonds issued by the National Treasury.

§10 The futures contracts provided for in the caput must be traded on a commodities and futures exchange and settled in clearinghouses and settlement service providers that assume the position of central counterparty.

§11. In the case of funds that seek to reflect the variations and yield of fixed-income indices, financial assets that are not part of the reference index shall be admitted, provided they are of the same nature as those of the index, but from different issuances, limited to 20% (twenty percent) of the fund's net asset value.” (NR)

“Art. 59. ......

I - public bonds issued by the National Treasury;

......

III - shares of investment funds of the Short Term, Fixed Income, and Referenced classes;

IV - committed operations, in accordance with the regulation issued by the Monetary National Council;

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

V - derivative operations distinct from that provided for in item II of art. 58, carried out on a stock exchange, a commodities and futures exchange, or an organized over-the-counter market, exclusively for the management of risks inherent to the fund's portfolio or the underlying financial assets, observing the limit fixed in § 5 of art. 58;

VI – financial assets with liquidity not included in the reference index; and

VII - shares of other index funds.” (NR)

“Art. 60 The fund may carry out securities lending operations on the securities that compose its portfolio, in the manner regulated by the CVM and according to the limit and conditions established in the bylaws.

......” (NR)

“Art. 61. ......

......

IX - expenses with custody and settlement of operations with financial assets;

...... ” (NR)

“Art. 62. The fund's bylaws may provide for the possibility that the expenses provided for in items I and XI of the previous article be appropriated to the fund's own account and paid exclusively based on the revenues earned by the fund through securities lending operations or other extraordinary revenues.

...... ” (NR)

“Art. 65. The fund may only be transformed into an investment fund regulated by CVM Instruction No. 409, of August 18, 2004, observing the norms applicable to those funds.” (NR)

CVM INSTRUCTION NO. 537, OF SEPTEMBER 16, 2013

“Art. 66. The spin-off shall be admitted only in the case of the creation of index funds that follow new reference indices, composed solely of part of the financial assets of the original reference index.” (NR)

“Art. 70. After the division of the fund's assets among the unitholders, the administrator must promote its closure, forwarding to the CVM, within a period of 10 (ten) days, counted from the date on which the resources or financial assets from the liquidation were made available to the unitholders, the following documentation:

...... ” (NR)

“Art. 76. Non-compliance with the provisions of arts. 9; 12, § 1; 13; 15; 18; 20; 25, sole paragraph; 26; 32; 33; 35; 37, sole paragraph; 38; 39; 41 to 43; 45 to 51; 54 to 60 and 63 to 71 constitutes a case of objective infraction, subject to the summary procedure of the administrative sanctioning process.” (NR)

Art. 2. Market Index Investment Funds constituted before the entry into force of this Instruction are exempt from holding a unitholder meeting to adapt the bylaws to the changes in CVM Instruction No. 359, of January 22, 2002, introduced by this Instruction, except for the prerogative contained in item II of art. 18 of that Instruction, the introduction of which into the bylaws will depend on the approval of unitholders in a meeting.

Art. 3. Art. 24 of CVM Instruction No. 359, of January 22, 2002, is hereby revoked.

Art. 4. This Instruction enters into force on the date of its publication.

Original signed by

OTAVIO YAZBEK
Acting President