Explanatory Note to CVM Instruction No. 82

EXPLANATORY NOTE TO CVM INSTRUCTION NO. 82, OF SEPTEMBER 19, 1988.
Ref.: CVM INSTRUCTION NO. 82, of September 19, 1988, which provides for the administration of securities portfolios.

According to Art. 23 of LAW NO. 6.385, of December 7, 1976, it is incumbent upon the CVM to authorize the exercise of portfolio administration and also "establish the norms to be observed by administrators in the management of portfolios and their remuneration, observing the provisions of Art. 7, item IV."

In compliance with the legal mandate and considering that the work of professionals dedicated to portfolio administration can only be carried out effectively by technically qualified individuals who demonstrate irrefutable conditions of integrity, the CVM deemed it necessary and opportune to regulate this activity, after having heard all segments of the market in a public hearing regarding the matter.

The objective of this Instruction is to establish a set of rules that will govern the exercise of portfolio administration through the definition of responsibilities of those who perform it and the establishment of minimum technical qualification requirements for access to the activity.

Thus, the Instruction determines that any person, natural or legal, including administrators of mutual equity funds' portfolios, open and closed private pension entities, and other institutional investors, who administer or come to administer portfolios, must apply for such authorization with the CVM, satisfying the established requirements.

Regarding natural persons, it was decided to require applicants to have an adequate technical profile, considering the level of education and experience of the applicants directly related to the securities market. With respect to legal persons, in addition to the obligation to constitute a specialized technical department for the analysis of securities and financial assets, or to contract this service from natural persons or other legal entities, direct responsibility for the administration activity was assigned to a director or managing partner, who must meet the requirements imposed on natural persons.

On the other hand, it should be noted that in certain situations, regulation is necessary to prevent the occurrence of conflicts of interest, which are incompatible with the reliability required by the market. Thus, the segregation between portfolio administration and other activities is undoubtedly necessary and desirable.

In this regard, Articles 10 and 11 of the Instruction deserve special attention. Indeed, the first establishes a series of rules aimed at explicitly defining the responsibilities of those who may administer portfolios. The conduct standards established by Art. 10 determine that the administrator, in addition to the obligation to perform their duties in a manner that meets the investment objectives of the portfolio holder, must reveal to the client the basic characteristics of the services to be provided.

Furthermore, aiming to minimize potential conflict of interest situations, Art. 11 of the Instruction established a series of prohibitions on the administrator's performance, among which stand out those that do not allow the administrator to purchase, for the portfolios they administer, securities that are the object of a distribution operation in which they participate as an agent, or on their own account, or even to execute brokerage services for circulating securities for these portfolios, or still to conduct transactions, directly or indirectly, between their own portfolio and the portfolios under their management. This article also explicitly prohibited administrators from promoting transactions with the securities comprising the portfolios they administer, with the primary purpose of generating brokerage revenue.

Finally, the Instruction sets a deadline of six months, counted from the date of its publication in the Official Gazette of the Union, for natural and legal persons who already administer portfolios to obtain the competent authorization from the CVM.

Signed original by
ARNOLD WALD
President