Joint Circular Letter CVM/SIN/SPREV No. 3/2019

SECURITY AND COMMODITIES COMMISSION
Rua Sete de Setembro, 111/2-5th and 23-34th Floors - Center - Rio de Janeiro - RJ - CEP: 20050-901 - Brazil Tel.: (21) 3554-8686 - www.cvm.gov.br Joint Circular Letter No. 3/2019/CVM/SIN/SPREV Rio de Janeiro, February 8, 2019

To the Directors Responsible for the Administration and Management of Investment Funds

Subject: Clarifications regarding the amendment of CMN Resolution No. 3922, of November 25, 2010, through CMN Resolution No. 4,695, of November 27, 2018 (Compliance with subscription commitments and maintenance of resources in investment funds by unitholders characterized as RPPS).

Dear Sirs,

1. CMN Resolution No. 4,695, approved in a meeting on November 27, 2018, amended CMN Resolution No. 3,922, of November 25, 2010, and introduced, among other points, criteria related to service providers that can administer or manage investment funds in which the Own Social Security Regimes - RPPS can apply their resources, as provided in the new wording given to article 15 of the aforementioned Resolution.

2. As previously clarified (Joint Circular Letter SIN-SPREV 02/2018), only institutions that are required to establish an audit committee and a risk committee, in accordance with CMN regulations (CMN Resolution No. 3,198/2004 and CMN Resolution No. 4,557/2017), meet the requirement established in §§ 2 and 8 of article 15 of CMN Resolution No. 3,922/2010. Thus, it is in this capacity that legal entities registered as administrators of securities portfolios, in accordance with CVM Instruction No. 558/2015, must participate as administrator or manager of the investment fund that receives applications of resources from the RPPS.

3. These changes affect the application of resources from all RPPS, so that the administrative or management institutions of investment funds, as well as the intermediaries of the funds, in accordance with their competencies and duties, must observe that any application of resources from RPPS in funds complies with the provisions of that Resolution. Therefore, it is worth reiterating that the criteria introduced by the CMN prevent the manager and administrator of investment funds (in their duty of diligence) from accepting any resources from unitholders characterized as RPPS, under any title, when there is no administrator or manager that meets these criteria. These applications include:

(i) acquisition of units through the secondary market; (ii) subscription in a new offering registered or exempt from registration; (iii) capitalization intended for investments, coverage of fund expenses, or applications of any nature; (iv) capitalization by the unithers themselves, even when not characterized as a public offering of units.
(v) contribution of resources, such as a debit note, even if intended for the managers/administrators of the fund, to cover ordinary and/or extraordinary expenses, including in funds with insufficient cash; and,

(vi) any allocation of resources, in any form, directly or indirectly, and under any denomination.

4. However, it is worth noting that in situations where the RPPS has signed subscription bulletins for units prior to the amendment of the Resolution, the same may continue to capitalize resources in the funds, within the limit of the subscription made, provided that the limits and conditions provided in the then-effective wording of CMN Resolution No. 3,922, of 2010, are met at the time of the commitment made. This point was already clarified in Joint Circular Letter No. 1/2018/CVM/SIN/SPREV, but as the aforementioned Circular Letter specifically dealt with the changes related to CMN Resolution No. 4,604/2017, we clarify through this Circular Letter its application also with regard to CMN Resolution No. 4,695/2018. Thus, in cases where the RPPS assumed subscription commitments, duly proven, signed before November 29, 2018, whose resource has not been capitalized by that date, it may capitalize the resources in the funds, up to the limit of the subscription commitment.

5. Regarding the maintenance of resources in funds that do not meet the criteria established by CMN Resolution 3,922/2010, article 21 provides that RPPS that, due to the changes in the Resolution, come to present applications in disagreement with what is established, may keep them in the portfolio for up to 180 days or, with respect to closed-ended funds or funds with a grace period or redemption period, until the date provided in the fund's regulations. However, with respect to the criteria brought by items I and II of § 2, c/c § 8 of article 15 of CMN Resolution No. 3,922/2010 with the wording given by CMN Resolution No. 4,695/2018, § 9 of this same article provides that "the requirements referred to in §§ 2 and 8 of this article must be observed only when the resources are applied by the own social security regime."

6. Thus, as § 9 specifically deals with the compliance with the requirements inserted by the new Resolution in this same art. 15, the applications made prior to CMN Resolution No. 4,695/2018 may be maintained by the RPPS, as these criteria of §§ 2 and 8 of art. 15 must only be observed at the time of the application of resources.

7. However, it is important to emphasize that RPPS that invested in investment funds on a date prior to the publication of CMN Resolution No. 4,695/2018, which do not comply with the provisions of this Resolution, will not be able to make new applications, under any form or denomination, as previously clarified (except for the fulfillment of subscription commitments previously signed).

8. Finally, it is worth noting that the CVM and the SPREV, in accordance with the Technical Cooperation Agreement published on December 24, 2015, have intensified the exchange of information and the execution of coordinated supervision actions of the segments under their responsibility, aiming to achieve greater efficiency and effectiveness in their respective areas of operation.

Sincerely,

Signed originally by
DANIEL WALTER MAEDA BERNARDO

Signed originally by
ALLEX ALBERT RODRIGUES

Superintendent of Institutional Investor Relations Securities and Commodities Commission

Undersecretary of Own Social Security Regimes
Secretariat of Social Security of the Ministry of Economy