BRAZIL Law and Practice Contributed by: Guilherme Bueno Malouf, Luciana Costa Engelberg, Bruna Marrara and Thales Saito, Machado Meyer Advogados
best practices issued by credible third parties, to prevent “carbon washing”. Regarding the limits on the composition and diversification of the asset portfolio, CVM chose to leave it to the discretion of the administra - tor and the manager of the FIAGRO multima - rket fund to define the minimum and maximum investment limits per asset class, as well as the diversification of investment requirements by issuer or debtor, considering the fund’s net worth. If a FIAGRO invests more than 50% of its assets in investment types that are commonly found in other fund categories – such as FIPs, FIDCs, or FIIs – then the regulations that apply to those funds will also apply to the FIAGRO, alongside its specific regulations. In this case, additional limitations must be adhered to. 2.1.2 Common Process for Setting Up Investment Funds All Brazilian investment funds must be registered with CVM, regardless of whether their quotas are subject to a public or private offer or are open- ended or closed-ended condominiums. Establishing an alternative investment fund in Brazil requires the fund’s administrator and man - ager to create a constitutive act that approves the formation of the fund and its by-laws. A spe - cific set of documents must be submitted to the CVM for the fund’s registration in accordance with the applicable regulations. CVM Resolution 175 establishes that the fund’s registration will be automatically granted upon filing the required documents with CVM through CVM’s electronic system.
Currently, the fund’s enrollment in the Federal Revenue Office taxpayer’s register is concurrent with the fund’s registration with CVM. The public placement of quotas requires inter - mediation by a company pertaining to the so- called Brazilian Securities Distribution System. Such placement must also be registered with CVM for closed-ended investment funds. Such registration shall be effected pursuant to the Securities Law and CVM Resolution 160. Public offerings in Brazil follow the definition found in other jurisdictions – ie, a public offering occurs whenever it is directed to an undetermined group of people. Public offerings are also subject to several other requirements, including: • publication of a prospectus with respect to the offering of quotas to retail and qualified investors (not applicable to offerings to pro - fessional investors); • publication of offering announcements; • the payment of a supervisory fee to CVM; and • adherence to conduct rules under CVM Reso - lution 160 (such as silence period rules and full and proper disclosure). Closed-ended investment funds targeting quali - fied and professional investors undergo an auto - matic offering registration process with CVM, pursuant to CVM Resolution 160. In such cases, there are no limitations on the maximum number of investors to be assessed. If the quotas of the investment fund, which is subject to an auto - matic offering registration process with CVM, are subsequently traded to a different category of investors, a lock-up period may apply. For instance, in the case of a fund/class of quotas targeted only at professional investors, no lock- up period will apply if they are traded to other professional investors. However, a 180-day lock- up period will apply if they are traded to qualified
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