BRAZIL Law and Practice Contributed by: Guilherme Bueno Malouf, Luciana Costa Engelberg, Bruna Marrara and Thales Saito, Machado Meyer Advogados
please see 2.1.1 Fund Structures and 2.3.1 Regulatory Regime . Pursuant to Brazilian regulations, investment funds must engage a custodian duly author - ised by CVM, which will be responsible for managing the bookkeeping of the investment fund’s assets. For FIIs, the custody service is not required for financial assets that represent up to 5% of the fund’s net equity, provided that such assets are admitted for trading on a stock exchange or organised over-the-counter market or are registered in a registration or financial set - tlement system authorised by the Central Bank of Brazil or CVM. The main regulations regarding risk, borrowing restrictions and the valuation and pricing of the assets held by investment funds are set up by CVM Resolution 175, as described in 3.4 Opera- tional Requirements . In addition to the general rules, Normative Annex IV of CVM Resolution 175 provides that FIPs that obtain direct financial support from development agencies are authorised to contract loans direct - ly from such development agencies, limited to an amount corresponding to 30% of the FIP’s assets. In addition, the FIP’s administrator and asset manager may contract a loan on behalf of the fund only in cases authorised by CVM (in practice, a consultation should be submitted to CVM requesting authorisation for such borrow - ing) or cover the default of quota holders who have not paid their subscribed quotas. The last case will also be applied to classes of quotas destined for qualified or professional investors of all other categories of funds as set forth in CVM Resolution 175. As for FIDCs, the administrator may not current - ly borrow or grant loans on behalf of the fund,
(f) using information that is false, inaccurate or misleading to the investor. 2.3.10 Investor Protection Rules Please see 2.2.3 Restrictions on Investors for more information on the restrictions relating to certain categories of investors in certain types of alternative investment funds. The administrator and the manager of an invest - ment fund have fiduciary duties towards the fund and its quota holders and shall be liable for any damages caused to the quota holders in case of non-compliance with the fund’s by-laws or the applicable laws and regulations. CVM may apply penalties to service providers for any violation of the fund’s by-laws or the applicable laws and regulations, including fines, suspension of authorisation or registration for the exercise of the administration and/or man - agement activities or temporary disqualification to carry out such activities, up to a maximum of 20 years. 2.3.11 Approach of the Regulator CVM typically responds to day-to-day inquir - ies via email within a reasonable timeframe. They also welcome virtual or in-person meet - ings, which can be requested online through their website. For more complex questions, it is recommended to submit a formal consulta - tion to CVM; however, this may result in a longer response time. All registration processes are completed electronically through the CVM web - site. 2.4 Operational Requirements Each alternative fund is allowed to invest in cer - tain types of assets, as provided by its specific regulation. For types of investments and the applicable regulation for each alternative fund,
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