Regulation, licensing and registrationPrincipal regulatory bodies
What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?
The principal regulatory body that would have authority over a private equity fund and its manager is the CVM. As mentioned above, there is also a self-regulatory body called the Anbima, which only has jurisdiction over its members.
The CVM has broad audit and inspection rights over its supervised entities. Investment managers must be previously licensed by the CVM. Also, such entities have continuing filing and disclosure obligations with the CVM, such as annually filing a form of reference which must be continuously updated), filing codes of conduct, compliance manuals and money laundering prevention mechanisms, among others.
Funds also have several reporting obligations (see question 8).
All such reporting information must be made available at the managers’ and the CVM’s websites.Governmental requirements
What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?
There are no additional requirements other than those listed in question 2.Registration of investment adviser
Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?
Yes. The portfolio manager must be registered with the CVM and, in order to do so, it must assign at least one director to lead on the activity of portfolio management. This director must also be registered with the CVM.Fund manager requirements
Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?
The FIP manager, as well as any other fund manager, must be duly registered with the CVM and, as such, must comply with the requirements set by the regulatory entity. The requirements vary as applied to individuals or legal entities, are listed by current Brazilian laws and may be summarised as follows.
The individual manager must, aside from being able to dispose of his or her own goods:
- have a residence in Brazil;
- have a higher degree qualification, either from Brazil or elsewhere;
- take a certification exam, which must have had its methodology and content previously approved by the CVM - this exam is nowadays set and applied by certain certified institutions, such as the Anbima and the charted financial analyst organisation;
- have an immaculate reputation;
- not be prevented or suspended from exercising an administrative position at financial institutions or other entities regulated by the CVM, the Central Bank of Brazil (BACEN), the Private Insurance Agency or the National Private Pension Agency;
- not have convictions for bankruptcy, corruption, money laundering or other related crimes; and
- not be prevented from managing his or her own assets as a result of an administrative or judicial decision.
The legal entity that wishes to provide these services must comply with the following:
- have its headquarters in Brazil;
- include in its corporate aims the administration and management of securities portfolios;
- assign the activity of management of securities portfolios to one or more statutory directors, who must also be authorised by the CVM to do so under the criteria listed above; and
- assign compliance activities to a statutory director.
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.
There are no specific rules, laws or other regulatory mechanisms regarding political contributions by FIPs, whether about disclosure or limitations of any kind. However, since 2015, pursuant to a Brazilian Supreme Court decision, no kinds of political financing by legal entities are allowed - only individuals, and up to the limit of 10 per cent of their annual net revenues, can contribute to parties, candidates or their campaigns.
Even though an FIP, as stated in question 1, is not recognised as a legal entity owing to its lack of legal personality, it could be fairly reasonable to assume that the prohibition would be extendable to any investment funds.Use of intermediaries and lobbyist registration
Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.
There are no specific rules, policies or regulations that restrict or require disclosure by an FIP in the marketing of the fund to public pension plans and other governmental entities.Bank participation
Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.
There are no legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks when it comes to investing in FIPs. However, a federal law dating from 1964 establishes the written authorisation of BACEN as a requisite for any private banks to participate in companies in general.