Private banking and wealth management

All questions Regulation

What are the main sources of law and regulation relevant for private banking?

Banking activities in Brazil are subject to extensive and detailed regulations issued mainly by the Central Bank of Brazil. Currently, however, there are no specific regulations concerning private banking activities per se.

The Brazilian Association of Financial and Capital Markets Entities (ANBIMA), a private self-regulatory association dedicated to improving the standards and best practices in the Brazilian financial and capital markets, coordinated the preparation of a code to be observed by participants when conducting private banking activities (ANBIMA Private Banking Code).

It is also worth mentioning that other regulations issued by the Central Bank of Brazil and the Brazilian Securities Commission (CVM) should be observed by market participants involved with private banking and wealth management activities, as applicable. Such specific regulations are detailed herein where appropriate.

Regulatory bodies

What are the main government, regulatory or self-regulatory bodies relevant for private banking and wealth management?

The Central Bank of Brazil is responsible for authorising and supervising the activities conducted by Brazilian financial institutions.

In addition, all entities carrying out discretionary asset management activities or non-discretionary securities advisory activities are subject to accreditation with and supervision by the CVM.

The main self-regulatory body in respect to private banking and wealth management activities is ANBIMA.

Private wealth services

How are private wealth services commonly provided in your jurisdiction?

Private wealth services are typically performed either by specific departments of Brazilian financial institutions or by independent asset management entities.

Definition of private banking

What is the definition of private banking or similar business in your jurisdiction?

There is no specific definition of private banking under Brazilian law; however, the ANBIMA Private Banking Code sets forth that private banking activities primarily consist of:

  • providing banking, financial or credit services;
  • providing services related to consulting on allocation and reallocation of financial investments;
  • maintaining discussions with clients regarding their net worth, investment profile and financial goals, liquidity needs, investment capabilities and acceptable risk levels, in order to establish a set of expectations of risk and return, within the standards established by each institution;
  • performance of transactions pursuant to the client’s determined objectives; and
  • providing information in order to assist clients on their decision-making process.

Licensing requirements

What are the main licensing requirements for a private bank?

There are no specific licensing requirements related to private banking activities under Brazilian regulation. Nevertheless, financial institutions carrying out private banking activities are subject to authorisation from the Central Bank of Brazil in order to operate. The main general requirements for obtaining the relevant licence from the Central Bank of Brazil are:

  • filing of an authorisation request accompanied by the proper documentation and information, including, among others, a draft statement of intent, an executive summary of the business plan, the identification of the institution’s controlling and economic group, statements and documents evidencing that the members of the controlling group have sufficient knowledge regarding the type of business and the sector in which the institution intends to operate, as well as the identification of the origin of the resources to be used in the institution’s incorporation;
  • a technical interview between the controlling shareholders and the Central Bank of Brazil, if applicable;
  • evidence of economic and financial capacity compatible with the size, nature and purpose of the enterprise, to be met by the controlling group or, individually, by each of the members of the controlling group;
  • evidence of the absence of impairments or restrictions;
  • inspection of the institution by the Central Bank of Brazil; and
  • issuance of a Presidential Decree, in case of the organisation of a financial institution controlled by foreign capital.

In addition, it is worth highlighting that the ANBIMA Private Banking Code also sets forth minimum requirements for the performance of private banking activities, including requirements related to the structure and personnel dedicated to such activities within the institution, as well as the adoption of certain policies and manuals.

Licensing conditions

What are the main ongoing conditions of a licence for a private bank?

Financial institutions must meet the requirements for obtaining the licence, as well as meet on an ongoing basis several other requirements imposed by the Central Bank of Brazil under sparse regulations, including, for example, those related to governance, internal controls, accounting and reporting requirements.

Furthermore, all corporate documents, amendments to the bylaws, capital increases and other non-routine corporate acts of financial institutions must be previously approved by the Central Bank of Brazil.

Organisational forms

What are the most common forms of organisation of a private bank?

Private banks are typically organised under the form of specific departments within Brazilian financial institutions designated to cater to the financial needs of wealthier individuals.

Brazilian financial institutions may be generally organised in the form of commercial banks; investment banks; multiservice banks; foreign exchange banks; credit, financing and investment companies; securities dealerships; and brokerage companies.

Licences

Obtaining a licence

How long does it take to obtain a licence for a private bank?

There are no specific licences for purposes of private banking. The licence for a financial institution may take from one to two years to be granted.

Licence withdrawal

What are the processes and conditions for closure or withdrawal of licences?

The cancellation of the licence of a financial institution may generally occur in the following scenarios:

  • winding-up or amendment to the company’s corporate purpose;
  • formal request by the company through a proceeding with the Central Bank of Brazil; or
  • if the Central Bank of Brazil verifies the existence of certain conditions, such as the company’s inactivity or breach of its business plan.

Wealth management licensing

Is wealth management subject to supervision or licensing?

The performance of securities portfolio management activities and non-discretionary securities advisory activities are subject to licensing and supervision by the CVM.

Under Brazilian regulation, securities portfolio management activities are distinguished between (i) fiduciary administration, consisting of the direct or indirect responsibility for custody and controllership of assets and liabilities and, generally, for supervision of the markets healthiness; and (ii) discretionary asset management, consisting of the investment decision-making activities. Consequently, it is possible to seek a licence to carry out fiduciary administration, discretionary asset management or both.

It should be noted that individuals or entities accredited as discretionary asset managers are automatically authorised to perform non-discretionary securities advisory services, thus not requiring a specific authorisation from the CVM for such purposes.

Requirements

What are the main licensing requirements for wealth management?

The main requirements for an entity seeking a discretionary asset management licence with the CVM are:

  • be duly organised and headquartered in Brazil;
  • engage primarily in securities portfolio management activities;
  • entrust the responsibility for securities portfolio management to one or more executive officers individually licensed with the CVM to carry out asset management activities;
  • entrust the responsibility for compliance and risk management to one or more executive officers, who shall not be the same individuals responsible for the asset management activities of the company;
  • have its direct or indirect controlling partners satisfy certain good standing requirements;
  • set up and maintain human and IT resources at a level that is consistent with the entity’s size and field of business; and
  • prepare a reference form, which is a document similar to the prospectus of a listed company.

As of this moment, there is no specific regulation in force dealing with the requirements for obtaining and maintaining a non-discretionary securities advisory licence.

Nevertheless, the CVM has set for public hearing a proposed regulation with the purpose of extending to non-discretionary securities advisers similar standards to those applicable to discretionary asset managers. The criteria for obtaining such a licence shall be clarified once the CVM effectively issues the definitive regulation.

What are the main ongoing conditions of a wealth management licence?

The conditions required for obtaining the asset management licence must be met on an ongoing basis. In addition, asset management entities shall file updated versions of their reference forms with the CVM annually.

Moreover, asset management entities must prepare policies and manuals as required under Brazilian regulation. The reference form and such policies and manuals must be kept up to date and made available on the entity’s website.

Anti-money laundering and financial crime prevention

Requirements

What are the main anti-money laundering and financial crime prevention requirements for private banking and wealth management in your jurisdiction?

There are no specific anti-money laundering and financial crime prevention requirements for private banking and wealth management, but rather for financial institutions in general. Similar requirements also exist for asset managers and securities advisers.

Such requirements are mainly the following:

  • identification of clients and know your client procedures;
  • keeping of updated client records, which allow the identification of compatibility between the transactions, the economic activity and financial capacity of its client, the origin of the funds, and the final beneficiaries of transactions;
  • keeping of records of any transactions exceeding the limits set forth under Brazilian regulation;
  • adoption of policies, internal procedures and controls adequate to the amount and volume of the transactions entered; and
  • reporting of suspicious transactions to the Council for Financial Activities Control (COAF).

Politically exposed persons

What is the definition of a politically exposed person (PEP) in local law? Are there increased due diligence requirements for establishing a private banking relationship for a PEP?

In summary, politically exposed persons (PEP) are defined under Brazilian law as any government officials who have held or been entrusted with, during the previous five years, in Brazil or in foreign countries, territories and jurisdictions, any prominent government position, employment or function, as well as their representatives, relatives and close associates.

Whenever dealing with PEPs, financial institutions shall adopt enhanced due diligence procedures, which encompass the following measures:

  • ongoing enhanced monitoring by adopting more stringent procedures to investigate into suspicious activities;
  • analysis to verify the need of reporting suspicious transactions pursuant to the Brazilian regulations; and
  • assessment by senior management regarding the interest in initiating or maintaining a customer relationship.

Documentation requirements

What is the minimum identification documentation required for account opening? Describe the customary level of due diligence and information required to establish a private banking relationship in your jurisdiction.

Financial institutions are required to collect and keep up-to-date record data on their ongoing customers, including, among others:

  • full client identification;
  • complete residential and business addresses;
  • telephone number;
  • monthly income and wealth (for individuals) and average monthly revenues for the past 12-month period (for legal entities); and
  • a signed statement regarding the purposes and type of the business relationship with the institution in question.

Asset managers and securities advisors are also required to keep records of customer data, which shall contain customers’ full identification and appropriate documents.

Tax offence

Are tax offences predicate offences for money laundering? What is the definition and scope of the main predicate offences?

Brazilian legislation establishes tax fraud and money laundering as different criminal offences.

The characterisation of a tax fraud depends on the wilful act of evading taxes through false statements, omission of information, falsification of documents and other similar procedures.

On the other hand, money laundering crimes are verified upon the concealment or dissimulation as to the true nature, origin, location, availability, transaction or ownership of assets, rights or valuables that are connected to any criminal activity.

Individuals involved in tax fraud are subject to the penalty of imprisonment from two to five years, plus a fine. In the case of money laundering crimes, the penalty is of imprisonment from three to ten years, plus a fine. Given that these are separate crimes under Brazilian law, the penalties may be aggregated.

In the case of tax fraud, it is also worth mentioning that the Brazilian tax authorities may initiate an administrative proceeding leading to a tax assessment of the uncollected tax increased by fine of up to 150 per cent plus interest.

Compliance verification

What is the minimum compliance verification required from financial intermediaries in connection to tax compliance of their clients?

As a general rule, financial intermediaries are required to maintain proper identification of their clients and to adopt adequate and updated record keeping systems for such client information, as well as afford special attention to transactions that may serve as substantial indicia of crimes.

Considering the recent attention to private banking transactions with non-declared funds by Brazilian residents, it is advisable that financial institutions also request to their clients proper documentation evidencing that the client funds are in compliance with tax reporting obligations.

Liability

What is the liability for failing to comply with money laundering or financial crime rules?

Noncompliance with Brazilian anti-money laundering rules may generally be subject to the following penalties, to be assessed on a case-by-case basis:

  • warning;
  • a variable fine not exceeding: (i) twice the transaction value, (ii) twice the actual profit obtained or conceivably obtainable from the transaction or (iii) 20 million reais;
  • temporary disqualification of the involved officers and employees of the company for a period of up to ten years; and
  • cancellation or suspension of the authorisation or licence to operate.

Client segmentation and protection

Types of client

Does your jurisdiction’s legal and regulatory framework distinguish between types of client for private banking purposes?

There are no legal distinctions in Brazil between types of client for private banking purposes. In any event, CVM regulations establish three categories of investors for purposes of the Brazilian financial and capital markets in general.

The CVM rules set forth the criteria for the characterisation of qualified and professional investors, being retail investors understood as those that do not fall under the previous categories.

The following are considered professions investors under Brazilian regulation:

  • financial institutions and other entities authorised to operate by the Central Bank of Brazil;
  • insurance companies and capitalisation societies;
  • open and closed-ended pension funds;
  • individuals or legal entities that hold financial investments in an amount in excess of 10 million reais;
  • investment funds;
  • investment clubs managed by a professional manager;
  • portfolio administrators and securities consultants authorised by the CVM, in relation to their own monies; and
  • non-resident investors.

Likewise, qualified investors are defined as follows:

  • professional investors;
  • individuals or legal entities that hold financial investments in an amount in excess of 1 million reais;
  • individuals that have been approved in specific certification exams; and
  • investment clubs managed by quota holders.

Pursuant to the ANBIMA Private Banking Code, however, regardless of how clients are categorised by the institutions, in order to be eligible to have access to private banking services, such client must meet the minimum investment capability of the equivalent to 1 million reais.

Client segmentation

What are the consequences of client segmentation?

The main consequences of the regulatory client segmentation are applicable to the Brazil investment fund industry. Even though there are no carve-outs for HNWIs in connection with private banking, such segmentation may be useful for purposes of compliance with suitability rules.

Consumer protection

Is there consumer protection or similar legislation in your jurisdiction relevant to private banking and wealth management?

All services rendered on the Brazilian market are governed by the Brazilian Consumer Protection Code, including those of banking, financial, credit and securities nature. Therefore, consumer authorities are likely to understand that the Brazilian consumer laws also govern private banking and wealth management relationships.

However, the Brazilian Consumer Protection Code does not contain any specific provisions concerning financial services or products. It provides, on the other hand, for general and broad principles that apply to any products and services offered in the consumer market. As a general rule, these provisions are based on the assumption that consumer is always the weaker party in the relationship.

Notwithstanding the above, given that private banking and wealth management activities usually engage only very experienced and sophisticated investors, there are good arguments to sustain that such overqualified investors are not subject to the protection of Brazilian consumer rules.

Assuming that Brazilian consumer rules do indeed govern private and wealth management banking relationships, it should be stressed that agreements must be written in Portuguese and worded in a way that makes it easy for investors to understand its content. Any provision limiting investors’ rights or creating obligations should be highlighted and printed in bold or capital letters. In case of any ambiguity, the relevant provision would be interpreted in favour of the investors. The Brazilian Consumer Protection Code also provides that contractual provisions are not binding to consumers in case they are not aware of such provisions before entering into the agreements. Therefore, all risks related to the product or service must be clearly and fully disclosed. Any provisions limiting the institution’s liability would be considered null and void.

Exchange controls and withdrawals

Exchange controls and restrictions

Describe any exchange controls or restrictions on the movement of funds.

There are strict foreign exchange controls on the inflow or outflow of funds into or out of Brazil. Under Brazilian regulations all foreign exchange transactions must be carried out by a local financial institution authorised by the Central Bank of Brazil to deal in exchange, and a relevant foreign exchange contract must be signed.

Therefore, the Brazilian real is not a freely exchangeable or convertible currency within the international financial market. Furthermore, Brazilian individuals and legal entities are generally not permitted to hold foreign currency in Brazil.

Withdrawal restrictions

Are there restrictions on cash withdrawals imposed by law or regulation? Do banks customarily impose restrictions on account withdrawals?

Brazilian law does not generally impose any restriction on cash withdrawals. There are, however, strict foreign exchange regulations in place that may impact withdrawals in foreign currencies.

Notwithstanding the above, Brazilian bank customarily impose restrictions on account withdrawals for security reasons. In addition, withdrawals in unusual amounts may be subject to reporting to COAF.

Are there any restrictions on other withdrawals from an account in your jurisdiction?

Brazilian law does not generally impose any restriction on other withdrawals.

Confidentiality

Obligations

Describe the private banking confidentiality obligations.

The Brazilian Federal Constitution ensures the inviolability of one’s privacy, private life, honour and image. The Brazilian Civil Code provides for a general protection of privacy as well, by determining that the privacy of individuals is inviolable.

Banking secrecy is also specifically contemplated under Brazilian legislation, pursuant to which financial institutions must keep confidential all of their credit and debit transactions, as well as the services rendered thereby.

Scope

What information and documents are within the scope of confidentiality?

Client’s personal data and documents, as well as their financial information and services rendered.

Expectations and limitations

What are the exceptions and limitations to the duty of confidentiality?

Banking secrecy can be lifted either through the client’s specific consent, or in the case of: (i) exchange of information between financial institutions or ancillary entities for credit protection; (ii) disclosures determined by law or ordered by a competent authority; and (iii) disclosures authorised by the interested parties.

Breach

What is the liability for breach of confidentiality?

Breach of banking secrecy may subject financial institutions to penalties in the civil and administrative spheres, in addition to their directors, officers or similar managers, as well as its audit committee members, who may also be held criminally liable for their actions.

Cross-border services

Framework

What is the general framework dealing with cross-border private banking services into your jurisdiction?

Cross-border private banking services are not subject to regulation under Brazilian law, since they are carried out outside of Brazil. Brazilian law does, however, contemplate the concept of ‘doing business in Brazil’ from a tax and banking perspectives.

In that regard, an entity carrying out cross-border private banking services into Brazil should be careful whenever marketing and conducting its activities in the country in order to avoid being viewed as carrying out banking activities in the country without the proper licence from the Central Bank of Brazil.

In addition, foreign securities are subject to regulation that affects the possibility of their offering in Brazil. Under Brazilian law, it is necessary to obtain a registration with the CVM for purposes of conducting a public offering in the country. Given the fact that foreign securities are generally not eligible for registration in Brazil, there are no Brazilian registration requirements or licences that could be obtained in order to offer such securities publicly in Brazil.

As a result, foreign securities can only be marketed and sold in Brazil on a private placement basis. Brazilian law, however, does not provide a definition of what constitutes a private placement of securities. In other words, there is no ‘safe harbour rule’ as to what constitutes a private placement in Brazil.

Consequently, the concept of private placement is based on what would not constitute a public offering under Brazilian law and, therefore, would not require registration with the CVM. Any party intending to market and sell unregistered securities in Brazil on a private basis should, thus, be very careful about the means and methods to be used in connection with such activities in order to mitigate the risk of questioning by the CVM. In summary, any contact or communication with investors in Brazil should be made on an individual one-to-one basis.

The same applies, by analogy, to the offering of wealth management services to Brazilian residents by foreign entities.

Licensing requirements

Are there any licensing requirements for cross-border private banking services into your jurisdiction?

There are no licensing requirements for cross-border private banking services into Brazil; see question 25.

Regulation

What forms of cross-border services are regulated and how?

There are no forms of cross-border services regulated under Brazilian law; see question 25.

Employee travel

May employees of foreign private banking institutions travel to meet clients and prospective clients in your jurisdiction? Are there any licensing or registration requirements?

Employees of foreign private banking institutions may travel to meet clients and prospective clients in Brazil provided any contact is made on a strictly private basis, as explained in question 25 above. There are no licensing or registration requirements for such purposes.

Exchanging documents

May foreign private banking institutions send documents to clients and prospective clients in your jurisdiction? Are there any licensing or registration requirements?

Foreign private banking institutions may send documents to clients and prospective clients in Brazil provided they are individually sent to investors following an initial contact. This means that documents should not be sent indiscriminately to a number of investors on a mass distribution basis. There are no licensing or registration requirements for such purposes.

Tax disclosure and reporting

Taxpayer requirements

What are the main requirements on individual taxpayers in your jurisdiction to disclose or establish tax-compliant status of private banking accounts to the authorities in your jurisdiction? Does the requirement differ for domestic and foreign private banking accounts?

Individuals considered as Brazilian residents for tax purposes are currently required to file, on an annual basis, an income tax return to the Brazilian tax authorities between March and April of every year. In such ancillary tax return, the Brazilian individual will have to disclose the income ascertained during the calendar year of reference as well as all the assets, rights and liabilities held by the taxpayer at the end of the calendar year, including assets and rights located abroad.

Specifically for offshore investments, Brazilian individuals with investments abroad in excess of the equivalent of US$100,000 are also required to file, on an annual basis, a declaration to the Central Bank of Brazil reporting all assets and rights held abroad with the respective investment market value. However, if the individual maintains investments abroad on a total amount in excess of the equivalent of US$100 million, the investor must file the Central Bank declaration on a quarterly basis.

Reporting requirements

Are there any reporting requirements imposed on the private banks or financial intermediaries in your jurisdiction in respect to their domestic and international clients?

Brazilian financial institutions are generally required to file, on a biannual basis, an ancillary tax return (e-financeira) with information on their clients, both domestic and international. The required tax information shall comprise, among others, the client’s identification information, the final balance of the investment accounts and the income ascertained during the period.

It is worth mentioning that financial institutions will only have to disclose such information if the total amount negotiated by the client each month or if each monthly balance of the investment exceeds 2,000 reais for individuals or 6,000 reais for legal entities. The threshold mentioned above shall be considered separately for each kind of investment held by the client.

Client consent on reporting

Is client consent required to permit reporting by the private bank or financial intermediary? Can such consent be revoked? What is the consequence of consent not being given or being revoked?

No. Brazilian tax legislation provides that financial institutions must disclose the required tax information about their clients, regardless of any consent.

Structures

Asset-holding structures

What is the most common legal structure for holding private assets in your jurisdiction? Describe the benefits, risks and costs of the most common structures.

There are no typical legal structures designed for holding private assets in Brazil. Private assets are generally held directly by individuals, which, as a general rule, are also subject to lower tax rates than legal entities in the country.

Notwithstanding the above, in the case of professional investors, it is possible to hold private assets through exclusive investment funds, that is, investment funds with a sole shareholder, or through closed-ended investment funds. Such structures commonly represent higher costs for investors; however, they provide the possibility of deferring the payment of taxes until the redemption or amortisation of fund shares.

Know-your-customer

What is the customary level of know-your-customer (KYC) and other information required to establish a private banking relationship where assets are held in the name of a legal structure?

For purposes of establishing a private banking relationship in Brazil with any structure, Brazilian KYC standards generally require (i) the identification of individuals authorised to represent the structure, as well as the ownership up to the up the ultimate beneficial owner, and (ii) the name, identification and tax ID of the structure.

Also required are:

  • adoption of control measures in order to confirm their clients’ registry information, so as to avoid the use of the account by third parties and identify the final beneficiaries of the transactions;
  • identification of persons considered politically exposed;
  • more rigorous supervision of the business relationship maintained with the politically exposed person;
  • dedication of special attention to proposals of relationship initiation and the transactions executed with politically exposed persons from countries with which Brazil has a high number of financial and commercial transactions, common borders or ethnic, linguistic or political proximity; and
  • adoption of rules, procedures and controls in order to identify the origin of the funds involved in transactions carried out by clients and beneficiaries identified as politically exposed.

Controlling person

What is the definition of controlling person in your jurisdiction?

The Brazilian Corporation Law defines a controlling shareholder as an individual or legal entity, or a group of persons bound by a voting agreement or under common control, which: (i) holds shareholder rights ensuring, on a permanent basis, the majority of votes in general meeting resolutions, as well as the power to elect the majority of the company’s management; and (ii) effectively uses its power to direct the company’s activities, as well as to guide the operations of the company’s bodies.

Obstacles

Are there any regulatory or tax obstacles to the use of structures to hold private assets?

Brazilian investment funds are subject to registration with the CVM and generally require a fiduciary administrator, a discretionary asset manager and a custodian, among other service providers, in order to operate.

Contract provisions

Types of contract

Describe the various types of private banking and wealth management contracts and their main features.

Private banking and wealth management contracts are not specifically regulated by local legislation. Therefore, they may typically assume the form of investment advisory agreements, bank account agreements and asset management agreements.

Brazilian law provides, as a general rule, that obligations arising from acts of the parties are governed by the law of the country in which they are created. Nevertheless, the parties are generally free to choose another law to govern their relationship, to the extent that such choice of law does not violate Brazilian national sovereignty, public policy or good morals. For example, local courts could consider the choice of law clause null and void if they understand that the Brazilian Consumer Protection Code should govern the relationship.

Liability standard

What is the liability standard provided for by law? Can it be varied by contract and what is the customary negotiated liability standard in your jurisdiction?

Under Brazilian law, the general liability standard of individuals and entities depends on the evidence of: (i) that the act or omission has been carried out negligently or maliciously; (ii) a loss actually suffered by a third party; and (iii) the causal relation between such act or omission and the actual losses suffered by the third party and its extension.

The burden of proof shall fall upon the victim of the loss, who must evidence the relation between the fact and the damage suffered. Nevertheless, the burden of proof is inverted in the case of a consumer relationship, thus falling upon the alleged faulty party.

Provided the contract is not governed by the Brazilian Consumer Protection Code, parties may generally be free to vary the liability standards by contract.

Mandatory legal provisions

Are any mandatory provisions imposed by law or regulation in private banking or wealth management contracts? Are there any mandatory requirements for any disclosure, notice, form or content of any of the private banking contract documentation?

There are no mandatory provisions imposed by law or regulation with regard to private banking and wealth management contracts. Such contracts may, however, be affected by sparse regulations from the Central Bank of Brazil applicable to banking contracts in general.

Limitation period

What is the applicable limitation period for claims under a private banking or wealth management contract? Can the limitation period be varied contractually? How can the limitation period be tolled or waived?

The statute of limitations for civil liability for claims in connection with contracts in general is of three years. This period cannot be varied contractually or waived.

Disputes

Competent authorities

What are the local competent authorities for dispute resolution in the private banking industry?

The ordinary judicial courts are the legal competent authorities for resolving disputes related to private banking relationships. Parties may also elect to resolve disputes via arbitration.

In any event, it is worth mentioning that the Central Bank of Brazil and the CVM may, as a result of complaints received or ex-officio, investigate potential malpractices. In these cases, an administrative proceeding would be initiated with the purpose of sanctioning the regulated entity. Both agencies may also cooperate with Brazilian courts in judicial proceedings involving matters of relevance.

Disclosure

Are private banking disputes subject to disclosure to the local regulator? Can a client lodge a complaint with the local regulator? How are complaints investigated?

As mentioned above, even though private banking disputes are not subject to disclosure with local regulators, it is possible for a client to lodge a complaint with the Central Bank of Brazil or the CVM, as applicable. Regulators may initiate an investigation either ex-officio or based on complaints received from the public.

The investigation may lead to an administrative proceeding initiated against the regulated entity, the decision of which is appealable at the regulator level, as well as with the judicial courts.

UPDATE & TRENDS

Update & trends

Updates and trends

The Brazilian wealth management regulatory framework has been subject to significant modernisation and will likely to lead to significant development of the industry.

On the other hand, even though financial institutions are extensively regulated and supervised by the Central Bank of Brazil, there are no specific rules governing this type of business, which creates several uncertainties for market participants, especially with regard to assisting private banking clients with offshore investments.

Finally, we note that Brazil has recently developed stricter rules for the development of other activities, such as investment advisory and discretionary asset management. In our opinion, the trend towards tighter regulations in other sectors, such as private banking, may follow.