By Brazil Stock Guide – Brazil’s securities regulator CVM has said that receivables investment funds, known locally as FIDCs, cannot allocate all or part of their performance fees to specialized consultants hired by the fund manager.
The guidance was issued by the CVM’s Securitization and Agribusiness Superintendence, or SSE, which said performance-based compensation is directly linked to the professional management of the fund’s portfolio.
According to the regulator, hiring specialized consultants to assist with credit analysis or monitor receivables does not change the manager’s responsibility for investment and divestment decisions.
The CVM also warned that linking a consultant’s compensation to the fund’s performance fee could, depending on the structure, be viewed as the unauthorized provision of portfolio management services, potentially exposing the consultant, fund manager or administrator to liability.
The interpretation is based on CVM Resolution 175, which assigns responsibility for charging performance fees to the fund manager.
The circular does not expressly address whether the same interpretation applies without qualification to funds restricted to professional investors or to structures that benefit from specific regulatory exemptions.
Brazilian law firm Mattos Filho said in an analysis of the guidance that this remains an open issue and could prompt managers, administrators and specialized consultants to review existing compensation arrangements.
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