Investment Funds and Stroctured Finance Newsletter – April 2022

HIGHLIGHTS

CVM Regulation 60 goes into effect on May 2, 2022

On May 2, 2022, CVM Regulation 60 comes into force and repeals CVM Regulations 414, 443, and 600 – rules that regulate securitization companies, Real Estate Receivables Certificates (CRI) and of Agribusiness Receivables (CRA)-, following up on the CVM’s effort to consolidate regulations on the rules of the securitization market and incorporating most of the provisions of these regulations. The securitization companies that are already constituted will have a period of 180 (one hundred and eighty) days after the entry into force of the Resolution to adapt to the new rule.

For more information, see CVM Resolution 60

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Law that reduces CVM’s Inspection Fees for individuals and smaller companies published by the Government

On March 30, 2022, Law 14,317 was published, which substantially reduces the amounts of the Securities Market Inspection Fees (“TFCVM”) for regulated individuals, which in turn improves the rate regime applicable to those regulated by the Securities and Exchange Commission (“CVM”).  The Law derives from MP 1072/21.

Such Law promotes improved compliance with the ability-to-pay principle, reducing fees and tax burden to regulated individuals and small companies, and increases such fees for larger companies.  Some of the benefits include:

(a) Reduction of up to 79% of fees for service providers (individuals), with emphasis on independent investment agents (“AAIs”), who are now called “investment advisors”;

(b) Reduction of up to 50% of fees for investment advisors (legal entity), providers of portfolio management services (legal entity) and securities advisors (legal entity);

(c) Reduction of tax burden for Public Companies, Investment Funds and other smaller companies, stimulating the entry of new agents and increasing competition and efficiency in the capital market;

(d) Unification and reduction of the rate on offers of securities, which became 0.03% of the amount of the offer, representing a reduction of up to 95% in the nominal rate;

(e) Update of the legal structure, with the inclusion of new categories of taxpayers that emerged with the evolution of the market;

(f) Reduced and exclusive taxation for market innovation agents, such as crowdfunding platforms and legal entities authorized to participate in the experimental regulatory environment (sandbox);

(g) Increase in the fee-charging frequency, from quarterly to annually, reducing transactional and operating costs for both regulated entities and the CVM.

The taxpayers included are: (a) Foreign companies; (b) Leading offer intermediaries; (c) Representative of a non-resident investor (“INR”); (d) Risk-classification agencies (rating agencies; (e) Trustees; (f) Organized over-the-counter market entities; (g) Securities depository centers; (h) Other institutions operating Market infrastructure; (i) Electronic collective investment platform; (j) Legal entity authorized to participate in the regulatory environment (sandbox).

For more information, see Law 14,317.

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Fulfillment of payment terms for redemptions provided for in the fund’s regulations

The CVM’s Superintendence of Institutional Investors (“SIN”) published on March 9, 2022, Circular CVM/SIN 1/2022, whose objective is to explain the technical area’s understanding of what must be computed in the operational processing of redemptions, within the maximum period of five business days, provided for in art. 37, III, of CVM Regulation 555.  

The document clarifies that SIN understands that the “payment” of the redemption is the moment the financial resources are effectively placed at the disposal of the shareholder. In addition, the document informs that the period between the settlement of redemption by the fund and the effective availability of resources to the investor must be considered within five business days. 

Fine: When estimating the payment term of redemptions in the fund’s regulations, the administrator must ensure compliance with the period of five business days, under penalty of a daily fine, provided for in article 37, V, of CVM Regulation 555.

For more information, see Circular CVM/SIN 1/2022.

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Financial volume managed by equity managers grows 22.3% and reaches BRL 321.6 billion in 2021

The financial volume managed by equity managers reached BRL 321.6 billion in 2021, an increase of 22.3% compared to December 2020, according to Anbima’s semiannual Equity Management report.

Fixed income assets gained momentum in the composition of investors’ portfolios, from 37.6% to 40.2% last year. Structured funds, represented by Equity Investment Funds (“FIPs”) and real estate funds, grew from 8.3% to 10% of financial volume. The variable income category lost ground: it dropped from 27.3% to 22.8% of the portfolio, on the same basis of comparison.

“Despite the drop in the IBX and Ibovespa in 2021, and a certain aversion to risk in the 2nd half of last year, variable income grew by BRL 1.4 billion in the period, proving that equity managers maintained their diversification strategy noticed in recent years”, explains Anbima’s head officer, Jan Gunnar Karsten.

• • Financial Volume: In relation to net equity, almost all assets presented positive variations. Within fixed income, the highlight was government bonds, which grew 54.9% over the last year and reached BRL 31.9 billion, the second largest financial volume in the segment. Fixed income fund shares concentrate most of the equity, with BRL 37.2 billion, an increase of 22.2% on the same basis of comparison. Debentures occupy the third position, with BRL 12.9 billion, an increase of 28% over the year.

In variable income and hybrid assets (those with fixed and variable income characteristics), the shares of multimarket funds reached BRL 77.8 billion in 2021, a variation of 22.5% compared to December 2020. Shares in equity funds increased by 5.8%, reaching BRL 47.2 billion, while shares in FIPs and real estate funds grew by 63.8% and 23.1%, respectively, reaching BRL 20.4 billion and BRL 11.5 billion.

The negative variations were concentrated in stock, which registered a fall of BRL 1.5 billion (5.5%), totaling BRL 25.3 billion; the LCIs (Real Estate Credit Bills), with a retraction of BRL 200 million (9.2%), at BRL 1.5 billion; and LCAs (Agribusiness Credit Bills), whose volume was reduced by BRL 12.3 million (0.3%), amounting to BRL 4.4 billion.

• • Types of instruments: Equity management clients’ applications can be made through two instruments: investment funds or managed portfolios.

The funds concentrate most of the financial volume. They closed 2021 with BRL 228.6 billion, an increase of 24.9% from 2020. Meanwhile, portfolios account for BRL 93.1 billion, an increase of 16.3% over the same period.

As for the quantity of instruments, managed portfolios are the majority: 26,563 compared to 3,121 investment funds. “Managed portfolios are usually created individually for each customer and have a smaller entry ticket, which explains the high volume in the number of these vehicles. Funds aimed at the segment, in general, are intended for a family of clients and, therefore, include several investors, justifying the smaller amount, but the greater financial volume”, explains Karsten.

• • Distribution over the country: All regions of the country had positive net equity variations in 2021. The Southeast region concentrates BRL 275 billion, a growth of 24.1% (BRL 53.4 billion) last year. The South region accounts for BRL 29.4 billion, an increase of 11.2% (BRL 3 billion).

The Northeast and Midwest regions total amounts of BRL 11.1 billion and BRL 5 billion, with positive variations of 8.7% and 23% compared to the previous year. The smallest volume among the regions is with the North, which was at BRL 1.1 billion in December, reaching the highest percentage change in the period (55.6%).

For more information, see  Equity Management Semiannual Report.

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Anbima compiles all information on ESG Funds identification in a special webpage

Anbima launched a special webpage  on its website, containing all documents and information about the identification of sustainable funds. Since January, financial institutions can identify the ESG (environmental, social and governance criteria), of shares and fixed income funds, in accordance with the rules of the Third-Party Resources Administration Code.  

“The special page will be a repository of information about the identification process of ESG funds. It will make it easier for institutions to consult documents related to this topic and will be updated whenever necessary”, explains Juliana Agostino, Anbima’s Representation Manager.

Among the webpage’s materials are self-regulation rules that include criteria for identifying funds; the ESG Guide that helps the market with compliance; the answers to players’ main queries and news related to the subject, among others.

• • More information about the identification of funds: Financial institutions must identify funds with a 100% sustainable investment objective/term. They carry the suffix IS (Sustainable Investment, Portuguese) in their name and no investment can compromise them.

Funds that integrate ESG aspects into their management process, but do not have sustainable investment as their main objective, will also be recognized. They may not carry the suffix ‘IS’, but they are different from the others: these funds carry the following sentence “this fund integrates ESG issues in its management” in sales materials aimed at investors.

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Courts deny requests for employment relationship from investment agents

The legislation allows a self-employed agent to carry out activities through a partnership or individual firm. The agent must enter into a written agreement with an institution that is part of the securities distribution system. The activity of such professional is governed by Law no. 6,385, of 1976, Resolution no 2,838, of 2001, and Regulation no. 497, of 2011, all under the CVM.

In the lawsuits, agents requested the recognition of employment relationship with the partner company and subsidiary liability of the brokerage firm – in order to pay labor costs in case of default by the main debtor – or directly sue the service taker. The topic had already gone to the Superior Labor Court (“TST”), but there had not been, until such time, a judgment on the merits because ministers are not authorized to review evidence.

At the second-level appellate courts, however, there are precedents against independent investment agents. Two recent rulings in Minas Gerais and Rio de Janeiro have denied requests for employment relationship. The courts took into account that, due to their degree of specialization, these professionals knew how their services were being contracted.

One of the cases was analyzed by the 8th Panel of the Regional Labor Court (“TRT”) of Minas Gerais. The decision amended the judgment of the 21st Labor Court of Belo Horizonte, which had recognized the employment relationship requested by an agent (Case No. 0010045-93.2020.5.03.0021).

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A new version of the Investment Fund Management System (SGF) is available

The CVM’s Superintendence of Institutional Investors published on April 7, 2022, Circular CVM/SIN 2/2022, whose purpose is to release the new version of the Investment Fund Management System (“SGF”), available since April 7, 2022.

The improved version contains the registration management of investment funds regulated by CVM Regulations 279 (Mutual Privatization Funds – FMP-FGTS), 359 (Market Index Investment Funds – ETF) and 423 (Individual Programmed Retirement Funds – FAPI).

From now on, administrators can access the system, through their CVMWeb login and password, and must register new types of investment funds exclusively through this system. The User Manual is available on SGF’s homepage, along with its respective step-by-step guide.

This system is intended for the management of fund registration information. The submission of periodic information (Daily Report, Monthly Profile, CDA, balance sheets and audited Financial Statements), already in force through the CVMWEB Document Submission System, will not undergo any change. Thus, the use of the CVMWeb system will also be discontinued for registration purposes of FMP-FGTS, ETF and FAPI. Registration operations of all relevant types of funds must be carried out only by the SGF.

For more information, see Circular CVM/SIN 2/2022.

CVM DECISIONS

CVM judges case of alleged violations involving a securities brokerage firm (“CTVM”)1

On March 29, 2022, the CVM judged the sanctioning administrative proceeding PAS CVM SEI 19957.000198/2020-11 (21/2013).

The proceeding was brought by the Superintendence of Sanctioning Proceedings (“SPS”) together with the Specialized Federal Attorney’s Office (“PFE/CVM”) to investigate alleged irregularities carried out between 2008 and 2011 by entities that are part of the distribution system, including those related to the management of securities portfolios without the respective registration with the CVM.

According to the CVM, an alleged scheme was carried out regarding irregular portfolio management for several CTVM clients, and in some cases, excessive negotiations aiming to generate brokerage (churning).

The case contains the following allegations:

(a) Performance of the portfolio management activity without authorization from the CVM (violation of article 3 of CVM Regulation 306, in conjunction with article 16, IV of CVM Regulation 434 – for acting as an independent investment agent);

(b) Performance of the portfolio management activity without authorization from the CVM (infringement of article 3 of CVM Regulation 306);

(c) Practice of churning, fraudulent operations with the purpose of generating brokerage (violation of item I, with item II, “c,” of CVM Regulation 08);

(d) Practice of churning, fraudulent operations, including cases with managed portfolio contracts, with the purpose of generating brokerage (violation of item I, with item II, “c,” of CVM Regulation 08, and with article 16, VI, of CVM Regulation 306);

(e) In the capacity of a portfolio manager, delegation of this function to non-qualified persons (violation of article 14, II and IV, of CVM Regulation 306);

(f) As a securities brokerage firm, allowing the performance of mediation activities by unauthorized persons (violation of article 13, I, c, of CVM Regulation 387);

(g) As a member of the securities market distribution system, competing for the maintenance of churning schemes (violation of item I, c/c item II, “c,” of CVM Regulation 08).

The CVM decided that immediate compliance with the aforementioned decision may result in obstacles of an operational nature that are difficult to overcome during the short time available to the Administrator for compliance with its obligations towards the shareholders, which need to be further understood.

For more information, see the report and the vote of the case’s rapporteur Marcelo Barbosa, President of CVM.

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CVM fines those accused of failures involving an investment fund in credit rights2

PAS CVM SEI 19957.002596/2017-68 (02596/2017) was brought by the SPS to determine the liability of a financial institution, a financial consulting firm and two individuals, for allegedly carrying out operations with previously agreed results, which constitutes the creation of artificial demand, supply or price conditions (violation of item I c/c item II, “a,” of CVM Regulation 08 – in force at the time the facts occurred).

Liability was also determined on the part of the securities distributor that intermediated part of the aforementioned transactions, due to an alleged failure to monitor them and the failure to carry out the appropriate communications (violation of Articles 6, II and VII, and Article 7, I and II, of CVM Regulation 301 – in force at the time the facts occurred).

For more information, see the report and vote of the case’s rapporteur, Marcelo Barbosa, President of CVM, and  statement of vote of Officer Flávia Perlingeiro.

PAS CVM SEI 19957.006688/2016-36 (RJ2016/8375) was brought by SIN to determine the liability of a financial institution for alleged failures in the collection of credit rights; custody and maintenance of documents related to credit rights and other assets of the investment fund portfolio in credit rights; and assessment of backing (violation of article 38, VII, “b;” article 38, V and VI, together with article 38, §9, I and II, “b,” and §10, II; article 38, III; and article 38, §9, II, “a” with article 38, §10, II of CVM Regulation 356, as amended by CVM Regulation 531).

Liability was also determined on the part of another financial institution and the officer in charge of managing investment funds in credit rights of the aforementioned financial institution for failure to supervise custody activities performed by Banco Santander; for not making available on the website the rules and procedures related to verification of the backing of credit rights and the keeping of the Fund’s documentation; and for not providing in the Fund’s Regulations the deadlines related to activities of receipt and analysis of the supporting documentation by the custodian (infringement of art. 39, §4; art. 38, §10, III; and art. 38, §12, I of CVM Regulation 356, as amended by CVM Regulation 531).

For more information, see the report and vote of Officer Rapporteur Otto Lobo.

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CVM considers Settlement Agreement proposed by FIDC Manager and its responsible officer

This is a proposal for a settlement agreement presented by a certain manager (“Manager”), in the capacity of manager of a FIDC-NP (“Fund”), and by the officer responsible for the Manager (“Officer” and, together with the Manager, the “Proposers”), within the scope of Administrative Proceeding 19957.009826/2019-81 (“PA”), conducted by the Brazilian Superintendence of Securitization Supervision (“SSE”).

According to the technical team of the Brazilian Securities Exchange Commission (“CVM”), the Proposers are alleged to have acquired, on behalf of the Fund, credits that were not suitable to integrate the investment fund portfolio in non-standardized credit rights, which would constitute a violation of article 1, §1, of CVM Regulation no. 444/2006, and the head paragraph of article 92, of CVM Regulation No. 555/2014.

The proposal presented by the Proposers, within the scope of the PA and prior to the summons, consisted of the assumption of “pecuniary obligations in the individual amount of eighty thousand reais (BRL 80,000.00), resulting in the total amount of one hundred and sixty thousand reais (BRL 160,000.00).”

As a result of the provisions of article 83 of CVM Regulation No. 607/2019 in force at the time, PFE/CVM considered, in light of article 11, § 5, items I and II of Law No. 6.385/1976, the legal aspects of the proposal presented, and issued the opinion that there were no impediments to the execution of the Settlement Agreement.

Thus, according to the Settlement Agreement Committee (“Committee”), it would be possible to discuss the feasibility of an adjustment for the early closing of the case and, especially considering (i) the provisions of the head paragraph of article 86, of CVM Regulation No. 607/2019 applicable at the time; (ii) that the facts occurred after Law no. 13.506/2017 came into force; (iii) that the irregular conduct allegedly carried out is classified within Group V of Annex 63 of CVM Regulation No. 607/2019; (iv) the history of the Proposers, who have executed a settlement agreement due to a similar irregularity; and (v) the phase of the proceeding at the time of presentation of such proposal offered an improvement of such proposal with assumption of pecuniary obligations in one single installment of eight hundred and ten thousand reais (BRL 810,000.00), distributed as follows: (a) Manager: five hundred and forty thousand reais (BRL 540,000.00); and (b) Officer: two hundred and seventy thousand reais (BRL 270,000.00).

The Proposers agreed with the terms proposed by the Committee in a timely manner.

The Collegiate Board unanimously accepted the proposal for a Settlement Agreement presented, following the Committee’s opinion.

The Administrative and Financial Superintendence (“SAD”) was appointed as the party responsible for attesting to the fulfillment of pecuniary obligations assumed. Finally, the Collegiate Board determined that, once the agreed obligations are fulfilled, as attested by the SAD, the proceeding against the Proposers shall be shelved.

For more information, see the Committee’s Opinion.

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CVM considers Request for waiver of FIP Regulatory Requirement

A request for waiver of rule in article 12 of CVM Regulation No. 578/2016 was made within the scope of request for registration of a certain FIP (“Fund”), as drafted by its portfolio manager (“Manager” or “Claimant”), in order to enable the Fund to invest up 100% of its portfolio in assets abroad, even if destined for qualified investors.

The Claimant also presented a request that the matter be treated with confidentiality, due to “innovations and particular details of the Request.”

In this context, the Manager stated that the Fund will seek to invest up to 100% of its capital subscribed in funds abroad, in strict compliance with the following criteria: (i) application of its resources in at least 7 funds abroad; (ii) maximum limit of application of 15% of its capital subscribed in a single fund abroad – individually; (iii)  at least 80% of the Fund’s portfolio shall be invested in funds abroad, whose management must be performed by managers and/or other service providers constituted in selected jurisdictions, and the remaining 20% shall be invested in funds constituted in Asia (as clarified by the Claimant, after the request for information by the Superintendence of Institutional Investors (“SIN”)); (iv) the application in each fund abroad will occur if the Manager finds that the respective managers of invested funds have an investment history and expertise compatible with the investment policy of the Fund, and the portfolios are managed in amounts equal or higher than five hundred million US dollars (USD 500,000,000.00) on the date the investment is made; (v) as for the informational regime, “the Administrator will provide a report for composition and diversification of Fund applications (“CDA Report”) to CVM on a quarterly basis, within up to fifteen (15) days after the closing of each calendar quarter or, in the event this is not possible due to operational and/or CVM system issues, another document containing at least the information in the CDA Report in relation to the Fund”; and (vi) with respect to valuation, “the Fund’s portfolio will be reassessed every six months, for the update and disclosure of information necessary for the Document Submission System on CVM’s website.”  

In order to support its claim, the Manager mentioned the discussions in SDM Public Hearing Notice No. 08/20, currently ongoing at the CVM, which addresses, among other topics, the possibility of current investment funds regulated by CVM Regulation No. 555/2014 (“555 Funds“), even if destined for the general public, to apply up to 100% of its net equity in financial assets abroad, upon compliance with certain requirements. The Manager pointed out that such change in the rules for 555 Funds would be aligned with changes brought by CVM Resolution No. 3/2020, which eased retail investors’ access to assets abroad, through the possibility of applying their resources in Level I BDR. In this regard, the Manager argued that if the CVM “is making certain products more accessible to retail investors, one can assume that qualified investors, who are presumably, by the very regulations in force, more sophisticated than retail investors, may also enjoy the same accessibility that are currently under discussion.“

Subsequently, analyzing the possibility of adopting alternative solutions already set forth in the regulation for this case, the technical team followed the Claimant’s understanding that a FIP would be the most appropriate vehicle to achieve the intended goal with the claim in question. In addition, it considered that “the Claimant’s allegation is relevant (…) that, in short, the nature of a FIP is closer than that of a FIC-FIM for the intended assets (private equity funds shares), and that [the] use of this vehicle (the FIP) would give more transparency to potential investors and the market of what is intended as an investment,” having also added that “a FIP is supported by its own rule (CVM Regulation 578) which best enables and defines the intended structure, of which [we highlight] the possibility of calling capital as well as the issuance of different classes of shares, which, in turn, are provided for within the scope of the Fund’s operation.”

As for the analysis that the concern, discussed in article 12 of CVM Regulation No. 578/2016, was properly and sufficiently mitigated in in this case, the SIN understood that, in view of the characteristics of the Fund to be constituted and the measures that the Claimant has undertaken to adopt, as mentioned above, such concern would be duly mitigated, especially considering that the potential shareholders of the Fund will necessarily be qualified investors and not the general public. Thus, the technical team concluded that this case does not present any damage to the public interest, the market or potential investors. 

SIN further stressed that the Claimant’s commitments to carry out the portfolio’s valuation on a semiannual basis and to disclose the portfolio on a quarterly basis substantially mitigates the risk mentioned in the SDM Report 05/2015, that “FIPs are on a higher scale in terms of complexity and risk level,” with assets with little or no liquidity and difficult pricing.

For all of the above, SIN proposed to the CVM Collegiate Board (i) that the request for granting confidential treatment to the consultation be rejected; and (ii) granting waiver of article 12 of CVM Regulation No. 578/2016, under the terms claimed, so that the Fund can invest up to 100% of its portfolio in assets abroad, even if intended for qualified investors, as long as there is strict compliance with certain measures.

The Collegiate Board, unanimously, following the conclusions of the technical team, decided (i) to reject the request for confidentiality and (ii) to grant the requested waiver. 

For more information, see the Technical Team Statement.

ANBIMA DECISIONS

Anbima fines securities dealership for violations of Third-Party Resources Administration Code (“ART”) 3

A securities dealership (“DTVM”), acting in the administration of third-party resources, was fined due to the following violations of self-regulation rules: (a) Failures in the process of monitoring and periodic reassessment of service providers of the investment fund, in the capacity of administrator responsible, in view of the due diligence (Article 18, item II and Article 23, item II together with Articles 7 and 6, item II, of the ART Code); (b) Failures in management and mitigation of potential conflicts of interest (Article 6, item VIII and Article 18, §4 of the ART Code); (c) Failure to avoid practices that could harm the Administration of Third-Party Resources and its participants (Article 6, item VI of the ART Code); (d) Failure to meet the fund’s objectives, especially in regard to monitoring the Collection Policy provided for in regulation and compliance with the agreements for assignment of rights acquired by the fund in the event of default (Article 6, item X of the Code of ART).

Decision: The Board of Third-Party Resources Administration decided by majority for the penalty of prohibiting the DTVM from using the ANBIMA seal of the ART Code for five (5) years and a fine of three hundred and twenty-five thousand reais (BRL 325,000.00).

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Anbima signs Settlement Agreement with securities dealership due to indications of violation of the Investment Product Distribution Code 4

Anbima signed a Settlement Agreement with a securities dealership (“DTVM”) due to indications of the following violations to the Investment Product Distribution Code (“DPI”): (a) Indications that DTVM accepted an application request without knowledge of the investor’s qualification; (b) Indications of failure to obtain a prior statement from the client regarding the absence of an investment profile; (c) Indications of flaws in the methodology for classifying the profile of investors who declare they have a low risk tolerance and who prioritize investments in products with liquidity; (d) Indications of flaws in the classification of the Institution’s clients, with a higher probability of classification in profiles with a higher risk tolerance; (e) Indications that DVTM adopted a methodology for classifying the risk of products and verifying the suitability of these products for customers that differs from that recommended by ANBIMA’s self-regulation; and (f) Indication of non-application of product classifications provided for in the Institution’s methodology.

Therefore, DTVM has undertaken to: (a) Review the distribution procedures, with implementation of a new flow related to suitability; (b) Develop a shareholder information control system and adjust profiles and subscriptions, with contracted third parties; (c) Contract a company with proven experience and well known reputation in the capital market and the investment fund industry to review the suitability questionnaire and the investment fund risk classification manual; (d) Conduct a training on suitability for the related areas; (e) Map out its client base and update their respective registrations, and clients whose registrations are not updated must be indicated as clients without a profile. Additionally, the DVTM has undertaken to obtain an express statement signed by the client who wishes to maintain the investment decision, in case the client does not have an updated registration; (f) Publish a communication, without any marketing bias, to all active clients informing them of the changes in suitability methodology and requesting they fill out a new suitability questionnaire; (g) Send a report signed by the statutory officers responsible for compliance and distribution, attesting to the fulfillment of the commitments assumed; and (h) Make a financial contribution in the total amount of forty thousand reais (BRL 40,000.00), allocated to fund educational actions and events to be promoted by ANBIMA.

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Anbima signs Settlement Agreement with investment fund management institution (“Manager”) due to indications of violation of the Third-Party Resources Administration Code (“ART”)

Anbima signed a Settlement Agreement with a certain Manager due to indications of arbitrary decisions in managing resources in investment funds in credit rights, especially in regard to investment decisions, considering that: (a) the Manager terminated the agreement entailed the indication of arbitrary decisions and, additionally, resigned from the role of manager of the FIDC at issue; (b) the Manager, before signing the Settlement Agreement, improved its internal systems for recording the entire investment process and for analyzing the counterpart of credit operations, in addition to changing parameters of the internal system for the onboarding process of new equity management clients; (c) contracted a new background-check system for reputational analysis and identification of monitoring by related parties; and (d) reviewed private credit assets that are part of the exclusive investment fund portfolios under its management, the procedures adopted in credit operations, as well as its Internal Controls and Compliance Policy.

Therefore, the Manager has undertaken to: (a) Hire and complete a Corporate Governance and Ethics Course to reinforce the concepts of governance and internal controls; (b) Promote periodic Compliance training for employees on internal policies, focusing on the ART rules; (c) Update equity management agreements signed, from the perspective of ART rules, especially with regard to the contracting of suppliers, so that the Manager is responsible for contracting suppliers for the exclusive funds and/or managed portfolios, under penalty of termination of the relationship with the client at issue; (d) Implement an Extraordinary Credit Committee to validate new credits received in cases of client transfer, forwarding the respective minutes of the Committee for a period of six (6) months from the execution of the Instrument of Commitment; and (e) Make a financial contribution in the total amount of fifty thousand reais (R$ 50,000.00), intended to fund educational events and actions to be promoted by ANBIMA.

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