2023-08-09 20:02:07
A CVM Resolution 179 is a standard issued by the Brazilian Securities and Exchange Commission
(CVM) – entity responsible for the regulation and supervision of the Brazilian securities market. Published in the Federal Official Gazette on February 15, 2023, it establishes the rules for the public offer of distribution of securities.
In replacement of Resolution 35/2021, this administrative act seeks to expand the transparency about the remuneration of professionals with intermediaries.
To do so, it encompasses both the investment advisors as well as other financial market agents.
Together with CVM Resolution 178 – which revoked CVM Resolution 16 and now provides for investment advisor activity –, CVM Resolution 179 forms the new regulatory framework for the activity.
With the measures adopted, the norm seeks to improve the performance of advisors and ensure greater transparency and protection for investors, combating conflicts of interest.
Due to the relevance of the changes, it is necessary to know the subject in more detail. Want to better understand the topic? Then check out this special material that we have prepared for you.
In this text you will learn about:
– CVM Resolution 179: what is it?
– Relevant points of CVM Resolution 178
– Transparency is a highlight of CVM Resolution 179
– New arrangements for advisors
– Benefits from changes
– Conclusion
CVM Resolution 179: what is it?
A CVM Resolution 179 “amends CVM Resolution No. 35, of May 26, 2021 and updates the name of investment advisors in various resolutions”, as summarized in the summary itself.
Acting in conjunction with CVM Resolution 178, it forms the new regulatory framework for investment advisory activity.
In force almost in its entirety since the 1st of June 2023, this administrative act applies to all intermediaries dealing with investment products. But what are its virtues?
To the investors, a relevant aspect is whether the suggestions presented really take into account both the investor’s profile and the objectives set. Or whether the product recommendation is influenced by the higher remuneration received by the fund manager’s distributor.
With the new rule, therefore, it is expected that people will be able to more easily identify possible conflicts of interest.
In addition, it ensures more credibility for qualified professionals, who achieve better results every day.
In an interview with the newspaper Economic value on February 14, the president of the municipality, João Pedro Nascimento, highlighted the growth of the capital market and the importance of investment advisors in the democratization of this market throughout Brazil.
Therefore, the regulatory framework grants new prerogatives to advisors, he explained at the time.
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Relevant points of CVM Resolution 178
It is difficult to explain CVM Resolution 179 without understanding more about its partnership in the formation of the new regulatory framework for the investment advisory activity.
Therefore, it is also necessary to know some details about the CVM Resolution 178, which “provides for the activity of investment advisor and revokes CVM Resolution No. 16, of February 9, 2021”. Among the highlights, we can mention:
end of exclusivity
Now the advisors can work with one or more brokers.
Despite the change, the brokerage firm may still demand exclusivity. However, this needs to be negotiated transparently with investors.
In addition, advisors must inform brokers which clients they are working with.
Compensation structure
The standard also reinforces the disclosure of remunerationmaking it easier to identify possible conflicts of interest.
investment offices
With regard to the structure of the offices, the resolution creates the designation of director responsible for the corporate investment adviser.
Registered, this professional will act as a direct bridge with CVM and the accreditation entity, acting as a “protector” of compliance with the rules. As the resolution describes, he must act with “probity, good faith and professional ethics”.
This change aims to increase advisors’ accountabilitywith a central focus on the responsible director.
The expectation with this new norm is that the brokerage firms assume the contingencies of the offices and the advisors, more responsibilities, concentrated on the director in charge.
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Transparency is a highlight of CVM Resolution 179
Now that we have learned details of CVM Resolution 178, one of the arms of the regulatory framework, it is easier to understand some points of CVM Resolution 179.
This administrative act highlights the requirement for transparency regarding remuneration in investment advice.
Now the advisors will be obliged to disclose information qualitative as well as quantitative.
This data must be available on the office’s website. In this way, investors can access information before making investment decisions.
Another relevant detail is the advisor’s need to provide investors with a quarterly pay statement.
This document needs to detail the amounts received by the brokerage during the period, allowing the monitoring of this data.
The purpose of these amendments is to promote transparency throughout the distribution chain; as well as guaranteeing investors important information for their decisions and monitoring of investments.
New arrangements for advisors
For investment advisors, the resolutions that came into force bring another novelty: the possibility of operate with different corporate arrangements. The change includes the formation of economic groups, holding companies and the presence of capital partners.
In addition, investment advisory firms may now include other activities in their corporate purpose, but as long as they are complementary to the “financial, capital, insurance, pension and capitalization markets”, without conflicting with the distribution of investment products. investment.
This change simplifies the organization of companies, reducing operating costs.
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Benefits with the changes
Now that we have learned details about the changes, it is worth highlighting the importance of the existence of a resolution to regulate the training and activities of investment advisers. After all, it brings benefits for both professionals and investors.
Certainly, the existence of a resolution for the training and performance of investment advisors contributes to the protection, transparency, standardization and adequacy of activities.
Therefore, it provides investors with greater security, adequate information and expert guidance for their decisions, as is the case in a broad and clear manner in the Warren.
The new regulation aims to protect investors, establishing standards and minimum qualification and suitability requirements for advisors.
In addition, it brings more transparency to the process, requiring the disclosure of relevant information on remuneration, conflicts of interest and product characteristics.
The regulatory framework also standardizes and professionalizes advisors’ activity, establishing criteria and guidelines for their training and ethical conduct. This increases investors’ confidence in the market and in the services provided.
Also among the benefits, the resolution guides advisors to adapt their recommendations to the needs and objectives of each investor.
Finally, it establishes inspection and accountability mechanisms, promoting a safe and reliable business environment.
Conclusion
A CVM Resolution 179 and CVM Resolution 178 have a significant impact on the investor’s life, promoting greater transparency, protection and standardization in the activities of investment advisers.
These resolutions establish norms and guidelines aimed at improving the performance of advisors, ensuring transparency in remuneration practices and providing adequate information to investors.
In particular, CVM Resolution 179 seeks to increase transparency regarding institutions’ remuneration and possible conflicts of interest in investment advice.
In this context, it requires the disclosure of information on remuneration arrangements, in addition to providing investors with a quarterly remuneration statement.
This allows for a clear view of advisors’ financial incentives, which makes it possible to identify possible conflicts of interest.
In turn, Resolution 178 brings news such as the end of the advisors’ exclusivity, allowing them to work with one or more brokerage firms. The norm also created the figure of the director responsible for the corporate investment advisor, increasing the advisors’ responsibility and promoting a new regulatory arrangement.
In general, CVM Resolutions 179 and 178 represent important advances for the securities market in Brazilproviding greater transparency, protection and professionalization in the performance of investment advisors.
Now that you know the details of the regulatory framework, it’s time to learn how to expand and protect your assets.
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