The New CVM Instructions (Nos. 554 And 555)

In 2014, the Brazilian Securities and Exchange Commission ("CVM") presented to a public hearing a draft of an Instruction that proposes to change the definition of the category of "qualified investors" of CVM Instruction No. 409, dated of August 18th 2004 ("CVM Instruction 409″), which provides of rules for investment funds, related to CVM Instruction No. 539, dated of November 13th 2013 ("CVM Instruction 539″).

With this proposal, the definition of "qualified investor" of the article 109 of CVM Instruction 409 has suffered a rupture, yielding two concepts of investors: (i) the Professional Investors, defined as people who have investments greater than R$20,000,000.00 (twenty million reais) and that act directly in the financial market or that due to a great amount of equity, may hire service providers that are able to assist them in make decisions to diversify their investments; and (ii) qualified investors, represented by the people who have investments greater than R$1,000,000.00 (one million reais) and that requires a broader regulatory protection than the professional investors do.

According to the draft, in addition to the subjects quoted above, the following will be considered included in the definition of professional investors: (i) financial institutions and other institutions authorized to operate by the Central Bank of Brazil; (ii) the insurance and capitalization companies; (iii) the open and closed pension funds; (iv) investment funds; (vi) investment clubs, provided that their investment portfolio is managed by a securities portfolio manager authorized by CVM; (vii) independent investment agents, investment portfolio managers, analysts and securities consultants authorized by CVM, regarding their own investments; and (viii) non-resident investors.

The concept of qualified investors extends to the following cases, in addition to the ones quoted above: (i) professional investors; (ii) individuals who have been approved in technical qualification tests or who have certifications approved by the CVM as requirements for the registration of independent investment agents, investment portfolio managers, analysts and securities consultants, regarding their own investments, (iii) investment clubs, provided that the investment portfolio is managed by one or more shareholders, who are qualified investors.

Thus, besides the creation of the concept of professional investors and the alteration of the concept of qualified investors, the draft...