CVM’s Rule creates the Stock Investment Fund – Access Market
On June 26, 2014, Brazil’s Securities and Exchange Commission (local acronym CVM) published Rule No. 549/14 to amend some of the provisions of CVM’s Rule No. 409/04, which currently regulates investment funds in Brazil.
The most significant innovation introduced by CVM’s Rule No. 549/14 was the creation of the Stock Investment Funds – Access Market (local acronym FMA). The FMA is a fund whose investment policies stipulate that at least two thirds (2/3) of its owners’ equity must be invested in shares of companies listed on a securities trading segment focused on the access market, established by the stock exchange or by an entity of the organized over-the-counter (OTC) market, which contractually ensures differentiated corporate governance practices.
If the FMA is incorporated as closed co-ownership, then it will also be allowed to invest up to one third (1/3) of its assets in securities issued by closely-held corporations. For this purpose, the FMA must participate in the decision-making process of the investee, effectively influencing the definition of the investee’s strategic policies and management. Additionally, the investees will have to adopt best governance practices.
Provided that the requirements of CVM’s Rule No. 549/14 are met, the FMA can invest in public or closely-held corporations and, therefore, can follow the evolution of companies that have not yet made a public offering but intend to do so.
CVM’s Rule No. 549/14 is another example of a rule that aims to give smaller companies – that usually do not participate in pulic offerings – access to the Brazilian stock market, thus expanding the range of possible participants.