In a judgment session on May 17th, 2022, the Brazilian Securities and Exchange Commission (CVM) examined a specific case in which the existence of fraudulent operations was investigated within a credit rights investment fund, or FIDC (acronym in Portuguese), that had in its investment portfolio credit rights represented by invoices (duplicatas), which lacked an underlying commercial relationship.
The invoices did not have the necessary formalities for the correct identification of its backing, such as the corresponding invoice number, to identify the products delivered or the services provided.
The FIDC must allocate, at least, 50% of its net equity value in credit rights, such as debt instruments, originating from operations carried out in the financial, commercial, industrial, real estate, mortgage, leasing and service provision segments, in addition to warrants, contracts, and securities in commercial contracts for the purchase and sale of products, goods, or services for future distribution or provision and representative securities or certificates of these contracts.
The FIDC, which is regulated by the CVM Rule No. 356, of December 17, 2001 (“ICVM 356”), can only receive investments, as well as have shares traded on the secondary market, when the subscriber or purchaser of the shares is a qualified investor, a person who has financial investments above BRL 1,000,000.00.
The FIDC administrator is empowered to perform all acts necessary for its administration, as well as, upon resolution of the general meeting or, as long as provided for in the FIDC regulation, contract portfolio management services.
The investment manager is responsible for selecting the credit rights to be acquired by the FIDC, but, pursuant to article 8 of ICVM 356, the custodian is responsible for: (i) validating the credit rights in relation to the eligibility criteria established in the regulation; (ii) receive and verify the documentation that verifies the backing of the credit rights represented by financial, commercial, and service operations; and (iii) verify the documentation that demonstrates the backing of the credit rights represented by financial, commercial, and service operations.
Additionally, CVM Instructions No. 8 and No. 555 prohibit practices that could harm the fiduciary relationship maintained with investors, such as the ones which could induce in error, and also establish other obligations.
In this case, the CVM understood that the custodian, as the agent responsible for verifying the backing of the credit rights, did not exercise the due diligence and care necessary for such function, which cannot be merely a formality. The custodian should have, therefore, taken all measures to identify any flaws in the formalization of credit rights and correct them.
In conclusion, the president and the Board of CVM unanimously decided to impose fines on all those involved for the practice of a fraudulent operation, including the custodian.
