On June 1, 2023, CVM Resolution 178 came into effect, establishing new rules for investment advisors and replacing CVM Resolution 16. The main innovations introduced by the new regulation are:
Possibility for investment advisors to operate without an exclusivity arrangement: investment advisors may act as agents of one or more intermediaries.
Flexibility regarding the corporate structure adopted by investment advisors that are legal entities: this measure replaces the previous mandatory requirement to adopt the simple partnership form.
Greater transparency for investors: the regulation includes an investor awareness statement describing the essential characteristics of the investment advisory activity, while also reinforcing advisors’ obligations to disclose their remuneration structure and potential conflicts of interest to investors.
Creation of the responsible director for investment advisor legal entities: this professional must be registered as an investment advisor and is responsible, among other duties, for acting as the focal point before regulators, self-regulatory bodies and intermediaries.
Detailed aspects related to the supervisory duties that intermediaries must exercise over investment advisors: the regulation seeks to clarify aspects that form part of the intermediary’s supervisory duty and reinforces its responsibility for the investment advisor’s actions vis-à-vis the client.
Chief Internal Controls Officer and Chief Compliance Officer: the final version of the rule does not require investment advisor legal entities operating on a non-exclusive basis to have these two directors. Instead, an arrangement has been adopted that involves only one director and a reinforcement of the intermediaries’ supervisory role.
Removal of the exclusive corporate purpose requirement: investment advisor legal entities may now engage in other activities related to the financial, capital markets, insurance and capitalization markets, provided that applicable legislation and regulations are observed and that such activities do not conflict with their core activities as established by CVM regulations.
Removal of rules establishing a specific regime for non-exclusive investment advisors or those admitting unregistered partners: with the creation of the responsible director, who must be present in all investment advisor legal entities, and the reinforced supervisory duty of intermediaries, it was possible to adopt a less prescriptive and more flexible approach regarding the corporate structure, rules, procedures and internal controls of non-exclusive investment advisors or those admitting unregistered partners.
Possibility for individual investment advisors to operate on a non-exclusive basis: the flexibility introduced by the new regulation regarding the possibility of multi-affiliation has been extended to individual investment advisors as well.
Inclusion of a transitional rule to allow the change from the term “autonomous investment agent” to “investment advisor” or “AI” in the legal entity’s name or trade name to take place at the time of the next amendment to the articles of association or equivalent document.
MCS Markup’s multidisciplinary teams are prepared to support advisors navigating the market movements arising from this new framework and to assist with regulatory compliance.
