The Brazilian Securities and Exchange Commission (CVM) has the function of regulatory agent of the Brazilian capital market under the terms of Law 6,385/76. In this capacity, the authority is responsible for the regulation, oversight, and imposition of sanctions on issuers, controllers, and administrators of securities, to the entities that are part of the securities distribution system, to the independent auditors, and to other persons that act professionally in the capital market.

Due to the inspection and supervision activities performed by the CVM, a securities markets oversight fee was instituted by law. The taxable event is exercise of the police power legally attributed to the CVM, under the terms of Law 7,940/89, with constitutional support in article 145, subsection II, of the Federal Constitution.

This Law 7,940/89 was recently amended by Law 14,317/22 (originated from the conversion of Executive Order 1,072/21), which modified the oversight fee as follows:

  • expanded the list of taxpayers;
  • updated the sums charged;
  • established a new calculation criterion based on the net equity of the regulated participants;
  • created a type of fee resulting from CVM registration activity, in addition to the already existing periodic oversight fee and public offering fee; and
  • changed the form of appeal for coercive fines imposed when a CVM order is not complied with.

For the purpose of clarifying the levying and collection of the oversight fee, the CVM disclosed Circular-Letter 1/2022-CVM/SER, on January 14, 2022. The CVM also makes available on its website a series of answers to frequently asked questions, through which it seeks to clarify the taxpayers' main doubts about the levying, collection, and calculation of the oversight fee.

Considering, however, the questions received, especially from investment fund managers, regarding the correct interpretation of Law 14,317/22, the CVM published, on September 20, 2022, Circular-Letter 2/2022/CVM/SIN/SSE, with guidelines on the levying and collection of the oversight fee, directed especially to the sector in which these administrators operate. We highlight the main clarifications provided by the authority:

  1. Modalities of the CVM oversight fee

There are three cases for levying the oversight fee for the securities markets (CVM fees):

  • CVM registration activity, for which a registration fee will be due;
  • periodic inspection activity, for which an annual fee will be due; and
  • activity of public offering oversight, for which an offering fee will be due.
  1. CVM Fee Payers

The CVM fee payers are the individuals and legal entities listed in article 3 of Law 14,317/22, among which are, with special regard for the investment fund industry:

  • individuals and legal entities within the securities distribution system;
  • investment funds, regardless of the assets that make up their portfolio;
  • administrators of securities portfolios;
  • providers of securities bookkeeping and custody services;
  • non-resident investors' portfolios (and not directly the investors); and
  • offerors of securities in the public offering of securities, subject to registration or exemption from registration by the CVM.
  1. Situations, frequency, and conditions for the collection of CVM fees

The situations, frequency, and conditions for the collection of CVM fees are indicated in articles 4 and 5 of Law 14,317/22. We highlight the main points:

Registration Fee

The CVM registration fee will be due upon initial application for registration as a securities market participant or issuance of an equivalent authorizing act, including market participants whose registration is simplified or automatic, as long as they are regulated by the CVM.

This fee must be paid in full, regardless of the date of the initial registration application or equivalent act, and therefore pro rata payment is not allowed.

As a general rule, the registration fee will be due within 30 calendar days of the registration request. The CVM advised to pay within this deadline, even if the payment notice issued on the CVM website has a different due date.

The regulator explained that it was not possible to customize the system used to issue the payment notice to allow correct setting of the due date. It advised that it is the participant's responsibility to keep track of the deadline.

The CVM made a point of clarifying again, as it had already done in its answers to frequently asked questions, that the registration fee is different from the annual fee. The former is not an advance, even if partial, of the payment of the latter. This point raised doubt since the registration fee consists of 25% of the annual fee applicable to the regulated participant. This, however, does not mean that it is an advance; it only refers to the way of calculating the amount due as a registration fee.

Annual Fee

This fee will be due annually and must be paid in full considering the entire year to which it refers, with pro rata payment not being admitted.

The CVM's annual fee is now due from the date of registration with the CVM until the request for cancellation or suspension is granted, even if the taxpayer is not performing activities or has had its registration suspended by an administrative act of the CVM.

Law 14,317/22 contains a table in its Annex I with the ranges of amounts owed by legal entities for the annual fee. The calculation criterion used is the taxpayers' net equity, except in relation to independent auditors, whose criterion is the number of establishments, according to Annex III of the standard. For individuals, the fees are fixed and are listed in Annex II of the law.

- Investment Funds:

The annual fee for the oversight of investment funds has some specifics:

  • Investment funds with asset separation between classes/subclasses:

If the units of the fund are divided into classes or sub-classes for the purposes of calculating the annual fee the sum of the amounts calculated according to the net equity of each class or sub-class should be considered, observing the parameters established in Annex I of Law 14,317/22.

The CVM clarified that this form of calculation provided in the law already considers the new structure of investment funds with mandatory separation of equity between classes and subclasses, whose regulation is still being discussed in the scope of Public Hearing SDM 08/20, which intends to change the rules for investment funds, regulated by CVM Instruction 555 and the standardized and non-standardized Receivables Investment Funds (FIDCs), regulated by CVM Instruction 356 and CVM Instruction 444.

The public hearing has already been subject to comments by market participants and, according to the CVM's Regulatory Agenda 2022, the standard should be issued this year.

  • Investment funds with a single class:

In relation to single class funds, for the purposes of calculating the annual fee, the fund's net equity should be considered, observing the parameters set forth in Annex I of Law 14,317/22.

  • Method of calculation of the annual fee:

The value of the net equity of the investment funds for the purpose of determining the annual fee should be calculated as follows:

  • by the arithmetic average of the daily net assets ascertained in the first four months of the calendar year (i.e. January to April) for funds with daily calculation; or
  • based on the value calculated on the last business day of the first four-month period of the year (that is, the last business day of April) for those who have not calculated their net equity on a daily basis.

In view of the rule set out above, the CVM clarified in Circular-Letter 2/2022/CVM/SIN/SSE that the annual fee will only apply to funds that have been created by the end of April of each year and are operating during this first four-month period.

There will be no annual fee for investment funds created after the beginning of May of each year. In this case, the annual fee will be due as of the next calendar year.

If the fund is created at any time after the beginning of May and ends up being closed in the same year, there will also be no levying of the annual fee.

If the fund is created or closed during the first four months of the year, however, the calculation of the annual fee should consider the arithmetic average of the net equity in the period in which the fund operated within that four-month period.

  • Investment funds with net equity or zero equity:

The authority clarified that the investment funds registered with the CVM that have zero or negative net equity during the entire first four months of the year must pay the annual fee at the lowest value of the table in which they fit. This means that pre-operational investment funds are also required to pay the annual fee, at the lower amount provided for in Annex I of Law 14,317/22.

  • Investment funds that are closing down their activities:

As a general rule, the annual fee will be due up to the closing date of the fund's registration with the CVM, calculated in the ways set out above.

The CVM has clarified how taxpayers should proceed when faced with two exceptional situations related to the liquidation of investment funds:

  • in extraordinary liquidation attributed to some external factor caused by a third party (such as liquidation order by the CVM or resignation or extrajudicial liquidation of the fund administrator without replacement), a new annual fee will not be due if the forced liquidation extends into the following year;
  • in ordinary liquidation ordered by unitholders, whether by total redemption of the units or by resolution in a meeting, the annual fee for the following year will be due, if the liquidation extends into the next calendar year.

Offering Fee

The CVM offering fee will be due on the occasion of a public offering of securities, including cases of exemption from registration by the CVM, and will be calculated based on the total value of the transaction.

Regarding the public offering of investment fund units, the offering fee must be collected:

  • in the case of public offerings subject to registration with the CVM, when filing the registration request; and
  • in the case of public offerings with restricted placement efforts that benefit from an automatic waiver of registration with the CVM, by the closing date of the public offering. As stated by the authority, this date may be the settlement date, but not necessarily, since it may be some later date if the structure of the offering provides for the fulfillment of steps related to the completion of the offering after the liquidation date.

If the public offering is done concomitantly with the issuer's initial application for registration with the CVM - including for investment funds - there will be no registration fee, only the offering fee. In other words, there can be no double charging of the CVM oversight fee in this situation.

The offer rate corresponds to a 0.03% rate over the total value of the transaction, observing the minimum rate of R$ 809.16 (that is, transactions under R$ 2,697,200.00 must pay the minimum amount). There is no longer a maximum ceiling for the offering rate.

In public offerings, the total value of the transaction for purposes of calculating the registration fee must cover the base lot, the additional lot, and the supplementary lot, if any. In case of a bookbuilding procedure, the ceiling value of the issue must be considered.

In restricted offerings, the total value of the transaction for the purposes of calculating the registration fee will be the total amount effectively raised, as reported in the closing notice. In this notice, the reference number of the payment of the offering fee that has been made at the closing of the offering must be filled out for information to the CVM.

It is important to note that the concept of the closing of the offering, for the purposes of payment of the registration fee, is not necessarily confused with the date of sending the closing notice.

The offering fee is not charged for public offerings:

  • of shares owned by the Federal Government, states, Federal District, and municipalities and other Public Administration entities, which cumulatively: do not seek placement with the public in general and are held in an auction organized by an entity managing an organized market, under the terms of Law 8,666/93;
  • of a single, indivisible lot of securities; or
  • of Audiovisual Investment Certificates.

The CVM guidelines in Circular-Letter 2/2022/CVM/SIN/SSE are timely and useful to clarify unclear areas, especially regarding the assumptions of levying and form of calculation of the CVM fees that must be collected by administrators of investment funds at the time of registration of issuers, periodically for the funds under management and for the administrator itself and its employees accredited with the CVM, and in conducting public offerings of units.

This is a subject with material economic implications, since any errors that lead to under calculation of the amounts due or delays may generate interest and a late payment fine, in addition to legal charges, under the terms of article 5, paragraph 1, of Law 7,940/89 , which is obviously undesirable.

We remain at your disposal for any further clarifications on this subject.