Brazil Supreme Court orders review of CVM regulatory norms

Supreme Federal Court Minister Flávio Dino has ordered the Brazilian federal government to conduct a technical evaluation and review the regulatory norms of the Securities and Exchange Commission (CVM) within 90 days. This decision follows concerns regarding the agency's oversight capabilities and functional independence.

Drawing on information from Transparency International, the ruling highlights potential weaknesses in internal control mechanisms. The Minister noted instances where complaints were allegedly dismissed without minimal investigation, specifically citing a 2022 report that detailed irregularities later identified at Banco Master. Additionally, the decision addresses potential non-compliance with guidelines intended to protect whistleblowers.

A significant point of concern involves a 2022 CVM resolution that allowed for the creation of multi-layered investment fund structures without a cap. Minister Dino stated that this regulation could hinder the identification of ultimate beneficial owners and compromise market supervision effectiveness. The legal proceedings also touch upon how oversight fees collected by the CVM are utilized, with questions raised about whether funds are being reinvested into the agency's modernization or redirected to the Union's general treasury.