Brazilian securities regulator CVM is considering changes to the rules governing investment funds in hopes of boosting transparency and financial innovation as interest rates are likely to stay near record lows for a long period of time.
_0">The agency is currently in talks with asset managers, asset custodians and other players in the country's $1.2 trillion industry to discuss potential modifications to the so-called Instrução 409, CVM President Leonardo Pereira said on Tuesday at a news conference in São Paulo.
Changes could be broad or specific, depending on feedback from industry executives, Ana Novaes, a CVM director, said. In either scenario, potential changes will be discussed at a public hearing, she said.
Any modifications to terms of the rules aim to help funds better cope with the benefits and risks of Brazil's historic decline in borrowing costs, which is forcing money managers to diversify into riskier instruments to propel returns.
Some of the risks include clients failing to understand the new products or financial innovation lagging behind demand for more complex products.
"Things like a stretching out of maturities or the search for more risk are not being motivated by regulatory changes or tax reasons. It's an evolution that we see as natural because of this new reality," Novaes said on the sidelines of a fund industry conference.
No timetable has been set for any changes in the rules, the CVM officials said. The Instrução 409 help classify funds and give general guidelines for the industry.
More specific guidelines might be needed in order to smooth the transition from the current model into one that better addresses liquidity, risk, return and transparency concerns, Demosthenes Pinho Neto, chief executive of investment fund Brasil Warrant Investimentos, told an industry event on Tuesday.