On November 23, 2020, the Brazilian Securities Commission (CVM) disclosed a study of the regulatory impact of the rule that requires a connection of exclusivity between independent investment agents and intermediaries in the distribution of securities (“Study”). The Study was prepared by the CVM’s Economic Analysis and Risk Management Department.
The requirement for exclusivity of independent investment agents was included in the regulation of that activity provided by CVM Instruction 497/2011, specifically in its Article 13, § 4, to establish that “independent investment agents that maintain a contract with an intermediary by means of a legal entity in the form of Art. 2 may not be contracted directly by another intermediary.”
According to the Study, the objective of the exclusivity rule is to prevent the potential multiplicity of the controls to which an independent investment agent is subject from winding up hampering the oversight of this participant by its client (the market intermediary).
In the Study, the CVM conducted the following activities:
- analysis of the historical evolution of the rules directly covering the activities of independent investment agents;
- mapping of the activities of independent investment agents and intermediaries, as well as the ties between them;
- analysis of the market practices (such as forms of remuneration and supervision) that are not comprehensively covered in the regulations;
- analysis of the history of the conduct of independent investment agents from different perspectives and guidance on a potential alternative (or complement) to explain the improvement observed in the conduct of these participants;
- analysis of the business model known as “open architecture platforms”, adopted successfully by intermediaries, its relationship with the concept of two-sided markets and their potential implications on the configuration of the framework for the activities of independent investment agents;
- analysis of similar regulations in some foreign jurisdictions; and
- analysis of the costs and benefits of two distinct scenarios related to the rule of exclusivity between independent investment agents and intermediaries.
The Study concludes that it is reasonable to recommend the removal of the regulatory requirement for exclusivity contained in CVM Instruction 497/2011, as long as the association of independent investment agents with more than one intermediary occurs by mutual agreement between the participants involved and the potential conflicts in the service provision agreements are addressed.
More information, as well as the full text of the Study (in Portuguese), can be found at the website of the CVM (www.cvm.gov.br).
