Initiatives such as the open capital market and the new fund regulation should make room for offering retail investors a capital market that is more inclusive, risk-transparent and committed to ESG (environmental, social and governance) causes, according to the Commission of the Securities (CVM).
Some guidelines that should be part of this “revolution” in the coming months include the definitive regulation of Fiagros – funds that invest in agro-industrial supply chains – the access of individual investors to Credit Rights Investment Funds (FDIC), the regulation of some crypto- assets, which are considered securities, and the portability of funds.
The topic was discussed during the event Where to invest in 2023organized by Money info with the participation of João Pedro Nascimento, president of the CVM. Between 16 and 19 January, the event features panels on the most diverse topics that will affect your finances and investments throughout the year. Click here to register now.
Nascimento points out that with these changes the idea is to give retail investors access to a complete basket of products, but without giving up protection. “When we are able to do this through mechanisms to reduce the risk assumed by the investor, we are able to expand the space to freely exercise their choices,” he says.
The president of the CVM also hinted at the need for autarky to have access to greater resources to finance the development of the capital market, a request he hopes will be accepted by the new economic team of the federal government. Birth explained a Money info that the CVM today collects R$ 800 million a year with inspection fees, without considering the amounts deriving from the terms of commitment or fines. However, the municipality has only R$25 million left.
“We have no intention of keeping the entire amount raised, because we are a small municipality. But I would need a progressive value,” she said.
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Nascimento explains that the expenses of the CVM are made up of an ordinary budget, which includes the payment of civil servants, former civil servants and retirees. While discretionary expenses include CVM enhancements, event attendance and investments. “The value that the CVM has is very low compared to other regulators. Brazil has a gigantic capital market that serves as an example for our peers,” he highlighted. The funding problem has gone on for several governments, according to Nascimento.
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Good opportunities in Fiagros
As regards the definitive regulation of Fiagros, which should unify the three categories Fiagro FII, Fiagro FIP and Fiagro FDIC, in a single fund, Nascimento was optimistic and underlined that the agri-food sector represents around 25% of the Gross Domestic Product (GDP) Brazilian, while the agro in the capital market occupies only 5%. “There is a gap, a huge amount of business in the agribusiness sector that tends to be financed by the capital market and represents a good investment opportunity,” he said.
Nascimento highlighted that in addition to unifying the three types of Fiagros, the definitive regulation of this category should leave room for new types of funds, more in line with the sustainability agenda. Among these, the low carbon Fiagros, which will have a very strong commitment to the control of climate change. “A product that I am sure will be very well received, not only for the good income opportunities, but also for the respect of the socio-environmental agenda,” he reiterated.
There are also other initiatives on the radar such as fiagros and funds for recycling projects (ProRecicle), which according to Nascimento, in addition to the environmental agenda, should contribute to the social factor, giving the funds the possibility to invest in management cooperatives, composting , solid waste treatment, among others.
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The more profitable Fiagro has been listed for less than six months and has paid dividends of 1.64% per month in 2022; see list
Fiagros pays dividends of up to 1.62% in December; see samples
In the FDICs, market modernization
Now that Credit Rights Investment Funds (FDIC) are accessible to individual investors, Nascimento emphasizes the importance of pillars such as limitation of liability – where the retail investor will only assume the risk of the share of the fund to which he has contributed, instead of being forced to top up resources, should the fund need to call up capital.
Nascimento also points out that in funds such as financial investment funds (FIFs), it is possible to have different unit classes within the same fund, in order to limit the risk that the investor is contracting.
Although the environment in the financial market is not the best, due to the volatility, Nascimento is optimistic on the development of FDIC and FIF, with the new regulation. “The investment funds sector is the 4th in the world, these regulations will improve public attention towards this type of investment”, he comments.
Cryptocurrencies and the open capital market
Still on Nascimento’s radar for 2023 is fund portability, which should allow investors to transfer custody of their assets from one fund manager to another without having to redeem investments or pay income tax. The provision is part of the art open capital marketwhich aims to democratize the capital market, and should be one of the first to be implemented in the new regulatory agenda.
Other initiatives include the use of technology to facilitate the exercise of investor rights at meetings of publicly traded companies and investment funds. Nascimento also plans to extend the exchange’s opening hours beyond 6pm, allowing more investors to trade after hours, although he dismisses the interest in having a market that operates 24/7 per week.
As for cryptoassets, Nascimento raises the flag for the CVM to regulate what look like securities. He mentions, for example, cryptocurrencies that already exist in the common market and are tokenized or some that have characteristics of collective investment contracts.
“Those that are considered securities must adhere to the rules of the CVM, which requires respect for the concept of transparency,” Nascimento says, citing crypto assets in confusing and inaccessible language in investment documents.
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