Central Bank of Brazil consults on client protection and competition rules for funding product distribution

The Central Bank of Brazil is consulting on proposed rules governing how financial institutions and other authorized institutions distribute funding products. The proposal would require distributors to act in clients’ best interests and address imbalances in bargaining power between distributors and issuers, including practices that restrict access to distribution channels. Products offered would have to match clients’ needs, objectives and risk profiles. Institutions would need a Best Interest of the Client Policy covering remuneration for staff directly involved in distribution, aimed at reducing incentives to prioritize immediate sales over products’ outcomes and risks over time. Sales targets or minimum quotas for specific products within a given period would be prohibited. The draft also provides for deferred payments and cancellation of unpaid remuneration installments, alongside stronger conflict management and transparency about remuneration and incentives. Distribution Policies would establish remuneration criteria and govern the selection, ranking, prominence and exclusion of products and issuers. Discriminatory, inequitable or anticompetitive practices would be prohibited, including exclusivity agreements and unjustified restrictions on access to distribution channels. Institutions would have to keep information available to the central bank, including distribution volumes, remuneration and distributors’ shares of issuers’ total funding. Boards and executive management would oversee the policies, with separate directors responsible for the client interest and distribution policies.