Brazil Securities Commission sets reporting process for intermediaries that detect signs of unregistered portfolio management

The Brazil Securities Commission’s Superintendence of Institutional Investor Supervision (SIN) and Superintendence of Market and Intermediary Relations (SMI) issued a joint circular letter setting out how intermediaries should proceed when they detect indications of irregular administration of securities portfolios. The guidance supplements earlier instructions on transaction monitoring and reporting to CVM under Article 33 of CVM Resolution 35. Where an intermediary identifies indications of irregular portfolio management, the facts must be reported to SIN via the electronic protocol, and where other irregularities are also detected the report should be sent to both SIN and SMI. The circular describes irregular administration as applying third-party financial resources without prior CVM authorisation and highlights minimum controls and red flags, including unregistered third parties acting under investor powers of attorney, coordinated transactions by different clients from the same source IP, legal entities using “investments” in their corporate or trade name, social media offering investment services, unregistered firms operating a proprietary desk, and transactions in the intermediary’s own name that are inconsistent with its financial capacity.