The Brazilian government may create a central regulatory agency to govern fixed-income and equity mutual funds, it was revealed recently.
The regulatory system for mutual funds in Brazil is highly fragmented at the moment, with equity funds falling under the jurisdiction of the securities regulator, Comissao de Valores Mobiliarios (CVM), and fixed-income funds under the Central Bank (BACEN). However, the CVM is unhappy with this situation, believing that there is a conflict of interest because BACEN also acts as the regulator of interest rates.
In order to address this situation, the two bodies, working with the country's insurance and pension fund regulators, are working on a proposal which it is said will be submitted to Congress by the end of the year, for consideration in 2002.
The move is seen as something of a landmark in Brazil, and is certainly a break from the norm, as in most countries, the securities regulator oversees fund regulation as well. However, the announcement has been universally welcomed, and the creation of an independent central regulatory body is seen as the best way forward in promoting transparency and relieving the conflict of interest which has dogged the system in the past.
Speaking to Global Fund News last week, two prominent figures in the Brazilian mutual fund industry responded enthusiastically to the news: 'I am all for the modernisation of the current system,' explained Marcelo Giufruda, the President of the mutual fund trade association ANBID. Glenn Johnston, director of Citigroup Asset Management in Brazil also endorsed the proposed petition, observing that a centralised regulator would make a lot of sense, and would facilitate a better environment for mutual fund companies in general.
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