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Brazil securities agency aims to cut funds' regulatory costs

Aluisio Alves
·2 mins read

By Aluisio Alves

SAO PAULO, July 22 (Reuters) - Brazilian securities regulator CVM is working on several measures to help reduce investment funds' regulatory costs as they face growing pressure to cut administrative fees as the country's interest rates hit record lows.

The move comes as investors hungry for stronger returns increasingly shift funds to multimarkets and equities vehicles from fixed income ones.

Among other actions, CVM is likely to announce a platform allowing funds to automatically update basic information, replacing a manual system which is considered one of the sector's main regulatory costs.

"This will mean a dramatic reduction in costs for the market," Daniel Maeda, superintendent of institutional investor relations at CVM, told Reuters without providing an estimate for the cost-savings.

Brazil's financial and equities markets association Anbima said fees at some major fixed income funds run by the country's five largest banks - Itau Unibanco SA, Banco do Brasil SA, Banco Bradesco, Santander Brasil and state-owned Caixa Economica Federal - were in the two percent range.

According to Refinitiv Lipper, a unit which tracks and collects statistics on mutual funds, the average total expense ratio for U.S. funds - equity, bond, money market and fixed income - is 0.9%.

Anbima estimates investors withdrew 95.2 billion reais from fixed income funds, which correspond to 40% of Brazil's 5.5 trillion-real ($1.07 trillion) fund industry, in the first half.

On Monday, CVM announced an agreement with Brazil's tax authority to unify the registration of investment funds and foreign funds, a move Maeda said would prevent conflicting queries from the two agencies which currently bedevil some funds.

In another streamlining move, non-resident investors will be able to register in just a few minutes, reduced from a two-day wait, he said, adding the changes are expected to take effect in 2021.

($1 = 5.1441 reais) (Reporting by Aluisio Alves; Writing by Gabriela Mello Editing by Marguerita Choy)