On 22 June, 2007, the Brazilian Securities and Exchange Commission (CVM) issued Instruction n. 456, introducing some improvements to the amendments recently carried out by CVM, by means of Instruction 450, of March 30, 2007, on the regulatory basis for investment funds in Brazil, as established by Instruction 409 of  August 18, 2004 (regulating the administration, establishment, and operation procedures of investment funds in Brazil).
Such improvements were made based on suggestions received after the enactment of Instruction 450, on March 30, 2007 which, among other changes, contributed to mitigating risks relating to investment funds. Accordingly, it has created new mechanisms to protect investors, bringing increased transparency in the whole process relating to investment funds, as well as demanding more responsibility from its managers.

The improvements brought by Instruction 456 reflect the tendency of CVM giving more attention to the operators under its rules in order to bring technicality and reality closer, in such a way that the soundness of the market is enhanced without blocking the virtuous mentality of the Brazilian funds managers.

Moreover, wherever the market is taken seriously by the respective government and authorities, being provided with the necessary tools and guarantees for acting either as a supplier or as a demander, a positive response from the market can follow. The concerns that have been shown by CVM in relation to the investor in Brazil, have been of great importance for the development of the Brazilian securities market and the growing demand, which has been constantly breaking records, has reached figures never previously experienced in Brazil.

The demand for Brazilian investment funds has significantly increased in recent years. In two trimesters of 2006, for instance, Brazil moved up two positions in the global ranking of investment funds, becoming the 11th biggest market in terms of assets held by investment funds – ahead of developed economies such as Spain, Germany and Sweden. It is also worth of mentioning that among developing countries, besides Brazil, only Korea (14th position) figured in the middle of the top 20 in 2006, leaving countries as Mexico, India and Russia behind. Additionally, if we take the period between 2002 and 2006, for example, the assets held by Brazilian investment funds increased almost 400 per cent. Likewise, the funds raised in the first semester of 2007 already represent 77 per cent of the total of funds raised last year.
Undeniably, this scenario represents a great achievement for the Brazilian securities market, from both economic and legal perspectives. However, it is vital that CVM seeks to maintain improvements, consolidating these levels of performance into an established part of the Brazilian economy, so that this is not merely a “bubble”.