This innovation, if well implemented, represents an important evolution for the investment fund market in Brazil, especially for the structured fund segment (considering the universe of FIPs, FIDCs and FIIs), which has grown significantly in recent years, reaching the R$ 730 billion mark by the end of 2020, in terms of net assets.

In practice, from a more superficial perspective, the segregation of assets between different classes of shares allows investment funds to save money in relation to the overall costs of administration and maintenance of the funds, with a gain in efficiency, for example, in costs related to the registration of the fund with the CVM, as well as in expenses with accounting and auditing of its financial statements.

In terms of products, and from a more in-depth perspective, the segregation of assets of different share classes allows administrators and managers to use the fund as an investment "platform", in which it is possible to structure, within the same fund, several investments that are in different stages of maturity or with different risk profiles.

To illustrate the above scenario, imagine a real estate investment fund that proposes to develop certain real estate projects for the subsequent generation of rental income.

With the possibility of issuing different classes of quotas, it is admissible that during the development phase (which includes project approval, development, construction, leasing, etc.) the investors in Class A quotas run the risks related to Empreendimentos A, the investors in Class B quotas run the risks related to Empreendimentos B, and so on.

At the moment in which the assets are already performed, and generating rental income, it would be possible to convert Class B Shares into Class A Shares, observing a certain exchange ratio, unifying them into a single class of shares, thus providing greater liquidity to all shareholders of the fund in question.

Another way to propose the use of different share classes is the possibility of investment by the fund in a single real estate enterprise, with different levels of risk allocated among the respective share classes.

As an example, the Class A Quotas could have a more moderate profile, in which the investments in the venture are made 100% with capital from the Class A Quotaholders(equity), while the Class B Quotas could have a more aggressive profile, in which the investments in the venture are made partly with capital from the Class B Quotaholders(equity) and partly by obtainingleverage or financing(leverage), with different rates of return in case of success of the venture.

Going back to the SDM Public Hearing nº 08/2020, the CVM, in a very positive way, tried to charge the administrators and managers, when preparing the regulations, with the definition of the segregation of assets and liabilities and the allocation of expenses between the respective classes, with special emphasis on avoiding an improper transfer of wealth (and, a contrario sensu, of risks) between the different classes of shares of the same fund

On the other hand, when dealing with the insolvency of investment funds, according to art. 1.368-E introduced by the Economic Freedom Law, CVM ended up not considering, in the hypotheses of decree of insolvency (art. 105, item "iv" of the Resolution proposed by CVM), the possibility of eventual specific situations involving only one class of shares.

As a result, the insolvency decree would contaminate the fund as a whole, even when the problems are linked only to a certain share class.

From a more macro perspective, this specific point of the draft rule put up for public hearing by the CVM reflects perhaps the greatest difficulty in establishing asset segregation between different classes of shares:

(i) to what extent the different share classes "share" the overall administration and maintenance costs and expenses;

and (ii) to what extent segregation is carried out in a full and absolute manner (ring fence), without one class of shares or the assets linked to it negatively impacting another class; so that an optimal point is reached between sharing and segregation, thus producing the expected effect of stimulating the development of the investment fund market in Brazil.

Additionally, without considering any discussions regarding the applicability of a more specific rule in detriment to the general rule, it is important to keep in mind that art. 76 of PM 2.158, of August 24, 2001, as re-edited from time to time, remains in effect in our legal system.

This provision establishes the non-effectiveness of rules that aim to affect or separate, for any reason, the assets of individuals or legal entities, in relation to tax, social security or labor debts, especially with regard to the guarantees and privileges attributed to them.

In conclusion, we highlight the importance of the innovations brought by the Economic Freedom Law for the development and evolution of the capital market in the country, especially in relation to the legal and regulatory framework applicable to investment funds.

However, there are numerous challenges to the implementation of such innovations from a regulatory perspective that deserve a lot of care and attention from both the market and the CVM, so that the opportunity to promote substantial improvements to the full development of this market segment is not wasted due to the imposition of regulatory devices that may eliminate or discourage innovations before they have actually emerged.