Framework

On 18 November 2024, Decree-Law no. 89/2024 was published in the Diário da República and introduced the first amendment to the Asset Management Regime (Regime da Gestão de Ativos – “RGA”), approved in annex to the Decree-Law no. 27/2023, of 28 April. The amendment consists of adding paragraph 8 to article 31 of the RGA, allowing management companies of collective investment undertakings to invest amounts that exceed the amount of legally required own funds, under the terms that may be defined by the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários – “CMVM”).

In light of article 31 of the RGA, management companies must, at all times, maintain own funds equal to or greater than (a) the amount of the minimum initial capital – EUR 125,000 or EUR 150,000 if they are authorized to carry out the ancillary activity of registering and depositing participation units of collective investment undertakings -, having the management company to set up an additional amount of own funds whenever the global net asset value of the portfolios under management exceeds EUR 250,000,000, calculated at 0.02% on the amount of the net asset value of the portfolios under management that exceeds this amount, and the sum of this supplementary amount and the minimum initial capital may never exceed EUR 10,000,000; or (b) the amount based on fixed overheads under the terms of European Union legislation on the prudential requirements of investment companies, prevailing the greater amount among these two items.

In its original text, Article 31 already provided for the possibility of investing management companies’ own funds, but its paragraph 7 limited the range of permitted investment instruments to liquid assets or assets promptly convertible into cash in a short term, and excluded the possibility for investment in speculative positions, regardless of whether the amount of own funds equaled or exceeded the amount of legally required funds.

What changes?

With this change, the law now allows amounts that exceed the legally required minimums to be invested in a more diversified manner, provided that this investment is an ancillary activity to the manager’s operations and that the situations of conflicts of interest provided for in articles 309 and 309-A of the Securities Code are adequately addressed.

Without the provision of further specifications, the legislator seems to be paving the way for greater freedom for management companies to invest their surplus freely, the responsibility now lies on CMVM, through the publication of regulatory measures – which are, therefore, more flexible and closer to market realities – to define the limits and parameters it deems appropriate at any given time.

Although the initiative to amend the law and allow the allocation of the surplus of management companies’ own funds to more complex and, eventually, more profitable investment instruments is to be commendable, the question regarding the limits to be applied to this investment remains and is currently awaiting regulation by the CMVM.

Written by the Banking and Finance Law Department: Marcos Sousa Guedes (Coordinating Partner), Bernardo Vasquez Tavares (Lawyer) e Beatriz Ribeiro (Lawyer).