Justice Flávio Dino of Brazil's Supreme Federal Court (STF) on Sunday ordered the federal government to review the rules governing the capital markets and the work of the CVM, the country's securities regulator, with a focus on investment funds and anti-money laundering rules. The government has 90 days to present its conclusions, proposed measures and technical justifications, in a review to be coordinated by the Finance Ministry, which oversees the agency.

The ruling came in a lawsuit filed by the Novo party that questions the budget structure and inspection capacity of the CVM. According to Folha de S.Paulo, the case received new material after Transparency International sent a formal letter to the court. O Globo reports that Dino also examined documents from the so-called GT Master, a task force created inside the regulator itself. In his reading, the agency's problems go beyond scarce funding and include governance and supervision mechanisms, difficulties he said worsened after regulatory changes in 2021 and 2022.

One point that drove the order was the handling of a complaint filed with the CVM in 2022. According to documents cited by Dino, the tip anticipated, "with a high degree of detail," irregularities later identified at Banco Master, including illiquid assets, manipulation of quotations and the repurchase of credits. The agency's technical staff shelved it on the grounds that the information was implausible. The decision also flags failures in whistleblower protection: sensitive complaints were reportedly processed outside the Fala.BR platform, without proper safeguards for informants' identities, exposing them to possible retaliation.

Timeline of the Master case

• 2021 and 2022: the CVM issues rules that loosen fund market regulation, including Resolution 175 of 2022.
• 2022: a complaint detailing alleged irregularities at Banco Master is shelved by the CVM's technical staff.
• March 4, 2026: federal police arrest Banco Master controller Daniel Vorcaro and three others in São Paulo on preventive arrest warrants; according to Conjur, it was his second arrest in the case. Vorcaro, who is under investigation, later asked for the arrest to be revoked, Folha reported.
• September 20, 2026: Dino orders the government to review the CVM's rules and sets a 90-day deadline.

What the review must cover

According to O Globo, the order covers three CVM resolutions. The central one is Resolution 175, which lets funds invest in shares of similar funds in successive layers with no quantitative limit. "This circumstance makes it harder to see the final economic composition of transactions and increases the challenges inherent in regulatory supervision," the justice wrote. He also cited the market's expansion: the number of regulated funds rose from 14,400 in 2014 to 32,300 in 2026, and FIDCs, funds that buy receivables, grew 810 percent in the period. Dino further asked for a review of rules that handed fund managers the task of verifying that the credits in their portfolios exist, work once done by independent custodians, with checks by sampling or waived in some cases.

On money laundering, the justice said current rules require market players to monitor and report suspicious transactions, but do not require them to refuse a deal when the ultimate beneficiary of complex corporate structures cannot be identified. In his assessment, the low-transparency scenario created, in theory, conditions for large-scale fraud and for the use of the regulated market by criminal structures. In the decision, Dino wrote:

These difficulties end up expanding the reach of criminal organizations dedicated to very serious crimes (drug trafficking; arms trafficking; corruption; embezzlement of congressional earmarks; the buying and selling of judicial decisions involving judges, aides and lawyers; bid-rigging; the illegal court debt market, among others).

This is Dino's second order in the same case. He had already ruled that the CVM must spend 70 percent of what it collects from its inspection fee on its own structure, instead of sending the money to the National Treasury. Folha also reports that he suggested the Finance Ministry revise the CVM's rule on sanctioning proceedings. The reports consulted contain no comment from the CVM or the ministry on the decision. The next step is the deadline: the conclusions of the review, coordinated by the Finance Ministry, are due 90 days from the September 20 ruling, which puts the deadline at about December 19.