Justice Flávio Dino of Brazil's Supreme Federal Court (STF) ordered the Federal Police on Thursday, September 24, to open an inquiry into whether the securities regulator CVM failed to act on warnings about Banco Master, the bank controlled by businessman Daniel Vorcaro that is already under an investigation Dino oversees. The ruling came in a case that examines the enforcement capacity of the agency, which answers to the Finance Ministry and regulates Brazil's capital markets, a role comparable to that of the U.S. Securities and Exchange Commission.
The inquiry will focus on a case the CVM opened in February 2022 after a formal notice from the FGC (Fundo Garantidor de Créditos), a private fund that insures bank deposits in Brazil, much as the FDIC does in the United States. According to G1, a CVM report cited in Dino's ruling shows the notice contained detailed indications that the Master group might be financially insolvent, that its financial statements had inconsistencies and that quotations of open-end funds were being manipulated. CVM technical staff at the time classified the notice as an anonymous complaint "lacking sufficient elements" and archived the case without investigating it, Folha de S.Paulo reported.
G1 reports that the alert also described the use of deposit-insured money to buy illiquid assets, estimated at more than 3 billion reais out of a total of 5 billion, and a mechanism in which new deposits paid for earlier withdrawals, foreshadowing risks that only became public years later.
What the ruling orders
Dino wrote that the suspicions go "beyond the sphere of possible exclusively administrative or regulatory irregularities". In a passage quoted by Folha, the justice said:
"There are indications that establish the legal duty to investigate possible unlawful acts related to the functional conduct of public officials linked to the Securities Commission, as well as high-level authorities who would have influenced decision-making processes at the agency."
In the justice's view, the archived case "describes circumstances that, in theory, go beyond the domain of simple operational failures or regulatory deficiencies". Dino kept the new inquiry under his rapporteurship, arguing that it is connected to the investigation he already leads into financial operations between Master and cemetery concessions in the city of São Paulo. The CVM must hand over a full copy of the archived case within 72 hours and identify which units and officials had access to the file, the grounds for the secrecy applied and any steps taken after the archiving. The Federal Police must deliver a first report within 60 days.
Timeline of the case
- February 2022: the FGC sends the CVM a formal notice with detailed indications about the Master group.
- Soon after: CVM technical staff classify the notice as an anonymous complaint lacking sufficient elements and archive the case without further investigation.
- September 24, 2026: Dino orders the Federal Police to investigate the CVM's conduct; the regulator has 72 hours to produce the archived file.
The ruling names no one. Any officials identified will answer solely as persons under investigation until prosecutors file charges and a court rules. In the broader Master inquiry, Central Bank president Gabriel Galípolo confirmed on Thursday that he had been summoned by the Federal Police to testify as a witness in October, according to Folha.