Financial Crime World

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Financial Services Industry Legal Framework in Brazil

Brazil’s financial services industry operates within a complex legal framework that governs interactions between financial institutions and retail customers. This framework sets standards of care for each type of financial services firm and authorized person, ensuring a level playing field and protecting consumer rights.

Liability and Accountability

  • Controlling Shareholders’ Liability: Controlling shareholders are jointly and severally liable for liabilities exceeding assets of a financial institution in cases of bank resolution or insolvency regimes.
  • Private Rights of Action: Private rights of action apply to violations of national financial services authority rules and regulations, allowing individuals, consumer protection associations, or the Public Prosecutor’s Office to bring suit for alleged violations.

Standard of Care and Consumer Protection

  • Standard of Care: The standard of care is based on the Civil Code, which requires a duty to redress subject to the existence of an illicit act and a causal relationship between the illicit act and the loss caused to the aggrieved person.
  • Consumer Protection Code: The Consumer Protection Code applies to the relationship between banks and consumers, requiring disclosure of products and services, limiting fees, and protecting consumer rights.

Dual System of Liability

Financial institutions are subject to a dual system of liability:

  • One for corporate clients based on civil law principles
  • Another for consumers based on rules issued by supervisory authorities and the Consumer Protection Code

Adoption of Rules Affecting the Financial Services Industry

Rules affecting the financial services industry are adopted through public consultation processes, ensuring transparency and stakeholder engagement in shaping the regulatory landscape.

This article provides an overview of Brazil’s complex legal framework governing the financial services industry. By understanding these rules and regulations, financial institutions can ensure compliance and protect consumer rights, fostering a fair and transparent market environment.