Brazil Regulator CMN Bans Uncertain Judicial Credits from FIDCs to Curb Fraud and Opacity

The Brazil regulator CMN (National Monetary Council), the country’s highest financial policy-making body, has approved new rules prohibiting Credit Rights Investment Funds, or FIDCs, from purchasing credit rights derived from ongoing judicial or arbitration proceedings that lack final certainty. The decision, made on September 24, 2026, requires that any such assets acquired by FIDCs must be characterized by "liquidity, certainty, and enforceability"—meaning the legal right must be definitively recognized, the value fixed, and the credit ready to be collected, with no further possibility of appeal. The new restriction on new investments will take effect on October 13, 2026.

The move dramatically alters how these popular funds operate, specifically targeting assets considered high-risk and opaque. A FIDC is a Brazilian investment vehicle that pools investor money to purchase receivables, or credit rights, such as loan installments or trade notes. The FIDCs targeted by the rule, however, had increasingly invested in "judicial credits"—future payments owed to a party as the result of a court or arbitration decision. Previously, funds were able to purchase these rights while the underlying legal case was still pending, creating an asset that was inherently difficult to value.

This sweeping regulatory change is a direct response to concerns from the Central Bank and government about money laundering, fraud, and the manipulation of asset prices within the Brazilian capital market. The regulator signaled that the previous rules provided structural vulnerabilities that allowed illicit funds to be concealed and fund balances to be inflated, pointing to high-profile fraud investigations, including those involving the Banco Master case, as a catalyst for the action. The government stated the new measure is aimed at preserving market integrity by eliminating the use of assets with high degrees of uncertainty and opacity.

The immediate impact is substantial: an estimated R$ 35.2 billion ($6.5 billion USD) in FIDC exposure to judicial credit assets was reported as of July 2026, according to data from Brazil’s Securities and Exchange Commission (CVM). While the new rule bans new investments in uncertain credits, the CMN established strict new compliance requirements for the existing R$ 35.2 billion stock already held by the funds. These requirements include enhanced procedures for valuation and pricing, increased transparency of information disclosed to investors, and mandatory submission of valuation procedures to independent auditors. The industry, which often uses these assets for corporate financing, has pushed back, with some participants warning the restrictions are excessive and may inadvertently push legitimate "special situations" financing operations toward less regulated structures.

What it touches The new regulations create immediate changes for the distressed asset funds and special situations desks that specialize in litigation finance, forcing a re-evaluation of billions in existing assets and closing off a key avenue for acquiring new, uncertain judicial credits as investment instruments. The FIDC segment itself, a major part of the non-bank corporate credit market, now faces greater scrutiny and compliance costs.