Brazil securities regulator probes reinsurer IRB, asset manager

Brazilian securities regulator CVM on Tuesday said it was opening a broad investigation into reinsurer IRB Brasil Resseguros SA (IRBR3.SA) along with its management and shareholders. The move announced by CVM in a statement follows a decision by the country’s insurance regulator earlier this month to inspect IRB for potential liquidity problems. The securities regulator said one of the investigations will focus on an 8% drop in IRB’s shares on Feb. 3, after Brazilian asset manager Squadra questioned the reinsurer’s financial statements in a letter. CVM will probe whether there was a conflict of interest, as Squadra had a short position in the company. Another probe will look into the company’s financial statements, taking into consideration potential problems cited by Squadra and also the alleged dissemination of false information by IRB’s management. IRB and Squadra did not immediately respond to requests for comment. In March, media reports said Berkshire Hathaway (BRKa.N), the investment company controlled by billionaire Warren Buffett, was an investor in the company. Berkshire denied having any position in IRB. IRB’s chief executive and chief financial officer were subsequently replaced. Shares in IRB, which has Brazil’s top two private lenders - Itau Unibanco Holding SA (ITUB4.SA) and Banco Bradesco SA (BBDC4.SA) - among its lsargest shareholders, lost more than 80% this year.

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