Colombia proposes comprehensive regulation for fiduciary business under Draft Decree

• The Colombian Ministry of Finance has released a draft regulation that comprehensively restructures the legal framework for trust businesses (negocios fiduciarios, including trusts, and trust mandates).
• The proposal defines a clear taxonomy of trust businesses and introduces detailed duties for both trust companies and their clients.
• Trust companies (sociedades fiduciarias) will be subject to new obligations on transparency, risk management, conflict-of-interest policies, and asset valuation.
• Clients (fideicomitentes) will also face new compliance obligations, including risk documentation and reporting duties to committees.
• A transitional period is provided, but trust companies and project sponsors must begin adapting immediately to align with the proposed framework.

Introduction and Background

Colombia’s Ministry of Finance (Ministerio de Hacienda) published a draft regulation proposing a new regulatory framework for fiduciary businesses (Proyecto de Decreto para regular los negocios fiduciarios). The draft decree—open for public comment until August 13, 2025—would amend Decree 2555 of 2010 by introducing a detailed Title 5 that governs all trust-related operations conducted by licensed fiduciary companies in Colombia.

Analysis

Scope and Definitions

The decree applies to fiduciary and escrow operations under Article 29 of the Financial System Law (Decree 663 of 1993). It introduces standardized definitions for fiduciary business types, including fiduciary trusts (fiducia mercantil) and fiduciary mandates (encargo fiduciario), and distinguishes between fiduciary and non-fiduciary risks.

Core Principles

Five guiding principles will govern fiduciary activity:

• Segregation – Ensures trust assets remain separate from the fiduciary’s own and protected in insolvency.
• Professionalism – Fiduciaries must act with diligence, expertise, and prudence.
• Client Interests First – Fiduciaries must prioritize beneficiaries’ interests over their own or affiliated parties.
• Prevention – Proactive risk management is mandated.
• Transparency – Disclosure of fiduciary activity must be accurate, timely, and accessible.

Obligations of Fiduciary Companies

The draft decree imposes a suite of operational and compliance obligations:

• Disclosure – Firms must clearly disclose all costs, risks, and obligations throughout the life cycle of the trust.
• Periodic Reporting – Includes mandated account reporting and performance disclosures.
• Asset Valuation – Fiduciaries must periodically assess asset value using regulated methodologies.
• Risk Management – Fiduciaries must identify and disclose fiduciary risks via documented matrices included in contracts.
• Conflict-of-Interest Policies – Firms must adopt governance policies to address internal conflicts, especially involving related parties.
• Execution Duty – Asset dispositions must reflect fair market conditions or follow pre-agreed pricing mechanisms.
• Contractual Clarity – Contracts must specify terms for the use of fiduciary branding and procedures for trust liquidation.

Obligations of Clients (Fideicomitentes)

The draft also imposes compliance duties on trust clients:

• Risk Disclosure – Clients must deliver a documented matrix of non-fiduciary risks to fiduciaries.
• Disclosure to Committees – Clients must notify fiduciary committees of any risk events or disruptions.
• Beneficiary Communication – For mass-service or multi-beneficiary structures, additional transparency measures must be established.
• Conflict Management – Clients are required to detect and disclose conflicts of interest affecting trust operations.

Fiduciary Committees

A fiduciary committee will be mandatory for trust contracts involving real estate development (instrumentalización de proyectos inmobiliarios) under standard-form or mass-service structures. These committees:

• Must have at least one qualified representative for beneficiaries.
• Will supervise risk management, conflicts of interest, and information disclosures.

Approval and Reporting Requirements

• Standard Contracts – All standard-form contracts must be approved in advance by the Financial Superintendence.
• Reporting – Fiduciary firms must periodically report trust classifications and modalities to the Financial Superintendence.

Modalities of Fiduciary Business

Nine trust modalities are identified, including collection, payment, guarantee, administration, investment, custody, and project structuring (both real estate and non-real estate). Fiduciaries may combine modalities within a single contract.

Key Considerations for Fiduciaries and Project Developers

• Governance Burden – Fiduciaries must overhaul internal controls and risk-management systems. Boards must ratify new conflict-of-interest policies.
• Contractual Adjustments – Existing trust contracts, especially for real estate projects, may need to be renegotiated to reflect committee oversight and reporting obligations.
• Client Coordination – Project sponsors and fiduciary clients must prepare detailed risk matrices and reporting systems aligned with new pre-contractual duties.
• Mass Service Implications – Entities using standard trust models at scale (e.g., for housing developments or private equity vehicles) face heightened consumer protection scrutiny and contractual approval requirements.
• Investment Activity Limits – Fiduciary investment discretion will be contractually bounded, especially where price discovery is limited or market benchmarks are absent.

Next Steps and Outlook

The Ministry of Finance has opened a public comment period through August 13, 2025. We expect Financial Superintendence to issue detailed implementation instructions within 12 months of the final decree’s publication. Fiduciary companies will then have a six-month grace period to comply.

Market participants—especially fiduciaries, debt providers (banks, debt funds etc.) structured debt takers (payroll lenders, point of sale originators, and other fintechs etc.) developers, and fund managers—should initiate internal reviews, map impacted contracts and begin gap assessments. The proposed framework reflects a fundamental shift in Colombia’s approach to fiduciary business governance and will shape industry practice for years to come.