Financial Fair Play (Assumptions and Scope) - Part IV

As pointed out in the third part of this series, the imposition (and implementation) of the financial fair play system usually reveals a show of force by the regulatory body. Furthermore, the rules that govern a particular team may originate from more than one regulator, depending on the organizational structure in the respective continent and in each country.

UEFA regulated the issue, in the way it did, in a pioneering manner worldwide, and European leagues, such as the English, Spanish, and French leagues – to cite three examples – have also established their regulations, which, in these cases, obviously apply to the national teams subject to them.

Thus, participation in European and local competitions leads to the need to verify different systems, not necessarily similar in their objectives; but which express the positions of the respective regulators – and which contain the instruments for imposing the purposes of each regulator.

Brazil, for now, has only one system, originating from the CBF (Brazilian Football Confederation). It reveals the vision that the entity currently has for Brazilian football. And, as previously stated, it serves as a measure of central power, which reversed the failures of previous attempts, promoted directly or indirectly – in 2019 and 2021 – under, therefore, different administrative compositions.

This time, according to the program launched and implemented within approximately six months, it was finally possible to impose the (necessary) SSF – financial sustainability system, which was correctly built not only from the main existing systems, but also – and this is quite relevant – taking into account the evolutions that have occurred in these systems, which have undergone, over the years, since their introductions, tests of legality and effectiveness, sometimes resisted in contentious processes. And, therefore, through reformulations.

According to material released by the CBF (Brazilian Football Confederation), clubs and other agents participated and contributed to the result. In short, there were 77 participations from clubs, federations or bodies of the football industry, of which 85% were active; and 70% of the participating clubs also acted regularly. Moreover, the working group was composed of members from Série A, Série B, federations and other agents linked to the industry.

This composition does not relativize the proposition formulated above, that the product consists, firstly, in the expression of the CBF's will and, secondly, contains the content it desired, with surgical adjustments.

This is not a criticism, but a simple observation, since its study of comparable models, their origins, problems, alterations, and solutions served as both a starting and ending point. This, incidentally, aligns with the function of a centralizing entity that increasingly seeks to assert its position. It will also align with the regulation of any league that may be created, should it deem specific rules necessary for the participants of the tournament it organizes.

The various sustainability systems adopted as references, which address what has become known as financial fair play, originating from confederations or leagues, are based, according to CBF material and the book of the same name by Caio Cordeiro de Resende, on four main pillars: (i) control of overdue debts; (ii) operational balance; (iii) control of squad costs; and (iv) control of short-term debt. Based on these, the RSSF – the Financial Sustainability System Regulation – was established.

The axes, in turn, are fixed on a punitive and, more importantly, coercive basis, without which the entire system would tend to collapse if refused, confronted, or circumvented by clubs subject to the RSSF (as, incidentally, has been verified in emblematic cases tested within UEFA and European leagues).

The RSSF is composed of six chapters, which deal with: (i) general provisions; (ii) structure; (iii) SSF Series A and B; (iv) Simplified Monitoring System for Series C; (v) sanctions; and (vi) final provisions. It also includes an interesting set of annexes that present specifications regarding: (a) calculation of the operating result of each club/SAF; (b) calculation of the cost indicator with the squad; (c) calculation of the indebtedness indicator; (d) accounting and presentation standards; and (e) reporting deadlines and obligations.

Article 1 of the RSSF (Regulatory Standard for Economic and Financial Management) defines its scope: It establishes rules for the economic and financial regulation of football clubs (a definition that includes non-profit civil associations and SAFs - Public Limited Companies), licensed for the Brazilian professional men's championship, Series A and B ("Championships").

Article 2 reveals its objective: (i) to increase the transparency and credibility of club finances; (ii) to promote better cost control and greater financial balance; (iii) to encourage clubs to operate within their financial realities; (iii.i) to discourage excessive indebtedness; and (iv) to encourage investments that contribute to the medium- and long-term future of Brazilian football.

Article 3 presents the foundations for the effectiveness and correct application of the SSF: Quality, accuracy, and reliability of information, which must be observed and provided by the clubs.

Article... Article 4 lists the CBF's responsibilities within the scope of the SSF: (i) conception, regulation, and administration of the SSF and its structure; (i.i) maintenance of a qualified team; (ii) establishment of financial criteria that must be observed by the clubs; (iii) creation and maintenance of an administrative unit in charge of procedures related to the SSF; (iv) execution of sanctions, according to decisions issued by the competent body of the SSF; (v) appealing and defending decisions issued in accordance with the RSSF; (vi) amending the RSSF; and (vii) monitoring and encouraging the adoption of financial discipline and rationality in club spending and investments.

The article also stipulates that the CBF must safeguard the confidentiality of non-public information and ensure that it offers equitable, impartial, and transparent treatment, providing clarifications during the process. This set of responsibilities, treated as an attribution, constitutes, however, a duty.

Article 5 establishes conditions for club participation in championships (which therefore do not apply to other competitions): (i) timely provision of financial information and supply of documents requested in the RSSF; (ii) presentation of correct, accurate and complete information; and (iii) provision of additional information when requested.

Article 6, the last of the general provisions, establishes that the publication of data or sanctioning decisions will observe the principles of transparency and public interest, respecting the confidentiality of sensitive commercial information.

The next texts in the series will be dedicated to the analysis of the axes of the SSR, including the punitive and sanctioning system, and, subsequently, to the content of the other chapters of the RSSF (which will impose a new, necessary, complex and possibly tense reality on the structure of Brazilian football).