MANILA – The Securities and Exchange Commission (SEC) is finalizing the guidelines that will facilitate the offering of collective investment schemes (CIS) across member jurisdictions of the Asean Capital Markets Forum (ACMF) that are signatory to the Asean CIS Framework, as it moves toward deepening capital market connectivity in the region.
In a statement Tuesday, the SEC said the guidelines will operationalize the supplemental memorandum of understanding signed by the SEC together with the Securities Commission Malaysia, the Monetary Authority of Singapore, and Securities and Exchange Commission of Thailand on May 11, 2021 for the admission of the Philippines to the Asean CIS framework.
Established in 2014, the framework allows fund managers operating in a member jurisdiction to offer CIS such as unit trust funds or mutual funds to retail investors in other member jurisdictions under a streamlined authorization process.
The guidelines being finalized by the SEC will apply to investment companies incorporated in the Philippines who intend to participate in the framework, as well as foreign CIS of member jurisdictions that will offer for sale units in the Philippines or other qualifying CIS as specified under the Asean CIS Framework.
Qualifying CIS
Under the draft guidelines, to be authorized as a qualifying CIS, an investment company must first be duly incorporated in the Philippines and authorized under Republic Act No. 2629, or the Investment Company Act (ICA), as well as Republic Act No. 8799, or the Securities Regulation Code (SRC), to issue shares to the public.
Only shares will be allowed to be issued by qualified investment companies from the Philippines.
Those offering both shares and units are still eligible to participate in the framework, but only shares can be offered cross-border.
The investment company must be assessed by the Commission to be compliant with both local regulations and the standards of qualifying CIS, or the set of rules and regulations as agreed and as may be amended from time to time among member jurisdictions.
The SEC will review and assess the application for authorization of an investment company as a qualifying CIS within 21 business days from the submission of complete documents.
In case of cross-border offerings, the roles and responsibilities of the board of directors of the investment company, or the qualifying CIS; fund manager, acting as CIS operator; custodian; independent oversight entity; and other entities or persons dealing with the investment company shall also be governed by the standards of qualifying CIS or any amendments thereto.
Foreign CIS
A foreign CIS may be offered in the Philippines under the Asean CIS Framework if it is constituted in a member jurisdiction and is authorized to be offered to the general public of that member jurisdiction; has been assessed by its home regulator as suitable to be a qualifying CIS; and has been recognized by the SEC and is permitted to be offered in the Philippines, subject to existing requirements.
Moreover, the foreign CIS must be concurrently offered in the Philippines and in its home jurisdiction; must comply with the standards of qualifying CIS, along with its CIS operator and trustee/fund supervisor; and must comply with the disclosure requirements of the SEC, among others.
The operator of the foreign CIS will likewise be required to appoint a registered entity with a mutual fund distributor license to act as local representative and distributor/s in the Philippines for each foreign CIS that is to be offered, marketed, and distributed in the country.
The local distributor of the foreign CIS will have the responsibility of offering, marketing, or distributing the foreign CIS in the country.
It will also be required to keep a register of investors that will be readily available to the Commission.
The SEC may refuse to recognize or approve a foreign qualifying CIS for public offer in the Philippines if the CIS operator or qualifying CIS was found to have submitted false or misleading information to either the home regulator or the commission; or if they were found to be misrepresenting or defrauding investors.
They may also be rejected if the CIS operator, qualifying CIS, trustee/fund supervisor contravenes any obligations in the applicable constitutive documents; if they have failed to comply with any resolution passed by investors; or if they were found to have contravened any laws, regulations, Standards of Qualifying CIS, or administrative provisions imposed in the home jurisdiction or in the Philippines.
Existing provisions under Rule 12. 1 of the implementing rules and regulations of the ICA as well as applicable provisions of the SRC shall apply to the reportorial requirements of the investment company that will participate in the framework. (PR)
