SEC sets rules for investment companies to qualify for cross-border transactions

THE SECURITIES and Exchange Commission (SEC) on Tuesday released guidelines to allow qualified investment firms in the Philippines to offer and invest in shares via the ASEAN Collective Investment Schemes (CIS) Framework.

“The rules 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 allowed under the ASEAN CIS Framework,” the corporate regulator said in a statement.

In May, the SEC inked a supplemental memorandum of understanding with its counterparts in Malaysia (Securities Commission Malaysia), Singapore (Monetary Authority of Singapore), and Thailand (SEC Thailand) to join the framework.

As one of the initiatives of the ASEAN Capital Markets Forum (ACMF), this allows fund managers in member jurisdictions to offer investments such as trust funds or mutual funds to retail investors in other Association of Southeast Asian Nations (ASEAN) countries.

According to the SEC’s Memorandum Circular No. 9, Series of 2021, to participate in the framework, firms must be compliant with local guidelines and the ACMF’s standards of qualifying CIS.

“In instances where two sets of requirements differ on a particular provision, the stricter requirement must be followed and highlighted as such in the prospectus of the fund,” the SEC said.

Philippine investment companies and their fund managers may offer shares to other members of the ASEAN CIS Framework if they are incorporated in the Philippines and are authorized to issue shares to the public under the Investment Company Act (ICA) and the Securities Regulation Code (SRC).

Investment firms offering both shares and units may still participate in the framework, however, only shares may be offered for cross-border transactions.

The commission will assess whether the investment company is suitable to be a qualifying CIS. The review process will be done within 21 business days from the submission of complete documents.

“The shares of the qualifying CIS must be concurrently offered in the Philippines and in member jurisdictions,” the SEC said in the memorandum circular.

Meanwhile, a foreign CIS may be offered in the Philippines if it is constituted in a member jurisdiction and is authorized to offer shares to the public in its home jurisdiction. It should also be deemed as a qualifying CIS by its home regulator.

The foreign CIS must be recognized by the SEC and must gain permission to be offered in the country.

“A local representative and distributor/s in the Philippines must be appointed in relation to each foreign CIS that is to be offered, marketed and distributed in the Philippines,” the SEC said.

Guidelines for the foreign CIS’ representative and distributors are also included. A single entity may take both roles, provided that it has the necessary requirements.

The foreign CIS will have to comply with the disclosure requirements of the SEC. Therefore, the local representative will act on behalf of the foreign CIS and its operator, taking on responsibilities such as filing and keeping reports and documents.

“The applicable provisions of the SRC, ICA and their implementing rules and regulations on civil and/or criminal liabilities shall apply in case of any violation relative to the offering of the foreign CIS in the Philippines,” the SEC said. — K.C.G. Valmonte

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