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Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
Nineteenth Congress 
First Regular Session 
HOUSE BILL NO. __________ 
__________________________________________________________________________ 
Introduced by Representative JOEY SARTE SALCEDA 
__________________________________________________________________________ 
AN ACT 
PROVIDING FOR THE COMPREHENSIVE REGULATORY AND LEGAL 
FRAMEWORK FOR COLLECTIVE INVESTMENT SCHEMES 
EXPLANATORY NOTE 
The Philippines, in recent year has received a couple of credit rating upgrades, which 
were the output of a generally stable political situation, strong remittances from abroad and 
improving fiscal position. Hence, to further strengthen and improve economic stability, the 
government should be committed to implementing stronger administrative reforms and pass 
identified priority legislative measures that will help ease the investment constraints and 
facilitate simplicity in doing business in the country. 
One of these priority measures is the need to harmonize the regulatory and tax 
framework for all form of Collective Investment Schemes (CIS). Countries, including the 
United Kingdom, Japan, Australia, Korea and Singapore, have adopted a single law to regulate 
all types of CIS. Presently, the Philippines has various laws governing investment companies 
(mutual funds), unit investment trust funds (UITFs), and separate account funds or variable 
unit linked insurance products. 
These investment products are basically the same but differ in regulatory requirements 
(regulatory arbitrage) and taxation mainly because of differences in their governing laws. This 
regulatory and tax arbitrage give rise to an uneven playing field which will prove unfavorable 
to the growth of the industry. More importantly, such arbitrage will result in uneven levels of 
protection to the investing public. 
Establishing a comprehensive regulatory and tax framework for all CIS products will 
eventually lead to a more competitive environment for the CIS industry and provide enhanced 
and uniform levels of protection to the investing public. 
July 1, 2022
8:00 am
642


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In view of the foregoing, approval of this bill is earnestly sought. 
JOEY SARTE SALCEDA 


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Republic of the Philippines 
HOUSE OF REPRESENTATIVES 
Quezon City 
Nineteenth Congress 
First Regular Session 
HOUSE BILL NO. __________ 
__________________________________________________________________________ 
Introduced by Representative JOEY SARTE SALCEDA 
__________________________________________________________________________ 
AN ACT 
PROVIDING FOR THE COMPREHENSIVE REGULATORY AND LEGAL 
FRAMEWORK FOR COLLECTIVE INVESTMENT SCHEMES  
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
TITLE I – GENERAL PROVISIONS 
SECTION 1. Short Title. – This Law shall be known as the “Collective Investment 
Schemes Law”. 
SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to: 
(a) Promote investor protection by applying high governance standards in the
establishment, management and operation of collective investment schemes (CIS)
and the registration and sale of CIS securities  in order to prevent abuse and protect
the interests of the investing public, including the setting of standards  for the
eligibility of persons who establish, manage or operate collective investment
schemes and register and sell CIS securities; the prevention, disclosure and
elimination of all conflicts of interest which may prejudice the investing public; and
the provision of independent third party supervision over the operations of
collective investment schemes;
(b) Promote the growth of pooled investments and the development of the capital
market by providing a favorable framework to facilitate the flow of investment
capital from sources within the country and abroad;
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(c) Encourage the participation in the collective investment scheme industry of the best 
qualified fund managers regardless of place of incorporation, and the best qualified 
investment advisers regardless of nationality; 
(d) Broaden citizen participation in economic activity and growth by widening their 
access to securities ownership and other investment assets as allowed under this 
Act; 
(e) Provide equal protection to investors and the participants in all similar CIS and the 
same competitive environment for such schemes, with the imposition of standard 
requirements therein; and 
(f) Encourage responsible investing through the dissemination of information on the 
opportunities and risks involved in investments. 
 
SEC.3. Purpose. – This Act establishes a comprehensive regulatory and tax framework 
to enable CIS and all the participants therein to play key roles in the development of the capital 
market in a manner consistent with the policies declared in Section 2 hereof. 
 
SEC.4. Coverage. – This Act shall apply to the establishment, management and 
operation of all CIS and the registration and sale of CIS securities in the Philippines. 
 
SEC. 5. Definitions. – As used in this Act, 
(a) Affiliate of another person means: 
(1) Any person directly or indirectly owning, controlling or holding with power to 
vote, ten per centum (10%) or more of the outstanding voting securities of such 
other person;  
(2) Any person ten per centum (10%) or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with power to 
vote, by such other person;  
(3) Any person directly or indirectly controlling, controlled by, or under common 
control with, such other person;  
(4) Any officer, director, partner, or employee of such other person; 
(5) If such other person is a juridical CIS, any investment adviser,  fund manager, 
CIS distributor, CIS solicitor and custodian thereof;  
(6) If a juridical CIS, any other corporation or partnership having interlocking 


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directors, managing partners, or officers with the juridical CIS, except in cases 
involving independent directors as defined under existing regulations: 
Provided, That for juridical CIS that are not corporations or partnerships, the 
term shall refer to such persons with equivalent duties or functions as directors 
or officers of corporations, or managing partners in a partnership; 
(7) If a juridical CIS that is organized as a stock corporation, any other corporation 
having common stockholders owning at least ten percent (10%) of the 
outstanding voting stock of the juridical CIS or any partnership having partners 
who own at least ten percent (10%) of the interest in the juridical CIS: Provided,  
That for juridical CIS that are not corporations or partnerships, this term shall 
refer to the form of security ownership in the said entity; 
(8) Any person who is a party to a management contract or any arrangement 
granting power to one corporation, partnership or entity to direct or cause the 
direction of management and policies of the other corporation, partnership or 
entity, or vice-versa; or 
(9) Any person who has permanent proxy or voting trusts in favor of the 
corporation, partnership or entity constituting at least ten percent (10%) of the 
outstanding voting stock or voting power of the other corporation, partnership 
or entity, or vice versa; 
(b) Appropriate regulatory agency means: 
(1) The Bangko Sentral ng Pilipinas (BSP), in the case of banks, trust entities and 
other financial institutions supervised by the BSP;  
(2) The Insurance Commission (IC), as may be provided by law or by the order of 
any competent authority, in the case of insurance companies and other persons 
regulated by the IC ; and 
(3) The Securities and Exchange Commission (SEC), in the case of investment 
companies, Real Estate Investment Trusts (REITs), Exchange-Traded Funds 
(ETFs), Special Purpose Corporations or partnerships or other persons or other 
entities not under the regulation of the BSP or the IC; 
(c) Broker means any person duly licensed by the appropriate regulatory agency and, 
if required, accredited by the appropriate self-regulatory organization to engage in 
the business of buying and selling securities for the account of others, but does not 
include a bank or any person solely by reason of the fact that such person is a CIS 


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or a distributor of CIS securities;  
(d) CIS distributor means any stock corporation or broker licensed by the appropriate 
regulatory agency to engage in the offering or selling of CIS securities; 
(e) CIS investor means any person who purchases or otherwise invests in CIS 
securities;  
(f) CIS plan means the plan for the registration and sale of CIS securities filed with the 
appropriate regulatory agency in accordance with Sections 25, 27, 30 and 31 hereof, 
which shall be in lieu of the registration statement required to be filed pursuant to 
Republic Act No. 8799, otherwise known as “Securities Regulation Code” for the 
sale and offer for sale of securities to the public; 
(g) CIS securities mean units of participation or similar interests in a contractual CIS 
or shares of stock or similar interests in a juridical CIS;  
(h) CIS security holder means a stockholder, partner or other security holder, as 
applicable, of a juridical CIS; 
(i) CIS solicitor means a natural person who is duly licensed as such by the appropriate 
regulatory agency to sell CIS securities; 
(j) Commission means the Securities and Exchange Commission; 
(k) Contractual CIS means a CIS that is:  
(1) Organized pursuant to a contract, such as a Unit Investment Trust Fund (UITF), 
REITs in a trust form, Exchange Traded Funds (ETFs) or  a Separate Variable 
Account of a variable insurance contract;  
(2) Engaged, or holds itself out as being engaged, or proposes to engage, in the 
business of investing, reinvesting, and/or trading in securities or other 
investment assets allowed under this Act; and 
(3) That issues units of participation each of which represents an undivided interest 
in a pool of investment assets; 
(l) Control means the condition that exists when the parent company owns, directly or 
indirectly through subsidiaries, more than one half of the voting power of an entity 
unless, in exceptional circumstances, it can be clearly demonstrated that such 
ownership does not constitute control.  Control is  also presumed to exist even when 
the parent company owns half or less of the voting power of an entity when the 
former has:  
(1) Power over more than one half of the voting rights by virtue of an agreement 


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with other investors; 
(2) Power to govern the financial and operating policies of an entity under a statute 
or an agreement; 
(3) Power to appoint or remove the majority of the members of the board of 
directors, partners, or other equivalent governing body and control of the entity 
is by that board or body;  
(4) Power to cast the majority of votes at meetings of the board of directors, partners 
or other equivalent governing body and control of the entity is by that board or 
body; or 
(5) Any other arrangement similar to any of the above; 
(m) Creation of a CIS means the issuance of CIS securities upon its due registration or 
recognition by the appropriate regulatory agency; 
(n) Custodian means an entity duly authorized by the BSP to engage in the business of 
safekeeping investment assets, and act as the custodian of the investment assets of 
a CIS pursuant to this Act and the relevant regulations of the BSP, IC, and/or the 
SEC;  
(o) Dealer means a person duly licensed by the appropriate regulatory agency and 
accredited by the appropriate self-regulatory organization to engage in the buying 
and selling of securities, whether or not through a broker.  The term excludes banks, 
insurance companies, or CIS, or any person insofar as he is engaged in investing, 
reinvesting, or trading in securities, or in owning or holding securities, for his own 
account, either individually or in some fiduciary capacity, but not as a part of regular 
business;  
(p) Exchange means an organized marketplace or facility duly licensed by the SEC that 
brings together buyers and sellers and executes trades of securities and/or 
commodities;  
(q) Fund manager means a juridical person engaged in the business of managing the 
investment assets of a CIS or in the business of providing administrative and 
ancillary services for such CIS as licensed by the appropriate regulatory agency in 
accordance with Section 9 hereof, and performing the duties and responsibilities 
enumerated in Section 10 hereof; 
(r) Independent auditor means the independent external certified public accountant 
referred to in Section 19 hereof; 


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(s) Independent director means a person other than an officer or employee of the 
corporation, its affiliates, or any other individual having any relationship with the 
corporation who would materially interfere with the exercise of independent 
judgment in carrying out the responsibilities of a director. An independent director 
shall possess the highest degree of independence, the qualifications and none of the 
disqualifications for independent directors as defined in RA 8799 or the Securities 
Regulation Code, and its implementing rules and regulations;  
(t) Insurance company means a company engaged in the insurance business that has 
been duly authorized by the IC to transact such business, as specifically defined 
under Republic Act No. 10607, as amended, otherwise known as the “Insurance 
Code”; 
(u) Investment adviser means any person who regularly advises or recommends 
investment decisions pursuant to an advisory contract with a CIS investor regarding 
securities or other CIS portfolio offered by a fund manager, trustee or insurance 
company; 
(v) Investment assets means the securities and other assets in which the funds of a CIS 
may be invested in accordance with Section 38 hereof; 
(w) Investment company means a stock corporation organized as a juridical CIS, which 
is engaged, or holds itself out as being engaged, or proposes to engage, in the 
business of investing, reinvesting, and/or trading in securities allowed under this 
Act; 
(x) Investment house means any enterprise which engages in the underwriting of 
securities of other companies, as defined in Section 2 of Presidential Decree No. 
129, otherwise known as “The Investment Houses Law”, as may be amended from 
time to time, and is registered pursuant to said law; 
(y) Juridical CIS means a CIS: 
(1) Organized as a stock corporation such as an investment company or a 
partnership, including limited partnerships and limited liability companies 
whether incorporated in or outside the Philippines, or such other entity as the 
SEC shall allow in accordance with International Organization of Securities 
Commissions (IOSCO) principles or the implementing rules and regulations of 
this Act; 


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(2) That is also known as an investment company that pools the funds of investors 
to form a massive asset base which is then entrusted to a full time professional 
fund manager who develops and maintains a diversified portfolio of security 
investments: Provided, That limited partnerships that are managed by a general 
partner and pools the investments of limited partners, who are either qualified 
institutional investors or qualified individual investors; 
(3) Engaged, or holds itself out as being engaged, or proposes to engage, in the 
business of investing, reinvesting, and/or trading in securities or other 
investment assets allowed under this Act; and 
(4) That issues common stock or units of participation each share or unit of which 
represents an undivided interest in a pool of investment assets or, as may be 
allowed by the appropriate regulatory agency, represents underlying securities; 
(z)  Net asset value means the value of all assets less all liabilities of a CIS as 
determined in accordance with generally accepted accounting principles and the 
provisions of this Act and its implementing rules and regulations; 
(aa) 
Organized Marketplace means an exchange or an over-the-counter market 
alternative trading system, or otherwise recognized as such by the SEC, and 
governed by, among others, transparent and binding rules and market conventions 
on membership, trading, price transparency, trade reporting, market monitoring and 
orderly conduct/operation of the market which are enforceable on the members and 
participants; 
(bb) 
Person means a natural or juridical person as defined in Republic Act No. 386, 
otherwise known as the “Civil Code of the Philippines”; 
(cc) 
Real Estate Investment Trust or “REIT” means a Collective Investment Scheme 
formed principally for the purpose of acquiring, owning or operating income-
generating real estate assets, as specifically defined in Republic Act No. 9856, 
otherwise known as “The Real Estate Investment Trust Act of 2009”. For the 
purpose of clarity, a REIT in contractual or trust form organized under this Act 
shall, to the extent applicable, be governed by RA 9856; 
(dd) 
Redemption means the liquidation of a CIS security through its surrender to the 
issuer in exchange for its net asset value or the underlying securities it represents;   
(ee) 
Registrar means the fund manager or trustee or such other person or persons as 
may from time to time be appointed by the trustee, or the fund manager with the 


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prior approval of the trustee, to perform all or any of the duties and functions of the 
registrar under Section 24 hereof; 
(ff)  Sale, sell, offer to sell or offer for sale means a contract of sale or disposition of, 
attempt or offer to dispose of, or solicitation of an offer to buy a unit of participation, 
including security and interest therein, for value.  Any such security, unit of 
participation or interest therein, given or delivered with, or as a bonus on account 
of, any purchase of securities, unit of participation or any other thing, shall be 
conclusively presumed to constitute a part of the subject of such purchase and to 
have been sold for value; 
(gg) 
Security means any instrument or product defined under RA 8799, as amended, 
and its implementing rules and regulations; 
(hh) 
Separate Variable Account Fund means the segregated portfolio of investments 
established, maintained and invested in by an insurance company for its variable 
insurance contracts and accounted for separately and apart from its other 
investments and accounts, pursuant to RA 10607, as amended,  under which the 
income, gains and losses, or the expenses incurred in the acquisition, disposal and 
management of investment assets allocated to such account, are credited to or 
charged against without regard to the other income, gains, losses and other expenses 
of the insurance company. The Separate Variable Account Fund shall be deemed a 
contractual CIS, and the units of participation therein shall be deemed as CIS 
securities, subject to this Act. The investment assets held in any such separate 
variable account shall be applied exclusively for the benefit of the owners or 
beneficiaries of the variable insurance contracts; 
(ii) Special Purpose Corporation means a juridical person created in accordance with 
Batas Pambansa Blg. 68, otherwise known as the Corporation Code of the 
Philippines, solely for the purpose of securitization and to which the seller makes a 
true and absolute sale of assets, as specifically defined in Republic Act No. 9267, 
otherwise known as the “Securitization Act”; 
(jj) Special Purpose Trust means a trust administered by an entity duly licensed to 
perform trust functions under Republic Act No. 8791, otherwise known as the 
“General Banking Law”, and created for a special purpose such as securitization of 
assets; 
(kk) 
Trust Entity means any bank, non-bank financial institution or a stock 


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corporation duly authorized by the Monetary Board of the BSP to engage in trust, 
investment management and fiduciary business;  
(ll) Trustee means a trust entity appointed and acting as the trustee of a contractual CIS 
pursuant to this Act; 
(mm) Unit of Participation means an undivided interest in the pool of investment 
assets of the CIS; 
(nn) 
 Value means the market value or fair value of securities as may be determined 
in accordance with such rules and regulations as the appropriate regulatory agency 
may prescribe. 
 
TITLE II - COLLECTIVE INVESTMENT SCHEMES 
 
Chapter 1 – Nature and Structure of Collective Investment Schemes 
 
SEC. 6. Collective Investment Schemes. –  
(a) A Collective Investment Scheme (CIS) is any arrangement whereby funds are 
solicited from the investing public and pooled together for the purpose of investing, 
re-investing and/or trading in securities or other investment assets or different 
classes thereof as allowed under this Act. All CIS shall be covered by and regulated 
by this Act and its implementing rules and regulations. A CIS may either be a 
juridical CIS, or has a contractual structure such as a unit investment trust fund, a 
special purpose trust, or similar scheme held by a trust entity or a separate account 
fund established pursuant to a variable unit linked insurance policy issued by an 
insurance company.  All CIS shall be governed by and shall comply with the 
requirements of this Act, the pertinent provisions of RA 8799 and other applicable 
laws not inconsistent with this Act.  For purposes of clarity, a REIT, ETF and other 
forms of investment arrangements existing and accepted in other international 
markets, consistent with the IOSCO Objectives and Principles of Securities 
Regulation, and allowed by the appropriate regulatory agency as may be formed or 
organized under  this Act.  
(b) Subject to the regulation under this Act, none of the following arrangements shall 
be deemed a CIS: 
(1) Any arrangement whereby securities are issued to not more than nineteen (19) 
beneficial owners within any twelve-month period, and there is no current 


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offering or intention to make a public offering of such securities: Provided, 
however, That within ten (10) calendar days from the issuance of said security, 
the issuer shall notify the appropriate regulatory agency of the said transaction. 
For this purpose, beneficial ownership by a company shall be deemed to be 
beneficial ownership by one person: Provided, That, if such company owns 
twenty-five per centum (25%) or more of the outstanding voting securities of 
the issuer, the beneficial ownership shall be deemed to be that of the holders of 
outstanding securities of such company; 
(2) Any insurance company in the conduct of its ordinary business: Provided, 
however, That a separate account fund established by an insurance company 
shall be deemed a contractual CIS as defined under this Act; 
(3)  Any employees' stock, bonus, pension, retirement, provident  or profit sharing 
plans which were transacted or contracted in the regular conduct of their 
ordinary business; 
(4) Any fund which is employed by the trust entity solely as an aid to the 
administration of existing trust or fiduciary accounts covered by agreements 
separate from those in connection with the CIS: Provided, That interests in such 
fund are not advertised or offered for sale to the general public;  
(5) Any arrangement whereby an investment house, dealer, or broker, registered as 
such with the SEC, primarily engaged in the business of underwriting securities 
issued by other persons, purchases and sells securities for its own account, or 
effects transactions in securities for the account of others; 
(6) Any arrangement whereby a company primarily engages in the business of 
factoring or mortgage financing, by purchasing or otherwise acquiring accounts 
receivable and similar obligations or making loans in respect of goods or 
services of a business, or by purchasing or otherwise acquiring mortgages and 
other liens on or interests in real estate: Provided, That such arrangement does 
not include the business of issuing redeemable securities; 
(7) Any arrangement organized and operated by an entity exclusively for religious, 
educational, benevolent, fraternal, charitable, or reformatory purposes, where 
no part of the net earnings from such arrangement inures to the benefit of any 
shareholder or member of such entity; 
(8) Any arrangement whereby an issuer is primarily engaged in investing in 


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securities issued by a majority-owned subsidiary or subsidiaries of such issuer, 
where each such subsidiary is not a CIS; and 
(9) Any other arrangement that, pursuant to rule or order issued by the appropriate 
regulatory agency, is determined not to be a CIS, or is excluded from the 
definition thereof as not necessary in the public interest and for the protection 
of investors. 
(c) A CIS may either be open-end or closed-end, defined as follows: 
(1) “Open-end CIS” means a CIS where securities are offered and are always 
redeemable by the CIS ; and  
(2) “Closed-end CIS” means a CIS where a fixed number of securities are offered 
in an initial public offering and thereafter may be traded in an organized market 
as determined by the SEC, but may not be redeemed by the CIS.  A closed–end 
CIS shall not be allowed to increase its number of securities. 
(d) A CIS may be constituted as a single compartment or as a multiple compartment 
CIS, defined as follows: 
(1) Single compartment CIS is a single CIS plan comprising of only one 
compartment or CIS or fund. 
(2) Multiple compartment CIS or otherwise known as umbrella CIS is a single CIS 
plan comprising of two or more compartments or sub-CIS or sub-funds. 
 
SEC. 7. Juridical CIS. – 
(a) No company, partnership, or entity shall act as a juridical CIS unless duly licensed 
by the SEC, and no company, partnership, or entity shall be licensed as a juridical 
CIS under this Act, unless it shall: 
(1) Be organized in the form of a stock corporation, such as an investment company 
or a partnership, including limited partnerships and limited liability companies 
whether incorporated in or outside the Philippines, or such other entity as the 
SEC shall allow in accordance with IOSCO principles or the implementing rules 
and regulations of this law; 
 
(2) Issue shares of stock consisting of common stock or units of participation, if a 
corporation, or issue units of interest, or other similar security, in the case of a 
partnership or other allowed structure or entity;  


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(3) In the case of a corporation, provide in its articles of incorporation that 
shareholders shall not be   entitled to pre-emptive rights; 
(4) At the time of registration, have an initial subscribed and paid-up capital of at 
least Fifty million pesos (P50,000,000.00): Provided, however, That the SEC 
may prescribe a higher paid-up capital. The SEC may prescribe a lower 
minimum paid-up capital for any subsequent juridical CIS that is established 
and managed by the same fund manager. The SEC shall also prescribe the 
minimum required capital for a juridical CIS that is organized as partnership or 
other structure that may be allowed by the SEC; 
(5) Hold  the original subscription of securities and maintains unimpaired its initial 
paid-up capital for a period of twelve (12) months following its registration with 
the SEC as a juridical CIS, or such other period as the SEC may prescribe; and 
(6) Maintain at all times, if an open-ended CIS, a reserve in liquid or semi-liquid 
assets, equal to at least ten per centum (10%)  of  its  total investment assets, or 
such other percentage and in such form as the SEC may prescribe. 
(b) Notwithstanding any provision of the Corporation Code to the contrary, no juridical 
CIS that is organized as a stock corporation shall be required to comply with the 
minimum subscribed and paid-up capital relative to an increase in its authorized 
capital stock.  
(c) The incorporators or partners of a juridical CIS shall, at incorporation or recording, 
fully pay in cash their respective subscriptions.  
(d) The SEC may prescribe such other or additional requirements under subsection (a) 
of this section respecting the form, share structure, and level of restrictions on 
capitalization and reserves as necessary or appropriate in the public interest or for 
the protection of investors. 
(e) At least one third (1/3) of the entire membership of the board of directors of a 
juridical CIS organized as a stock corporation shall be independent directors but in 
no case shall it be less than three (3) or as may be required by the appropriate 
regulatory agency. 
 
Chapter 2 – Parties Involved In Collective Investment Schemes 
 


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SEC. 8. Participants in the CIS. – The following shall be considered as participants in 
the CIS: 
(a) Fund Manager; 
(b) Trustee  or/Board of Directors (BOD), Partners, or other persons exercising 
similar functions, as appropriate; 
(c) Custodian; 
(d) CIS Distributor;  
(e) CIS Solicitor, and 
(f) Investment Adviser , as deemed appropriate 
 
SEC. 9. Fund manager. – No company shall act as a fund manager for a CIS unless 
duly licensed by the appropriate regulatory agency. A company may be licensed as a fund 
manager for purposes of this Act if it meets the following criteria: 
(a) It is organized as a stock corporation; 
(b) It has a minimum paid-up capital of not less than One hundred million pesos 
(P100,000,000.00): Provided, however, That the appropriate regulatory agency may 
prescribe a higher minimum paid-up capital taking into consideration, among other 
factors: 
(1) The risk-based principles on capital adequacy based on internationally accepted 
standards; and 
(2) The number and/or total net asset values of all CIS managed;   
(c)  At least one-third (1/3) of the entire membership of the BOD of the fund manager, 
but in no case less than three (3), shall be independent directors or as may be 
required by the appropriate regulatory agency; and 
(d) It has complied with such other requirements as may be prescribed by the 
appropriate regulatory agency. 
In licensing a fund manager, the appropriate regulatory agency shall ensure that the 
requirements under this Act and its implementing rules and regulations, and other pertinent 
laws not inconsistent with this Act are, complied with. 
 
SEC. 10. Duties and Responsibilities of the Fund Manager. – The fund manager shall 
have the following duties and responsibilities:  


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(a) Manage the investment assets of the CIS and perform the functions in accordance 
with the CIS plan, the provisions of this Act and its implementing rules and 
regulations for the exclusive interest of the CIS investors;  
(b) Provide copies of financial and other records of CIS investments to the CIS 
investors, trustee/BOD, CIS and auditor; 
(c) Ensure that the fund and CIS securities are accurately valued or priced; 
(d) Ensure that all payments out of CIS funds and investment assets are made in 
accordance with the CIS plan, this Act and its implementing rules and regulations;  
(e) Comply with the instructions of the juridical CIS or the trustee to remedy a breach 
of the provisions or covenants of the CIS plan, its contract with the juridical CIS or 
trustee, the provisions of this Law or its implementing rules and regulations; 
(f) Furnish the juridical CIS or the trustee with all contracts and agreements relating to 
the operation and management of the CIS; 
(g) Report to the juridical CIS or the trustee and the CIS investors results of the CIS 
operations; 
(h) Facilitate the redemption of CIS securities where applicable; 
(i) Maintain proper accounting records and other records to: 
(1) Enable a complete and accurate review of the CIS funds and investment assets; 
and  
(2) Ensure that the CIS funds and investment assets are managed and administered 
in accordance with the CIS plan, its contract with the juridical CIS or trustee, 
this Law and its implementing rules and regulations;  
(j) Propose and secure approval from the respective regulatory agency for the 
establishment and amendment of the CIS plan in accordance with this Act and its 
implementing rules and regulations;  
(k)  File such information and documents to keep reasonably current the information 
and documents contained in the CIS Plan; and ,  
(l)  Such other duties and responsibilities that the appropriate regulatory agency may 
prescribe.    
 
SEC.11. Prohibited Acts of the Fund Manager. – The fund manager shall not: 
(a) Invest CIS funds in any security, property and investment asset in which such fund 
manager or any of its directors, officers, employees and affiliates has a substantial 


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financial interest, subject to such exceptions and/or guidelines as may be prescribed 
by the appropriate regulatory agency; 
(b) Engage in a business other than the business of managing, administering, marketing 
and distributing CIS funds and securities: Provided,  That this prohibition shall not 
apply if the fund manager is a trust entity or an insurance company; 
(c) Pay or cause to be paid out of the CIS funds any fee, commission and other similar 
expense that has not been, or exceeds what have been provided for  in the CIS plan, 
this Act and its implementing rules and regulations or any other applicable laws and 
regulations;  
(d) Retain any rebate from, or otherwise share in any commission with any broker or 
dealer in consideration of transactions or investments of the CIS funds. 
Accordingly, any rebate or shared commission shall be for the account of the CIS 
fund concerned; and 
(e) Engage in such other acts as may be prohibited by rule or order of the appropriate 
regulatory agency.  
 
SEC. 12. Fund Management Agreement. –  
(a) The agreement between the fund manager and the trustee or the juridical CIS or the 
insurance company shall contain, among others, provisions pertaining to: 
(1) Extent of services to be rendered; 
(2) Any restriction or prohibition regarding the performance of the functions of the 
fund manager; 
(3) All compensation to be paid thereunder which shall be clearly described in a 
transparent manner, and which shall be in accordance with such requirements 
and limitations as the implementing rules and regulations of this Act may 
prescribe; 
(4) The term of the engagement and the manner of termination thereof, which shall 
be in accordance with such requirements or limitations as this law and its 
implementing rules and regulations may prescribe;  
(5) Reporting requirements to the trustee, juridical CIS, CIS investors and the 
appropriate regulatory agencies; and 
(6) Such other terms or conditions as the implementing rules and regulations of this 
Act may prescribe.   


Page | 16  
 
 
(b) In all cases where the trustee or insurance company functions as a fund manager, 
the foregoing provisions which should otherwise be contained in the fund 
management agreement with the fund manager shall be contained in the CIS plan.  
 
SEC. 13. Board of Directors. – The Board of Directors of a juridical entity shall act as 
the board of directors of a CIS. The duties and responsibilities of the board of directors of a 
contractual CIS under a trust arrangement shall be performed by its Trustees. In addition to 
those prescribed under existing laws and regulations, the following duties and responsibilities 
shall be exercised by the board of directors of a CIS: 
(a) Monitor the activities of the CIS distributors in the sale and/or redemption of the 
CIS units and ensure that the provisions of any marketing document relating to the 
sale or offer for sale of the CIS securities do not contain any matter which is 
inconsistent with the provisions of the CIS plan, this Act and its implementing rules 
and regulations;  
(b) Ensure that the management and investments of the CIS funds by the fund manager 
are in accordance with the CIS plan; 
(c) Ensure that the fund manager remedies any breach of the CIS plan or the terms of 
its appointment as fund manager, or any contravention of the provisions of this Act 
or its implementing rules and regulations; 
(d) Appoint an independent third-party custodian; 
(e) Ensure that CIS funds and investment assets are clearly identified and held 
separately from its own properties and other properties held in trust; 
(f) Ensure that all payments out of CIS funds and investment assets  are made in 
accordance with the CIS plan, this Act and its implementing rules and regulations; 
(g) Monitor the existence of conflict of interest situations and address the same for the 
best interests of the CIS investors; 
(h) Report to the appropriate regulatory agency, as soon as practicable, any material 
development or breach of the provisions or covenants of the CIS plan, the 
provisions of this Act or its implementing rules and regulations that:  
(1) relates to the establishment, operation or dissolution of the CIS or to the 
registration and sale of CIS securities, and 
(2) has had or is likely to have a material adverse effect on the interests of the CIS 
investors; 


Page | 17  
 
 
(i) File such information and documents to keep reasonably current the information 
and documents contained in the CIS Plan ; 
(j) Send, either by registered mail or other means authorized by the appropriate 
regulatory agency, annual reports for the investors as appropriate, which may be 
annual holding statements for UITFs as required by BSP, separate financial 
statements as required by IC for insurance companies, and in the case of Mutual 
Funds (MFs), the annual report as required by the SEC; 
(k) Propose and secure approval from the respective regulatory agency for the 
establishment or amendment of the CIS plan in accordance with the provisions of 
this Law and its implementing rules and regulations; and 
(l) Such other duties and responsibilities that the appropriate regulatory agency may 
prescribe. 
 
SEC.14. Custodian. – Unless otherwise authorized by the appropriate regulatory 
authority, taking into account the interest of the investing public, all CIS must appoint an 
independent third party custodian which shall have custody of the investment assets of the CIS.   
Only entities duly authorized to engage in investment management or trust business by 
the BSP or authorized by their home regulator may be licensed by the BSP to act as custodian 
of investment assets of a CIS.  
In addition to those prescribed under existing laws and regulations, a custodian shall 
have the following duties and responsibilities: 
(a) Hold the investment assets of a CIS in accordance with its agreement with the 
trustee or the juridical CIS; and 
(b) Such other duties and responsibilities that the BSP may prescribe, which shall 
include: 
(1) Earmarking, segregation and hypothecation of the investment assets of the CIS; 
and 
(2) Providing for periodic inspections by employees and agents of the BSP.  
 
SEC. 15. Appointment of Custodian. – The agreement between the custodian and the 
juridical CIS or the trustee or the insurance company of a contractual CIS shall contain, among 
others: 
(a) Extent of services to be rendered by the custodian; 


Page | 18  
 
 
(b) Fees, remuneration and other expenses of the custodian; 
(c) Any restriction or prohibition regarding the performance by the custodian of its 
functions; and 
(d) Reporting requirements of the custodian.  
 
SEC.16. CIS Distributor. – 
(a) No entity shall be licensed by the appropriate regulatory agency as a distributor of 
CIS securities, unless: 
(1) It is organized as a stock corporation; 
(2) It has a minimum paid-up capital of at least Ten million pesos  
(P10,000,000.00), or such higher capitalization to be prescribed by the 
appropriate regulatory agency taking into consideration (i) the risk-based 
principles on capital adequacy based on internationally accepted standards, and 
(ii) the number and/or total net asset value of all CIS distributed; and 
(3) It has complied with such other requirements as may be prescribed by the 
appropriate regulatory agency.  
(b) For purposes of this Act, the following juridical persons may be licensed as a 
distributor of all types of CIS by the appropriate regulatory agency: Provided, That 
the requirements under this Section and the implementing rules and regulations are 
complied with: 
(1) Any fund manager; 
(2) Any investment house; 
(3) Any bank, financial institution or trust entity under the supervision of the BSP;  
(4) Any insurance broker or its agents under the supervision of the IC;  
(5) Securities brokerage firms or their agents and sales persons duly licensed by the 
SEC; and 
(6) Other persons as may be hereinafter allowed by the appropriate regulatory 
agency. 
(c) A juridical CIS is not permitted to act as a distributor of securities of which it is the 
issuer, unless it complies with such rules and orders as the appropriate regulatory 
agency may prescribe as necessary or appropriate in the public interest or for the 
protection of investors. 


Page | 19  
 
 
(d)  The CIS distributor shall be principally responsible for marketing, distributing, 
selling CIS securities and safekeeping of identification documents as well as the 
minimum information required by existing Anti-Money Laundering laws, rules and 
regulations. It shall perform such other duties and responsibilities as the 
implementing rules and regulations of this Act. 
 
SEC.17. Marketing and Distribution Agreement. – 
(a) The agreement between the CIS distributor and the juridical CIS or the trustee or 
insurance company of a contractual CIS shall contain, among others, provisions 
pertaining to: 
(1) Extent of services to be rendered by the CIS distributor; 
(2) Fees, remuneration and other expenses of the CIS distributor; 
(3) Any restriction or prohibition regarding the performance of the functions by the 
CIS distributor; 
(4) Undertaking to employ or appoint only CIS solicitors duly licensed by the 
appropriate regulatory agency; and 
(5) Reporting requirements. 
(b) In all cases where the trustee or insurance company functions as a CIS distributor, 
the foregoing provisions which should otherwise be contained in the marketing and 
distribution agreement with the CIS shall be contained in the CIS plan.  
 
SEC.18. CIS Solicitor. – No person shall be allowed to solicit, sell or offer to sell CIS 
securities unless duly licensed by the appropriate regulatory agency after compliance with such 
requirements and standards for eligibility as may be prescribed in this Act and its implementing 
rules and regulations, and RA 8799 and its implementing rules and regulations. 
 
SEC.19. Independent Auditors. – 
(a) The financial statements of every juridical CIS, fund manager and contractual CIS 
shall be audited and certified by an independent auditor duly accredited by the 
appropriate regulatory agency. 
(b) In addition to those prescribed under existing laws and regulations, the following 
shall be the duties and responsibilities of an independent auditor: 


Page | 20  
 
 
(1) Report to the Board of directors or the trustee of the CIS any irregularity or 
undesirable practice in the operation of the CIS which has come to the auditor’s 
knowledge. Any material finding shall be reported by the independent auditor 
to the appropriate regulatory agency; 
(2) Report to the appropriate regulatory agency non-compliance by the fund 
manager and trustee with its contractual and regulatory requirements; and 
(3) Report to the appropriate regulatory agency whether the internal control and 
audit structures in the operation of the CIS are at an acceptable level.  
 
SEC.20. Common Duties and Responsibilities of Parties. – In addition to their specific 
duties and responsibilities, each of the juridical CIS, fund manager, trustee, CIS distributor, 
CIS solicitor, and the CIS custodian shall have the following common duties and 
responsibilities:  
(a) Manage the business and the CIS in a proper, diligent and efficient manner; 
(b) Observe honesty, due care and diligence, utmost good faith and high standards of 
integrity; 
(c) Act in the best interest of CIS investors;  
(d) Establish systems, procedures and processes to be observed by its officers and 
employees to ensure compliance with this Act and its implementing rules and 
regulations and to protect the interests of the CIS investors; 
(e) Take responsibility for all actions and omissions of any third party to whom it 
delegates any of its duties and responsibilities, except for any resulting damage or 
liability arising from force majeure or other similar occurrence beyond the control 
of such third party; 
(f) Ensure that any person appointed or employed is of good repute, has relevant 
expertise and experience to act in the capacity so appointed or employed;  
(g) Refrain from using the position to gain, directly or indirectly, an advantage for itself 
or for any other person or which may be detrimental to the interests of CIS investors;  
(h) Avoid and eliminate conflicts of interest in the performance of functions, which 
may be identified by the appropriate regulatory agency as prejudicial to the interests 
of the investing public;  
(i) Disclose all conflicts of interest in the performance of functions; and 


Page | 21  
 
 
(j) Comply with orders, rules and regulations as may be prescribed by the appropriate 
regulatory agency. 
Any contractual provision which protects or purports to protect the fund manager, 
juridical CIS, trustee, CIS distributor, CIS solicitor, or CIS custodian against any liability for 
willful misfeasance, malfeasance, fraud, bad faith, or gross negligence in the performance of 
their duties as determined by the appropriate regulatory body shall be declared void. 
 
SEC.21. Revocation, Refusal or Suspension of License of the Fund Manager, 
Juridical CIS, Trustee, Insurance Company, Custodian, CIS Distributor and CIS Solicitor. 
– The licensing or authorization of a fund manager, juridical CIS, trustee, insurance company, 
custodian, CIS distributor or CIS solicitor to engage in CIS business under this Act may be 
refused, or any license granted thereunder may be revoked, suspended, or limitations placed 
thereon by the appropriate regulatory agency if, after due notice and hearing, the appropriate 
regulatory agency which granted the license determines that the applicant or licensee: 
(a) Has willfully violated any provision of this Act, any rule, regulation or order made 
hereunder, or any other law administered by the appropriate regulatory agency, or 
has failed to supervise, with a view to preventing such violation, another person 
who commits such violation; 
(b) Has willfully made or caused to be made a materially false or misleading statement 
in any application for license or report filed with the appropriate regulatory agency, 
or has willfully omitted to state any material fact that is required to be stated therein 
or necessary to make the statement therein not misleading;  
(c) Has failed to satisfy the qualifications or requirements for licensing prescribed 
under this Act and its implementing rules and regulations;  
(d) Is enjoined or restrained by a competent body from engaging in securities, 
commodities, banking, real estate, insurance or similar activities; 
(e) Is subject to an order of a competent body refusing, revoking or suspending any 
license or other permit under this Act, the  implementing rules and regulations, any 
other law or regulation administered by the appropriate regulatory agency  or any 
other governmental authority; 
(f) Has been found by a competent body to have violated any provision of securities, 
commodities, banking, real estate or insurance laws, or has aided, abetted, 
counseled, commanded, induced or procured such violation. The term "competent 


Page | 22  
 
 
body" shall include a foreign court of competent jurisdiction and a foreign financial 
regulator; or 
(g) Is insolvent as may be determined by the appropriate regulatory agency.  
 
SEC. 22. Fit and Proper Rule. – To maintain the quality of management of the CIS and 
afford better protection to CIS investors, the appropriate regulatory agency shall prescribe or 
pass upon and review the qualifications of individuals elected or appointed as directors or 
officers, partners or other equivalent personnel of fund managers, trustees, insurance 
companies, juridical CIS or CIS distributors and disqualify those found unfit. The appropriate 
regulatory agency may disqualify, suspend or remove any director, partner, officer or other 
person performing similar functions who commits or omits an act which renders one unfit for 
the position. 
In determining whether an individual is fit and proper to hold the position of a director, 
partner, officer or other similar position of the fund manager, trustee, insurance company, 
juridical CIS or CIS distributor, regard shall be given to one’s integrity, experience, education, 
training, and competence: Provided, however, That the following persons, and those 
determined by the appropriate regulatory agency  to be unfit, shall in no case be allowed to 
serve or act in the capacity of officer, director, partner, consultant, or similar position of any 
fund manager, trustee, insurance company, juridical CIS or CIS distributor:  
(a) Any person convicted of any crime involving any security or financial product; 
(b) Any person convicted of an offense involving fraud or embezzlement, theft, estafa 
or other fraudulent, dishonest acts or transactions;  
(c) Any person who, by reason of any misconduct, is enjoined by order, judgment, or 
decree by any court, quasi-judicial body or administrative agency of competent  
jurisdiction from acting as a director, officer, employee, consultant, or agent  
occupying any fiduciary position; 
(d) Any person found by the appropriate regulatory agency  to have violated, or aided, 
abetted, counseled, commanded, induced, or procured the violation of this Act, RA 
8791, Republic Act No. 9160, as amended, otherwise known as the “Anti-Money 
Laundering Act” and its implementing rules, the Insurance Code, the Securities 
Regulation Code, or any related law, rule, regulation or order thereunder;  
(e) Any person who is insolvent, or incapacitated to contract;  
(f) Any person found guilty by a foreign court, regulatory authority or government 


Page | 23  
 
 
agency of the acts or violations similar to any of the acts or misconduct enumerated 
in the foregoing paragraphs; 
(g) Any person convicted by final judgment of an offense punishable by imprisonment 
for a period exceeding  six (6) years; and 
(h) Any person convicted by final judgment of violation of the Corporation Code 
committed within five (5) years prior to the date of election or appointment. 
 
Chapter 3 - Provisions Applicable to Contractual CIS 
 
SEC. 23. Establishment of a Contractual CIS. – 
(a) Any fund manager may establish, administer and manage one or more contractual 
CIS.  Such fund manager shall enter into a fund management contract with a trustee 
or insurance company. In case the functions of the fund manager, on the one hand, 
and the trustee or insurance company, on the other hand, are performed by the same 
or affiliated entities, there must be an independent oversight body which shall be 
created pursuant to and shall perform the oversight duties and responsibilities 
enumerated in Section 49(b)(2) hereof. 
(b) In a contractual CIS, the trust agreement shall be between the trustee and the CIS 
investors, and the insurance contract shall be between the insurance company and 
policy holders.  The trust agreement or the insurance contract, as the case may be, 
shall define the rights and obligations of the parties. 
(c) Notwithstanding any provision of law to the contrary, the investment assets of each 
contractual CIS shall be deemed separate and independent of the investment assets 
of the fund manager, trustee and/or insurance company, and shall not be available 
to the creditors of such fund manager, trustee and/or insurance company in the event 
of attachment, garnishment, execution, bankruptcy, insolvency or rehabilitation or 
any form of action or claim against the fund manager, trustee and/or insurance 
company. 
 
SEC. 24. Registry of CIS Investors. – An up-to-date registry of all CIS investors shall 
be kept and maintained by or under the control of a registrar, which could be the fund manager, 
trustee, distributor or insurance company. The registry shall be kept in written or other forms 
such as digital records, microfilm, microfiche or electronic recording that can allow the 


Page | 24  
 
 
reproduction of information therein as maybe required by the registrar from time to time. There 
shall be entered into the registry such relevant information as may be prescribed by the fund 
manager or the trustee.  Information about CIS investors shall be considered confidential in 
nature and may not be inquired or looked into except upon order of a court of competent 
jurisdiction or in the course of examination by the appropriate regulatory agency or  for 
purposes of complying with the provisions of RA 9160, as amended, such as, the reporting of 
covered transactions or suspicious transactions to the Anti-Money Laundering Council 
(AMLC) and the exercise of the power of the AMLC to examine or inquire into the details of 
the CIS account including the personal information of the CIS investors: Provided, That the 
processing of personal information shall only be to the minimum extent necessary for the 
achievement of the above purposes, and in a manner mindful of the data privacy rights of CIS 
investors. 
 
SEC. 25. The Contractual CIS Plan. – In addition to the matters specified in Section 
31 hereof, a Contractual CIS Plan shall contain the following matters:   
(a) In cases where the trustee or its affiliate, or insurance company or its affiliate, 
performs the functions of the fund manager, a description of the independent 
oversight body, as prescribed under Section 49 (b)(2) of this Act; 
(b) Initial unit value and the basis thereof; 
(c) Basis upon which the CIS may be terminated. The CIS plan shall state the rights of 
participants in case of termination of the CIS; and 
(d) Such other matters as the appropriate regulatory agency may prescribe.   
 
 
 
Chapter 4 – Provisions Applicable to Juridical CIS 
 
SEC. 26. Engagement of Fund Manager. – A Juridical CIS shall engage a duly 
registered fund manager to perform the functions prescribed in Section 10 hereof. A majority 
of the directors, partners or other persons performing similar functions of the juridical CIS must 
not be directors, officers or employees of the fund manager. No Chairperson, Chief Executive 
Officer (CEO), President, Chief Operating Officer (COO) or equivalent positions may be 
interlocking but both the juridical CIS and the fund manager may simultaneously employ 
officers with lower rank with prior approval of the appropriate regulatory authority.  


Page | 25  
 
 
 
SEC. 27. The Juridical CIS Plan. – 
(a) In addition to the matters specified in Section 31 hereof, a juridical CIS plan shall 
contain the following matters:  
(1) Par value of the CIS securities issued by the juridical CIS;  
(2) Dissolution of the juridical CIS and the rights of CIS security holders in case of 
dissolution of the juridical CIS;  
(3) Borrowing of money in accordance with the rules and regulations as may be 
prescribed by the SEC;  
(4) Extension of loans to other persons in accordance with the rules and regulations 
as may be provided by the SEC; and 
(5) Such other matters as the SEC may prescribe.    
(b) The juridical CIS shall file such information and documents to keep reasonably 
current the information and documents contained in the CIS Plan. 
 
SEC. 28. Dividends. – 
(a) Dividends, or their equivalent, in the case of partnerships or other structures, shall 
be declared and paid in accordance with the requirements of the CIS plan, the 
Corporation Code and applicable laws and regulations: Provided, That the SEC may 
prescribe other requirements or restrictions in the declaration and payment of 
dividends or their equivalent by the juridical CIS as necessary or appropriate in the 
public interest and for the protection of the investors.  
(b) Dividend payments or their equivalent shall be accompanied by a written statement 
which adequately discloses the source or sources of such payment.  The SEC may 
prescribe the form of such statement as necessary or appropriate in the public 
interest and for the protection of the investors. 
 
TITLE III – TAX PROVISIONS 
 
SEC. 29. Tax Treatment of the CIS. – Without prejudice to the exemptions under 
existing laws, all CIS shall be subject only to the following national internal revenue taxes: 
(a) Tax on Income or Gross Receipts of CIS. – The income or gross receipts from 
investments or reinvestments of funds, including income incidental thereto, 


Page | 26  
 
 
received or accrued by any CIS shall be subject to all applicable taxes imposed 
under Title II of the National Internal Revenue Code (NIRC) of 1997, as amended. 
However, such income or gross receipts shall be exempt from taxes imposed under 
Title V of the NIRC of 1997, as amended. 
(b) Tax on Gains upon Redemption, Sale, Barter, Exchange or other Disposition of CIS 
Securities. – Any gain realized by the investor from the redemption of any form of 
CIS securities shall be covered by Section 32(B)(7)(H) of the NIRC of 1997, as 
amended. The sale, barter, exchange or other disposition of listed CIS securities 
through a local stock exchange, shall be exempt from the stock transaction tax 
imposed under Section 127(A) of the NIRC of 1997, as amended. If such CIS 
security is not listed and traded through a local stock exchange, any such gain shall 
be subject to applicable income tax imposed under Title II of the NIRC of 1997, as 
amended. 
Gains realized from the transfer of securities in exchange for original issuance of 
CIS securities shall be exempt from tax imposed under Title II of the NIRC of 1997, 
as amended. 
(c) The issuance of CIS securities, shares of stock upon creation of CIS, certificate of 
units of participation in a CIS, insurance policies evidencing participation in a CIS 
variable insurance, or any other form of document evidencing proof of participation 
in a CIS shall be exempt from documentary stamp tax imposed under Title VII of 
the NIRC of 1997, as amended. 
(d) A CIS that complies with the requirements of Republic Act No. 9856, otherwise 
known as “The Real Estate Investment Trust Act of 2009”, shall also be entitled to 
all the tax and other incentives under this Act that are not provided under RA 9856.   
 
TITLE IV - REGISTRATION OF CIS SECURITIES AND OPERATIONS OF CIS 
 
Chapter 1 - Registration and Suspension of Offer and Sale of CIS Securities 
 
SEC. 30. Filing of CIS Plans. – 
(a) No CIS securities shall be sold or offered for sale within the Philippines unless such 
securities have been registered through the filing of a CIS plan which has been 
rendered effective by the appropriate regulatory agency.  The CIS Plan shall be filed 
together with a registration statement, in such form and containing such information 


Page | 27  
 
 
and documents as prescribed by this Act, the implementing rules and regulations or 
the appropriate regulatory agency.  The CIS plan shall include any prospectus as 
required or permitted by the appropriate regulatory agency to be delivered to CIS 
investors.  It shall be unlawful for any person to sell or offer for sale CIS securities 
unless the corresponding CIS plan has been duly filed with and rendered effective 
by the appropriate regulatory agency. 
(b) The CIS plan shall be signed by the executive officer, principal operating officer, 
principal financial officer, comptroller, principal accounting officer, corporate 
secretary, designated managing partner, or persons performing similar functions of 
the juridical CIS, or the fund manager, trustee or insurance company in the case of 
a contractual CIS, accompanied by a duly verified resolution of the BOD.  
(c) Upon effectivity of the CIS plan, the juridical CIS, fund manager,  trustee or 
insurance company shall state in every promotional or marketing material that all 
registration requirements of the CIS securities have been met and that all 
information are true and correct as represented by the juridical CIS, fund manager, 
trustee or insurance company or the person making the statement. Any untrue 
statement of fact or omission to state a material fact required to be stated therein or 
necessary to make the statement therein not misleading shall constitute fraud. 
(d) The appropriate regulatory agency may refuse the registration of a CIS security if: 
(1) It contains a false or misleading statement; 
(2) It omits to state a material fact required to be stated therein or necessary to make 
the statement therein not misleading; 
(3) It does not comply with the requirements of this Act and applicable laws and 
regulations; or  
(4) It is in the public interest to refuse the registration of such CIS securities. 
In the event that the appropriate regulatory agency fails to approve or deny the 
proposed CIS plan within thirty (30) calendar days from receipt thereof, the 
proposed CIS plan is deemed approved. 
(e) If any change occurs in the facts set forth in the CIS plan, the juridical CIS, fund 
manager, trustee or insurance company shall file an amendment thereto setting forth 
the change. 
 


Page | 28  
 
 
SEC. 31. Contents of the CIS Plan. – The CIS plan shall contain the following 
matters: 
(a) Title of the CIS plan. This shall correspond to the product or brand name by which 
the CIS is proposed to be known and made available to its investors;  
(b) Name of the fund manager and/or Trustees; 
(c) A statement of the investment objectives and policies of the CIS including 
limitations, if any, and risk factors in investing in the CIS; 
(d) Investment powers of the fund manager with respect to the CIS, including the 
character and kind of investments which may be purchased by the CIS;  
(e) Profile of the proposed investors; 
(f) Its classification, whether an open-end or closed-end fund; 
(g) Total value of the CIS securities to be issued in case of closed-end CIS; 
(h) Terms and conditions governing the issuance and redemption of CIS securities;  
(i) Provision for the external audit of the CIS; 
(j) Liabilities of the juridical CIS and the fund manager to the CIS security holders;  
(k) Amount of fees, commissions and other charges and expenses to be deducted from 
the fund, in the case of a contractual CIS, or to be paid by the CIS security holders, 
in the case of juridical CIS;  
(l) Annual reports for distribution to investors as appropriate, which may be annual 
holding statements for UITFs as required by the BSP, separate financial statements 
for insurance companies as required by the IC, and in the case of MFs, the annual 
report as required by the SEC; 
(m) Public disclosures and reports;  
(n) Distribution plan of CIS investment assets in case of dissolution; and 
(o) Such other matters as the appropriate regulatory agency may prescribe.    
A copy of the CIS plan shall be made available during regular office hours to any 
interested person at the principal office of the fund manager or the custodian in case of a 
juridical CIS, and the fund manager or trustee in case of contractual CIS. The CIS plan shall 
also be distributed to prospective investors and posted in the website, publication and/or other 
mode of information dissemination as required by the appropriate regulatory agency. 
 
SEC.32. Revocation of Registration or Suspension of Offer and Sale of Securities. – 
The appropriate regulatory agency may revoke the registration of the CIS securities or order 


Page | 29  
 
 
the suspension of the offer and sale of the CIS securities in accordance with Sections 13.1 and 
13.4 of RA 8799, respectively, and its implementing rules and regulations.  
 
Chapter 2 – Dealings in CIS Securities 
 
SEC. 33. Rights and Privileges of CIS Investors. – Each CIS security shall be equal in 
all respects to every other CIS security belonging to the same class of CIS securities. 
 
SEC. 34. Proxies; Voting Trust. – The appropriate regulatory agency may prescribe 
rules and regulations for the solicitation of proxies and the issuance and transfer of voting trust 
certificates in accordance with the requirements of the Corporation Code and applicable laws 
and regulations: Provided, That the SEC may prescribe other requirements or restrictions as 
may be necessary or appropriate in the public interest and for the protection of the investors: 
Provided, further, That no proxies shall be used as a device to control the management of any 
CIS. 
 
SEC. 35. Payment for CIS Securities. – Except as provided by law or regulation, no 
CIS shall issue any of its securities for services or for property other than cleared funds. 
Installment sales are expressly prohibited. 
 
SEC. 36. Distribution, Redemption and Pricing of CIS Securities. –  
(a) Unless otherwise allowed in this Act, CIS securities shall be sold only through a 
licensed CIS distributor and by licensed CIS solicitors.  Notwithstanding the 
pertinent provision of Section 65 of the Corporation Code, CIS securities may be 
issued at the net asset value computed in accordance with Section 43 of this Act. 
(b) CIS investors have the right to surrender their securities for redemption, except in 
the case of closed-end CIS, in accordance with the CIS plan. Redemption shall not 
be suspended except pursuant to the CIS plan as approved by the appropriate 
regulatory agency in the public interest or for the protection of investors.  The 
redemption price of CIS securities shall be at the applicable price described in the 
CIS plan.  
 


Page | 30  
 
 
Chapter 3 – Operations of CIS 
 
SEC. 37. Custody of Investment Assets. – Every CIS shall place and maintain its 
investment assets with a custodian in accordance with Sections 14 and 15 hereof. 
 
SEC.  38. Investment Limitations. – 
(a) The CIS funds may be invested only in the following liquid or semi-liquid assets 
tradeable through an organized market, subject to limitations as may be provided 
by this Act, its implementing rules and regulations or the rules issued by the 
appropriate regulatory agency: 
(1) Bank deposits; 
(2) Securities issued by or guaranteed by the Philippine government  or the BSP; 
(3) Tradable securities issued by the government of a foreign country, any 
political subdivision of a foreign country or any supranational entity; 
(4) Exchange-listed securities; 
(5) Marketable instruments that are traded in an organized exchange or market; 
(6) Loans traded in an organized market; 
(7) Exchange traded funds; 
(8) Derivatives as may be authorized by the appropriate regulatory agency; 
(9) Real estate investment companies under the REITA; 
(10) Real estate investment trusts or companies; 
(11) Other CIS; and 
(12) Such other investments or instruments existing and accepted in other 
international markets, such as those consistent with the IOSCO objectives 
and principles of Securities Regulation, as the appropriate regulatory agency 
may allow: Provided, however, That no CIS shall, directly or indirectly: 
(i) Acquire more than ten per centum  (10%) of another CIS; or 
(ii) Acquire securities of any issuer having an aggregate value in excess of 
twenty per centum (20%) of the net asset value of the acquiring CIS, or 
the weight of the security in a recognized benchmark or index, whichever 
is higher. 
(b) The appropriate regulatory agencies may jointly issue such implementing rules and 
regulations in accordance with Section 59 hereof, and as may be necessary or 


Page | 31  
 
 
appropriate in the public interest or for the protection of investors, including 
regulations that provide for different percentages or further restrictions with respect 
to investments in other CIS or the concentration of investments by a CIS.  
 
SEC. 39. Prohibited Acts of CIS. – It shall be unlawful for any CIS to: 
(a) Purchase any security on margin, except such short-term credits as are necessary 
for the clearance of transactions; 
(b) Participate on a joint or a joint and several basis in any trading account in securities;  
(c) Generate funds for promoting the private business or industry of any employee, 
officer, director, partner, promoter or stockholder thereof; or   
(d)  Allow any of its employees, officers, directors, organizers and incorporators, 
stockholders, partners, or CIS security holder in the case of juridical CIS to sell real 
estate, personal property or any other kind of CIS property to the CIS at a price 
higher than the procurement cost or the market value thereof, or sell to any of the 
aforementioned persons any property of the CIS, or a portion thereof, at a price 
below the market value thereof. 
The appropriate regulatory agency may, by rules and regulations prohibit CIS from 
engaging in such other acts as it may deem necessary or appropriate in the public interest or 
for the protection of investors, taking into account the policy and purpose of this Act.  
 
SEC. 40. Meetings of CIS Investors. – 
(a) Meetings of juridical CIS investors, as may be appropriate, shall be held annually 
for the purpose of electing directors. Notice shall be sent to all CIS investors by 
registered mail or other modes as may be authorized by the appropriate regulatory 
agency. 
(b) CIS investors may attend the meetings in person or by proxy. A quorum at said 
meeting shall consist of CIS security holders or stockholders owning or representing 
at least ten per centum (10%) of the total number of units in the fund or the 
outstanding capital stock, respectively, or such other percentage as the appropriate 
regulatory agency may prescribe taking into account the size of the CIS and the 
number of its CIS investors. At least a majority vote of those present or represented 
shall be required to constitute a valid act of the CIS investors.  


Page | 32  
 
 
(c) All other matters, such as changing the investment policy, may be adopted with prior 
written notice to the CIS investors but will be effective only after approval by the 
appropriate regulatory agency. 
(d) The appropriate regulatory agency shall prescribe by rule or regulation the 
requirements for the conduct of meetings.  
 
SEC. 41. Requirements for selling materials and advertisements. – Sales and 
marketing documents and advertisements shall be subject to such requirements as the 
implementing rules and regulations of this Act or the appropriate regulatory agency may 
prescribe. All promotional and marketing documents, and advertisements shall: 
(a) Not contain any untrue statement of fact or omit to state any fact that is necessary 
in order to prevent the statements made, in the light of the circumstances in which 
they were made, from being misleading; 
(b) Contain information about the CIS performance that shall be calculated and 
presented from the viewpoint of the public to whom the CIS is targeted; 
(c) Provide that the CIS performance information in advertisements is presented in a 
manner that will enable CIS investors to make meaningful comparisons among 
various CIS, and not be misled by differences in the method of calculation and 
presentation; and 
(d) Comply with such other terms and conditions prescribed by the appropriate 
regulatory agency which are necessary or appropriate in the public interest or for 
the protection of CIS investors. 
 
SEC. 42. Reports and Financial Statements of CIS. – 
(a) Every CIS shall file with the appropriate regulatory agency: 
(1) Such information and documents including financial statements as the 
implementing rules and regulations of this Act and the appropriate regulatory 
agency may require, to keep reasonably current the information and documents 
contained in the CIS plan filed under this Law; and  
(2) Copies of every periodic or interim report or similar communication transmitted 
to the CIS investors. 
(b) Every CIS shall transmit to its CIS investors, at least annually, reports containing 
the following information and financial statements or their equivalent, as of the 


Page | 33  
 
 
latest fiscal year, which reports shall not be misleading in any material respect in 
the light of the reports required to be filed pursuant to paragraph (a) herein:  
(1) A balance sheet accompanied by a statement of the aggregate value of 
investments on the date of such balance sheet;  
(2) A list showing the amounts and values of securities owned on the date of such 
balance sheet;  
(3) A statement of income, for the period covered by the report, which shall be 
itemized at least with respect to each category of income and expense 
representing more than five per centum (5%) of total income or expense;  
(4) A statement of surplus, which shall be itemized at least with respect to each 
charge or credit to the surplus account which represents more than five per 
centum (5%) of the total charges or credits during the period covered by the 
report;  
(5) A statement of the aggregate fees or remuneration paid by the CIS during the 
period covered by the report to (i) the fund manager, trustee, CIS distributor  
and independent auditor; and (ii) each director officer, partner, or other person 
performing similar functions, as the case may be,  as regular or special 
compensation; and 
(6) A statement of the aggregate amounts of purchases and sales of investment  
assets made during the period covered by the report:  
Provided, That the implementing rules and regulations may permit, in lieu of any 
item required under this subsection which may be inapplicable or inappropriate to 
any specified type or types of CIS, the inclusion of such item of a comparable 
character as it may deem applicable or appropriate to such type or types of CIS: 
Provided, further, That the reports and financial statements mentioned above, or 
such other material information as the appropriate regulatory agency may 
determine, shall also be posted in the website, publication and/or other mode of 
information dissemination of the appropriate regulatory agency and the CIS. 
The appropriate regulatory agency shall prescribe the forms for the reports and financial 
statements, or such other material information as the appropriate regulatory agency may 
determine, so that CIS investors may make meaningful comparisons among various CIS, and 
will not be misled by differences in the method of calculation and presentation.  
 


Page | 34  
 
 
SEC. 43. Net Asset Value. – 
(a) A CIS shall compute and post its net asset value per share/unit at such frequency as 
may be prescribed by the implementing rules and regulations of this Act. 
(b) The computation of the net asset value per share or unit shall be made in accordance 
with the valuation method prescribed by the implementing rules and regulations of 
this Act and shall be applied consistently. 
 
SEC. 44. Accounts and Records. – Every CIS, and every fund manager and trustee 
shall maintain and preserve for such period or periods as may be prescribed by the 
implementing rules and regulations of this Act, such accounts, books, and other documents that 
shall constitute the record forming the basis for financial statements required to be filed 
pursuant to this Act. All accounts, books and other records required to be maintained and 
preserved by a CIS, fund manager or trustee shall be subject to examination by the appropriate 
regulatory agency. 
 
SEC. 45. Management and Trust Fees; Expenses Chargeable to Fund/CIS Investors. 
– The management or trust fees shall cover the CIS’ fair and equitable share of the routine 
administrative expenses of the fund manager, trustee and/or insurance company such as 
directors’ fees, salaries and wages, supplies, credit investigation, collateral appraisal, security, 
messengerial and janitorial services, information technology expenses, annual report 
preparation, supervision fees, regulatory reporting expenses, and internal audit fees.  
Marketing, advertising, and other publicity or promotional related expenses shall be for the 
account of the fund manager, trustee, and insurance company and shall be considered covered 
by the management or trust fee. 
A fund manager, trustee, or insurance company may charge special or reimbursable 
expenses from the CIS in case such expenses are (1) necessary to preserve or enhance the value 
of the CIS, (2) payable to an independent or non-related third party covered by a separate 
contract, and (3) disclosed to CIS investors.  The fund manager, trustee, and insurance company 
shall secure prior approval of the appropriate regulatory agency for outsourcing services 
provided under existing regulations of the concerned regulatory agency. No other fees shall be 
charged to the fund/CIS investors, except in case of a juridical CIS, the fees of directors, 
managing partners, or others persons performing similar functions shall be chargeable to the 
fund: Provided, That the total operating expenses shall not exceed ten per centum (10%) of its 


Page | 35  
 
 
average investment fund or net worth as shown in its previous audited financial statements 
covering the immediately preceding fiscal year. 
 
SEC. 46. Dissolution. – 
(a) The juridical CIS, trustee or insurance company shall cause the dissolution of the 
CIS whenever any of the following grounds is present: 
(1) Dissolution is required by the CIS plan, when the specified conditions or time 
for dissolution have been met or reached;  
(2) Dissolution is agreed upon in a resolution of the CIS investors owning at least 
two-thirds (2/3) of the outstanding CIS securities in a CIS at a meeting duly 
called for the purpose or such percentage as may be prescribed by the 
appropriate regulatory agency taking into account the nature and size of the CIS 
and the number of CIS investors: Provided, That there has been prior 
publication of the notice of time, place and object of the meeting for two (2) 
consecutive weeks in a newspaper of general circulation in the Philippines;  
(3) Dissolution is required by a final and executory order of the court; 
(4) Dissolution is ordered by the appropriate regulatory agency for non-compliance 
with the conditions for the lifting of a suspension or revocation order previously 
issued; and 
(5) Dissolution is deemed necessary in view of the dissolution or the revocation of 
the license of the fund manager, trustee or insurance company:  
(b) A CIS may not be dissolved whenever any of the following conditions are 
obtaining: 
(1) The appropriate regulatory agency orders the transfer of the CIS to a willing and 
qualified fund manager, trustee or insurance company; 
(2) The loss of license of the trustee, insurance company or fund manager is due to 
a merger and the surviving company in such merger is also an authorized 
trustee, insurance company or fund manager; or 
(3) The new company that is established as a result of the consolidation of trust 
entities, insurance companies or fund managers promptly obtains a license to 
act as trustee, insurance company or fund manager, as the case may be.  
(c) Upon dissolution of a CIS, the fund manager, trustee or insurance company shall 
distribute the proceeds and investment assets of the CIS to the CIS investors as 


Page | 36  
 
 
prescribed by the CIS plan and in accordance with the implementing rules and 
regulations of this Act. 
 
SEC. 47. Merger or Consolidation. – No merger or consolidation of CIS will be 
authorized by the appropriate regulatory agency unless the following conditions are met: 
(a) The merger or consolidation plan has been prepared in accordance with the 
requirements as may be prescribed by the appropriate regulatory agency; and  
(b) The merger plan has been approved by the CIS investors owning at least two-thirds 
(2/3) of the outstanding CIS securities in each of the CIS to be merged or 
consolidated in a meeting duly called for the purpose; 
The implementing rules and regulations of this Act shall prescribe the procedures and 
requirements for merger or consolidation in the public interest and for the protection of 
investors. 
 
TITLE V– CIS INVESTORS PROTECTION FUND 
 
SEC. 48. Establishment of the CIS Investors Protection Fund. – The appropriate 
regulatory agency shall define the rules and procedures for the creation and management of an 
investors protection fund, the contribution to which shall be determined as a proportion of the 
CIS, and shall be segregated from the CIS for the purpose of compensating investors who suffer 
material loss in investment due to fraud, gross negligence or mismanagement: Provided, That 
any contribution to the investor’s protection fund shall not be chargeable to the CIS. A CIS that 
maintains an existing fund for the same purpose shall not be required to make contributions to 
the CIS investors protection fund: Provided, That the appropriate regulatory agency has 
determined that the existing fund is of equivalent purpose, and the contributions to such fund 
are of equivalent value as that of the CIS investors protection fund established pursuant to this 
Section.  
 
TITLE VI– SPECIAL RULES GOVERNING ESTABLISHMENT OF 
CONTRACTUAL CIS BY TRUST ENTITIES AND INSURANCE COMPANIES 
 
SEC. 49. Establishment of Contractual CIS by Trust Entities and Insurance 
Companies. 


Page | 37  
 
 
(a) Any trust entity or insurance company may establish a contractual CIS: Provided, 
That the trust entity or insurance company may engage the services of a fund 
manager: Provided, further, That no director and/or officer of the trust entity or 
insurance company shall at the same time serve as director and/or officer of the fund 
manager: Provided, finally, That the trust entity or insurance company shall not 
engage a fund manager which is an affiliate of the trust entity or insurance company, 
unless it complies with the requirements of paragraph (b) (2) of this Section. 
(b) The engagement of a fund manager shall not be required in cases where: 
(1) In addition to the functions of a trustee prescribed under this Act, the trust entity 
or insurance company shall comply with and observe the duties, responsibilities 
and prohibitions of a fund manager under Sections 9 and 10 hereof;  
(2) The CIS plan provides for the creation of an Independent Oversight Body. The 
Independent Oversight Body shall be composed of at least three (3) members 
who shall be appointed subject to the implementing rules and regulations of this 
Act and approval of appropriate regulatory agency in accordance with such rules 
as the implementing rules and regulations shall prescribe, all of whom shall have 
the degree of independence, as may be determined by the appropriate regulatory 
agency based on international best practices like the ASEAN CIS: Provided, 
That a juridical entity organized and existing pursuant to the implementing rules 
and regulations of this Act may act as the Independent Oversight Body as 
provided herein.  
The Independent Oversight Body shall have the following duties and 
responsibilities: 
(i) 
Oversee the activities of the CIS distributors in the sale and/or redemption 
of the CIS units and ensure that the provisions of any marketing document 
relating to the sale or offer for sale of the CIS units do not contain any 


Page | 38  
 
 
matter which is inconsistent with the provisions of the CIS plan, this Law 
and its implementing rules and regulations;  
(ii) Ensure that the management and investments of the CIS funds are in 
accordance with the CIS plan; 
(iii) Guarantee that the trust entity or insurance company remedies any breach 
of the CIS plan or any contravention of the provisions of this Act or its 
implementing rules and regulations; 
(iv) Assure that CIS funds, investment assets and properties are clearly 
identified and held separately from the trust entity’s or insurance 
company’s own properties and other properties held in trust; 
(v) 
Monitor conflict of interest and adoption of measures to address the same 
for the best interest of the CIS investors. 
 
TITLE VII –SANCTIONS, PENALTIES AND SMALL CLAIMS 
 
SEC. 50. Administrative Sanctions. – 
(a) If, after due notice and hearing, the appropriate regulatory agency finds that: 
(1) There is a violation of this Law and its implementing rules and regulations, or 
the rules or orders of the appropriate regulatory agency; 
(2) Any fund manager, trustee, insurance company, juridical CIS, CIS distributor 
or CIS solicitor has failed reasonably to supervise, with a view to preventing 
violations, another person subject to supervision who commits any such 
violation; 
(3) Any person has, in a CIS plan or in other reports, applications, accounts, 
records or documents required by this law and its implementing rules and 
regulations to be filed with the appropriate regulatory agency, made any 
untrue statement of a material fact, or omitted to state any material fact 
required to be stated therein or necessary to make the statements therein not 
misleading; or  
(4) Any person has refused to permit any lawful examination into its affairs, 
including the refusal to produce books, records or documents upon demand by 
the CIS investor or the appropriate regulatory agency.  


Page | 39  
 
 
It shall, in its discretion, and subject only to the limitations hereinafter 
prescribed, impose any or all of the following sanctions as may be appropriate 
in light of the facts and circumstances: 
(i) 
A  fine of no less than Ten thousand pesos (P10,000.00) nor more than 
One million pesos (P1,000,000.00): Provided, That the fine herein 
prescribed may be increased by the appropriate regulatory agency every 
five (5) years based on the current price index, to maintain its punitive 
value; 
(ii) Disqualification from being an officer, member of the BOD, partner, or 
any person performing similar functions, of the fund manager, trustee, 
insurance company, juridical CIS or CIS distributor;  
(iii) Suspension of the license of such person;  
(iv) Revocation of the license of such person; and 
(v) 
Other penalties within the power of the appropriate regulatory agency to 
impose. 
(b) The imposition of the foregoing administrative sanctions shall be without prejudice 
to the filing of criminal charges and civil cases against the entities and individuals 
responsible for the violation. 
(c) The appropriate regulatory agency shall have the power to issue writs of execution 
to enforce the provisions of this Section and to enforce payment of the fines, 
penalties, fees and other dues collectible under this Act. 
(d) If the offender is a corporation, partnership, or other juridical entity, the 
administrative sanctions may, in the discretion of the appropriate regulatory agency, 
be imposed upon such corporation, partnership,  or other juridical entity and upon 
the officer or officers, or other persons performing similar functions, of the 
corporation, partnership, or entity responsible for the violation: Provided, That in 
case of the imposition of administrative fines, the appropriate regulatory agency 
may, in its discretion, impose such fines solely upon the officer,  director, managing 
partner, or other persons performing similar functions, responsible for the violation: 
Provided, further, That if the officer is an alien, that person shall, in addition to the 
penalties prescribed, be deported without further proceedings after service of 
sentence. 


Page | 40  
 
 
(e) The directors, officers, managing partner, or other persons performing similar 
functions, of a corporation, partnership or other entity held administratively liable 
under this Section shall in no case recover the administrative liability from the CIS  
corporation partnership or entity. 
 
SEC.  51. Criminal penalties. – 
(a) The following acts are criminal in nature and shall be penalized as follows: 
 
(1) Refusal to comply with the orders of the appropriate regulatory agency, for the 
production of books, records or documents, or to undergo an examination shall 
be penalized by imprisonment of one (1) month to six (6) months or fine in the 
amount of One hundred thousand pesos (P100,000.00) to Two million pesos 
(P2,000,000.00), or both imprisonment and fine, at the discretion of the court;  
(2) Selling or offering for sale a CIS security by unregistered sellers, distributors or 
solicitors shall be penalized by imprisonment of six (6) years and one (1) day to 
twelve (12) years or fine equivalent to triple the contract price of each of the 
CIS securities sold, or both imprisonment and fine, at the discretion of the court; 
(3) Selling or offering for sale CIS securities by the issuer of a CIS plan that has 
not been registered pursuant to this Act shall be penalized by imprisonment of 
six (6) years and one (1) day to twelve (12) years or fine equivalent to triple the 
contract price of each of the CIS securities sold or offered for sale, or both 
imprisonment and fine, at the discretion of the court;   
(4) Any negligent act or omission that is prejudicial or injurious to the CIS investors 
shall be penalized by imprisonment of one (1) year and one (1) day to six (6) 
years and fine in the amount of Fifty thousand pesos (P50,000.00) to Five 
million pesos (P5,000,000.00), or both imprisonment and fine, at the discretion 
of the court; 
(5) Any fraudulent act or omission that is prejudicial or injurious to the CIS 
investors shall be penalized by imprisonment of six (6) years and one (1) day to 
twelve (12) years and fine in the amount of Five hundred thousand pesos 
(P500,000.00) to Ten million pesos (P10,000,000.00), or both imprisonment 
and fine, at the discretion of the court; and 
(6) Violation of the provisions of this Act, its implementing rules and regulations 
or orders of the appropriate regulatory agency unless already provided in the 


Page | 41  
 
 
above enumeration of this Act shall be penalized by imprisonment of six (6) 
years and one (1) day to twelve (12) years and a fine in the amount of One 
hundred thousand pesos (P100,000.00) to Five million pesos (P5,000,000.00):  
Provided, That repeated violations shall constitute prima facie evidence against 
the offender. 
(b) Solidary Liability –  
(1) The fund manager, trustee and/or insurance company shall be jointly and 
severally liable for actual losses and damages that CIS investors may directly 
suffer as a result of bad faith, gross negligence and/or willful misconduct by the 
fund manager, trustee and/or insurance company resulting in the violation of 
any of the provisions of this Act, its implementing rules and regulations, or their 
failure to observe and comply with the terms and conditions of the CIS plan. 
(2) The directors, managing partners, officers or other persons performing similar 
functions of the juridical CIS, fund manager, trustee and/or insurance company 
shall also be jointly and severally liable for all losses and damages that CIS 
investors may suffer as a result of bad faith, gross negligence and/or willful 
misconduct by the juridical CIS, fund manager, trustee and/or insurance 
company resulting in the violation of any of the provisions of this Act, its 
implementing rules and regulations, or their failure to observe and comply with 
the terms and conditions of the CIS plan.  Notwithstanding any provision of law 
to the contrary, in no case shall such directors, managing partners, officers or 
other persons performing similar functions, recover their liability from the 
juridical CIS, fund manager, trustee and/or insurance company. 
(c) If the offender is a corporation, partnership, or other juridical entity, the criminal 
penalties shall be imposed upon the officer or officers of the corporation or entity 
responsible for the violation: Provided, That in case of the imposition of the fines, 
the court may, in its discretion, impose such fines solely upon the officer, director, 
managing partners, general partner or other persons performing similar functions 
who is responsible for the violation: Provided, further, That if such person is an 
alien, the person shall, in addition to the penalties prescribed, be deported without 
further proceedings after service of sentence.  
(d) The director/s, officer/s managing partner/s, or other person/s performing similar 
functions, of the corporation, partnership or entity held criminally liable under this 


Page | 42  
 
 
Section shall in no case recover the administrative liability from the CIS or 
corporation, partnership or entity, except if their failure to observe and comply with 
the terms and conditions of the CIS plan arises solely from incidents of force 
majeure or acts of god.  
 
SEC.  52. Small Claims Clause. – 
(a) The appropriate regulatory agency under this provision shall have the power to 
adjudicate any and all claims involving CIS amounting to not more than One 
million pesos (P1,000,000.00) or such higher amount as may be determined by the 
appropriate regulatory agency, for each CIS Investor. The proceedings before the 
appropriate regulatory agency shall be summary in nature, and the decision of the 
appropriate regulatory agency shall be final and immediately executory, unless 
restrained by the Court of Appeals or the Supreme Court. 
(b) Claims filed with the appropriate regulatory agency shall not be subject to the 
payment of filing fees. 
(c) The authority to adjudicate granted to the appropriate regulatory agency under this 
Section shall be concurrent with that of the civil courts, but the filing of a 
complaint with the appropriate regulatory agency shall preclude the civil courts 
from taking cognizance of a suit involving the same subject matter. 
(d) The appropriate regulatory agency, having due regard to the facts and 
circumstances of each claim, may refer the claim to compulsory arbitration, under 
such rules and regulations as the appropriate regulatory agency may prescribe. 
 
SEC. 53. Full Disclosure and Transparency. – All CIS, whether contractual or 
juridical, shall disclose all relevant and important information, such as the investment plan, 
attendant risks, insurance coverage and all costs to be charged by the company on investors 
subscribing to the fund. All CIS distributors and solicitors should be required to fully explain 
the investment instrument and conduct due diligence on the suitability of prospective investors 
to understand rules attendant to investments before obtaining funds from them. 
 


Page | 43  
 
 
TITLE VIII – MISCELLANEOUS PROVISIONS 
 
SEC. 54. Cross Border Transactions. – Cross offering or selling by authorized CIS in 
the Philippines or in another economy shall be subject to the regulations provided in a mutual 
or multilateral agreement/s which the Philippines is a signatory thereof. 
 
SEC.  55. Cooperation and Coordination. – The appropriate regulatory agencies, with 
the SEC as the lead agency, shall adopt all other appropriate measures as may be necessary or 
desirable for the effective regulation of the products and uniform implementation and 
enforcement of this Act, taking into full account declaration of policy contained in Section 2 
of this Act.   
The coordination shall cover the following concerns:  
(a) Ensuring that avoidable market failures are prevented;  
(b) Instilling measures that nurture systemic stability;  
(c) Providing equal access to relevant market information to stakeholders; and  
(d) Overseeing the conduct of CIS issuers to institutionalize consumer protection and 
address anti-competitive behavior.  
 
SEC. 56. Transitory Provisions. – Any CIS which at the time of the effectivity of this 
Act has been established, authorized, licensed or registered by the  appropriate regulatory 
agency and has continued to exist, shall be deemed to have been authorized, licensed and 
registered under the provisions of this Act and its implementing rules and regulations and shall 
be subject to and governed by the provisions hereof: Provided, however, That where any such 
CIS is affected by the new requirements of this law and its implementing rules and regulations, 
said CIS shall, unless otherwise herein provided, be given a period of not more than two (2) 
years from the effectivity of the implementing rules and regulations of this Act within which 
to comply with such new requirements.  
For a period of three (3) years from the effectivity of the implementing rules and 
regulations of this Act, the SEC shall undertake capacity building measures to enable it to 
exercise the powers and perform the functions presently being exercised and performed by the 
other regulatory agencies with respect to CIS products presently under their jurisdiction. Upon 
expiration of this period, the SEC shall exercise the powers and perform the functions given to 


Page | 44  
 
 
the BSP and Insurance Commission for CIS products, and shall be considered the sole 
appropriate regulatory authority referred to in this Act. 
 
SEC. 57. Partial Use of Income. – To carry out the purposes of this Act, the SEC is 
hereby authorized, in addition to its annual budget, to retain and utilize five (5%) of its annual 
income. 
 
SEC. 58. Congressional Oversight Committee. – To oversee the implementation of 
this Act, there shall be created a Congressional Oversight Committee on CIS (COCCIS) to be 
composed of the Chairpersons of the Senate Committee on Economic Affairs, Banks, Financial 
Institutions and Currencies, and Trade, Commerce and Entrepreneurship, the Chairpersons of 
the House of Representatives Committees on Economic Affairs, Banks and Financial 
Intermediaries, and Trade and Industry and two (2) members each from the Senate and the 
House of Representatives who shall be designated by the Senate President and the Speaker of 
the House of Representatives: Provided, That one (1) of the two (2) Senators and one (1) of the 
two (2) House Members shall be nominated by the respective Minority Leaders of the Senate 
and the House of Representatives. The Congressional Oversight Committee shall be jointly 
chaired by the Chairpersons of the Senate and House Committees on Economic Affairs. The 
Vice Chairperson of the Congressional Oversight Committee shall be jointly held by the 
Chairpersons of the Senate Committee on Banks, Financial Institutions and Currencies and the 
House of Representatives’ Committee on Banks and Financial Intermediaries. 
The Secretariat of the COCCIS shall be drawn from the existing personnel of the Senate 
and House of Representatives committees comprising the Congressional Oversight Committee. 
 
SEC. 59 Implementing Rules and Regulations. – Consistent with the declaration of 
policy contained in Section 2 herein and the other relevant provisions of this Act, the 
appropriate regulatory agencies, with the SEC as lead agency, shall coordinate and jointly 
establish uniform rules and regulations implementing for this Act to include the following 
matters: 
(a) Qualification and disqualification standards for fund managers, CIS distributors and 
CIS solicitors; 


Page | 45  
 
 
(b) Qualification and disqualification standards for directors and officers, managing 
partners, or other similar positions of fund managers, trustees, insurance companies, 
juridical CIS or CIS distributor; 
(c) Revocation, refusal or suspension of licenses of the fund manager, juridical CIS, 
trustee, insurance company, custodian, CIS distributor and CIS solicitor; 
(d) Filing, amendment and suspension of CIS plans; 
(e) Registration, distribution, sale and marketing of CIS securities; 
(f) Disclosure requirements relating to the CIS; 
(g) Regulation, supervision and monitoring of the operations, management and/or 
activities of all CIS, fund managers, CIS distributors, CIS solicitors and other 
parties involved in CIS; 
(h) Ascertainment of client suitability for CIS securities; 
(i) Limitations or restrictions on the investment of CIS funds and on the other activities 
in which a CIS may engage; 
(j) Requirements for selling  materials and advertisements; 
(k) Record-keeping, reporting and audit requirements for CIS fund manager and 
trustees; 
(l) A minimum set of performance presentation standards including but not limited to: 
(1) Standardized methodology for calculation of measures of risk and return 
appropriate for each type of CIS and the underlying investment assets; 
(2) Construction of composites for each investment strategy defined by asset 
manager; 
(3) Minimum rules for benchmark selection; 
(4) Calculation and disclosure of all fees, charges and total expense ratios; and 
(5) Minimum contents and frequency of presentation. 
(m) A separate code of conduct to be adopted by each of the parties involved in CIS; 
(n) Requirements for changing investment policies; 
(o) Requirements for merger or consolidation of CIS; 
(p) Establishment of the CIS investors protection fund; 
(q) Minimum requirements for inculcating financial literacy in investors; 
(r) Recognition of accreditation or license extended by the appropriate regulatory 
authority pursuant to this law; and  
(s) Other pertinent matters to be determined by the regulatory authorities. 


Page | 46  
 
 
The implementing rules and regulations may be repealed, amended or supplemented at 
any time in the same manner as the original implementing rules and regulations are adopted 
and issued pursuant to this Section. 
The implementing rules and regulations and its amendments or supplements 
shall be published once a week for two (2) consecutive weeks in two (2) newspapers 
of general circulation.  
 
SEC. 60. Effect on Existing Laws and Contracts. – The rights and remedies provided 
by this Act shall be in addition to any and all other rights and remedies that exist under existing 
laws. 
Nothing in this Act shall impair the obligation of existing contracts nor affect or be 
construed to affect existing criminal, civil or administrative cases. 
 
SEC. 61. Suppletory Effect. – This Act shall apply suppletorily to any law that may be 
hereinafter enacted on collective investment schemes governing specialized products or 
investments. 
 
SEC. 62. Separability Clause. – Any portion or provision of this Act that may be 
declared unconstitutional or invalid shall not have the effect of nullifying other portions or 
provisions hereof as long as such remaining portion or provision can still subsist and be given 
effect in their entirety. 
 
SEC. 63. Repealing Clause. – All laws, executive orders and/or rules and regulations 
or parts thereof which are inconsistent with the provisions of this Act are hereby repealed or 
modified accordingly. 
 
SEC. 64. Effectivity. – This Act shall take effect fifteen (15) days after its publication 
in the Official Gazette or in a newspaper of general circulation. 
 
Approved,