THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
First Regular Session 
Introduced by Senator Franklin M. Drilon 
EXPLANATORY NOTE 
Educational, memorial and pension plans have become very popular in the 
country as evidenced by the fact that the pre-need plan industry has become a multi- 
billion peso concern in the Philippines with over sixty (60) firms actively engaged in the 
sale of pre-need plan securities. And, the growth of the industry is to be expected, 
attracting more Filipino families in saving their hard-earned money for future needs. 
With the proliferation of pre-need plan companies, it has become necessary to 
The enactment of a law that would regulate the operation of pre-need plan 
regulate their activities and assure their liquidity and solvency for the protection of the . 
public. 
industry appears imperative. 
Thus, this bill seeks to establish a Pre-Need Plan Securities Code to govern the 
operation of firms which issue, or sell pre-need plans or similar contracts and 
investments. The salient features of the bill include: 
I. Vesting the Insurance Commission with the authority to supervise and 
regulate the operation of pre-need plan companies. Since a pre-need plan is 
a contract between the planholder and issuer, there is a need for a third 
party to ensure that neither party takes advantage of the other and the terms 
and conditions offered are fair and equitable to both. 
2. Creation of a Trust Fund to be administered and managed by a reputable 
bank authorized to perform trust function in the Philippines. 
(a) At least lO0/o of the Fund, but in no case less than P500,000, shall be 
(b) Pre-need companies shall set aside IO0/o of the Fund for lending to ' 
set aside and maintained as a Liquidity Reserve Fund. 
Countryside and Business Enterprises established under RA 6810 and 
low-cost housing programs of the government. 
3. Establishment of a Planholders' Protection Fund to compensate planholders 
for the extraordinary losses or damage they may suffer due to business 
failure or insolvency of a pre-need plan company. 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Regular Session 
1 
Introduced by Senator Franklin M. Drilon 
AN ACT 
ESTABLISHING THE PRE-NEED PLAN SECURITIES CODE 
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled: 
SECTION 1. Vtie, - This Act shall be known as the "PRE-NEED PLAN 
SECURITIES CODE". 
I 
SECTION 2. Definition of Terms. - Wherever used in this Code, the following 
terms shall have the respective meanings hereafter set forth, unless the context 
otherwise req u i res : 
(a) "Commission" means the Insurance Commission. 
(b) "Pre-need Plans" are contracts which provide for the performance / delivery 
of future services and / or payment of monetary consideration / benefits at 
the time of actual need or maturity of the contract, payable either in cash or 
installment, with or without insurance coverage, by planholders at prices . 
stated in the contract, such as life memorial plans, pension plans, education, 
plans, interment plans, and similar contracts and investments. 
(c) "Issuer" means any corporation registered with the Commission and 
authorized / licensed to sell or offer for sale pre-need plans and / or similar 
contracts and investments. 
(d) "Planholder" means any natural or juridical person who purchases pre-need . 
plans or similar contracts and investments for whom or for whose 
beneficiaries future services are to be rendered or payments / benefits 
delivered as guaranteed by the issuer at the time of need or maturity of the 
contract. 
(e) "Traditional or actual cost plans" refer to such plans whose corresponding 
benefits / services are guaranteed in spite of increase in costs of such 
benefits / services at the time of availment on account of the contingencies of 
inflation and interest yield rate fluctuations, among others. 


(f) “Fixed Value Plans” refer to plans whose benefits and costs of services are 
fixed at the time of purchase of the plan. 
SECTION 3. 
Supervision & Regulation. - Every pre-need company shall be 
subject to the supervision and regulation of the Insurance Commission. 
The 
Commission shall create a new department within its control, headed by a director to 
regulate and supervise the operation and activities of pre-need plan companies in the 
country. For this purpose, an amount equivalent to twenty percent (20%) of the fees, 
charges, and other income derived from the pre-need industry shall be allocated and 
retained by the Commission. 
* 
The Commission shall have the authority to determine the number of pre-need 
companies in order to prevent industry overcrowding and undue competition. 
CHAPTER 11. REG1 
SECTION 4. RegistraLion, -No corporation shall issue or sell pre-need plans or 
similar contracts and investments unless such securities shall have been registered and 
licensed pursuant to the provisions of the Revised Securities Act. 
SEflION 5. Registration Procedure, -All pre-need plans or similar contracts and 
investments shall be registered and licensed through the filing by the issuer with the ’ 
Commission of a sworn registration statement containing the documents required by 
the Commission and an actuarial viability of the plan duly certified by an accredited 
actuary. 
Upon filing of the registration statement, the registrant shall pay to the 
Commission a minimum fee of one tenth of one percent of the maximum aggregate 
price at which such plans or contracts are proposed to be sold, but not less than One 
Thousand Pesos (P1,000.00), 
and the fact of such filing shall be immediately published 
by the Commission at the expense of registrant in two (2) newspapers of general 
circulation in the Philippines, once a week for two (2) consecutive weeks, reciting that a 
registration statement for the sale of such plans or contracts has been filed with it, and 
that the aforesaid registration statement, as well as the papers attached thereto, are 
open for inspection during business hours by interested parties. 
, 
Any interested party may file an opposition to the registration within ten (IO) 
days from the date of the last publication. 
SECTION 6. Capital. -The issuer engaged in the issue and sale of pre-need 
plans or similar contracts or investments shall have a minimum unimpaired capital of at 
least Ten Million Pesos (PlO,OOO,OOO.OO) 
plus Five Million Pesos (P5,000,000.00) 
for , 
every additional pre-need product, in cash or property. The Commission may increase 
such minimum paid-up capital stock, under such terms and conditions as it may impose, 
to an amount which, in its discretion, would reasonably assure the safety of the 
interests of the planholders and the public. 
SECTION 7. Federation Membership. - All pre-need plan companies shall be 
registered members of the federation of pre-need plan companies. 
CHAPTER III. T 
SECTION 8. Trust Fund -To ensure the delivery of the guaranteed benefits and 
services provided under a pre-need plan contract, a trust fund shall be established 


independently with and shall be administered and managed by a reputable bank 
authorized to perform trust functions in the Philippines. No withdrawal shall be made 
from the trust fund except for paying the cost of service rendered or property delivered, 
bank charges and investment expenses in the operation of the trust fund, expenses in 
the delivery of the benefits or ,services, cash surrender/termination values payable to . 
the planholders, annuities, contributions to the fund of cancelled plans, taxes on trust 
funds, and other costs necessary to insure the delivery of benefits or services. 
* 
SECTION 9. 
Deposits in’the Trust Fund - The issuer shall make periodic 
deposits in the trust fund in an amount not less than forty percent (40%) of the gross 
pre-need price of the plan, if sold for cash, within sixty (60) days upon receipt of 
payment. 
For plans sold on installment basis, the following minimum percentages on 
quarterly gross collections shall be deposited within sixty (60) days following the end of 
each quarter of the fiscal year of the issuer, as follows: 
(a) collections on the first 20% of plan value 
- 5% 
(b) collections on the second 20% of plan value 
- 5% 
(c) collections on the third 20% of plan value 
- 60% 
(d) collections on the fourth 20% of plan value 
(e) collections on the fifth 20% of plan value 
- 65% 
- 65% 
If the above trust fund deposit rates are not sufficient in accordance with the 
actuarial viability study of the plan prepared by the Commission-accredited actuary, the 
approved trust fund deposit rates appearing in the approved actuarial pricing by the 
Commission shall be the required basis for the periodic deposits to the trust fund. 
The proceeds of insurance coverage taken from an insurance company shall in 
appropriate cases be considered as collections, but shall not be subject to commission. 
SECTION IO, Actuarial Valuation of the Trust Fund, - An actuarial valuation 
report of the sufficiency of the trust fund to pay the contractual liabilities of the issuer 
under the plans issued, duly certified by an accredited actuary, shall be submitted to 
the Commission within one hundred twenty (120) days after the end of every fiscal 
year. The Commission shall refer the report to its actuarial consultant, if there is one, 
or to an independent actuary for verification and re-examination. 
The expenses 
incurred therefore shall be charged to the issuer. 
Upon approval by the Commission of 
the actuarial computation, any deficiency in the actuarially valued reserve liabilities shall 
be covered through additional deposits within thirty (30) days, or such longer additional 
deposits within thirty (30) days, or such longer period as the Commission may allow, 
after receipt of notice of deficiency from the Commission. Any excess in the trust fund . 
over the actuarial reserve liabilities may be applied to prospective required deposits to 
the trust fund. 
SECTION 11, Trust Agreement. - The agreement creating the trust fund which 
shall be submitted for approval of the Commission shall define the investment policy 
and portfolio mix taking into consideration the factors of security of the principal 
growth, yield and liquidity in accordance with the prevailing economic conditions; 
manner in which the trust fund is to be operated; the investment powers of the trustee; 
allocation and apportionment of income, profits and losses; terms and conditions 
governing the admission and withdrawal of the fund; and such other matters as may be 
necessary or proper to define clearly the rights of the issuer with regard to the trust 
fund. 


SECTION 12. Limits on Trust Fund Investment. - The trustee shall not use the 
trust fund to extend any loan to nor to invest in the pre-need company, its directors, 
officers, stockholders and related interests nor to any other entity directly or indirectly 
controlled by the above mentioned; Provided, however; That pre-need companies shall 
set aside ten percent (10%) of the trust fund for lending to Countryside and Business 
Enterprises established under R.A. No. 6810 and low-cost housing programs of the . 
govern men t. 
SECTION 13. Liquidity Reserve Fund -At least ten percent (10%) of the trust 
fund but in no case less than Five Hundred Thousand Pesos (P500,OOO.OO) must be set 
aside and maintained as a liquidity reserve fund which shall be invested only in the 
following transactions: 
(a) 
Loans secured by 4 hold-out on, assignment or pledge of deposits 
maintained either with the trustee or other banks, or of deposit substitutes 
of the trustee itself or mortgage and chattel mortgage bonds issued by the 
trustee; 
(b) 
Short-term government securities or bonds, and such other evidences of 
indebtedness or obligations, the servicing and repayment of which are fully 
guaranteed by the Republic of the Philippines; 
(c) 
Repurchase agreements with any of those mentioned in item (b) above, as 
underlying instruments thereof; 
(d) 
Savings or time deposits with government-owned banks or commercial . 
banks; Provided, That in no case shall any such savings or time deposit 
account be accepted or allowed under a "bearer", "numbered account" or 
other similar arrangements; and 
(e) 
Other investments as the Commission may allow. 
CHAPTER IV. PLAN AGREEMENT, AMENDMENT ND PUBLICATIONS 
SECTION 14. Compliance with the Contract, - Upon full payment of the contract 
price by the plan holder, the issuer shall render to him or his assigns the services or 
give value thereof or deliver the property as stipulated in the contract. 
SECTION 15. Amendments to the Plan Agreement.. Contracts, or Other 
Documents Pertnent to Registration. - No plan agreement, trust agreement, contract 
or other documents of the plan or contracts shall be amended or modified without prior 
approval of the Commission, and the planholders. 
SECTION 16. Default: Reinstatement Period - Every issuer must provide in all 
contracts issued to planholders, a grace period of at least three (3) months within 
which to pay accrued installments. Non-payment beyond the grace period shall render 
the plans without further force and effect. 
Any payment by the planholder after the 
grace period shall be reimbursed forthwith. 
The planholder shall be allowed a period 
of not less than two (2) years within which to reinstate his plan. 
No cancellation of 
plans shall be made by the issuer during such period when reinstatement may be 
effected. 
The planholder of cancelled or lapsed plans shall be entitled to termination 
values as provided in the following section. 


SECTION 17. Termination Vahes, - Holders of surrendered and lapsed or 
cancelled policies are entitled to such values in accordance with a schedule of minimum 
termination values that the Commission may formulate to protect the equities of 
planholders. 
SECTION 18. Required Actuary. - No pre-need company shall be licensed to do 
business in the Philippines nor shall any pre-need company doing business in the 
Philippines be allowed to continue doing-such business unless they shall engage the 
services of either a resident or consulting actuary duly accredited with the Commission 
who shall, during his tenure of office, be directly responsible for the direction and 
supervision of all actuarial work connected with or that may be involved in the business 
of the pre-need company. 
SECTION 19- Qualifications of thektuary, - Any person who is a fellow of good 
standing in the Actuarial Society of the Philippines may be officially accredited by the 
Commission to act as an actuary .in any pre-need company upon application therefore 
and the payment of the prescribed fee. 
CHAPTER VI. RE 
SECTION 20. 
Actuarial Vafuation Report - Every pre-need company shall . 
annually make a valuation of all pre-need plans in order to determine its financial 
stability and solvency. 
The valuation shall be made in accordance with the minimum 
standards of valuation for pre-need plans prepared by the Actuarial Society of the 
Philippines and adopted by the Commission. 
The results of such valuation shall be 
reported to the Commission accompanied by a sworn statement of opinion of the 
company's resident actuary or consulting actuary within one hundred twenty (120) days 
after the end of each fiscal period. 
SECTION 21. Audited Financial Statement. - Every pre-need company doing 
business in the Philippines shall annually render to the Commission within one hundred 
twenty (120) days after the end of each fiscal period a statement signed and sworn to 
by the chief officer of such company showing the exact condition of its financial affairs 
in accordance with a uniform accounting system that may be prescribed by the 
Com m ission . 
Any entry in the statement which is found to be false shall constitute a 
misdemeanor and the officer signing such statement shall be subject to the penalty 
provided for under this Act. 
SECTION 22. Annual Statement of Trust Fund. - Every issuer shall file with the 
Commission an annual statement of its operations with special focus on its trust fund 
within one hundred twenty (120) days after the end of each fiscal period. 
Such 
statement shall be on a form prescribed or approved by the Commission and shall 
include details as to all of the income, disbursements, assets and liability items of and 
associated with the said trust fund accounts. Said statement shall be under oath of two 
officers of the company and shall be filed simultaneously with the annual statement 
required in the preceding section. 


SECTION 23. Publication of the Annual Financial Statement. - Within thirty (30) 
days after receipt of the annual statement approved by the Commission, every pre- 
need company doing business in the Philippines shall publish in two (2) newspapers of 
general circulation a full synopsis of its annual financial statement showing fully the 
conditions of its business, and setting forth its resources and liabilities. 
CHAPTER VII. SUSPENSI 
OF LICENSE OR PERMIT 
SECTION 24. Suspension of License or Permit, - If at any time the information 
contained in the statement filed has been found to be misleading, incorrect, inadequate 
or incomplete or the sale or offering for sale of the plans or contracts may work or tend 
to work a fraud, the Commission may require from the person filing such statement 
further information as may, in its judgment, be necessary to enable the Commission to 
ascertain whether the registration of such security should be revoked on any ground 
specified in the Revised Securities Act, and the Commission may also suspend the right 
to sell such security pending further investigation, by entering an order specifying the 
grounds for such action and by notifying, expressly or by personal service, the person 
filing such statement and every broker who shall have notified the Commission of an 
intention to sell such security. 
Refusal to furnish information required by the 
Commission within a reasonable time to be fixed by the Commission, may be a proper 
ground for the entry of such order of suspension. 
Upon entry of such order of suspension, no further sales of such security shall be 
made until the Commission orders otherwise. 
Upon entry of such order of suspension, the Commission shall conduct a hearing 
with proper notice to the parties to determine whether the sale of any such security 
should be revoked on any ground under the Revised Securities Act. 
It shall make the 
necessary findings and enter a final order prohibiting the sale of such plans or contracts 
whenever proper. If, however, the Commission finds that the sale of the plans or 
contracts is not fraudulent or will not result in fraud, it shall forthwith enter an order 
revoking the suspension, and such plan or contract shall be restored to its status as a 
security registered under the Revised Securities Act, as of the date of such order of 
revocation of suspension. 
SECTION 25. Grounds for Revocation of Permit or License. - The Commission 
may, after due notice and hearing, revoke the registration of pre-need plan and the 
permit to sell such security by issuing an order to such effect, setting forth its findings 
in respect thereto, if upon examination it shall appear that the issuer: 
(a) 
is insolvent; 
(b) 
has violated any of the provisions of the Revised Securities Act, or the 
rules promulgated pursuant thereto, or any order of the Commission of 
which the issuer had notice; 
(c) 
has been or is engaged or is about to engage in fraudulent transactions; 
(d) 
has made fraudulent representation in any prospectus, circular, literature 
or other form of broadcast or media communication concerning its plans 
or securities; or 
(e) 
does not conduct its business in accordance with law. 


The Commission may compel the production of all books and records of the 
issuer, and may administer oaths and examine the officers or employees of the issuer. 
Failure by the issuer to submit the statements or books required or refusal to 
permit any examination thereof by the Commission shall be proper grounds for the 
revocation of the registration of and permit to sell its securities. 
If the Commission deems it necessary, it may issue an order suspending the 
right to sell securities pending any investigation stating the grounds therefore. Upon 
the issuance thereof, no further sale of such security shall be made until the suspension 
order is lifted or set aside by the Commission. 
Any such sales in the interim shall be 
void. 
e 
Notice of such suspension order or lifting thereof shall be made expressly or by 
personal service upon the issuer and every dealer or broker or by personal service upon 
the issuer and every dealer or broker who shall have notified the Commission of his 
intention to sell such security. 
SECTION 26. 
Withdrawal of Registration by the Issuer. - A registration 
statement may be revoked by the Commission upon petition made for its withdrawal by 
the issuer. 
An application for the withdrawal of a registration statement shall be 
accompanied by the following: 
petition or application withdrawal of the License/Permit to Sell Securities 
to the public, stating the reasons therefore; 
proof of publication of Notice to Stockholders/Investors of said 
revocation/withdrawaI; 
Board resolution approving such application for withdrawal, certified under ' 
oath by the Corporate Secretary and attested to by the President; 
I i st of a I I stock ho I d ers/ p I a n ho Ide rs/i nvesto rs; 
for pre-need plan issuers, a certification under oath by the Treasurer 
attested to by the President that the planholders' contributions were 
refunded and their claims fully settled; 
a joint and several assumption of liability executed by the President and 
Treasurer of the issuer for settlement of all proved claims that may arise 
as a result of said withdrawal; and 
sufficiency of trust fund to cover payment of cash surrender/termination 
values. 
iayment of filing fee to be determined by the Commission but not lower 
than One Thousand Pesos (Pl,OOO.OO), 
the petition shall be published by the 
Commission, at the expense of the issuer in two (2) newspapers of general circulation, 
once a week for two (2) consecutive weeks, with notice to the general public, . 
planholders, stockholders or other persons affected by said withdrawal, who may file 
their claims with the issuer and the Commission. 
* 
After publication and upon findings of the Commission that the petition with all 
papers and documents attached thereto is on its face complete and that no party 
stands to suffer damage thereby, it shall issue an order 
revoking said 
Registration/License or Permit to Sell Securities to the public. 


SECTIION 27. Amsdiiction over Cases, -The Commission shall have jurisdiction 
to adjudicate over all complaints filed by planholders against or by pre-need sales 
associates, solicitors and/or issuers of pre-need companies against one another. 
SECTION 20. 
Penalty for Issuance/Sale or Overpricing of Plans in €xcess of 
Authorized Amount. - The issuance/sale of pre-need plans and similar contracts and 
investments in excess of the amount authorized under a permit/license shall subject the 
issuer, to a fine, as follows: 
(a) 
(b) 
first violation - 3/10 of 1% of the aggregate gross pre-need price of the 
plans sold. 
second violation - 4/10 of lo/o of the aggregate gross pre-need price of 
the plans sold. 
(c) 
third violation - suspension or revocation of license. 
The recurrence of all violations shall be computed over a three year period. 
The Commission shall act within a period of sixty (60) days from submission of 
completed applications, for price upgrading and/or downgrading of sales values of any 
plan. 
Overpricing of plans above the amounts stated under said permit/license shall be 
(a) 
first violation - 3/10 of 1% of the difference between the authorized plan 
value and the value of the overpriced plan. 
penalized, by a fine based on the price difference realized from such sales, as follows: 
(b) 
second violation - 4/10 of l0/o of the difference between the authorized 
plan value and the value of the overpriced plan. 
(c) 
third violation - suspension or revocation of license. 
CHAPTER VIII. PLA 
S’ PROTECTION FUND 
SECTION 29. The Commission may establish or facilitate the establishment of a 
planholders’ protection fund for the purpose of compensating planholders for the 
extraordinary losses or damage they may suffer due to business failure or insolvency of 
a pre-need company, under such rules as the Commission may prescribe in the public 
interest. 
For this purpose, pre-need companies shall be required to contribute to the 
fund. 
The Commission may, having due regard to the public interest or the protection 
of planholders, regulate, supervise, examine, suspend, or otherwise discontinue such 
fund which may include taking custody and management of the fund itself as well as 
investments in and disbursements from the fund under such forms and control and 
supervision by the Commission. 
X. ADMINIST 
IVE SANCTIONS 
SECTION 30. - Administrative Sanctions, - If, after proper notice and hearing, 
the Commission finds that there is a violation of the provision of this Code, or that any 
registrant has, in a registration statement and its supporting papers and other reports 
required to be filed with the Commission, 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 refused to permit any lawful examination into 
it shall, in its discretion, impose any or all of the following sanctions: 
suspension or revocation of its certificate of registration and permit to offer 
securities; 
a fine of no less than Two Hundred Pesos (P200.00) nor more than Fifty 
Thousand Pesos (P50,OOO.OO) for each day of continuing violation; 
disqualification from being an officer, member of the board of directors or 
principal stockholder of an issuer whose securities are or are about to be 
registered pursuant to this Act; and 
other penalties within the power of the Commission under existing laws. 
The imposition of the foregoing administrative sanctions shall be without 
prejudice to the filing of criminal charges against the individual responsible for the 
violation. 
TER X. MISCELLANEOUS PR 
SECTION 31. Transitow Provi?iions, - Any issuer who at the time of the 
effectivity of this Act has been registered and licensed to issue pre-need plans and 
similar contracts and investments, shall be considered as registered and licensed under 
the provisions of this Act and its impiementing rules and regulations and shall be 
subject to and governed by the provisions hereof. 
SECTION 32. Implementing Rules and Regulations. - The Commission shall 
adopt such rules and regulations for the proper and effective implementation of this Act 
within sixty (60) days from approval hereof. The Commission shall publish once a week 
for two (2) consecutive weeks in two newspapers of general circulation the rules and 
regulations promulgated pursuant to the preceding section. 
* 
SECTION 33. Effect on Existing Law. -The rights and remedies provided by this 
Act shall be in addition to any and all other rights and remedies that exist under the 
Revised Securities Act and other existing laws. 
SECTION 34. Repealing Clause. - All acts, laws, executive orders or rules and 
regulations or any part thereof which are inconsistent with the provisions of this Act are 
hereby repealed or modified accordingly. 
SECTION 35. Effectivity Clause. -This Act shall take effect upon its approval. 
Approved,