FOURTEENTH CONGRESS OF THE REPUBLIC 
First Regular Session 
} 
OF THE PHILIPPINES 
SENATE 
S. No. 1181 
Introduced by SENATOR EDGARDO J. ANGARA 
EXPLANATORY NOTE 
The worldwide trend in the regulation of collective investment schemes 
(“CIS) is to have single law to regulate all types of CIS. Countries such as 
the United Kingdom, Japan, Australia, Korea and Singapore have adopted 
this approach. In the Philippines however, investment companies (mutual 
funds) and unit investment trust funds (“UITFs”), the most common forms of 
CIS, are still governed by varying laws and regulations. As such, there are 
differences in regulatory requirements (regulatory arbitrage) and taxation 
among the different forms of CIS, even though the investment products they 
offer to the public are essentially the same. It is believed that this regulatory 
arbitrage gives rise to an uneven playing field which will prove unfavorable 
to the growth of the industry. More importantly, such regulatory arbitrage 
will result in uneven levels of protection to the investing public. 
This bill proposes to establish a comprehensive regulatory framework 
for all forms of CIS that seeks to eliminate existing differences in regulatory 
treatment. This bill also seeks to balance the interests of the investors, ‘by 
incorporating mechanisms that would safeguard the public interest, at the 
same time recognizing the interests of the other parties involved in the CIS 
industry, by giving them flexibility to expand their CIS businesses. 
With the passage of this bill, it is anticipated that even middle to low 
income individuals will explore more investment opportunities in CIS, 
thereby gaining access to the capital markets. The economy, in turn, is 
expected to benefit greatly from an expanded capital base. 
In view of the foregoing, the urgent passage of the proposed measure is 
requested. 
EDGARDO 
b/& 
J. ANGARA 
Senator 


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FOURTEENTH CONGRESS OF THE REPUBLIC 
} 
OF THE PHILIPPINES 
I 
First Regular Session 
1 
SENATE 
S. No. $281 w 
BILLS 8< INDEX 
Introduced bv SENATOR EDGARDO J. ANGARA 
COLLECTIVE INVESTMENT SCHEMES LAW 
Be it enacted by the Senate and 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". 
SECTION 2. Declaration of Policy - The policy of the state is to: 
(a) Promote investor protection by applying high governance standards 
in the establishment, sale, management and operation of collective 
investment schemes in order to prevent abuse and protect the 
interests of the investing public, including but not limited to, the 
setting of standards for the eligibility of persons who establish, sell, 
manage or operate collective investment schemes; 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 for collective 
investment schemes to facilitate the flow of investment capital from 
sourcea within the country and abroad; 
(c)Encourage the participation in the collective investment scheme 
industry of the best qualified fund managers and investment 
advisers regardless of origin; 
(d) Broaden participation by Filipinos in ownership of securities and 
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other assets allowed in this Law so that more are able to share in 
economic growth; and 
(e) Provide equal protection to investors in all similar collective 
investment schemes, impose the same requirements and provide 
the same competitive environment for such schemes and the 
participants therein. 
SECTION 3. Purpose - The purpose of this Law is to establish a 
comprehensive regulatory framework to enable collective investment schemes 
and all the participants therein to play a key role in the development of the 
capital market in a manner consistent with the policy declared in Section 2 
hereof. 
SECTION 4. Coverage - This Law shall apply to the establishment, 
sale, management and operation of all collective investment schemes in the 
Philippines. i 
SECTION 5. Definitions - When used in this Law, unless the context 
otherwise requires: 
(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; 
and 
5. 
if such other person is a corporate CIS, any investment 
adviser, 
fund manager, CIS distributor, CIS solicitor and 
custodian thereof. ii 
@) 
“Appropriate regulatory agency” refers to: 
1. the Bangko Sentral ng Pilipinas, in the case of banks, trust 
entities and other financial institutions supervised by the 
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Bangko Sentral ng Pilipinas; 
2. the Insurance Commission, in the case of insurance companies; 
and 
3. the Securities and Exchange Commission, in the case of 
investment companies or other persons not under the 
regulation of the Bangko Sentral ng Pilipinas or the Insurance 
Commission. 
(c) 
93ankPf 
means an entity engaged in the lending of funds obtained 
from the public through the receipt of deposits of any kind and duly 
authorized to operate as a bank by the Monetary Board of the Bangko 
Sentral ng Pi1ipinas.iii 
(d) 
rBroker“ means any person engaged 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 or a 
distributor of CIS securities. iv 
(e) 
(f) 
“CIS” means a collective investment scheme 
“CIS ,distributor” means any stock corporation licensed by the 
appropriate regulatory agency to engage in the selling of CIS 
securities. 
(g) 
“CIS investor” means any person who purchases or otherwise 
invests in CIS securities. 
(h) 
“CIS plan” means the plan for the CIS registered with the 
Commission in accordance with Sections 24 and 27 hereof. 
(i) 
“CIS securities” means, units of participation in a contractual CIS 
or shares of stock in a corporate CIS. 
(j) 
“CIS solicitor” means a natural person who is duly licensed as 
such or a broker who is duly accredited by the appropriate regulatory 
agency to sell CIS securities.v 
(k) 
“Collective investment scheme” shall have the meaning given in 
Section 6 hereof. 
(1) 
(m) 
‘Commission“ means the Securities and Exchange Commission. 
“Common stock“ of a corporation means a class of shares with 
general voting rights.vi 
(n) 
“Company“ means a corporation, partnership, trust, or an 
association duly registered with the Commission and lawfully 
transacting business in the Philippines. 
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(0) 
“Contractual CIS” means a CIS: 
1. organized pursuant to a contract, such as a trust indenture, or 
as part of an 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 Law; 
and 
3. issues units of participation each of which represents an 
undivided interest in a pool of investment assets. 
@) 
“Control1‘ is presumed to exist when the parent 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 
also exists when the parent owns half or less of the voting power of an 
entity when there isvii: 
1. power over more than one half of the voting rights by virtue of 
an agreement 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 or 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 or 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. 
“Convicted“ includes being the subject of a verdict, judgment, or 
plea of guilty, if such verdict, judgment or plea has not been reversed, 
set aside, or withdrawn, whether or not sentence has been 
imposed.viii 
(q) 
(r) “Corporate CIS”means a CIS: 
1. organized as a stock corporation; 
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 
Law; and 
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3. issues common stock each of which represents an undivided 
interest in a pool of investment assets. 
(s) 
“Corporation Code“ means the Corporation Code of the 
Philippines, B.P. 68, enacted on May 1, 1980, as may be amended 
from time to time, or any law subsequently enacted in replacement or 
substitution thereof. 
(t) 
“Custodian” means an entity duly authorized by the Monetary 
Board to engage in the business of safekeeping investment assets, 
which is appointed and acts as the custodian of the investment assets 
of a CIS pursuant to this Law and the relevant regulations of the 
Monetary Board and/or the Commission. 
(u) 
“Dealer” means any person who buys and sells securities for his 
own account, in the ordinary course of business whether through a 
broker or otherwise. 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 businessix. 
(v) 
”Director” means a director of a corporation or any person 
performing similar functions with respect to any 0rganization.x 
(w) 
“Exchange” means an organized marketplace or facility that 
brings together buyers and sellers and executes trades of securities 
and/or commodities. xi 
(x) 
“Fund manager” means a juridical person engaged in the 
business of managing the investment assets of a CIS or engaged in 
the business of providing administrative and ancillary services for 
such CIS as licensed by the appropriate regulatory agency in 
accordance with Section 7, and having the duties and responsibilities 
enumerated in Section 8.xii 
(y) 
“General Banking Law”means Republic Act No. 8791, as may be 
amended from time to time, or any law subsequently enacted in 
replacement or substitution thereof. 
(z) 
“Implementing Rules and Regulations” or “IRR” means the 
uniform rules and regulations jointly formulated and issued by the 
appropriate regulatory agencies to implement the provisions of this 
Law, in accordance with Section 62 hereof. 
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(aa) “Independent auditor” means the independent certified public 
accountant referred to in Section 18 hereof. 
(bb) “Independent director” refers to a person other than an officer or 
employee of the corporation, its affiliates, or any other individual 
having any relationship with the corporation which would materially 
interfere with the exercise of independent judgment in carrying out 
the responsibilities of a director. An independent director shall 
possess all the qualifications and none of the disqualifications for 
independent directors as defined in the Securities Regulation Code 
and its implementing rules. 
(cc) “Independent oversight body” refers to the body or entity 
referred to in Section 50(b)(2) hereof. 
(dd) “Insurance Code of the Philippines” means Presidential Decree 
No. 1460 otherwise known as ‘The Insurance Code of 1978, as 
amended, or any law subsequently enacted in replacement or 
substitution thereof. 
(ee) ”Insurance companyp’ means a company engaged in the insurance 
or reinsurance business and duly issued by the Insurance Commission 
with a certificate of authority to transact such business, as specifically 
defined under the Insurance Code of the Philippines. “xiii 
(ff) 
Vnuestment adviser“ means any person who regularly advises or 
recommends investment decisions with regard to the securities or 
other portfolio of a CIS pursuant to an advisory contract with such 
CIS through the fund manager or trustee.xiv 
(gg) “Investment assets” means the securities and other assets in 
which the funds of a CIS may be invested in accordance with Section 
37 hereof. 
(hh) “Investment company” means the stock corporation organized 
pursuant to a corporate 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 Law. 
(ii) 
“Investment house” means any enterprise which engages in the 
underwriting of securities of other companies, as defined in Section 2 
of the Investment Houses Law, Presidential Decree No. 129, as may 
be amended from time to time, and is registered pursuant to said law. 
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(ij) 
”Net asset uaZue“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 Law and its implementing rules 
and regulations. xv 
(kk) !Person“means a natural or juridical person as defined in the Civil 
Code of the Philippines.xvi 
(11) “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 prior approval of the trustee, to perform 
all or any of the duties and functions of the registrar under Section 
24 hereof. 
(mm) rSale’: “sell1f “offer to sell“ o r  %offer for sale“ means every 
contract of sale or disposition of, attempt or offer to dispose of, or 
solicitation of an offer to buy a security or property or interest 
therein, for value. Any such security, property or interest therein, 
given or delivered with, or as a bonus on account of, any purchase of 
securities 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. xvii 
(nn) Y3ecurity”means any instrument or product defined as such by the 
Securities Regulation Code and its implementing rules. 
(00) “Securities Regulation Code” means Republic Act No. 8799, 
enacted on July 17,2002, as may be amended from time to time. xviii 
(pp) “Separate account fund’’& 
- means the segregated portfolio of 
investments established, maintained and invested in by an insurance 
company for its variable life insurance contracts and accounted for 
separately and apart from its other investments and accounts, 
pursuant to the Insurance Code of 1978, as amended (PD 1460), under 
which the income, gains and losses (whether or not realized) from, and 
expenses incurred on the acquisition, disposal and management of 
assets allocated to such account, are credited to or charged against 
such account without regard to the other income, gains, losses and 
other expenses of the insurance company. The Separate Account Fund 
shall be deemed a contractual CIS, and the units of participation 
therein shall be deemed as CIS securities, subject to this Law. The 
assets held in any such separate account shall be applied exclusively 
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for the benefit of the owners or beneficiaries of the variable life 
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insurance contracts.xx 
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(qq) “Shareholder” means a stockholder of a corporate CIS. 
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(rr) “Trust institution” - means any bank, investment house or a 
stock corporation duly authorized by the Monetary Board to engage in 
trust, investment management and fiduciary business. 
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“Trustee” means a trust institution appointed and acting as the 
trustee of a contractual CIS pursuant to this Law. 
(tt) “Unit Holder”- means an investor in a contractual CIS. 
(uu) “Vulue“ means the market value or fair value of securities as may 
be determined in accordance with such rules and regulations as the 
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Commission may prescribe. 
TITLE I1 - COLLECTIVE INVESTMENT SCHEMES 
Chapter 1 - Nature and Structure of Collective Investment Schemes 
SECTION 6. Collective Investment Schemes - 
(a) 
A Collective Investment Scheme (CIS) is any arrangement 
whereby funds are solicited from the investing public for the 
purpose of investing, re-investing and/or trading in securities or 
other assets allowed under this Law. All CIS shall be covered by 
and regulated pursuant to this Law. A CIS may have a 
corporate structure, such as an investment company, or a 
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contractual structure, such as a unit investment trust fund or 
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similar scheme held by a trust institution or a separate account 
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fund established pursuant to a variable unit linked life 
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insurance policy issued by an insurance company. All CIS shall 
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be governed by and shall comply with the requirements of this 
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Law. 
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(b) 
None of the following arrangements shall be deemed a collective 
investment scheme subject to regulation under this Law: 
1. Any arrangement whereby securities are issued to not more 
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than nineteen (19)xxi beneficial owners within any twelve- 
month period, and there is no current offering or intention to 
make a public offering of such securities. For purposes of this 
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paragraph, beneficial ownership by a company shall be 
deemed to be beneficial ownership by one person; except 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 such company's outstanding securities; 
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 Law. 
3. Any employees' stock, bonus, pension, retirement or profit 
sharing plan or fund, engaged in the 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 Commission, 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 banking, 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 
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shareholder or member of such entity; 
8. Any arrangement whereby an issuer is primarily engaged in 
investing in 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 Commission, 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 redeemable securities 
are offered or are outstanding such as but not limited to 
mutual funds; and 
2. "Closed-end CIS" means a CIS where the securities offered or 
outstanding are not redeemable securities. 
Chapter 2 - Parties Involved In Collective Investment Schemes 
SECTION 7. Fund manager- No company shall act as a fund 
manager unless duly licensed by the appropriate regulatory agency, and no 
company shall be licensed as a fund manager for purposes of this Law, 
unless: 
(a) It is organized as a stock corporation; 
(b) It has a minimum paid-up capital of not less than Fifty Million 
Pesos (P50,000,000.00); 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 of CIS managed; 
(c) The majority of the members of the Board of Directors of the fund 
manager shall be independent directors, provided that this 
requirement shall not apply if the fund manager is the trust 
department of a bank or an insurance company; and 
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(d) It has complied with such other requirements as may be prescribed 
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by the Commission or the appropriate regulatory agency. 
In licensing a fund manager, the appropriate regulatory agency 
shall ensure that the requirements under this Law and the IRR are 
complied with. 
SECTION 8. Duties and Responsibilities of the Fund Manager - 
The fund manager shall have the following duties and responsibilities: 
(a) Manage the investment assets of the CIS and perform its functions 
in accordance with the CIS plan, the provisions of this Law 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, corporate CIS and auditor; 
(c) Ensure that the fund and the CIS securities are accurately valued 
or priced; 
(d) Ensure that all payments out of CIS funds, assets and properties 
are made in accordance with the CIS plan, this Law and its 
implementing rules and regulations; 
(e) Comply with the instructions of the corporate CIS or the trustee to 
remedy a breach of the provisions or covenants of the CIS plan, its 
contract with the corporate CIS or trustee, the provisions of this 
Law or its implementing rules and regulations; 
(f) Furnish the corporate CIS or the trustee with all contracts and 
agreements relating to the operation and management of the CIS; 
(g) Report to the corporate CIS or the trustee and the CIS investors 
results of the CIS operations; 
(h) Call for and attend annual or special meetings of the unit holders of 
a contractual CIS, or attend meetings of stockholders of a corporate 
CIS; 
(i) Monitor the activities of the CIS distributors in the sale of the CIS 
securities; 
6) Facilitate the redemption of CIS securities; 
(k) Maintain proper accounting records and other records to: 
1. enable a complete and accurate review of the CIS funds, assets 
and properties; and 
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2. ensure that the CIS funds, assets and properties are managed 
and administered in accordance with the CIS plan, its contract 
with the corporate CIS or trustee, this Law and its 
implementing rules and regulations; 
(1) Propose amendments to the CIS plan and secure approval for those 
amendments which require investor approval in accordance with 
the provisions of this Law; 
(m) 
Report to the Commission, as soon as practicable, any material 
development or breach of the provisions or covenants of the CIS 
plan, the provisions of this Law or its implementing rules and 
regulations, that: 
1. relates to the establishment, distribution, management, 
operation or dissolution of the CIS, and 
2. has had or is likely to have a material adverse effect on the 
interests of the CIS investors; and 
(n) Such other duties and responsibilities that the Commission may 
prescribe. 
SECTION 9. Prohibited Acts of the Fund Manager. - The fund 
manager shall not: 
(a) Purchase securities and investment assets for its own account; 
(b) Invest CIS funds in any securities, property and assets in which 
such fund manager or any of its directors, officers, employees and 
affiliates have a substantial financial interest, subject to such 
exceptions and/or guidelines as may be prescribed by the 
Commission; 
(c) 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 the trust department of a bank or an insurance 
company; 
(d) Pay or cause to be paid out of the CIS funds any fees, commissions 
and other similar expenses that have not been, or exceed what have 
been, provided for in the CIS plan, this Law and its implementing 
rules and regulations or any other applicable laws and regulations; 
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(e) 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 rebates or shared commissions 
shall be for the account of the CIS fund concerned; and 
(0 Engage in such other acts as may be prohibited by rule or order of 
the Commission 
SECTION 10. Fund Management Agreement - (a) The agreement 
between the fund manager and the trustee or the corporate CIS shall contain, 
among others, provisions pertaining to: 
1. Extent of services to be rendered; 
2. Any restrictions or prohibitions 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 IRR 
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 the IRR may prescribe; 
5. Reporting requirements to the trustee, corporate CIS, CIS 
investors and the appropriate regulatory agencies; and 
6. Such other terms or conditions as the IRR may prescribe. 
(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. 
SECTION 11. The Trustee - Only a trust institution shall act as a 
trustee of a CIS. In authorizing a trust institution to engage in CIS activities, 
the Monetary Board shall ensure that all relevant requirements under this 
Law or the IRR shall be complied with. The following, in addition to those 
prescribed under existing laws and regulations, shall be the duties and 
responsibilities of a trustee of a CIS: 
(a)Monitor the activities of the CIS distributors in the sale andlor 
redemption of the CIS units and ensure that the provisions of any 
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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 Law 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 Law or its implementing 
rules and regulations; 
(d) Appoint an independent third-party custodian; 
(e) Ensure that CIS funds, assets and properties 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, assets and properties 
are made in accordance with the CIS plan, this Law 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 Commission and 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 Law 
or its implementing rules and regulations that: 
1. relates to the establishment, operation or dissolution of the 
CIS, and 
2. has had or is likely to have a material adverse effect on the 
interests of the CIS investors; 
(i) Call for annual or special meetings of the CIS investors in the event 
the fund manager fails or refuses to do so; 
6) Propose amendments to the CIS plan and secure approval for those 
amendments which require investor approval in accordance with 
the provisions of this Law; and 
(k) Such other duties and responsibilities that the Commission may 
prescribe. 
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SECTION 12. Corporate CZS - (a) No company shall act as a 
corporate CIS unless duly licensed by the Commission, and no company shall 
be licensed as a corporate CIS for purposes of this Law, unless it shall: 
1. 
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3. 
4. 
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6. 
Be organized in the form of a stock corporation; 
Issue shares of stock consisting solely of common stock; 
Provide in its articles of incorporation that shareholders shall 
not be entitled to pre-emptive rights; 
Have, at the time of registration, an initial subscribed and paid- 
up capital of at least fifty million pesos (P50,000,000.00) 
provided, however, that the Commission may prescribe a higher 
paid-up capital. The Commission may prescribe a lower 
minimum paid-up capital for any subsequent corporate CIS that 
is established and managed by the same fund manager; 
Maintain unimpaired its initial paid-up capital for a period of 
twelve (12) months following its registration with the 
Commission as a corporate CIS, or such other period as the 
Commission may prescribe; and 
Maintain at all times, if an open-end company, a reserve in 
liquid or semi-liquid assets, equal to ten per centum (10%) of the 
total assets of such company, or such other percentage and in 
such form as the Commission may prescribe. 
(b) Notwithstanding any provision of the Corporation Code to the 
contrary, no corporate CIS 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 of a corporate CIS shall, at incorporation, fully 
pay in cash their respective subscriptions. 
(d) The Commission 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) The majority of the members of the board of directors of a corporate 
CIS shall be independent directors. 
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SECTION 13. Custodian - Only entities duly licensed by the 
Monetary Board may act as custodian of assets of a CIS. Unless otherwise 
authorized by the appropriate reguIatory 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. 
The following, in addition to those prescribed under existing laws and 
regulations, shall be the duties and responsibilities of a custodian: 
(a) Hold the property of a CIS in accordance with its agreement with 
the trustee or the corporate CIS; and 
(b) Such other duties and responsibilities that the Monetary Board 
may prescribe, which shall include: 
1. Earmarking, segregation and hypothecation of the investment 
assets of the CIS; and 
2. Provisions for periodic or other inspections by employees and 
agents of the Monetary Board. 
SECTION 14. Appointment of Custodian - The agreement between 
the custodian and the corporate CIS or the trustee of a contractual CIS shall 
contain, among others, provisions pertaining to: 
1. 
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Extent of services to be rendered by the custodian; 
Fees, remuneration and other expenses of the custodian; 
Any restrictions or prohibitions regarding the performance by 
the custodian of its functions; and 
Reporting requirements of the custodian. 
4. 
SECTION 15. CIS Distributor - (a) No entity shall be licensed as a 
distributor of CIS securities, unless: 
1. 
2. 
3. 
It is organized as a stock corporation; 
It has a minimum paid-up capital of not less than ten million 
pesos 
(P10,000,000.00), or such higher capitalization to be 
prescribed by the Commission taking into consideration (i) the 
risk-based 
principles 
on 
capital 
adequacy 
based 
on 
internationally accepted standards, and (ii) the number of CIS 
distributed; and 
It has complied with such other requirements as may be 
prescribed by the Commission. 
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@) For purposes of this Law, the following juridical persons may be 
licensed as a CIS distributor by the appropriate regulatory agency, provided 
that the requirements under this section and the IRR are complied with: 
1. Any fund manager; 
2. Any investment house; 
3. Any bank, financial institution or trust institution under the 
supervision of the Bangko Sentral ng Pilipinas; 
4. Any insurance company under the supervision of the Insurance 
Commission; and 
5. Other persons as may be hereinafter allowed by the Commission. 
(c) A corporate 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 
Commission may prescribe as necessary or appropriate in the public interest 
or for the protection of investors. 
(d) Whenever a fund manager and/or its affiliate shall act as a CIS 
distributor of the CIS of which it is the fund manager, and whenever a 
trustee and/or its affiliate shall act as a CIS distributor of the CIS of which it 
is the trustee, the prior written consent of the Commission shall be secured. 
(e) The CIS distributor shall be principally responsible for marketing, 
distributing and selling CIS securities. It shall perform such other duties and 
responsibilities as the IRR may prescribe. 
SECTION 16. Marketing and Distribzition Agreement - (a) The 
agreement between the CIS distributor and the corporate CIS or the trustee 
of a contractual CIS shall contain, among others, provisions pertaining to: 
1. 
2. 
3. 
Extent of services to be rendered by the CIS distributor; 
Fees, remuneration and other expenses of the CIS distributor; 
Any restrictions or prohibitions regarding the performance of 
the functions by the CIS distributor; 
Undertaking to employ or appoint only CIS solicitors duly 
licensed by the Commission; and 
4. 
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(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. 
SECTION 17. 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 prescribed in the IRR. 
SECTION 18. Accountants and Auditors.- (a) The financial 
statements of every corporate CIS, fund manager and contractual CIS shall 
be audited and certified by an independent certified public accountant duly 
accredited by the Commission. 
(b) The following, in addition to those prescribed under existing laws 
and regulations, shall be the duties and responsibilities of the independent 
auditor: 
1. 
Report to the fund manager any irregularity or undesirable 
practice in the operation of the CIS which has come to its 
knowledge. Any inaction by the fund manager, irregularity or 
undesirable practice shall be reported by the independent 
auditor to the Commission; 
Report to the Commission non-compliance by the fund manager 
with its contractual and regulatory requirements; and 
Report to the Commission whether the internal control and 
audit structures in the operation of the CIS are at an acceptable 
level. 
2. 
3. 
SECTION 19. Common Duties and Responsibilities of Parties - 
In addition to their specific duties and responsibilities, each of the corporate 
CIS, fund manager, trustee, CIS distributor, CIS solicitor, and the CIS 
custodian shall have the following common duties and responsibilities: 
(a) 
Carry on and manage its business and the CIS in a proper, 
diligent and efficient manner; 
Observe honesty, due care and diligence, utmost good faith and 
high standards of integrity; 
(b) 
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Act in the best interests of the CIS investors; 
Establish systems, procedures and processes to be observed by 
its officers and employees to ensure compliance with this Law 
and its implementing rules and regulations and to protect the 
interests of the CIS investors; 
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; 
Ensure that any person appointed or employed by it is of good 
repute, having relevant expertise and experience to act in the 
capacity so appointed or employed; 
Refrain from using its position to gain, directly or indirectly, an 
advantage for itself or for any other person or to cause detriment 
to the interests of CIS investors; 
Avoid and eliminate conflicts of interest in the performance of 
their functions, which may be identified by the appropriate 
regulatory agency as prejudicial to the interests of the investing 
public; 
Disclose all conflicts of interest in the performance of their 
functions; and 
Comply with orders, rules and regulations as may be prescribed 
by the Commission or other appropriate regulatory agency. 
Any contractual provision which protects or purports to protect the fund 
manager, corporate CIS, trustee, CIS distributor, CIS solicitor, or CIS 
custodian against any liability for wilful misfeasance, malfeasance, fraud, 
bad faith, or gross negligence in the performance of their duties shall be 
void. 
SECTION 20. Revocation, Refusal or Suspension of License of 
the Fund Manager, Corporate CIS, Trustee, Insurance Company, 
Custodian, CIS Distributor and CIS Solicitor. -The 
licensing or 
authorization of a fund manager, corporate CIS, trustee, insurance company, 
custodian, CIS distributor or CIS solicitor to engage in CIS business under 
this Law may be refused, or any license granted thereunder may be revoked, 
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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 Law, any rule, 
regulation or order made hereunder, or any other law administered 
by the Commission or 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 Commission or 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 Law and the IRR 
(d) Any of its directors or officers has been convicted by a competent 
body of an offense involving fraud, embezzlement, counterfeiting, 
theft, estafa, misappropriation, forgery, bribery, false oath, perjury, 
or of a violation of securities, commodities, banking, real estate or 
insurance laws; 
(e) Is enjoined or restrained by a competent body from engaging in 
securities, commodities, banking, real estate or insurance activities; 
(0 Is subject to an order of a competent body refusing, revoking or 
suspending any license or other permit under this Law, the IRR, 
any other law or regulation administered by the Commission, the 
Bangko Sentral ng Pilipinas, the Insurance Commission, or any 
other governmental authority; 
(g) Has been found by a competent body to have violated any 
provisions of securities, commodities, banking, real estate or 
insurance laws, or has aided, abetted, counseled, commanded, 
induced or procured such violation; or 
(h) Has been judicially declared insolvent. 
For purposes of this subsection, the term "competent body" shall include 
a foreign court of competent jurisdiction and a foreign financial regulator. 
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SECTION 21. 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 and disqualifications of individuals elected or appointed as 
directors or officers of fund managers, trustees, insurance companies, 
corporate CIS or CIS distributors and disqualify those found unfit. The 
appropriate regulatory agency may disqualify, suspend or remove any 
director or officer who commits or omits an act which render him unfit for the 
position. 
In determining whether an individual is fit and proper to hold the 
position of a director or officer of the fund manager, trustee, insurance 
company, corporate CIS or CIS distributor, regard shall be given to his 
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, consultant, of any fund manager, trustee, 
insurance company, corporate 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 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 Law, the General Banking Law, the 
Insurance Code, the Securities Regulation Code, or any related laws 
and any rules, regulations or orders thereunder; 
(e) any person judicially declared to be insolvent, or incapacitated to 
contract; and 
(f) any person found guilty by a foreign court, regulatory authority or 
government agency of the acts or violations similar to any of the 
acts or misconduct enumerated in the foregoing paragraphs. 
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A conviction in the first instance shall be considered sufficient ground 
for disqualification. 
Chapter 3 - Provisions applicable to Contractual CIS 
SECTION 22. Establishment of a Contractual CIS. 
Units of participation in a contractual CIS shall not be sold or 
offered for sale or distribution within the Philippines without a 
CIS plan duly filed and approved by the Commission. 
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 
that is not an affiliate of the fund manager; Provided, that no 
director and/or officer of the fund manager shall at the same 
time serve as director andlor officer of the trustee or insurance 
company; 
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. 
The assets of each contractual CIS shall be deemed separate and 
independent of the 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 andlor 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 50 (b)(Z) hereof. 
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SECTION 23. Register of CIS Investors -An up-to-date register of 
all CIS investors shall be kept and maintained by or under the control of a 
registrar, which may be kept and maintained either in written form or by 
other means which are capable of being reproduced in written form, 
including, but not limited to, computer records, microfilm, microfiche or 
electronic recording, as the fund manager shall from time to time determine. 
There shall be entered into the register such relevant information as may be 
prescribed by the fund manager or the trustee. 
SECTION 24. The Contractual CIS Plan. A Contractual CIS shall 
be established upon the registration of its CIS plan with the Commission. 
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) Names of the fund manager and the trustee; 
(c) 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 22 (e) of this Law. 
(d) A statement of the fund's investment objectives and policies 
including limitations, if any, and risk factors in investing in the 
fund; 
(e) A profile of the proposed investors; 
(0 Investment powers of the fund manager with respect to the fund, 
including the character and kind of investments which may be 
purchased by the fund; 
(g) Initial unit value and the basis thereof; 
(h) Total value to be issued in case of closed-end funds; 
(i) Terms and conditions governing the issuance and redemption of 
units of participation in the fund; 
6 )  Provision for the external audit of the fund; 
(k) Basis upon which the CIS may be terminated. The CIS plan shall 
state the rights of participants in case of termination of the CIS. 
(1) Liabilities of the fund manager and the trustee or insurance 
company to the unit or policy holders; 
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(m) 
Amount of fees, commissions and other charges to be deducted 
from the fund; 
(n) Ceiling for marketing or other promotional expenses; 
(0) Annual meetings of unit or policy holders; 
(p) Public disclosures and reports; and 
(4) Such other matters as the Commission may prescribe. 
A copy of the CIS plan shall be made available to any interested person 
at the principal office of the fund manager and the trustee or insurance 
company during regular office hours. 
Chapter 4 - Provisions Applicable to Corporate CIS 
SECTION 25. Establishment of a Corporate CIS. - Shares in a 
corporate CIS shall not be sold or offered for sale or distribution within the 
Philippines without a CIS plan duly filed and approved by the Commission. 
SECTION 26. Engagement of Fund Manager. Corporate CIS shall 
engage a duly registered fund manager to perform the functions prescribed in 
Section 8 hereof; Provided, that a majority of the directors of the corporate 
CIS are not directors, officers or employees of the fund manager; and 
Provided, further, that no Chairman, Chief Executive officer, President, Chief 
Operating Officer or equivalent positions may be interlocking but officers 
with lower rank may be common with prior approval of the appropriate 
regulatory authority. 
SECTION 27. The Corporate CIS plan - The CIS plan of corporate 
CIS 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; 
(b) Name of the fund manager; 
(c) A statement of the corporate CIS'S investment objectives and 
policies including limitations, if any, and risk factors in investing in 
the corporate CIS; 
(d)Investment powers of the fund manager with respect to the 
corporate CIS, including the character and kind of investments 
which may be purchased by the fund; 
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(e) Profile of the proposed investors; 
(f) Par Value of the shares of stock of the corporate CIS; 
(g) Total value to be issued in case of closed-end corporate CIS; 
(h) Terms and conditions governing the issuance and redemption of 
shares of stock; 
(i) Provision for the external audit of the corporate CIS; 
6) The dissolution of the corporate CIS and the rights of shareholders 
in case of dissolution of the corporate CIS; 
(k) Liabilities of the corporate CIS and the fund manager to the 
shareholders; 
(1) Amount of fees, commissions and other charges and expenses to be 
paid by the shareholders; 
(m) 
(n) Annual meetings of shareholders; 
(0) Public disclosures and reports; 
(p) Its classification, whether an open-end or closed-end company; 
(q) Borrowing of money in accordance with the rules and regulations 
Ceiling for marketing or other promotional expenses; 
as may be prescribed by the Commission; 
(r) Issuance of senior securities, if any; 
(s) Extension of loans to other persons in accordance with the rules 
and regulations as may be provided by the Commission; and 
(t) Such other matters as the Commission may prescribe. 
SECTION 28. Diuidends. (a) Dividends shall be declared and paid in 
accordance with the requirements of the Corporation Code and applicable 
laws and regulations; Provided, that the Commission may prescribe other 
requirements or restrictions in the declaration and payment of dividends by 
the corporate CIS as necessary or appropriate in the public interest and for 
the protection of the investors. 
03) Dividend payments shall be accompanied by a written statement 
which adequately discloses the source or sources of such payment. The 
Commission may prescribe the form of such statement as necessary or 
appropriate in the public interest and for the protection of the investors. 
SECTION 29. Proxies; Voting Trust. 
The Commission may 
prescribe rules and regulations for the solicitation of proxies and the issuance 
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and transfer of voting trust certificates in accordance with the requirements 
of the Corporation Code and applicable laws and regulations; Provided, that 
the Commission 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 corporate CIS. 
TITLE 111- REGISTRATION OF CIS PLAN AND OPERATIONS OF 
CIS 
Chapter 1 - Registration, Amendment and Suspension of CIS Plan 
SECTION 30. Registration of CIS Plans. - 
(a) All CIS must have a 
CIS plan which should be registered with the Commission before any 
securities of such CIS can be sold or offered for sale. All CIS plans shall be 
registered with the Commission by filing a sworn statement with respect to 
such CIS plan, in such form and containing such information and documents 
as prescribed by this Law, the IRR or the Commission. The CIS plan shall 
include any prospectus as required or permitted by the Commission 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 
registered under this section. 
(b) The CIS plan shall be signed by the executive officer, principal 
operating officer, principal financial officer, comptroller, principal accounting 
officer, corporate secretary or persons performing similar functions of the 
corporate CIS, or the fund manager, trustee or insurance company in the case 
of a contractual CIS, accompanied by a duly verified resolution of the board of 
directors. The written consent of the expert named as having certified any 
part of the CIS plan or any document used in connection therewith shall also 
be filed. 
(c) Upon effectivity of the CIS plan, the corporate CIS, fund manager, 
trustee or insurance company shall state in every sales material that all 
registration requirements have been met and that all information are true 
and correct as represented by the corporate 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 
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therein or necessary to make the statement therein not misleading shall 
constitute fraud. 
(d) The Commission may refuse the registration of a CIS plan 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 Law and 
applicable laws and regulations; or 
4. It is in the public interest to refuse the registration of such CIS 
plan. 
(e) If any change occurs in the facts set forth in the CIS plan, the 
corporate CIS, fund manager, trustee or insurance company shall file an 
amendment thereto setting forth the change. 
SECTION 31. Revocation of Registration or Suspension of Offer 
and Sale of Securities - (a) The Commission may revoke the registration 
of the CIS plan, or order the suspension of the offer and sale of the CIS 
securities, in accordance with the Securities and Regulation Code and other 
applicable laws and regulations, provided that the Commission may cause 
the publication or dissemination of the order of suspension or revocation at 
the expense of the CIS, and provided further, that any sale of the subject CIS 
securities during the effectivity of the suspension or revocation order shall be 
void, and the Commission shall have the power to order the return of the 
purchase price and/or earnings arising from such sales subject to applicable 
laws and regulations. 
(b) The Commission may conduct an examination, and, after due notice 
and hearing, issue an order revoking or suspending the effectivity of the CIS 
plan and the offer and sale of CIS securities. 
(c) In making such examination the Commission or any officer or 
officers designated by it may administer oaths and affirmations and shall 
have access to, and may demand the production of any books, records or 
documents relevant to the examination. Failure of the fund manager, the 
corporate CIS, trustee, insurance company, CIS distributor, CIS solicitor or 
any other person to cooperate, or his obstruction or refusal to undergo an 
examination, shall be a ground for the issuance of a suspension order. 
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Chapter 2 - Dealings in CIS Securities 
SECTION 32. Rights and Privileges of CIS Investors. Each share 
of stock of a corporate CIS and each unit of participation of a contractual CIS 
shall be equal in all respects to every other share or unit belonging to the 
same class of shares or units. 
SECTION 33. Payment for CIS Securities. No CIS shall issue any 
of its securities for services or for property other than cleared funds. 
SECTION 34. Distribution and Redemption of CIS Securities. (a) 
Unless otherwise allowed in this Law, securities of a CIS shall be sold 
through a licensed CIS distributor and by licensed CIS solicitors. 
(b) CIS investors have the right to surrender their securities for 
redemption in accordance with the CIS plan. Redemption shall not be 
suspended except pursuant to the CIS plan as approved by the Commission 
in the public interest or for the protection of investors. 
SECTION 35. Transferability of Securities. No CIS shall restrict 
the transferability or negotiability of its CIS securities except as provided in 
the CIS plan or by any rule or regulation prescribed by the Commission. 
Chapter 3 - Operations of CIS 
SECTION 36. Custody of Investment Assets. Every CIS shall place 
and maintain its investment assets in the custody of a custodian in 
accordance with Sections 13 and 14 hereof. 
SECTION 37. Investment Limitations. (a) The CIS funds may be 
invested only in the following assets, subject to limitations as may be 
provided by this Law or by the IRR 
1. Bank deposits; 
2. Securities issued by or guaranteed by the Philippine 
government, or the Bangko Sentral ng Pilipinas; 
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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; 
9. Real estate investment trusts or companies; 
10. Commercial papers, bonds or loans which are registered with 
the Commission, or are exempt from registration with the 
Commission: 
11. Other CIS; and 
12. Such other investments or instruments as the appropriate 
regulatory agency may allow. 
Provided, however, that no CIS shall, directly or indirectly: 
1. 
acquire more than ten per centum (10%) of another CIS 
or any one company; or 
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, whichever is higher. 
2. 
(b) The appropriate regulatory agencies may jointly issue such IRR, in 
accordance with Section 62 hereof, as may be necessary or appropriate in the 
public interest or for the protection of investors, that provide for different 
percentages or further restrictions with respect to investments in other CIS 
or the concentration of investments by a CIS. 
SECTION 38. Liquidity Requirement. Unless otherwise prescribed 
by the IRR, at least ten percent (10%) of the assets of a CIS shall be invested 
in liquid/semi-liquid assets such as, but not limited to: 
(a) Treasury notes or bills, certificates of indebtedness issued by the 
Bangko Sentral ng Pilipinas, and other government securities or 
bonds and such other evidence of indebtedness or obligations, the 
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servicing and repayment of which are fully guaranteed by the 
Republic of the Philippines; and 
(b) Savings or time deposits with government owned banks or 
commercial banks, provided that in no case shall any such savings 
or time deposit accounts be accepted or allowed under a “bearer” or 
“numbered” account or other similar arrangement; 
Provided that the requirement under this Section shall not apply to a 
closed-end CIS. 
SECTION 39. Prohibited Acts of CIS. - (a) Unless it complies with 
the IRR and orders which the Commission may prescribe as necessary or 
appropriate in the public interest or for the protection of investors, a 
registered corporate CIS is not permitted to: 
1. Purchase any security on margin, except such short-term credits 
as are necessary for the clearance of transactions; 
2. Participate on a joint or a joint and several basis in any trading 
account in securities; or 
3. Effect a short sale of any security. 
(b) It shall be unlawful for any CIS to - 
1. generate funds for promoting the private business or industry of 
any employee, officer, director, promoter or stockholder thereof; 
or 
2. allow any of its employees, officers, directors, organizers, 
incorporators or stockholders to sell real estate, personal 
property or any other kind of 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 
corporate CIS, or a portion thereof, at a price below the market 
value thereof. 
(c) The IRR may prohibit CIS from engaging in such other acts as may 
defeat the policy and purpose of this Law. 
SECTION 40. Meetings of CIS Investors. (a) Meetings of unit 
holders in a contractual CIS or stockholders in a corporate CIS shall be held 
at least annually. The following matters shall be presented to the CIS 
investors: 
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Proposals to change investment policies in the CIS plan which 
shall require the approval of the CIS investors; 
Report to the CIS investors of the engagement or replacement of 
the fund manager, trustee, CIS distributor, custodian and 
independent auditors; 
Report of the fund manager of the financial condition of the fund 
and results of its operations; and 
Any other matter pertaining to the management and operation of 
the CIS. 
(b) CIS investors may attend meetings in person or by proxy. A quorum at 
meetings shall consist of unit holders or stockholders owning or 
representing at least ten percentum (10%) of the total number of units in 
the fund or the outstanding capital stock, respectively, or such other 
percentage as the Commission 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. 
(c) The Commission shall prescribe by rule or regulation the 
requirements for the conduct of meetings. 
SECTION 41. Requirements for selling 
materials and 
advertisements. Sales and marketing documents and advertisements shall 
be subject to such requirements as the IRR or the Commission may prescribe. 
All sales 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) The CIS performance information in advertisements should be 
calculated and presented from the viewpoint of the average investor 
to whom the CIS is targeted; 
(c) All CIS should calculate and present their performance information 
in advertisements in a substantially similar manner so that CIS 
investors may (i) make meaningful comparisons among various 
CIS, and (ii) not be misled by differences in the method of 
calculation and presentation; and 
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(d) Comply with such other terms and conditions prescribed by the 
Commission which are necessary or appropriate in the public 
interest or for the protection of CIS investors. 
SECTION 42. Reports and Financial Statements of CIS. (a) Every 
CIS shall file with the Commission and the appropriate regulatory agency, if 
any: 
1. Such information and documents including financial statements as 
the IRR and the Commission and/or 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 such of the following information and financial statements or their 
equivalent, as of the 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 subsection (a): 
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 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 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 and all officers as regular or special 
compensation; and 
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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 IRR 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. 
SECTION 43. Net Asset Value. (a) A CIS shall compute and post its 
net asset value per sharelunit at such frequency as may be prescribed by the 
IRR or the Commission. 
(b) The computation of the net asset value per share or unit shall be 
made in accordance with the valuation method prescribed by the IRR or the 
Commission and shall be applied consistently. 
SECTION 44. Accounts and Records. (a) Every CIS, and every fund 
manager and trustee shall maintain and preserve for such period or periods 
as the may be prescribed by the IRR, such accounts, books, and other 
documents as constituting the record forming the basis for financial 
statements required to be filed pursuant to this Law. 
@) All accounts, books and other records required to be maintained and 
preserved by any person pursuant to subsection (a) shall be subject to 
examination by the appropriate regulatory agency. 
SECTION 45. Salaries and Emoluments. - No member of the board 
of directors or any executive officer of a CIS, fund manager, trustee, 
insurance company or CIS distributor shall receive, directly or indirectly, any 
salary or emolument from the CIS at a rate higher than that fixed by the 
appropriate regulatory agency after taking into consideration the experience 
and qualifications of the director or officer concerned; the amount and nature 
of securities issued; the size and standing of the CIS in the business 
community; the volume of business done by the CIS; the number of years the 
CIS has been in business; and other pertinent conditions and circumstances 
that the appropriate regulatory agency may prescribe. 
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SECTION 46. Marketing, 
Operational 
and Promotional 
Expenses and fees charged to CIS inuestors. - In no case shall the 
marketing, operational and promotional expenses of the CIS, and the fees 
charged to the CIS investors, exceed such limitations as the appropriate 
regulatory agency may prescribe pursuant to the IRR. 
SECTION 47. Changes in Investment Policy - Proposals to change 
the investment policies shall be subject to approval by the CIS investors 
pursuant to Section 40 hereof and by the Commission. The fund manager, 
trustee or insurance company shall disseminate to all CIS investors all 
material information pertaining to proposals to amend the investment 
policies and objectives. The Commission shall prescribe by rule or regulation 
the requirements for changes in investment policies. 
SECTION 48. Dissolution - (a) The corporate 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. In CIS other than a separate account fund, dissolution is agreed 
upon in a resolution of the CIS investors owning at least the 
majority interest in a CIS at a meeting duly held; Provided, that 
the IRR may prescribe a different percentage interest taking 
into account the nature and size of the CIS and the number of 
CIS investors; Provided, further, 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; and Provided, finally, that dissolution of separate 
account funds shall be governed by the relevant rules and 
regulations of the Insurance Commission; 
3. Dissolution is required by a lawful 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; provided that 
the appropriate regulatory agency shall not issue an order of 
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dissolution within six months from the issuance of the 
suspension or revocation order; 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; 
Provided, that the CIS may not be dissolved whenever: 
(i) The appropriate regulatory agency orders the transfer of the 
CIS to a willing and qualified fund manager, trustee or 
insurance company; 
(ii) The dissolution or 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, as the case 
may be; and 
(iii)The new company that is established as a result of the 
consolidation of trust institutions, insurance companies or 
fund managers promptly obtains a license to act as trustee, 
insurance company or fund manager, as the case may be. 
(b) Upon dissolution, the fund manager shall transfer the CIS property 
to the CIS investors as prescribed by the CIS plan and in accordance with the 
IRR. 
SECTION 49. 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 a majority interest in each of the CIS to be merged or 
consolidated in a meeting duly called for the purpose; 
The IRR shall prescribe the procedures and requirements for merger or 
consolidation in the public interest and for the protection of investors. 
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TITLE IV - SPECIAL RULES GOVERNING ESTABLISHMENT OF 
CONTRACTUAL CIS BY TRUST INSTITUTIONS AND INSURANCE 
COMPANIES 
SECTION 50. Establishment of Contractual CIS by Trust 
Institutions and Insurance Companies- (a) Any trust institution or 
insurance company may establish a contractual CIS, subject to the following 
provisions: 
The trust institution or insurance company may engage the services of 
a fund manager; Provided, that no director and/or officer of the trust 
institution or insurance company shall at the same time serve as director 
andlor officer of the fund manager; Provided, further, that the trust 
institution or insurance company shall not engage a fund manager which is 
an affiliate of the trust institution or insurance company, unless it complies 
with the requirements of paragraph (b) (2) of this Section. 
@) 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 
Law, the trust institution or insurance company shall comply 
with and observe the duties, responsibilities and prohibitions of 
a fund manager under Sections 8 and 9 hereof; 
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 
in accordance with such rules as the IRR shall prescribe, all of 
whom shall have the qualifications and none of 
the 
disqualifications of an independent director, or may be a 
juridical entity organized and existing pursuant to the IRR. 
2. 
The independent oversight body shall have the following duties and 
responsibilities: 
1. 
Monitor the activities of the CIS distributors in the sale 
andlor 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 matter 
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which is inconsistent with the provisions of the CIS plan, 
this Law and its implementing rules and regulations; 
Ensure that the management and investments of the CIS 
funds are in accordance with the CIS plan; 
Ensure that the trust institution or insurance company 
remedies any breach of the CIS plan or any contravention 
of the provisions of this Law or its implementing rules 
and regulations; 
Ensure that CIS funds, assets and properties are clearly 
identified and held separately from the trust institution’s 
or insurance company’s own properties and other 
properties held in trust; 
Ensure that all payments out of CIS funds, assets and 
properties are made in accordance with the CIS plan, this 
Law and its implementing rules and regulations; 
Monitor the existence of conflict of interest situations and 
address the same for the best interests of the CIS 
investors; 
Instruct the trust institution or insurance company to 
remedy a breach of the provisions or covenants of the CIS 
plan, the provisions of this Law or its implementing rules 
and regulations; and 
Report to the Commission and/or appropriate regulatory 
agency any breach of the provisions or covenants of the 
CIS plan, the provisions of this Law or its implementing 
rules and regulations that (i) relates to the establishment, 
operation or dissolution of the CIS, and (ii) has had or is 
likely to have a material adverse effect on the interests of 
the CIS investors. 
TITLE V- ASSOCIATION OF CIS 
SECTION 51. Membership in the Association of CIS- For the 
further protection of the CIS investors, all corporate CIS, and all fund 
managers, trustees, and insurance companies engaged or involved in CIS 
shall be members of the association of CIS duly accredited by the Commission 
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within one (1) year from the approval of this Law. Such corporate CIS, fund 
managers, trustees and insurance companies which are newly established or 
authorized to engage in CIS shall be registered members of the association 
within sixty (60) days after the Commission and/or appropriate regulatory 
agency shall have approved their registration or authorization. The 
association shall work with the regulators and Congress to ensure that the 
best laws and regulations are enacted and enforced for the protection of the 
investors and to promote the growth of the CIS industry. 
TITLE VI - CIS INVESTORS PROTECTION FUND 
SECTION 52. Establishment of the CIS Investors Protection 
Fund -The Commission may, in consultation with the other appropriate 
regulatory agencies, establish or facilitate the establishment of a CIS 
investors protection fund, for the purpose of compensating CIS investors for 
the extraordinary losses or damage they may suffer due to fraud or 
mismanagement or business failure other than market decline in the 
investment portfolio, subject to such rules and regulations as the Commission 
may from time to time prescribe or approve in the public interest. The 
Commission, having due regard for the public interest and the protection of 
investors, shall regulate, supervise, examine, suspend or otherwise 
discontinue such funds under rules which the Commission may prescribe. In 
the performance of such functions, the Commission may take over custody 
and management of the fund itself as well as investments in and 
disbursements from the fund under such forms of control and supervision by 
the Commission as it may from time to time require. The authority granted 
to the Commission under this section shall also apply to all funds established 
for the protection of CIS investors, whether established by the Commission or 
otherwise. 
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TITLE VII - SUPERVISION AND ENFORCEMENT 
SECTION 63. Powers and Functions of the Commission and 
Appropriate Regulatory Agencies - The Commission shall, at all times, act 
with transparency and dispatch and shall have, among others, the following 
powers and functions: 
(a) Primary jurisdiction and supervision over the registration, 
distribution and sale of all CIS securities; 
@)Approve, amend, renew or deny any license, registration or 
certificate issued by the Commission under this Law; 
(c) Fix and assess fees and/or charges as it may find reasonable in the 
exercise of regulation; 
(d) Regulate, supervise and monitor, in coordination with the 
appropriate regulatory agency, the operations, management and/or 
activities of all CIS, fund managers, CIS distributors and CIS 
solicitors to ensure compliance with the provisions of this Law, the 
IRR and other applicable laws, rules and regulations, including but 
not limited to the power to: 
1. Revoke or nullify CIS investments which are contrary to 
existing laws and regulations; and 
2. Demand the conversion of CIS investments into cash or other 
liquid assets to protect the interests of the CIS investors. 
(e) In coordination with the appropriate regulatory agency, order the 
refund or return of any monies or investments to CIS investors in 
appropriate cases or in accordance with such rules and regulations 
as the Commission may prescribe and in coordination with the 
appropriate regulatory agency; 
(Q In coordination with the appropriate regulatory agency, issue cease 
and desist orders to prevent fraud and injury to the investing 
public; 
(g) In coordination with the appropriate regulatory agency, issue 
subpoena duces tecum 
and ad testificandum, order the 
examination, search and seizure of documents, papers, files, tax 
returns, books of accounts and other records, in whatever form, of 
any entity or person under investigation; 
(h) Punish for contempt of the Commission, both direct and indirect, in 
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accordance with the pertinent provisions of and penalties 
prescribed by the Rules of Court; 
(i) In coordination with the appropriate regulatory agency, impose 
sanctions, institute cases and/or prosecute offenders for violation of 
this Law, related laws, rules, regulations and orders issued 
pursuant thereto, in coordination with the appropriate regulatory 
agency; 
0') Suspend or revoke registrations and/or licenses issued by the 
Commission; 
(k) Enlist the aid and support of and/or deputize any and all 
enforcement agencies of the Government in the implementation of 
its powers and exercise of its functions under this Law; 
(1) In coordination with the appropriate regulatory agency, take over a 
CIS or fund manager which fails to comply with this Law, related 
laws, rules, regulations and orders issued pursuant thereto, either 
through the appointment of a conservator, receiver or liquidator, in 
coordination with the appropriate regulatory agency; 
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Jointly with the other appropriate regulatory agencies, issue, 
amend or repeal implementing rules and regulations in accordance 
with Section 62 and orders for the proper enforcement of this Law, 
and issue opinions and provide guidance on and supervise 
compliance with such rules, regulations and orders; 
(n) Formulate policies and recommendations on issues concerning CIS, 
including proposed legislation; 
(0) Retain and utilize, in addition to its annual budget, an amount up 
to One Hundred Million Pesos (P 100,000,000.00) of the fees, 
charges and other income derived from the regulation of CIS;_and 
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(p) Exercise such other powers as may be provided by law as well as 
those which may be implied from, or which are necessary or 
incidental to carry out the express powers granted the Commission 
to achieve the objectives and purposes of this Law. 
SECTION 54. Solidary Liability - (a) The fund manager, trustee 
and/or insurance company shall be jointly and severally liable for all losses 
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and damages that CIS investors may suffer as a result of any violation by the 
fund manager, trustee andlor insurance company of this Law, its 
implementing rules and regulations, or their failure to observe and comply 
with the terms and conditions of the CIS plan. 
(b) The directors and/or officers of the CIS, fund manager, trustee 
and/or insurance company shall also be liable jointly and severally liable for 
all losses and damages that CIS investors may suffer as a result of any 
violation by the corporate CIS, trustee and/or insurance company of this Law, 
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 and officers 
recover their liability from the CIS, fund manager, trustee and/or insurance 
company. 
(c) If the offender is a corporation or other juridical entity, the 
administrative sanctions and/or criminal penalties may in the discretion 
of the Commission or the court be imposed upon such corporation or other 
juridical entity and upon the officer or officers of the corporation or entity 
responsible for the violation, and if such officer is an alien, he shall in 
addition to the penalties prescribed, be deported without further 
proceedings after service of sentence. 
SECTION 55. Investigations, Injunctions and Prosecution of 
Offences. (a) The Commission may, in its discretion, and in coordination 
with the appropriate regulatory agency, make such investigations as it deems 
necessary to determine whether any person has violated or is about to violate 
any provision of this Law, any rule, regulation or order thereunder, and may 
require or permit any person to file with it a statement in writing, under oath 
or otherwise, as the Commission shall determine, as to all facts and 
circumstances concerning the matter to be investigated. The Commission 
may publish information concerning any such violations, and to investigate 
any fact, condition, practice or matter which it may deem necessary or proper 
to aid in the enforcement of the provisions of this Law, in the prescribing of 
rules and regulations thereunder, or in securing information to serve as a 
basis for recommending further legislation concerning the matters to which 
this Law relates: Provided, however, That any person requested or 
subpoenaed to produce documents or testify in any investigation shall 
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simultaneously be notified in writing of the purpose of such investigation: 
Provided, further, That all criminal complaints for violations of this Law, and 
the implementing rules and regulations enforced or administered by the 
Commission shall be referred to the Department of Justice for preliminary 
investigation and prosecution before the proper court: Provided, furthermore, 
That in instances where the law allows independent civil or criminal 
proceedings of violations arising from the same act, the Commission shall 
take appropriate action to implement the same: Provided, finally, That the 
investigation, prosecution, and trial of such cases shall be given priority. 
(b) For the purpose of any such investigation, or any other proceeding 
under this Law, the Commission or any officer designated by it is empowered 
to administer oaths and affirmations, subpoena witnesses, compel 
attendance, take evidence, require the production of any book, paper, 
correspondence, memorandum, or other record which the Commission deems 
relevant or material to the inquiry, and to perform such other acts necessary 
in the conduct of such investigation or proceedings. 
(c) Whenever it shall appear to the Commission that any person has 
engaged or is about to engage in any act or practice constituting a violation of 
any provision of this Law, any rule, regulation or order thereunder, it may 
issue an order to such person to desist from committing such act or practice. 
After finding that such person has engaged in any such act or practice and 
that there is a reasonable likelihood of continuing, further or future 
violations by such person, the Commission may issue ex-parte a cease and 
desist order for a maximum period of ten (10) days, enjoining the violation 
and compelling compliance with such provision. The Commission may 
transmit such evidence as may be available concerning any violation of any 
provision of this Law, or any rule, regulation or order thereunder, to the 
Department of Justice, which may institute the appropriate criminal 
proceedings under this Law. 
(d) Any person who, within his power but without cause, fails or refuses to 
comply with any lawful order, decision or subpoena issued by the Commission 
shall after due notice and hearing, be guilty of contempt of the Commission. 
Such person shall be fined in such reasonable amount as the Commission 
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may determine, or when such failure or refusal is a clear and open defiance of 
the Commission's order, decision or subpoena, shall be detained under an 
arrest order issued by the Commission, until such order, decision or subpoena 
is complied with. 
SECTION 56. Cease and Desist Order. (a) The Commission, after 
proper investigation or verification, motu proprio, or upon verified complaint 
by any aggrieved party, may issue a cease and desist order without the 
necessity of a prior hearing if in its judgment the act or practice, unless 
restrained, will operate as a fraud on investors or is otherwise likely to cause 
grave or irreparable injury or prejudice to the investing public. 
(b) Until the Commission issues a cease and desist order, the fact that an 
investigation has been initiated or that a complaint has been filed, including 
the contents of the complaint, shall be confidential. Upon issuance of a cease 
and desist order, the Commission shall make public such order and a copy 
thereof shall be immediately furnished to each person subject to the order. 
(c) Any person against whom a cease and desist order was issued may, 
within five (5) days from receipt of the order, file a formal request for a lifting 
thereof. Said request shall be set for hearing by the Commission not later 
than fifteen (15) days from its filing and the resolution thereof shall be made 
not later than ten (10) days from the termination of the hearing. If the 
Commission fails to resolve the request within the time herein prescribed, the 
cease and desist order shall automatically be lifted. 
SECTION 57. Administrative Sanctions. (a) If, after due notice and 
hearing, the appropriate regulatory agency finds that: (a) there is a violation 
of this Law, its rules, or its orders; (b) any fund manager, trustee, insurance 
company, corporate 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; (c) any person has, in a CIS plan 
or in other reports, applications, accounts, records or documents required by 
law or rules 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 (d) 
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any person has refused to permit any lawful examinations into its affairs, 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: 
Suspension or revocation of the license of such person; 
A fine of no less than Ten thousand pesos (Pl0,OOO.OO) nor more 
than One million pesos (Pl,OOO,OOO.OO) plus not more than Two 
thousand pesos (P2,OOO.OO) for each day of continuing violation; 
Disqualification from being an officer, member of the board of 
directors, or person performing similar functions, of the fund 
manager, trustee, insurance company, corporate CIS or CIS 
Distributor; and 
Other penalties within the power of the appropriate regulatory 
agency to impose. 
@) The imposition of the foregoing administrative sanctions shall be 
without prejudice to the filing of criminal charges against the 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 fees and other dues collectible under this Law. 
SECTION 58. Criminal penalties. The following acts are criminal in 
nature and shall be penalized as follows: 
(a) 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 and fine in the amount of fifty thousand 
pesos (P50,OOO.OO) to five hundred thousand pesos (P500,OOO.OO). 
(b) Selling or offering for sale a CIS security by unregistered persons 
shall be penalized by imprisonment of one (1) year and fine 
equivalent to triple the contract price of each of the CIS securities 
sold; 
(c) Selling or offering for sale CIS securities of a CIS plan that has not 
been registered pursuant to this Law shall be penalized by 
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imprisonment of one (1) year and fine equivalent to triple the 
contract price of each of the CIS securities sold or offered for sale; 
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(d) 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,OOO.OO) to five hundred thousand pesos 
(P500,OOO.OO); 
(e) 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 one 
hundred thousand pesos (PlO0,OOO.OO) 
to one million pesos 
(Pl,000,000.00); and 
(0 Violation of the provisions of this Law, the IRR or orders of the 
appropriate regulatory agency, provided that repeated violations 
shall constitute prima facie evidence against the offender, 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 one million pesos (Pl,OOO,OOO.OO). 
SECTION 59. Adjudicatory power. (a) The Commission shall have 
the power to adjudicate any and all claims involving CIS amounting to not 
more than One Million Pesos (Pl,OOO,OOO.OO) for each CIS Investor. The 
proceedings before the Commission shall be summary in nature, and the 
decision of the Commission shall be final and executory if the amount 
granted does not exceed Five Hundred Thousand Pesos (P 500,000.00). 
(b) Claims filed with the Commission shall not be subject to the payment 
of filing fees. 
(c) The authority to adjudicate granted to the Commission under this 
section shall be concurrent with that of the civil courts, but the filing of a 
complaint with the Commission shall preclude the civil courts from taking 
cognizance of a suit involving the same subject matter. 
(d) The Commission, 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 Commission may prescribe. 
SECTION 60. Duty of the Regulator - In 'view of the nature of the 
CIS as one impressed with public interest, the officers and employees of the 
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appropriate regulatory agencies are strictly enjoined to monitor, enforce and 
ensure compliance with the provisions of this Law and its implementing rules 
and regulations. Failure to do so shall be dealt with under existing laws and 
regulations in the gravest degree. 
TITLE M - MISCELLANEOUS PROVISIONS 
SECTION 61. Transitory Provisions. - Any corporate or contractual 
CIS which at the time of the effectivity of this Law has been established and 
has continued to exist, shall be considered registered and licensed under the 
provision of this Law and its implementing rules and regulations and shall be 
subject to and governed by the provisions hereof; provided, however, that 
compliance with the applicable provisions of the Law, may be deferred for 
such reasonable time as the Commission may determine but not to exceed 
two (2) years from approval of this Law. 
SECTION 62. Implementing Rules and Regulations. - The 
appropriate regulatory agencies, with the Commission as the lead agency, 
shall coordinate and jointly issue the IRR to implement this Law. 
In 
adopting and issuing the IRR, the Commission and the appropriate 
regulatory agencies shall be guided by and adhere to the declaration of policy 
contained in Section 2 and the other relevant provisions of this Law. The IRR 
shall pertain to the following matters, in addition to other matters in 
connection with which other provisions of this Law may require the 
appropriate regulatory agencies to issue rules and regulations: 
a. Registration, amendment and suspension of CIS plans; 
b. Distribution, sale and marketing of CIS securities; 
c. Qualification and disqualification standards for directors and 
officers of the fund manager, corporate CIS, CIS distributors, 
independent oversight committee, CIS solicitor and other parties 
involved in CIS; 
d. Qualified and/or eligible CIS investments; 
e. Disclosure requirements on the terms and conditions of the CIS 
investments and material information regarding CIS operations; 
f. Minimum requirements for inculcating financial literacy in 
investors; 
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g. Ascertainment of'client suitability for CIS securities; 
h. Record-keeping, reporting and audit requirements of the fund 
manager, corporate CIS, trustee, custodian and other relevant 
parties in the CIS pertaining to records of all contributions, 
earnings, total account balances and other matters; 
i. Regulation, supervision and monitoring the operations, 
management andlor activities of all CIS, fund managers, CIS 
distributors, CIS solicitors and other parties involved in CIS; 
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k. Such other matters necessary and desirable for the proper and 
effective implementation of this Law. 
The IRR may be repealed, amended or supplemented at any time in 
the same manner as the original IRR are adopted and issued pursuant to this 
The IRR and its amendments or supplements shall be published once a 
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SECTION 63. Cooperation and Coordination. - The appropriate 
regulatory agencies, with the Commission as the lead agency, shall adopt all 
other appropriate measures as may be necessary or desirable for the effective 
implementation and enforcement of this Law, taking into full account 
declaration of policy contained in Section 2. 
SECTION 64. Effect on Existing Laws and Contracts. - The 
rights and remedies provided by this Law shall be in addition to any and all 
other rights and remedies that exist under existing laws. 
Nothing in this Law shall impair the obligation of existing contracts 
nor affect or be construed to affect existing criminal, civil or administrative 
cases. 
SECTION 65. Separability clause. -Any portion or provision of this 
Law that may be declared unconstitutional or invalid shall not have the effect 
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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. 
SECTION 66. Suppletory Effect - This Law shall apply suppletorily 
to any law that may be hereinafter enacted on collective investment schemes 
governing specialized products or investments. 
SECTION 67. Repealing Clause. - All acts, laws, executive orders 
and/or rules and regulations or any part thereof which are inconsistent with 
the provisions of this Law are hereby repealed or modified accordingly. 
SECTION 68. Effectivity Clause. - This Law shall take effect upon 
its approval. 
Approved, 
i Section 4. COVERAGE - SEC proposal adopted (April 21, 2006) ; add "Securities Market Professionals" in 
ii "Affiliated person" = TWG adopted the definition in SBN 211 as is (April 21,2006) 
iii "Bank" - Based on the definition under the General Banking Law @.A No. 8791); BSP proposal adopted (April 
iv "Broker" - PSE proposal adopted (April 21, 2006) 
v "Certified Investment Solicitor'' Adopted ICAF' proposal (April 21, 2006) 
vi "Common Stock" - Definition based on TWG discussion (April 21,2006) 
vii "ControP' . SEC proposal adopted (April 21,2006) 
viii "Convicted" The TWG decided to maintain the definition provided under SBN 211, subject to further 
deliberation 
ix "Dealer" PSE proposal adopted (April 21, 2006) 
x "Director" - Chairman Lim stressed that the term "director" may mean a "trustee" for it refers to any person 
performing similar functions with respect to the organization. (April 21, 2006) 
xi "Exchange" - PSE proposal adopted (April 21, 2006) 
xii "Investment company Manage?' -Adopted ICAP proposal (April 21,2006), for further discussion 
xiii '"Insurance Company Manage? . Adopted ICAP proposal (April 21, 2006) 
xiv '"Investment Adviser" - Contained in Atty. Callangan's email dated 18 July 06. 
xv "Net Asset Value" . Based on the provisions of the Manual of Regulations for Banks regarding Net Asset Value of 
the UTIF; BSP proposal adopted (April 21, 2006). The definition was further revised on June 16,2006 
xvi "Person" -definition retained from SBN 211 (April 21, 2006) 
xvii "Sale", "sell" "offer to sell' . Definition adopted from SBN 211 (June 16, 2006) 
xviii "Securities Regulation Code" - Definition adopted June 16,2006 
xix "Separate Account Fund" - term introduced by ICAF'on June 30,2006 
xx IC proposal, adopted on September 18,2006. 
xxi Section I. Definition of an Investment company - (h)(l) - suggestion by SEC to change to "nineteen persons" was 
adopted by the TWG (June 30, 2006) 
Definition of terms, assigned to SEC 
21, 2006) 
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