SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINE 
Second Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 26 B 4 
Introduced by SENATOR SONNY ANGARA 
COLLECTIVE INVESTMENT SCHEMES LAW 
EXPLANATORY NOTE 
·15 
MAR 10 P6 :36 
A 2014 study on the development of mutual funds in the Philippines have shown that 
mutual funds and other forms of collective investment schemes (CIS) have been thriving in the 
country in recent years as evidenced by the increasing amount of assets under management 
and the growing number of investors. However, compared with other ASEAN countries, the 
Philippine mutual fund industry still lags behind and shows potential for further growth. 
To ensure stability and consistency of regulation of all forms of CIS, existing differences 
in regulatory and tax treatment of CIS, as provided by varying laws and regulations, must be 
eliminated. Thus, this bill seeks the establishment of a favorable and comprehensive regulatory 
framework that will allow companies to facilitate the flow of investments and broaden investor 
participation. This bill also provides for a sole tax regime among the different forms of CIS. 
The proposed measure further aims to balance the interests of the investors, by 
incorporating mechanisms that would safeguard the public interest, as well as recognize 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 
and reaping the benefits thereof. The economy, in turn, is expected to benefit greatly from an 
expanded capital base. 
Moreover, the Philippine mutual fund industry has to be prepared for the eventual 
ASEAN regional integration, with free movement of goods, services, investment, skilled labor, 
including capital under the 2015 ASEAN Economic Community. There is already an initiative 
called the ASEAN CIS Framework to launch cross-border offering of CIS, which has now initially 
operated in Malaysia, Thailand and Indonesia. 
Under the framework, a company that has registered securities in the Philippines can 
bring the registration to other countries and offer shares to the citizens of those countries. With 
greater opportunities and risks brought by this regional and global integration, there is an urgent 
need to strengthen our regulatory framework to prepare local investment companies to compete 
with regional counterparts which in turn, can help develop the industry by providing wider 
investment opportunities in foreign markets. 
In view of the foregoing, the passage of the proposed measure is urgently sought. 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINE 
Second Regular Session 
) 
) 
) 
'15 
MAR 10 P6 :36 
SENATE 
Senate Bill No. 2684 
Introduced by SENATOR SONNY ANGARA 
COLLECTIVE INVESTMENT SCHEMES LAW 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
1 
TITLE I - GENERAL PROVISIONS 
2 
SECTION 1. Short Title - This Law shall be known as the "Collective 
3 
Investment Schemes Law". 
4 
SECTION 2. Declaration of Policy - It is the policy of the state to: 
5 
(a) Promote investor protection by applying high governance standards in 
6 
the establishment, management and operation of collective investment 
7 
schemes and the registration and sale of CIS securities in order to 
8 
prevent abuse and protect the interests of the investing public, 
9 
including but not limited to, the setting of standards for the eligibility of 
10 
persons who establish, manage or operate collective investment 
11 
schemes and register and sell CIS securities; the prevention, 
12 
disclosure and elimination of all conflicts of interest which may 
13 
prejudice the investing public; and the provision of independent third 
14 
party supervision over the operations of collective investment 
15 
schemes; 
16 
(b) Promote the growth of pooled investments and the development of the 
17 
capital market by providing a favorable framework for collective 
18 
investment schemes to facilitate the flow of investment capital from 
19 
sources within the country and abroad; 
20 
(c) Encourage the participation in the collective investment scheme 
21 
industry of the best qualified fund managers and investment advisers 
1 


1 
regardless of origin; 
2 
(d) Broaden participation by Filipinos in ownership of securities and other 
3 
assets allowed in this law so that more are able to share in economic 
4 
growth; and 
5 
(e) Provide equal protection to investors in all similar collective investment 
6 
schemes, impose the same requirements and provide the same 
7 
competitive environment for such schemes and the participants 
8 
therein. 
9 
SECTION 3. Purpose -
The purpose of this Law is to establish a 
10 
comprehensive regulatory and tax framework to enable collective investment 
11 
schemes and all the participants therein to playa key role in the development of 
12 
the capital market in a manner consistent with the policy declared in Section 2 
13 
hereof. 
14 
SECTION 4. Coverage-This Law shall apply to the establishment, 
15 
management and operation of all collective investment schemes and the 
16 
registration and sale of CIS securities in the Philippines. 
17 
SECTION 5. Definitions-When used in this Law, unless the context 
18 
otherwise requires: 
19 
(a) "Affiliate" of another person means: 
20 
1. any person directly or indirectly owning, controlling or holding with 
21 
power to vote, ten per centum (10%) or more of the outstanding 
22 
voting securities of such other person; 
23 
2. any person ten per centum (10%) or more of whose outstanding 
24 
voting securities are directly or indirectly owned, controlled, or held 
25 
with power to vote, by such other person; 
26 
3. any person directly or indirectly controlling, controlled by, or under 
27 
common control with, such other person; 
28 
4. any officer, director, partner, or employee of such other person; and 
29 
5. if such other person is a corporate CIS, any investment adviser, 
30 
fund manager, CIS distributor, CIS solicitor and custodian thereof. 
31 
(b) "Appropriate regulatory agency" refers to: 
32 
1. the 8angko Sentral ng Pilipinas, in the case of banks, trust entities 
33 
and other financial institutions supervised by the 8angko Sentral 
34 
ng Pilipinas; 
35 
2. the Insurance Commission, in the case of insurance companies 
2 


1 
and other persons regulated by the Insurance Commission; and 
2 
3. the Securities and Exchange Commission, in the case of 
3 
investment companies or other persons not under the regulation of 
4 
the Bangko Sentral ng Pilipinas or the Insurance Commission. 
5 
(c) "Bank" means an entity engaged in the lending of funds obtained from 
6 
the public through the receipt of deposits of any kind and duly authorized 
7 
to operate as a bank by the Monetary Board of the Bangko Sentral ng 
8 
Pilipinas. 
9 
(d) "Broker" means any juridical person duly licensed by the appropriate 
10 
regulatory agency and accredited by the appropriate self regulatory 
11 
organization to engage in the business of buying and selling securities for 
12 
the account of others, but does not include a bank or any person solely by 
13 
reason of the fact that such person is a CIS or a distributor of CIS 
14 
secu rities. 
15 
(e) "CIS distributor" means any stock corporation or broker licensed by the 
16 
appropriate regulatory agency to engage in the selling of CIS securities. 
17 
(f) "CIS investor" means any person who purchases or otherwise invests in 
18 
CIS securities. 
19 
(g) "CIS plan" means the plan for the registration and sale of CIS securities 
20 
filed with the Commission in accordance with Sections 24, 26, 29 and 30 
21 
hereof, which shall be in lieu of the registration statement required to be 
22 
filed pursuant to the Securities Regulation Code for the sale and offer for 
23 
sale of securities to the public. 
24 
(h) "CIS securities" means units of participation or similar interests in a 
25 
contractual CIS or shares of stock or similar interests in a corporate CIS. 
26 
(i) "CIS solicitor" means a natural person who is duly licensed as such by 
27 
the appropriate regulatory agency to sell CIS securities. 
28 
G) "Collective investment scheme" or "CIS" shall have the meaning given 
29 
in Section 6 hereof. 
30 
(k) "Commission" means the Securities and Exchange Commission. 
31 
(I) "Common stock" of a corporation means a class of shares with general 
32 
voting rights. 
33 
(m)"Company" means a corporation, partnership, trust, or an association 
34 
duly registered with the Commission and lawfully transacting business in 
35 
the Philippines. 
36 
(n) "Contractual CIS" means a CIS: 
37 
1. organized pursuant to a contract, such as a trust indenture, or as 
38 
an investment component of an insurance contract; 
3 


1 
2. engaged, or holds itself out as being engaged, or proposes to 
2 
engage, in the business of investing, reinvesting, and/or trading in 
3 
securities or other investment assets allowed under this Law; and 
4 
3. that issues units of participation each of which represents an 
5 
undivided interest in a pool of investment assets. 
6 
(0) "Control" is presumed to exist when the parent owns, directly or . 
7 
indirectly through subsidiaries, more than one half of the voting power of 
8 
an entity unless, in exceptional circumstances, it can be clearly 
9 
demonstrated that such ownership does not constitute control. Control 
10 
also exists even when the parent owns half or less of the voting power of 
11 
an entity when there is: 
12 
1. power over more than one half of the voting rights by virtue of an 
agreement with other investors; 
13 
14 
2. power to govern the financial and operating policies of an entity 
15 
under a statute or an agreement; 
16 
3. power to appoint or remove the majority of the members of the 
17 
board of directors or equivalent governing body and control of the 
18 
entity is by that board or body; 
19 
4. power to cast the majority of votes at meetings of the board of 
20 
directors or equivalent governing body and control of the entity is by 
21 
that board or body; or 
22 
5. any other arrangement similar to any of the above. 
23 
(p) "Convicted" includes being the subject of a verdict, judgment, or plea of 
24 
guilty in the first instance, if such verdict, judgment or plea has not been 
25 
reversed, set aside, or withdrawn, whether or not sentence has been 
26 
served. 
27 
(q) "Corporate CIS" means a CIS: 
28 
1. organized as a stock corporation; 
29 
2. engaged, or holds itself out as being engaged, or proposes to 
30 
engage, in the business of investing, reinvesting, and/or trading in 
31 
securities or other investment assets allowed under this Law; and 
32 
3. that issues common stock each of which represents an undivided 
33 
interest in a pool of investment assets. 
34 
(r) "Corporation Code" means the Corporation Code of the Philippines, 
35 
Batas Pambansa Big. 68, enacted on May 1, 1980, as may be amended 
36 
from time to time, or any law subsequently enacted in replacement or 
37 
substitution thereof. 
38 
(s) "Custodian" means an entity duly authorized by the Monetary Board of 
4 


1 
the Bangko Sentral ng Pilipinas to engage in the business of safekeeping 
2 
investment assets, which is appointed and acts as the custodian of the 
3 
investment assets of a CIS pursuant to this Law and the relevant 
4 
regulations of the Monetary Board of the Bangko Sentral ng Pilipinas 
5 
and/or the Commission. 
6 
(t) "Dealer" means any person duly licensed by the appropriate regulatory 
7 
agency and accredited by the appropriate self regulatory organization to 
8 
buy and sell securities for his own account, in the ordinary course of 
9 
business whether through a broker or otherwise. 
The term excludes 
10 
banks, insurance companies, or CIS, or any person insofar as he is 
11 
engaged in investing, reinvesting, or trading in securities, or in owning or 
12 
holding securities, for his own account, either individually or in some 
13 
fiduciary capacity, but not as a part of regular business. 
14 
(u) "Director" means a director of a corporation or any person performing 
15 
similar functions with respect to any organization. 
16 
(v) "Exchange" means an organized marketplace or facility duly licensed by 
17 
the Commission that brings together buyers and sellers and executes 
18 
trades of securities and/or commodities. 
19 
(w) "Fund manager" means a juridical person engaged in the business of 
20 
managing the investment assets of a CIS and/or engaged in the business 
21 
of providing administrative and ancillary services for such CIS as licensed 
22 
by the appropriate regulatory agency in accordance with Section 7, and 
23 
having the duties and responsibilities enumerated in Section 8 hereof. 
24 
(x) "General Banking Law" means Republic Act No. 8791, as may be 
25 
amended from time to time, or any law subsequently enacted in 
26 
replacement or substitution thereof. 
27 
(y) "Implementing Rules and Regulations" means the uniform rules and 
28 
regulations jointly formulated and issued by the appropriate regulatory 
29 
agencies to implement the provisions of this Law, in accordance with 
30 
Section 56 hereof. 
31 
(z) "Independent auditor" means the independent external certified public 
32 
accountant referred to in Section 18 hereof. 
33 
(a a) "Independent director" refers to a person other than an officer or 
34 
employee of the corporation, its affiliates, or any other individual having 
35 
any relationship with the corporation which would materially interfere with 
36 
the exercise of independent judgment in carrying out the responsibilities 
37 
of a director. An independent director shall possess the degree of 
38 
independence and all the qualifications and none of the disqualifications 
5 


1 
for independent directors as defined in the Securities Regulation Code 
2 
and its implementing rules and regulations. 
3 
(bb) 
"Independent oversight body" refers to the body or entity 
4 
referred to in Section 50 (b) (2) hereof. 
5 
(cc) 
"Insurance Code of the Philippines" means Presidential Decree 
6 
No. 1460 otherwise known as 'The Insurance Code of 1978', as 
7 
amended, or any law subsequently enacted in replacement or substitution 
8 
thereof. 
9 
(dd) 
"Insurance company" means a company engaged in the 
10 
insurance or reinsurance business and duly issued by the Insurance 
11 
Commission with a certificate of authority to transact such business, as 
12 
specifically defined under the Insurance Code of the Philippines." 
13 
(ee) 
"Investment adviser" means any person who regularly advises or 
14 
recommends investment decisions with regard to the securities or other 
15 
portfolio of a CIS pursuant to an advisory contract with such CIS through 
16 
the fund manager, trustee or insurance company. 
17 
(ff) 
"Investment assets" means the securities and other assets in 
18 
which the funds of a CIS may be invested in accordance with Section 38 
19 
hereof. 
20 
(gg) 
"Investment company" means the stock corporation organized as 
21 
a corporate CIS, which is engaged, or holds itself out as being engaged, 
22 
or proposes to engage, in the business of investing, reinvesting, and/or 
23 
trading in securities allowed under this Law. 
24 
(hh) 
"Investment house" means any enterprise which engages in the 
25 
underwriting of securities of other companies, as defined in Section 2 of 
26 
the Investment Houses Law, Presidential Decree No. 129, as may be 
27 
amended from time to time, and is registered pursuant to said law. 
28 
(ii) 
"Net asset value" means the value of all assets less all liabilities 
29 
of a CIS as determined in accordance with generally accepted accounting 
30 
principles and the provisions of this Law and its implementing rules and 
31 
regulations. 
32 
Uil 
"Organized Market" refers to an exchange or an over-the- counter 
33 
market governed by transparent and binding market conventions on price 
34 
transparency, trade reporting, market surveillance and fair and orderly 
35 
conduct/operations of the market. 
36 
(kk) 
"Person" means a natural or juridical person as defined in the Civil 
37 
Code of the Philippines. 
38 
(1/) 
"Redemption" refers to the liquidation of a CIS security by returning 
6 


1 
it to the issuer in exchange for its net asset value. 
2 
(mm) 
"Registrar" means the fund manager or trustee or such other 
3 
person or persons as may from time to time be appointed by the trustee, 
4 
or the fund manager with the prior approval of the trustee, to perform all 
5 
or any of the duties and functions of the registrar under Section 23 
6 
hereof. 
7 
(nn) 
"Sale", "sell" "offer to sell" or "offer for sale" means every 
8 
contract of sale or disposition of, attempt or offer to dispose of, or 
9 
solicitation of an offer to buy a security or property or interest therein, for 
10 
value. Any such security, property or interest therein, given or delivered 
11 
with, or as a bonus on account of, any purchase of securities or any 
12 
other thing, shall be conclusively presumed to constitute a part of the 
13 
subject of such purchase and to have been sold for value. 
14 
(00) 
"Security" means any instrument or product defined as such by the 
15 
Securities Regulation Code and its implementing rules and regulations. 
16 
(pp) 
"Securities Regulation Code" OR "SRC" means Republic Act 
17 
No. 8799, enacted on July 17, 2002, as may be amended from time to 
18 
time. 
19 
(qq) 
"Separate account fund" -
means the segregated portfolio of 
20 
investments established, maintained and invested in by an insurance 
21 
company for its variable life insurance contracts and accounted for 
22 
separately and apart from its other investments and accounts, pursuant 
23 
to the Insurance Code of the Philippines, under which the income, gains 
24 
and losses (whether or not realized) from, and expenses incurred on the 
25 
acquisition, disposal and management of assets allocated to such 
26 
account, are credited to or charged against such account without regard 
27 
to the other income, gains, losses and other expenses of the insurance 
28 
company. The Separate Account Fund shall be deemed a contractual 
29 
CIS, and the units of participation therein shall be deemed as CIS 
30 
securities, subject to this Law. The assets held in any such separate 
31 
account shall be applied exclusively for the benefit of the owners or 
32 
beneficiaries of the variable life insurance contracts. 
33 
(rr) 
"Shareholder" means a stockholder of a corporate CIS. 
34 
(ss) 
"Trust institution" - means any bank, investment house or a stock 
35 
corporation duly authorized by the Monetary Board of the Bangko Sentral 
36 
ng Pilipinas to engage in trust, investment management and fiduciary 
37 
business. 
38 
(U) 
"Trustee" means a trust institution appOinted and acting as the 
7 


1 
2 
(uu) 
trustee of a contractual CIS pursuant to this Law. 
"Unit Holder" - means a CIS investor in a contractual CIS. 
3 
(vv) 
"Value" means the market value or fair value of securities as may 
4 
be determined in accordance with such rules and regulations as the 
5 
appropriate regulatory agency may prescribe. 
6 
TITLE II - COLLECTIVE INVESTMENT SCHEMES 
7 
Chapter 1 - Nature and Structure of Collective Investment Schemes 
8 
SECTION 6. Col/ective Investment Schemes -
9 
(a) 
A Collective Investment Scheme is any arrangement whereby 
10 
funds are solicited from the investing public for the purpose of 
11 
investing, re-investing and/or trading in securities or other assets 
12 
allowed under this Law. All CIS shall be covered by and regulated 
13 
pursuant to this Law and its implementing rules and regulations. A 
14 
CIS may have a corporate structure, such as an investment 
15 
company, or a contractual structure, such as a unit investment trust 
16 
fund or similar scheme held by a trust institution or a separate 
17 
account fund established pursuant to a variable unit linked life 
18 
insurance policy issued by an insurance company. All CIS shall be 
19 
governed by and shall comply with the reqUirements of this Law 
20 
and the pertinent provisions of the SRC. 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
(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 
than nineteen (19) 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 
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; 
8 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
(c) 
3. Any employees' stock, bonus, pension, retirement, provident 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 
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. 
A CIS may either be open-end or closed-end, defined as follows: 
1. "Open-end CIS" means a CIS where securities are offered and 
are redeemable by the CIS; and 
9 


1 
2. "Closed-end CIS" means a CIS where a fixed number of 
2 
securities are offered in an initial public offering and thereafter 
3 
may be traded in an organized market as determined by the 
4 
Commission, but may not be redeemed by the CIS. A closed-
5 
end CIS shall not be allowed to increase its number of 
6 
securities. 
7 
Chapter 2 - Parties Involved In Collective Investment Schemes 
8 
SECTION 7. Fund manager- No company shall act as a fund manager 
9 
for a CIS unless duly licensed by the appropriate regulatory agency, and no 
10 
company shall be licensed as a fund manager for purposes of this Law, unless: 
11 
(a) It is organized as a stock corporation; 
12 
(b) It has a minimum paid-up capital of not less than One Hundred Million 
13 
Pesos (P100,OOO,OOO.OO); 
14 
(c) Provided, However, that the appropriate regulatory agency may 
15 
prescribe a higher minimum paid-up capital taking into consideration, 
among other factors: 
16 
17 
1. the risk-based principles on capital adequacy based on 
18 
internationally accepted standards; and 
19 
2. the number and/or total net asset values of all CIS managed; 
20 
(d) At least one-third (1/3) of the entire membership of the Board of 
21 
Directors of the fund manager shall be independent directors; and 
22 
(e) It has complied with such other requirements as may be prescribed by 
23 
the appropriate regulatory agency. 
24 
In licensing a fund manager, the appropriate regulatory agency 
25 
shall ensure that the requirements under this Law and its implementing 
26 
rules and regulations are complied with. 
27 
28 
SECTION 8.Duties and Responsibilities of the Fund Manager - The 
29 
fund manager shall have the following duties and responsibilities: 
30 
(a) Manage the investment assets of the CIS and perform its functions in 
31 
accordance with the CIS plan, the provisions of this Law and its 
32 
implementing rules and regulations for the exclusive interest of the CIS 
33 
investors; 
34 
(b) Provide copies of financial and other records of CIS investments to the 
35 
CIS investors, trustee, CIS and auditor; 
10 


1 
(c) Ensure that the fund and the CIS securities are accurately valued or 
2 
priced; 
3 
(d) Ensure that all payments out of CIS funds and investment assets are 
4 
made in accordance with the CIS plan, this Law and its implementing 
5 
rules and regulations; 
6 
(e) Comply with the instructions of the corporate CIS or the trustee to 
7 
remedy a breach of the provisions or covenants of the CIS plan, its 
8 
contract with the corporate CIS or trustee, the provisions of this Law or 
9 
its implementing rules and regulations; 
10 
(f) Furnish the corporate CIS or the trustee with all contracts and 
11 
agreements relating to the operation and management of the CIS; 
12 
(g) Report to the corporate CIS or the trustee and the CIS investors results 
13 
of the CIS operations; 
14 
(h) Call for and attend annual or special meetings of the unit holders of a 
15 
contractual CIS, or attend meetings of stockholders of a corporate CIS; 
16 
(i) Monitor the activities of the CIS distributors in the sale of the CIS 
17 
securities; 
18 
0) Facilitate the redemption of CIS securities; 
19 
(k) Maintain proper accounting records and other records to: 
20 
1. enable a complete and accurate review of the CIS funds and 
21 
investment assets; and 
22 
2. ensure that the CIS funds and investment assets are managed and 
23 
administered in accordance with the CIS plan, its contract with the 
24 
corporate CIS or trustee, this Law and its implementing rules and 
25 
regulations; 
26 
(I) Propose amendments to the CIS plan and secure approval for those 
27 
amendments which require investor approval in accordance with the 
28 
provisions of this Law; 
29 
(m) Report to the appropriate regulatory agency, as soon as practicable, 
30 
any material development or breach of the provisions or covenants of 
31 
the CIS plan, the provisions of this Law or its implementing rules and 
32 
regulations, that 
33 
1. relates to the establishment, management, operation or 
34 
dissolution of the CIS or to the registration and sale of CIS 
35 
securities, and 
36 
2. has had or is likely to have a material adverse effect on the 
37 
interests of the CIS investors; 
11 


1 
(n) File such information and documents to keep reasonably current the 
2 
information and documents contained in the CIS Plan; and, 
3 
(0) Such other duties and responsibilities that the appropriate regulatory 
4 
agency may prescribe. 
5 
SECTION 9. Prohibited Acts of the Fund Manager. - The fund manager 
6 
shall not: 
7 
(a) Purchase securities and investment assets for its own account which 
8 
may conflict with its obligations as fund manager; 
9 
(b) Invest CIS funds in any securities, property and assets in which such 
10 
fund manager or any of its directors, officers, employees and affiliates 
. 11 
have a substantial financial interest, subject to such exceptions and/or 
12 
guidelines as may be prescribed by the appropriate regulatory agency; 
13 
(c) Engage in a business other than the business of managing, 
14 
administering, marketing and distributing CIS funds and securities, 
15 
provided that this prohibition shall not apply if the fund manager is the 
16 
trust department of a bank or a non-bank financial institution; 
17 
(d) Payor cause to be paid out of the CIS funds any fees, commissions 
18 
and other similar expenses that have not been, or exceed what have 
19 
been, provided for in the CIS plan, this Law and its implementing rules 
20 
and regulations or any other applicable laws and regulations; 
21 
(e) Retain any rebate from, or otherwise share in any commission with, 
22 
any broker or dealer in consideration of transactions or investments of 
23 
the CIS funds. Accordingly, any rebates or shared commissions shall 
24 
be for the account of the CIS fund concerned; and 
25 
(f) Engage in such other acts as may be prohibited by rule or order of the 
26 
appropriate regulatory agency. 
27 
SECTION 10. Fund Management Agreement - (a) The agreement 
28 
between the fund manager and the trustee or the corporate CIS shall contain, 
29 
among others, provisions pertaining to: 
30 
1. Extent of services to be rendered; 
31 
2. Any restrictions or prohibitions regarding the performance of the 
32 
functions of the fund manager; 
33 
3. All compensation to be paid thereunder which shall be clearly 
34 
described in a transparent manner, and which shall be in 
35 
accordance with such requirements and 
limitations as the 
36 
implementing rules and regulations may prescribe; 
12 


1 
2 
3 
4 
5 
6 
7 
8 
4. The term of the engagement and the manner of termination thereof, 
which shall be in accordance with such requirements or limitations 
as this law and its implementing rules and regulations may 
prescribe; 
5. Reporting requirements to the trustee, corporate CIS, CIS investors 
and the appropriate regulatory agencies; and 
6. Such other terms or conditions as the implementing rules and 
regulations may prescribe. 
9 
(b) 
In all cases where the trustee or insurance company functions as a 
10 
fund manager, the foregoing provisions which should otherwise be contained in 
11 
the fund management agreement with the fund manager shall be contained in 
12 
the CIS plan. 
13 
SECTION 11. The Trustee - Only a trust institution shall act as a trustee 
14 
of a CIS. In authorizing a trust institution to engage in CIS activities, the Monetary 
15 
Board of the Bangko Sentral ng Pilipinas shall ensure that all relevant 
16 
requirements under this Law or its implementing rules and regulations shall be 
17 
complied with. The following, in addition to those prescribed under existing laws 
18 
and regulations, shall be the duties and responsibilities of a trustee of a CIS: 
19 
(a) Monitor the activities of the CIS distributors in the sale and/or 
20 
redemption of the CIS units and ensure that the provisions of any 
21 
marketing document relating to the sale or offer for sale of the CIS 
22 
securities do not contain any matter which is inconsistent with the 
23 
provisions of the CIS plan, this Law and its implementing rules and 
24 
regulations; 
25 
(b) Ensure that the management and investments of the CIS funds by the 
26 
fund manager are in accordance with the CIS plan; 
27 
(c) Ensure that the fund manager remedies any breach of the CIS plan or 
28 
the terms of its appointment as fund manager, or any contravention of 
29 
the provisions of this Law or its implementing rules and regulations; 
30 
(d) Appoint an independent third-party custodian; 
31 
(e) Ensure that CIS funds and investment assets are clearly identified and 
32 
held separately from its own properties and other properties held in 
33 
trust; 
34 
(f) Ensure that all payments out of CIS funds and investment assets are 
35 
made in accordance with the CIS plan, this Law and its implementing 
36 
rules and regulations; 
13 


1 
(g) Monitor the existence of conflict of interest situations and address the 
2 
same for the best interests of the CIS investors; 
3 
(h) Report to the appropriate regulatory agency, as soon as practicable, 
4 
any material development or breach of the provisions or covenants of 
5 
the CIS plan, the provisions of this Law or its implementing rules and 
6 
regulations that: 
7 
1. relates to the establishment, operation or dissolution of the CIS 
8 
or to the registration and sale of CIS securities, and 
9 
2. has had or is likely to have a material adverse effect on the 
10 
interests of the CIS investors; 
11 
(i) File such information and documents to keep reasonably current the 
12 
information and documents contained in the CIS Plan; 
13 
U) Call for annual or special meetings of the CIS investors in the event the 
14 
fund manager fails or refuses to do so; 
15 
(k) Propose amendments to the CIS plan and secure approval for those 
16 
amendments which require investor approval in accordance with the 
17 
provisions of this Law; and 
18 
(I) Such other duties and responsibilities that the appropriate regulatory 
19 
agency may prescribe. 
20 
SECTION 12. Corporate CIS - (a) No company shall act as a corporate 
21 
CIS unless duly licensed by the Commission, and no company shall be licensed 
22 
as a corporate CIS for purposes of this Law, unless it shall: 
23 
1. 
Be organized in the form of a stock corporation; 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
2. 
3. 
4. 
5. 
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,OOO,OOO.OO) 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 
14 


1 
6. 
Maintain at all times, if an open-end CIS, a reserve in liquid or 
2 
semi-liquid assets, equal to at least ten per centum (10%) of its 
3 
total assets, or such other percentage and in such form as the 
4 
Commission may prescribe. 
5 
(b) Notwithstanding any provision of the Corporation Code to the contrary, 
6 
no corporate CIS shall be required to comply with the minimum 
7 
subscribed and paid-up capital relative to an increase in its authorized 
8 
capital stock. 
9 
(c) The incorporators of a corporate CIS shall, at incorporation, fully pay in 
10 
cash their respective subscriptions. 
11 
(d) The Commission may prescribe such other or additional requirements 
12 
under sUbsection (a) of this section respecting the form, share 
13 
structure, and level of restrictions on capitalization and reserves, as 
14 
necessary or appropriate in the public interest or for the protection of 
15 
investors. 
16 
(e) At least one third of the entire membership of the board of directors of 
17 
a corporate CIS shall be independent directors. 
18 
SECTION 13. Custodian - Only entities duly licensed by the Monetary 
19 
Board of the Bangko Sentral ng Pilipinas may act as custodian of assets of a 
20 
CIS. 
Unless otherwise authorized by the appropriate regulatory authority taking 
21 
into account the interest of the investing public, all CIS must appoint an 
22 
independent third party custodian which shall have custody of the investment 
23 
assets of the CIS. The following, in addition to those prescribed under existing 
24 
laws and regulations, shall be the duties and responsibilities of a custodian: 
25 
(a) Hold the investment assets of a CIS in accordance with its agreement 
26 
with the trustee or the corporate CIS; and 
27 
(b) Such other duties and responsibilities that the Monetary Board of the 
28 
Bangko Sentral ng Pilipinas may prescribe, which shall include: 
29 
30 
1. Earmarking, segregation and hypothecation of the investment 
assets of the CIS; and 
31 
2. Provisions for periodic or other inspections by employees and 
32 
agents of the Monetary Board of the Bangko Sentral ng Pilipinas. 
33 
SECTION 14. Appointment of Custodian - The agreement between the 
34 
custodian and the corporate CIS or the trustee of a contractual CIS shall contain, 
35 
among others, provisions pertaining to: 
36 
1. 
Extent of services to be rendered by the custodian; 
15 


1 
2 
3 
4 
2. 
3. 
4. 
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. 
5 
SECTION 15. CIS Distributor - (a) No entity shall be licensed by the 
6 
Commission as a distributor of CIS securities, unless: 
It is organized as a stock corporation; 
7 
8 
9 
10 
11 
12 
13 
14 
15 
1. 
2. 
It has a minimum paid-up capital of at least Ten Million Pesos 
(P10,OOO,OOO.OO), or such higher capitalization to be prescribed by 
the appropriate regulatory agency taking into consideration (i) the 
risk-based principles on capital adequacy based on internationally 
accepted standards, and (ii) the number and/or total net asset value 
of all CIS distributed; and 
3. 
It has complied with such other requirements as rnay be prescribed 
by the appropriate regulatory agency. 
16 
(b) For purposes of this Law, the following juridical persons may be 
17 
licensed as a CIS distributor by the commission, provided that the requirements 
18 
under this section and the implementing rules and regulations are complied with: 
19 
1. Any fund manager; 
20 
2. Any investment house; 
21 
3. Any bank, financial institution or trust institution under the supervision 
22 
of the Bangko Sentral ng Pilipinas; 
23 
4. Any insurance broker under the supervision of the Insurance 
24 
Commission; 
25 
5. Stockbrokers duly accredited by the Commission; and 
26 
6. Other persons as may be hereinafter allowed by the Commission. 
27 
(c) A corporate CIS is not permitted to act as a distributor of securities of 
28 
which it is the issuer, unless it complies with such rules and orders as the 
29 
appropriate regulatory agency may prescribe as necessary or appropriate in the 
30 
public interest or for the protection of investors. 
31 
(d) Whenever a fund manager and/or its affiliate shall act as a CIS 
32 
distributor of the CIS of which it is the fund manager, and whenever a trustee 
33 
and/or its affiliate shall act as a CIS distributor of the CIS of which it is the 
34 
trustee, the prior written consent of the appropriate regulatory agency shall be 
35 
secured. 
16 


1 
(e) The CIS distributor shall be principally responsible for marketing, 
2 
distributing and selling CIS securities. It shall perform such other duties and 
3 
responsibilities as the implementing rules and regulations may prescribe. 
4 
SECTION 16. Marketing and Distribution Agreement -
(a) The 
5 
agreement between the CIS distributor and the corporate CIS or the trustee of a 
6 
contractual CIS shall contain, among others, provisions pertaining to: 
7 
1. 
Extent of services to be rendered by the CIS distributor; 
8 
2. 
Fees, remuneration and other expenses of the CIS distributor; 
9 
10 
11 
12 
13 
3. 
4. 
5. 
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 appropriate regulatory agency; and 
Reporting requirements. 
14 
(b) In all cases where the trustee or insurance company functions 
15 
as a CIS distributor, the foregoing provisions which should otherwise be 
16 
contained in the marketing and distribution agreement with the CIS shall be 
17 
contained in the CIS plan. 
18 
SECTION 17. CIS Solicitor- No person shall be allowed to solicit, sell or 
19 
offer to sell CIS securities unless duly licensed by the Commission after 
20 
compliance with such requirements and standards for eligibility as may 
21 
prescribed in this law and its implementing rules and regulations. 
22 
SECTION 18. Accountants and Auditors.- (a) The financial statements 
23 
of every corporate CIS, fund manager and contractual CIS shall be audited and 
24 
certified by an independent auditor duly accredited by the appropriate regulatory 
25 
agency. 
26 
(b) The following, in addition to those prescribed under existing laws and 
27 
regulations, shall be the duties and responsibilities of the independent auditor: 
28 
1. 
Report to the Board of Directors or the trustee of the CIS any 
29 
irregularity or undesirable practice in the operation of the CIS which 
30 
has come to its knowledge. Any material finding shall be reported 
31 
by the independent auditor to the appropriate regulatory agency; 
32 
33 
34 
2. 
Report to the appropriate regulatory agency non-compliance by the 
fund manager and trustee with its contractual and regulatory 
requirements; and 
17 


1 
2 
3. 
Report to the appropriate regulatory agency whether the internal 
control and audit structures in the operation of the CIS are at an 
3 
acceptable level. 
4 
5 
SECTION 19. Common Duties and Responsibilities of Parties -
In 
6 
addition to their specific duties and responsibilities, each of the corporate CIS, 
7 
fund manager, trustee, CIS distributor, CIS solicitor, and the CIS custodian shall 
8 
have the following common duties and responsibilities: 
9 
(a) 
Carry on and manage its business and the CIS in a proper, diligent 
10 
11 
12 
(b) 
and efficient manner; 
Observe honesty, due care and diligence, utmost good faith and 
high standards of integrity; 
13 
(c) 
Act in the best interests of the CIS investors; 
14 
(d) 
Establish systems, procedures and processes to be observed by its 
15 
16 
17 
officers and employees to ensure compliance with this Law and its 
implementing rules and regulations and to protect the interests of 
the CIS investors; 
18 
(e) 
Take responsibility for all actions and omissions of any third party to 
19 
whom it delegates any of its duties and responsibilities, except for 
20 
any resulting damage or liability ariSing from force majeure or other 
21 
similar occurrence beyond the control of such third party; 
22 
(f) 
Ensure that any person appointed or employed by it is of good 
23 
repute, having relevant expertise and experience to act in the 
24 
capacity so appointed or employed; 
25 
(g) 
Refrain from using its position to gain, directly or indirectly, an 
26 
27 
advantage for itself or for any other person or to cause detriment to 
the interests of CIS investors; 
28 
(h) 
Avoid and eliminate conflicts of interest in the performance of their 
29 
functions, which may be identified by the appropriate regulatory 
30 
31 
32 
33 
34 
35 
36 
37 
38 
agency as prejudicial to the interests of the investing public; 
(i) 
Disclose all conflicts of interest in the performance of their 
functions; and 
G) 
Comply with orders, rules and regulations as may be prescribed by 
the appropriate regulatory agency. 
Any contractual provision which protects or purports to protect the fund 
manager, corporate CIS, trustee, CIS distributor, CIS solicitor, or CIS 
custodian against any liability for willful misfeasance, malfeasance, fraud, bad 
faith, or gross negligence in the performance of their duties shall be void. 
18 


1 
SECTION 20. Revocation, Refusal or Suspension of License of the 
2 
Fund Manager, Corporate CIS, Trustee, Insurance Company, Custodian, 
3 
CIS Distributor and CIS Solicitor. - The licensing or authorization of a fund 
4 
manager, corporate CIS, trustee, insurance company, custodian, CIS distributor 
5 
or CIS solicitor to engage in CIS business under this Law may be refused, or any 
6 
license granted thereunder may be revoked, suspended, or limitations placed 
7 
thereon by the appropriate regulatory agency if, after due notice and hearing, the 
8 
appropriate regulatory agency which granted the license determines that the 
9 
applicant or licensee: 
10 
(a) Has willfully violated any provision of this Law, any rule, regulation or 
11 
order made hereunder, or any other law administered by the 
12 
appropriate regulatory agency, or has failed to supervise, with a view to 
13 
preventing such violation, another person who commits such violation; 
14 
(b) Has willfully made or caused to be made a materially false or 
15 
misleading statement in any application for license or report filed with 
16 
the appropriate regulatory agency, or has willfully omitted to state any 
17 
material fact that is required to be stated therein or necessary to make 
18 
the statement therein not misleading; 
19 
(c) Has failed to satisfy the qualifications or requirements for licensing 
20 
prescribed under this Law and its implementing rules and regulations; 
21 
(d) Any of its directors or officers has been convicted by a competent body 
22 
of an offense involving fraud, embezzlement, counterfeiting, theft, 
23 
estafa, misappropriation, forgery, bribery, false oath, perjury, or of a 
24 
violation of securities, commodities, banking, real estate or insurance 
25 
laws; 
26 
(e) Is enjoined or restrained by a competent body from engaging in 
27 
securities, commodities, banking, real estate, insurance or similar 
28 
activities; 
29 
(f) Is subject to an order of a competent body refusing, revoking or 
30 
suspending any license or other permit under this Law, the 
31 
implementing rules and regulations, any other law or regulation 
32 
administered by the appropriate regulatory agency 
or any other 
33 
governmental authority; 
34 
(g) Has been found by a competent body to have violated any provisions of 
35 
securities, commodities, banking, real estate or insurance laws, or has 
36 
aided, abetted, counseled, commanded, induced or procured such 
37 
violation; or 
19 


1 
(h) Has been judicially declared insolvent. 
2 
For purposes of this subsection, the term "competent body" shall 
3 
include a foreign court of competent jurisdiction and a foreign financial 
4 
regulator. 
5 
SECTION 21. Fit and Proper Rule. To maintain the quality of 
6 
management of the CIS and afford better protection to CIS investors, the 
7 
appropriate regulatory agency shall prescribe or pass upon and review the 
8 
qualifications and disqualifications of individuals elected or appointed as directors 
9 
or officers of fund managers, trustees, insurance companies, corporate CIS or 
10 
CIS distributors and disqualify those found unfit. The appropriate regulatory 
11 
agency may disqualify, suspend or remove any director or officer who commits or 
12 
omits an act which renders him unfit for the position. 
13 
In determining whether an individual is fit and proper to hold the position of 
14 
a director or officer of the fund manager, trustee, insurance company, corporate 
15 
CIS or CIS distributor, regard shall be given to his integrity, experience, 
16 
education, training, and competence: Provided, however, that the following 
17 
persons, and those determined by the appropriate regulatory agency to be unfit, 
18 
shall in no case be allowed to serve or act in the capacity of officer, director, 
19 
consultant, of any fund manager, trustee, insurance company, corporate CIS or 
20 
CIS distributor: 
21 
(a) any person convicted of any crime involving any security or financial 
22 
product; 
23 
(b) any person convicted of an offense involving fraud or embezzlement, 
24 
theft, estafa or other fraudulent acts or transactions; 
25 
(c) any person who, by reason of any misconduct, is enjoined by order, 
26 
judgment, or decree by any court, quasi-judicial body or administrative 
27 
agency of competent jurisdiction from acting as a director, officer, 
28 
employee, consultant, or agent occupying any fiduciary position; 
29 
(d) any person found by the appropriate regulatory agency 
to have 
30 
31 
32 
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 
33 
and any rules, regulations or orders thereunder; 
34 
(e) any person judicially declared to be insolvent, or incapacitated to 
35 
contract; and 
36 
(f) any person found guilty by a foreign court, regulatory authority or 
37 
government agency of the acts or violations similar to any of the acts 
38 
or misconduct enumerated in the foregoing paragraphs. 
20 


1 
Chapter 3 - Provisions applicable to Contractual CIS 
2 
SECTION 22. Establishment of a Contractual CIS. 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
(a) 
(b) 
(c) 
(d) 
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 and/or 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. 
Notwithstanding any provision of law to the contrary, 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 
and/or insurance company. 
In case the functions of the fund manager, on the one hand, and 
23 
the trustee or insurance company, on the other hand, are 
24 
performed by the same or affiliated entities, there must be an 
25 
independent oversight body which shall be created pursuant to, and 
26 
shall perform the oversight duties and responsibilities enumerated 
27 
in Section 50(b)(2) hereof. 
28 
SECTION 23. Register of CIS Investors - An up-to-date register of all 
29 
CIS investors shall be kept and maintained by or under the control of a registrar, 
30 
which may be kept and maintained either in written form or by other means which 
31 
are capable of being reproduced in written form, including, but not limited to, 
32 
computer records, microfilm, microfiche or electronic recording, as the fund 
33 
manager shall from time to time determine. There shall be entered into the 
34 
register such relevant information as may be prescribed by the fund manager or 
35 
the trustee. Information about CIS investors shall be considered confidential in 
21 


1 
nature and may not be inquired or looked into except upon order of a court of 
2 
competent jurisdiction or in the course of examination by the appropriate 
3 
regulatory agency. 
4 
SECTION 24. The Contractual CIS Plan. 
In addition to the matters 
5 
specified in Section 30, a Contractual CIS Plan shall contain the following 
6 
matters: 
7 
(a) In cases where the trustee or its affiliate, or insurance company or its 
8 
affiliate, performs the functions of the fund manager, a description of 
9 
the independent oversight body, as prescribed under Section 22 (d) of 
10 
this Law. 
11 
(b) Initial unit value and the basis thereof; 
12 
(e) Basis upon which the CIS may be terminated. The CIS plan shall state 
13 
the rights of participants in case of termination of the CIS; and 
14 
(d) Such other matters as the Commission may prescribe. 
15 
Chapter 4 - Provisions Applicable to Corporate CIS 
16 
17 
SECTION 25. Engagement of Fund Manager. Corporate CIS shall 
18 
engage a duly registered fund manager to perform the functions prescribed in 
19 
Section 8 hereof; Provided, Further, that a majority of the directors of the 
20 
corporate CIS are not directors, officers or employees of the fund manager; and 
21 
Provided, Finally that no Chairman, Chief Executive officer, President, Chief 
22 
Operating Officer or equivalent pOSitions may be interlocking but officers with 
23 
lower rank may be common with prior approval of the appropriate regulatory 
24 
authority. 
25 
SECTION 26. The Corporate CIS Plan - (a) In addition to the matters 
26 
specified in Section 30, a corporate CIS plan shall contain the following matters: 
27 
(1) Par value of the shares of stock of the corporate CIS; 
28 
(2) The dissolution of the corporate CIS and the rights of shareholders in 
29 
case of dissolution of the corporate CIS; 
30 
(3) Borrowing of money in accordance with the rules and regulations as 
31 
may be prescribed by the Commission; 
32 
(4) Extension of loans to other persons in accordance with the rules and 
33 
regulations as may be provided by the Commission; and 
34 
(5) Such other matters as the Commission may prescribe. 
35 
(b) The corporate CIS shall file such information and documents to 
22 


1 
keep reasonably current the information and documents contained in the CIS 
2 
Plan. 
3 
SECTION 27. Dividends. (a) Dividends shall be declared and paid in 
4 
accordance with the requirements of the Corporation Code and applicable laws 
5 
and 
regulations; 
Provided, 
that the Commission 
may prescribe other 
6 
requirements or restrictions in the declaration and payment of dividends by the 
7 
corporate CIS as necessary or appropriate in the public interest and for the 
8 
protection of the investors. 
9 
(b) Dividend payments shall be accompanied by a written statement which 
10 
adequately discloses the source or sources of such payment. The Commission 
11 
may prescribe the form of such statement as necessary or appropriate in the 
12 
public interest and for the protection of the investors. 
13 
TITLE'" - TAX PROVISIONS 
14 
SECTION 28 . Tax treatment of the CIS. All CIS shall be subject only to 
15 
the following national internal revenue taxes: 
16 
a. Imposition of Documentary Stamp Tax for CIS. - Any original issuance of a 
17 
document evidencing interest or participation in a CIS Security as defined under 
18 
Section (5) hereunder shall be subject to documentary stamp tax prescribed 
19 
under Section 188, Title VII of the National Internal Revenue Code of 1997. 
20 
b. Tax on Income or Gross Receipts of CIS. - The income or gross receipts from 
21 
investments or reinvestments of funds received or accrued by any of CIS shall be 
22 
subject to all applicable taxes imposed under Title II of the National Internal 
23 
Revenue Code of 1997. 
24 
c. Tax on gains upon creation, Redemption, Sale, Barter, Exchange or other 
25 
disposition of CIS Securities. - Any gains realized by the investor upon 
26 
redemption of CIS securities, or from the sale, 
barter, exchange or other 
27 
disposition of listed CIS Securities through a local stock exchange, shall be 
28 
governed by Section 32(B)(7)(h) of the National Internal Revenue Code of 1997. 
23 


1 
The same tax treatment shall apply to gains realized from the transfer of 
2 
securities and commodity products in exchange for original issuance of CIS 
3 
secu rities. 
4 
d. DST on the creation, Redemption, Sale, Barter or Exchange of CIS Securities. 
5 
The sale, barter, or exchange or other disposition of CIS securities listed and 
6 
traded through a local stock exchange shall be governed by Republic Act No. 
7 
9648. If not listed and trade, it shall be subject to Documentary Stamp Tax as 
8 
provided under Section 188, Title VII, of the National Internal Revenue Code of 
9 
1997. 
10 
The same tax treatment shall apply to the shares of stock transferred or 
11 
exchanged for the creation or redemption of CIS securities. 
12 
TITLE IV - REGISTRATION OF CIS SECURITIES AND OPERATIONS OF CIS 
13 
Chapter 1 - Registration and Suspension of Offer and Sale of CIS Securities 
14 
SECTION 29. Filing of CIS Plans. -
(a) No CIS securities shall be sold 
15 
or offered for sale within the Philippines unless such securities have been 
16 
registered through the filing of a CIS plan which has been rendered effective by 
17 
the appropriate regulatory agency. The CIS Plan shall be filed together with a 
18 
sworn staternent, in such form and containing such information and documents 
19 
as prescribed by this Law, the implementing rules and regulations or the 
20 
appropriate regulatory agency. The CIS plan shall include any prospectus as 
21 
required or permitted by the appropriate regulatory agency to be delivered to CIS 
22 
investors. 
It shall be unlawful for any person to sell or offer for sale CIS 
23 
securities unless the corresponding CIS plan has been duly filed with and 
24 
rendered effective by the appropriate regulatory agency. 
25 
(b) The CIS plan shall be signed by the executive officer, principal 
26 
operating officer, principal financial officer, comptroller, principal accounting 
27 
officer, corporate secretary or persons performing similar functions of the 
28 
corporate CIS, or the fund manager, trustee or insurance company in the case of 
29 
a contractual CIS, accompanied by a duly verified resolution of the board of 
30 
directors. The written consent of the expert named as having certified any part of 
31 
the CIS plan or any document used in connection therewith shall also be filed. 
32 
(c) Upon effectivity of the CIS plan, the corporate CIS, fund manager, 
33 
trustee or insurance company shall state in every sales material that all 
24 


1 
registration requirements of the CIS securities have been met and that all 
2 
information are true and correct as represented by the corporate CIS, fund 
3 
manager, trustee or insurance company or the person making the statement. Any 
4 
untrue statement of fact or omission to state a material fact required to be stated 
5 
therein or necessary to make the statement therein not misleading shall 
6 
constitute fraud. 
7 
(d) The appropriate regulatory agency may refuse the registration of a CIS 
8 
security if: 
9 
1. It contains a false or misleading statement; 
10 
2. It omits to state a material fact required to be stated therein or 
11 
necessary to make the statement therein not misleading; 
12 
3. It does not comply with the requirements of this Law and applicable 
13 
laws and regulations; or 
14 
4. It is in the public interest to refuse the registration of such CIS 
15 
securities. 
16 
(e) If any change occurs in the facts set forth in the CIS plan, the 
17 
corporate CIS, fund manager, trustee or insurance company shall file an 
18 
amendment thereto setting forth the change. 
19 
SECTION 30. Contents of the CIS Plan. The CIS plan shall contain the 
20 
following matters: 
21 
a) Title of the CIS plan. this shall correspond to the product or brand 
22 
name by which the CIS is proposed to be known and made available to 
23 
its investors; 
24 
b) Name of the fund manager; 
25 
c) A statement of the CIS' investment objectives and policies including 
26 
limitations, if any, and risk factors in investing in the CIS; 
27 
d) Investment powers of the fund manager with respect to the CIS, 
28 
including the character and kind of investments which may be 
29 
purchased by the CIS; 
30 
e) Profile of the proposed investors; 
31 
f) Its classification, whether an open-end or closed-end fund; 
32 
g) Total value of the CIS securities to be issued in case of closed-end 
33 
CIS; 
34 
h) Terms and conditions governing the issuance and redemption of CIS 
35 
securities; 
36 
i) 
Provision for the external audit of the CIS; 
25 


1 
j) Liabilities of the corporate CIS and the fund manager to the unit 
2 
holders or shareholders; 
3 
k) Amount of fees, commissions and other charges and expenses to be 
4 
deducted from the fund, in the case of a contractual CIS, or to be paid 
5 
by the shareholders, in the case of corporate CIS; 
6 
I) Annual meetings of unit/policy holders or shareholders; 
7 
m) Public disclosures and reports; 
8 
n) Plan of distribution of CIS assets in case of dissolution; and 
9 
0) Such other matters as the appropriate regulatory agency may 
10 
prescribe. 
11 
A copy of the CIS plan shall be made available during regular office hours to any 
12 
interested person at the principal office of the fund manager and corporate CIS in 
13 
case of a corporate CIS, and the fund manager or trustee in case of contractual 
14 
CIS. The CIS plan shall also be posted in the website, publication and/or other 
15 
mode of information dissemination of the commission and the CIS. 
16 
SECTION 31. Revocation of Registration or Suspension of Offer and 
17 
Sale of Securities -The appropriate regulatory agency may revoke the 
18 
registration of the CIS securities in accordance with Section 13.1 of the SRC or 
19 
order the suspension of the offer and sale of the CIS securities in accordance 
20 
with Section 13.4 of the SRC and their implementing rules and regulations. 
21 
Chapter 2 - Dealings in CIS Securities 
22 
SECTION 32. Rights and Privileges of CIS Investors. Each share of 
23 
stock of a corporate CIS and each unit of participation of a contractual CIS shall 
24 
be equal in all respects to every other share or unit belonging to the same class 
25 
of shares or units. 
26 
SECTION 33. Proxies; Voting Trust. The Commission may prescribe 
27 
rules and regulations for the solicitation of proxies and the issuance and transfer 
28 
of voting trust certificates in accordance with the requirements of the Corporation 
29 
Code and applicable laws and regulations; Provided, That the Commission may 
30 
prescribe other requirements or restrictions as may be necessary or appropriate 
31 
in the public interest and for the protection of the investors; Provided, Further, 
32 
that no proxies shall be used as a device to control the management of any CIS. 
26 


1 
SECTION 34. Payment for CIS Securities. No CIS shall issue any of its 
2 
securities for services or for property other than cleared funds. 
3 
SECTION 35. Distribution, Redemption and Pricing of CIS Securities. 
4 
(a) Unless otherwise allowed in this law, CIS securities shall be sold only through 
5 
a licensed CIS distributor and by licensed CIS solicitors. Notwithstanding the 
6 
pertinent provision of Section 65 of the Corporation Code, CIS securities may be 
7 
issued at the net asset value computed in accordance with Section 43. 
8 
(b) CIS investors have the right to surrender their securities for redemption in 
9 
accordance with the CIS plan. Redemption shall not be suspended except 
10 
pursuant to the CIS plan as approved by the appropriate regulatory agency in the 
11 
public interest or for the protection of investors. The redemption price of CIS 
12 
securities shall be at the applicable price described in the CIS plan. 
13 
SECTION 36. Transferability of Securities. No CIS shall restrict the 
14 
transferability or negotiability of its CIS securities except as provided in the CIS 
15 
plan or by any rule or regulation prescribed by the appropriate regulatory agency. 
16 
Chapter 3 - Operations of CIS 
17 
SECTION 37. Custody of Investment Assets. Every CIS shall place and 
18 
maintain its investment assets in the custody of a custodian in accordance with 
19 
Sections 13 and 14 hereof. 
20 
SECTION 38. Investment Limitations. (a) The CIS funds may be 
21 
invested only in the following liquid or semi-liquid assets tradeable through an 
22 
organized market, subject to limitations as may be provided by this Law, the 
23 
implementing rules and regulations or the appropriate regulatory agency: 
24 
1. 
Bank deposits; 
25 
2. 
Securities issued by or guaranteed by the Philippine government, or 
26 
the Bangko Sentral ng Pilipinas; 
27 
3. 
Tradable securities issued by the government of a foreign country, 
28 
any political subdivision of a foreign country or any supranational 
29 
entity; 
30 
4. 
Exchange-listed securities; 
31 
5. 
Marketable instruments that are traded in an organized exchange or 
32 
market; 
33 
6. 
Loans traded in an organized market; 
27 


1 
7. 
Exchange traded funds; 
2 
8. 
Derivatives as may be authorized by the appropriate regulatory 
3 
agency; 
4 
9. 
Real estate investment trusts or companies; 
5 
10. Other CIS; and 
6 
11. Such other investments or instruments as the appropriate regulatory 
7 
agency may allow. 
8 
Provided, however, that no CIS shall, directly or indirectly: 
9 
1. 
acquire more than ten per centum (10%) of another CIS or 
anyone company; or 
10 
11 
12 
2. 
acquire securities of any issuer having an aggregate value in 
excess of twenty per centum (20%) of the net asset value of 
13 
the 
acquiring CIS, or the weight of the security in a 
14 
recognized benchmark or index, whichever is higher. 
15 
(b) The appropriate regulatory agencies may jointly issue such 
16 
implementing rules and regulations, in accordance with Section 56 hereof, as 
17 
may be necessary or appropriate in the public interest or for the protection of 
18 
investors, that provide for different percentages or further restrictions with respect 
19 
to investments in other CIS or the concentration of investments by a CIS. 
20 
SECTION 39. Prohibited Acts of CIS. It shall be unlawful for any CIS to -
21 
i. Purchase any security on margin, except such short-term credits as 
22 
are necessary for the clearance of transactions; 
23 
ii. Participate on a joint or a joint and several basis in any trading 
24 
account in securities; or 
25 
iii. Generate funds for promoting the private business or industry of 
26 
any employee, officer, director, promoter or stockholder thereof; or 
27 
iv. Allow any of its employees, officers, directors, organizers, 
28 
incorporators or stockholders to sell real estate, personal property 
29 
or any other kind of property to the CIS at a price higher than the 
30 
procurement cost or the market value thereof, or sell to any of the 
31 
aforementioned persons any property of the CIS, or a portion 
32 
thereof, at a price below the market value thereof. 
33 
The appropriate regulatory agency may, by rules and regulations prohibit 
34 
CIS from engaging in such other acts as it may deem necessary or appropriate in 
35 
the public interest or for the protection of investors, taking into account the policy 
36 
and purpose of this Law. 
28 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
SECTION 40. Meetings of CIS Investors. (a) Meetings of CIS investors 
shall be held at least annually. The following matters shall be presented to the 
CIS investors: 
1. 
Proposals to change investment policies in the CIS plan which shall 
require the approval of the CIS investors; 
2. 
3. 
4. 
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. 
13 
(b) CIS investors may attend meetings in person or by proxy. A quorum at 
14 
meetings shall consist of unit holders or stockholders owning or representing 
15 
at least ten per centum (10%) of the total number of units in the fund or the 
16 
outstanding capital stock, respectively, or such other percentage as the 
17 
appropriate regulatory agency may prescribe taking into account the size of 
18 
the CIS and the number of its CIS investors. At least a majority vote of those 
19 
present or represented shall be required to constitute a valid act of the CIS 
20 
investors. 
21 
(c) The appropriate regulatory agency shall prescribe by rule or regulation 
22 
the requirements for the conduct of meetings. 
23 
SECTION 41. Requirements for selling materials and advertisements. 
24 
Sales and marketing documents and advertisements shall be subject to such 
25 
requirements as the implementing rules and regulations or the appropriate 
26 
regulatory agency may prescribe. All sales and marketing documents, and 
27 
advertisements shall: 
28 
(a) Not contain any untrue statement of fact or omit to state any fact that is 
29 
necessary in order to prevent the statements made, in the light of the 
30 
circumstances in which they were made, from being misleading; 
31 
(b) The CIS performance information in advertisements should be 
32 
calculated and presented from the viewpoint of the average investor to 
33 
whom the CIS is targeted; 
34 
(c) All CIS should calculate and present their performance information in 
35 
advertisements in a substantially similar manner so that CIS investors 
36 
may (i) make meaningful comparisons among various CIS, and (ii) not 
29 


1 
be misled by differences in the method of calculation and presentation; 
2 
and 
3 
(d) Comply with such other terms and conditions prescribed by the 
4 
appropriate regulatory agency which are necessary or appropriate in 
5 
the public interest or for the protection of CIS investors. 
6 
SECTION 42.Reports and Financial Statements of CIS. (a) Every CIS 
7 
shall file with the appropriate regulatory agency, if any: 
8 
1. Such information and documents including financial statements as the 
9 
implementing rules and regulations and the appropriate regulatory 
10 
agency may require, to keep reasonably current the information and 
11 
documents contained in the CIS plan filed under this Law; and 
12 
2. 
Copies of every periodic or interim report or similar communication 
13 
transmitted to the CIS investors. 
14 
(b) Every CIS shall transmit to its CIS investors, at least annually, reports 
15 
containing such of the following information and financial statements or their 
16 
equivalent, as of the latest fiscal year, which reports shall not be misleading in 
17 
any material respect in the light of the reports required to be filed pursuant to 
18 
subsection (a): 
19 
1. a balance sheet accompanied by a statement of the aggregate 
20 
value of investments on the date of such balance sheet; 
21 
2. a list showing the amounts and values of securities owned on the 
22 
date of such balance sheet; 
23 
3. a statement of income, for the period covered by the report, which 
24 
shall be itemized at least with respect to each category of income 
25 
and expense representing more than five per centum of total 
26 
income or expense; 
27 
4. a statement of surplus, which shall be itemized at least with respect 
28 
to each charge or credit to the surplus account which represents 
29 
more than five per centum of the total charges or credits during the 
30 
period covered by the report; 
31 
5. a statement of the aggregate fees or remuneration paid by the CIS 
32 
during the period covered by the report to (i) the fund manager, 
33 
trustee, CIS distributor 
and independent auditor; and (ii) each 
34 
director and all officers as regular or special compensation; and 
35 
6. a statement of the aggregate amounts of purchases and sales of 
36 
investment assets made during the period covered by the report. 
30 


1 
Provided, That the implementing rules and regulations may permit, in lieu 
2 
of any item required under this subsection which may be inapplicable or 
3 
inappropriate to any specified type or types of CIS, the inclusion of such item of a 
4 
comparable character as it may deem applicable or appropriate to such type or 
5 
types of CIS. 
6 
Provided, further, that the reports and financial statements mentioned 
7 
above, or such other material information as the appropriate regulatory agency 
8 
may determine, shall also be posted in the website, publication and/or other 
9 
mode of information dissemination of the appropriate regulatory agency and the 
10 
CIS. 
11 
The appropriate regulatory agency shall prescribe the forms for the 
12 
reports and financial statements, or such other material information as the 
13 
appropriate regulatory agency may determine, so that CIS investors may make 
14 
meaningful comparisons among various CIS, and will not be misled by 
15 
differences in the method of calculation and presentation. 
16 
SECTION 43. Net Asset Value. (a) A CIS shall compute and post its net 
17 
asset value per share/unit at such frequency as may be prescribed by the 
18 
implementing rules and regulations or the appropriate regulatory agency. 
19 
(b) The computation of the net asset value per share or unit shall be made 
20 
in accordance with the valuation method prescribed by the implementing rules 
21 
and regulations or the appropriate regulatory agency and shall be applied 
22 
consistently. 
23 
SECTION 44. Accounts and Records. (a) Every CIS, and every fund 
24 
manager and trustee shall maintain and preserve for such period or periods as 
25 
may be prescribed by the implementing rules and regulations, such accounts, 
26 
books, and other documents as constituting the record forming the basis for 
27 
financial statements required to be filed pursuant to this Law. 
28 
(b) All accounts, books and other records required to be maintained and 
29 
preserved by any person pursuant to subsection (a) shall be subject to 
30 
examination by the appropriate regulatory agency. 
31 
SECTION 45. Management and Trust Fees; Expenses Chargeable to 
32 
Fund/CIS Investors. The management or trust fees shall cover the CIS' fair and 
33 
equitable share of the routine administrative expenses of the fund manager, 
34 
trustee and/or insurance company such as directors' fees, salaries and wages, 
35 
supplies, credit investigation, collateral appraisal, security, messengerial and 
31 


1 
janitorial services, information technology expenses, annual report preparation, 
2 
supervision fees, regulatory reporting expenses, and internal audit fees. 
3 
Marketing, advertising, and other publicity or promotional related expenses shall 
4 
be for the account of the fund manager, trustee, and insurance company and 
5 
shall be considered covered by the management or trust fee. 
6 
However, the fund manager, trustee, and insurance company may charge 
7 
special or reimbursable expenses from the CIS in case such expenses are (1) 
8 
necessary to preserve or enhance the value of the CIS, (2) payable to an 
9 
independent or non-related third party covered by a separate contract, and (3) 
10 
disclosed to CIS investors. the fund manager, trustee, and insurance company 
11 
shall secure prior approval of the appropriate regulatory agency for outsourcing 
12 
services provided under existing regulations of the concerned regulatory 
13 
agency.no other fees shall be charged to the fund/CIS investors, except in case 
14 
of a corporate CIS, the directors fees shall be chargeable to the fund. 
15 
SECTION 46. Changes in Investment Policy - Proposals to change the 
16 
investment policies shall be subject to approval by the CIS investors pursuant to 
17 
Section 40 hereof and by the appropriate regulatory agency. The fund manager, 
18 
trustee or insurance company shall disseminate to all CIS investors all material 
19 
information pertaining to proposals to amend the investment policies and 
20 
objectives. 
The appropriate regulatory agency shall prescribe by rule or 
21 
regulation the reqUirements for changes in investment policies. 
22 
SECTION 47. Dissolution - (a) The corporate CIS, trustee or insurance 
23 
company shall cause the dissolution of the CIS whenever any of the following 
24 
grounds is present: 
25 
1. Dissolution is required by the CIS plan, when the specified 
26 
conditions or time for dissolution have been met or reached; 
27 
2. Dissolution is agreed upon in a resolution of the CIS investors 
28 
owning at least two-thirds (2/3) of the outstanding CIS securities in 
29 
a CIS at a meeting duly called for the purpose; Provided, that the 
30 
implementing rules and regulations may prescribe a different 
31 
percentage interest taking into account the nature and size of the 
32 
CIS and the number of CIS investors; Provided, Finally, that there 
33 
has been prior publication of the notice of time, place and object of 
34 
the meeting for two (2) consecutive weeks in a newspaper of 
35 
general circulation in the Philippines; 
36 
3. Dissolution is required by a final and executory order of the court; 
32 


1 
4. Dissolution is ordered by the appropriate regulatory agency for non-
2 
compliance with the conditions for the lifting of a suspension or 
3 
revocation order previously issued; provided that the appropriate 
4 
regulatory agency shall not issue an order of dissolution within six 
5 
months from the issuance of the suspension or revocation order; 
6 
and 
7 
5. Dissolution is deemed necessary in view of the dissolution or the 
8 
revocation of the license of the fund manager, trustee or insurance 
9 
company; 
10 
Provided, that the CIS may not be dissolved whenever: 
11 
(i) The appropriate regulatory agency orders the transfer of the CIS 
12 
to a willing and qualified fund manager, trustee or insurance 
13 
company; 
14 
(ii) The dissolution or the loss of license of the trustee, insurance 
15 
company or fund manager is due to a merger and the surviving 
16 
company in such merger is also an authorized trustee, 
17 
insurance company or fund manager, as the case may be; or 
18 
(iii)The new company that is established as a result of the 
19 
consolidation of trust institutions, insurance companies or fund 
20 
managers promptly obtains a license to act as trustee, 
21 
insurance company or fund manager, as the case may be. 
22 
(b) Upon dissolution, the fund manager, trustee or insurance company 
23 
shall distribute the investment assets of the CIS to the CIS investors as 
24 
prescribed by the CIS plan and in accordance with the implementing rules and 
25 
regulations. 
26 
SECTION 48. Merger or Consolidation - No merger or consolidation of 
27 
CIS will be authorized by the appropriate regulatory agency unless the following 
28 
conditions are met: 
29 
(a) The merger or consolidation plan has been prepared in accordance 
30 
with the requirements as may be prescribed by the appropriate 
31 
regulatory agency; and 
32 
(b) The merger plan has been approved by the CIS investors owning at 
33 
least two-thirds (2/3) of the outstanding CIS securities in each of the 
34 
CIS to be merged or consolidated in a meeting duly called for the 
35 
purpose; 
33 


1 
The implementing rules and regulations shall prescribe the procedures 
2 
and requirements for merger or consolidation in the public interest and for the 
3 
protection of investors. 
4 
TITLE V- CIS INVESTORS PROTECTION FUND 
5 
SECTION 49. Establishment of the CIS Investors Protection Fund -
6 
The appropriate regulatory agency shall, define the rules and procedures for the 
7 
creation and management of an investors protection fund, the contribution to 
8 
which shall be determined as a proportion of the CIS, which shall be segregated 
9 
from the CIS, for the purpose of compensating investors who suffer material loss 
10 
in investment due to fraud, gross negligence or mismanagement; provided that, 
11 
any contribution to the investor's protection fund shall not be chargeable to the 
12 
CIS. A CIS that maintains an existing fund for the same purpose shall not be 
13 
required to make contributions to the CIS investors protection fund, provided, that 
14 
the appropriate regulatory agency has determined that the existing fund is of 
15 
equivalent purpose, and the contributions to such fund are of equivalent value, as 
16 
that of the CIS investors protection fund established pursuant to this section. 
17 
TITLE VI- SPECIAL RULES GOVERNING ESTABLISHMENT OF 
18 
CONTRACTUAL CIS BY TRUST INSTITUTIONS AND INSURANCE 
19 
COMPANIES 
20 
SECTION 50. Establishment of Contractual CIS by Trust Institutions 
21 
and Insurance Companies- (a) Any trust institution or insurance company may 
22 
establish a contractual CIS, subject to the following provisions: 
23 
The trust institution or insurance company may engage the services of a 
24 
fund manager; Provided, that no director and/or officer of the trust institution or 
25 
insurance company shall at the same time serve as director and/or officer of the 
26 
fund manager; Provided, further, that the trust institution or insurance company 
27 
shall not engage a fund manager which is an affiliate of the trust institution or 
28 
insurance company, unless it complies with the requirements of paragraph (b) (2) 
29 
of this Section. 
30 
(b) The engagement of a fund manager shall not be required in cases 
31 
where: 
32 
33 
1. 
In addition to the functions of a trustee prescribed under this Law, 
the trust institution or insurance company shall comply with and 
34 


1 
2 
3 
4 
2. 
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 
5 
least three (3) members who shall be appointed in accordance with 
6 
such rules as the implementing rules and regulations shall 
7 
prescribe, all of whom shall have the degree of independence and 
8 
possess all the qualifications and none of the disqualifications of an 
9 
independent director, or may be a juridical entity organized and 
10 
existing pursuant to the implementing rules and regulations. 
11 
12 
The independent oversight body shall have the following duties and 
13 
responsibilities: 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
i. 
ii. 
iii. 
iv. 
Monitor the activities of the CIS distributors in the sale and/or 
redemption of the CIS units and ensure that the provisions of 
any marketing document relating to the sale or offer for sale 
of the CIS units do not contain any matter 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 
27 
identified and held separately from the trust institution's or 
28 
insurance company's own properties and other properties 
29 
held in trust; 
30 
SECTION 51. Administrative Sanctions. (A) If, after due notice and 
31 
hearing, the appropriate regulatory agency finds that: (1) there is a violation of 
32 
this Law and its implementing rules and regulations, or the rules or orders of the 
33 
appropriate regulatory agency; (2) any fund manager, trustee, insurance 
34 
company, corporate CIS, CIS distributor or CIS solicitor has failed reasonably to 
35 
supervise, with a view to preventing violations, another person subject to 
36 
supervision who commits any such violation; (3) any person has, in a CIS plan or 
37 
in other reports, applications, accounts, records or documents required by this 
35 


1 
law and its implementing rules and regulations to be filed with the appropriate 
2 
regulatory agency, made any untrue statement of a material fact, or omitted to 
3 
state any material fact required to be stated therein or necessary to make the 
4 
statements therein not misleading; or (4) any person has refused to permit any 
5 
lawful examination into its affairs, including the refusal to produce books, records 
6 
or documents upon demand by the CIS investor or the appropriate regulatory 
7 
agency, it shall, in its discretion, and subject only to the limitations hereinafter 
8 
prescribed, impose any or all of the following sanctions as may be appropriate in 
9 
light of the facts and circumstances: 
10 
(a) 
A fine of no less than Ten thousand Pesos (P10,000.00) nor more 
11 
than One million Pesos (P1 ,000,000.00); 
12 
13 
14 
15 
16 
17 
18 
19 
(b) 
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; 
Suspension the license of such person; 
Revocation of the license of such person; and 
(c) 
(d) 
(e) 
Other penalties within the power of the appropriate regulatory 
agency to impose. 
20 
(8) The imposition of the foregoing administrative sanctions shall be without 
21 
prejudice to the filing of criminal charges and civil cases against the entities 
22 
and individuals responsible for the violation. 
23 
(C) The appropriate regulatory agency shall have the power to issue writs of 
24 
execution to enforce the provisions of this section and to enforce payment of 
25 
the fines, penalties, fees and other dues collectible under this Law. 
26 
(D) If the offender is a corporation or other juridical entity, the administrative 
27 
sanctions may in the discretion of the appropriate regulatory agency be 
28 
imposed upon such corporation or other juridical entity and upon the officer or 
29 
officers of the corporation, or entity responsible for the Violation, Provided, 
30 
That in case of the imposition of administrative fines, the appropriate 
31 
regulatory agency may, in its discretion, impose such fines solely upon the 
32 
officer or director responsible for the violation; and Provided, Further, that if 
33 
such officer is an alien, he shall in addition to the penalties prescribed, be 
34 
deported without further proceedings after service of sentence. 
35 
(E) The director/s and other officer/s of a corporation held administratively 
36 
liable under this section shall in no case recover the administrative liability 
37 
from the CIS or corporation of which he/they is a director/s or officer/so 
36 


1 
SECTION 52. Criminal penalties. (A) The following acts are criminal in 
2 
nature and shall be penalized as follows: 
3 
(a) Refusal to comply with the orders of the appropriate regulatory agency, 
4 
for the production of books, records or documents, or to undergo an 
5 
examination shall be penalized by imprisonment of one (1) month to 
6 
six (6) months or fine in the amount of One Hundred Thousand Pesos 
7 
(P100,000.00) to Two Million Pesos (P2,000,000.00), or both 
8 
imprisonment and fine, at the discretion of the court; 
9 
(b) Selling or offering for sale a CIS security by unregistered sellers, 
10 
distributors or solicitors shall be penalized by imprisonment of six (6) 
11 
years and one day to twelve (12) years or fine equivalent to triple the 
12 
contract price of each of the CIS securities sold, or both imprisonment 
13 
and fine, at the discretion of the court; 
14 
(c) Selling or offering for sale CIS securities by the issuer of a CIS plan 
15 
that has not been registered pursuant to this Law shall be penalized by 
16 
imprisonment of six (6) years and one day to twelve (12) years or fine 
17 
equivalent to triple the contract price of each of the CIS securities sold 
18 
or offered for sale, or both imprisonment and fine, at the discretion of 
19 
the court; 
20 
(d) Any negligent act or omission that is prejudicial or injurious to the CIS 
21 
investors shall be penalized by imprisonment of one (1) year and one 
22 
(1) day to six (6) years and fine in the amount of Fifty Thousand Pesos 
23 
(P50,000.00) to Five Million 
Pesos (P5,000,000.00), or both 
24 
imprisonment and fine, at the discretion of the court; 
25 
(e) Any fraudulent act or omission that is prejudicial or injurious to the CIS 
26 
investors shall be penalized by imprisonment of six (6) years and one 
27 
(1) day to twelve (12) years and fine in the amount of Five Hundred 
28 
Thousand Pesos (500,000.00) to Ten Million Pesos (P10,000,000.00), 
29 
or both imprisonment and fine, at the discretion of the court; and 
30 
Violation of the provisions of this Law, the implementing rules and 
31 
regulations or orders of the appropriate regulatory agency shall be penalized by 
32 
imprisonment of six (6) years and one (1) day to twelve (12) years and a fine in 
33 
the amount of One Hundred Thousand Pesos (P100,000.00) to Five Million 
34 
Pesos (P5,000,000.00), Provided, That repeated violations shall constitute prima 
35 
facie evidence against the offender. 
37 


1 
(8) Solidary Liability - (1) The fund manager, trustee and/or insurance 
2 
company shall be jointly and severally liable for actual losses and damages that 
3 
CIS investors may directly suffer as a result of bad faith, gross negligence and/or 
4 
willful misconduct by the fund manager, trustee and/or insurance company 
5 
resulting in the violation of any of the provisions of this Law, its implementing 
6 
rules and regulations, or their failure to observe and comply with the terms and 
7 
conditions of the CIS plan. 
8 
(2) The directors and/or officers of the Corporate CIS, fund 
9 
manager, trustee and/or insurance company shall also be jointly and 
10 
severally liable for all losses and damages that CIS investors may suffer 
11 
as a result of bad faith, gross negligence and/or willful misconduct by the 
12 
corporate CIS, fund manager, trustee and/or insurance company resulting 
13 
in the violation of any of the provisions of this Law, its implementing rules 
14 
and regulations, or their failure to observe and comply with the terms and 
15 
conditions of the CIS plan. Notwithstanding any provision of law to the 
16 
contrary, in no case shall such directors and officers recover their liability 
17 
from the Corporate CIS, fund manager, trustee and/or insurance 
18 
company. 
19 
(C) 
If the offender is a corporation or other juridical entity, the criminal 
20 
penalties may in the discretion of the court be imposed upon such corporation or 
21 
other juridical entity and upon the officer or officers of the corporation or entity 
22 
responsible for the violation; Provided, That in case of the imposition of the fines, 
23 
the court may, in its discretion, impose such fines solely upon the officer or 
24 
director responsible for the Violation; Provided, Further, that if such officer is an 
25 
alien, he shall in addition to the penalties prescribed, be deported without further 
26 
proceedings after service of sentence. 
27 
(D) The director/s and other officer/s of a corporation held administratively 
28 
liable under this section shall in no case recover the administrative liability from 
29 
the CIS or corporation of which he/they is a director/s or officer/so 
30 
SECTION 53. Small Claims Clause. (a) The appropriate regulatory 
31 
agency shall have the power to adjudicate any and all claims involving CIS 
32 
amounting to not more than One Million Pesos (P1,000,000.00) or such higher 
33 
amount as may be determined by the appropriate regulatory agency, for each 
34 
CIS Investor. The proceedings before the appropriate regulatory agencyshall be 
38 


1 
summary in nature, and the decision of the appropriate regulatory agency shall 
2 
be final and immediately executory, unless restrained by the Court of Appeals or 
3 
the Supreme Court. 
4 
(b) 
Claims filed with the appropriate regulatory agency shall not be subject to 
5 
the payment of filing fees. 
6 
(c) 
The authority to adjudicate granted to the appropriate regulatory agency 
7 
under this section shall be concurrent with that of the civil courts, but the filing of 
8 
a complaint with the appropriate regulatory agency shall preclude the civil courts 
9 
from taking cognizance of a suit involving the same subject matter. 
10 
(d) 
The appropriate regulatory agency, having due regard to the facts and 
11 
circumstances of each claim, may refer the claim to compulsory arbitration, under 
12 
such rules and regulations as the appropriate regulatory agency may prescribe. 
13 
SECTION 54. Duty of the Regulators - In view of the nature of the CIS 
14 
as one impressed with public interest, the officers and employees of the 
15 
appropriate regulatory agencies are strictly enjoined to monitor and enforce 
16 
compliance with the provisions of this Law and its implementing rules and 
17 
regulations. 
Failure to do so shall be dealt with under existing laws and 
18 
regulations in the gravest degree. 
39 


1 
TITLE VII - MISCELLANEOUS PROVISIONS 
2 
SECTION 55. Transitory Provisions.- Any CIS which at the time of the 
3 
effectivity of this Law has been established, authorized, licensed or registered by 
4 
the appropriate regulatory agency and has continued to exist, shall be deemed 
5 
to have been authorized, licensed and registered under the provisions of this Law 
6 
and its implementing rules and regulations and shall be subject to and governed 
7 
by the provisions hereof; Provided, however, that where any such CIS is affected 
8 
by the new requirements of this law and its implementing rules and regulations, 
9 
said CIS shall, unless otherwise herein provided, be given a period of not more 
10 
than two (2) years from the effectivity of the implementing rules and regulations 
11 
within which to comply with such new requirements. 
12 
SECTION 56. Implementing Rules and Regulations.- Consistent with 
13 
the declaration of policy contained in Section 2 and the other relevant provisions 
14 
of this law, the appropriate regulatory agencies, with the commission as lead 
15 
agency, shall coordinate and jointly establish uniform rules and regulations 
16 
implementing this law, including but not limited to the following matters: 
17 
(1) Qualification and disqualification standards for fund managers, CIS 
18 
distributors and CIS solicitors; 
19 
(2) Qualification and disqualification standards for directors and officers of 
20 
fund managers, trustees, insurance companies, corporate CIS or CIS 
21 
distributor; 
22 
(3) Revocation, refusal or suspension of licenses of the fund manager, 
23 
corporate CIS, trustee, insurance company, custodian, CIS distributor 
24 
and CIS solicitor; 
25 
(4) Filing, amendment and suspension of CIS plans; 
26 
(5) Registration, distribution, sale and marketing of CIS securities; 
27 
(6) Disclosure requirements relating to the CIS; 
28 
(7) Regulation, supervision and monitoring of the operations, management 
29 
and/or activities of all CIS, fund managers, CIS distributors, CIS 
30 
solicitors and other parties involved in CIS; 
31 
(8) Ascertainment of client suitability for CIS securities; 
32 
(9) Limitations or restrictions on the investment of CIS funds and on the 
33 
other activities in which a CIS may engage; 
34 
(10) Requirements for selling materials and advertisements; 
40 


1 
(11) Record-keeping, reporting and audit requirements for CIS fund 
2 
manager and trustees; 
3 
(12)Valuation standards and methods to be observed by CIS; 
4 
(13) Requirements for changing investment policies; 
5 
(14) Requirements for merger or consolidation of CIS; 
6 
(15) Establishment of the CIS investors protection fund; 
7 
(16)Minimum requirements for inculcating financial literacy in investors; 
8 
(17) Recognition of accreditation or license extended by the appropriate 
9 
regulatory authority pursuant to this law; and 
10 
(18)Other pertinent matters to be determined by the regulatory authorities. 
11 
The implementing rules and regulations may be repealed, amended or 
12 
supplemented at any time in the same manner as the original implementing rules 
13 
and regulations are adopted and issued pursuant to this Section. 
14 
The implementing rules and regulations and its amendments or 
15 
supplements shall be published once a week for two (2) consecutive weeks in 
16 
two newspapers of general circulation. 
17 
SECTION 57. Cooperation and Coordination. 
-
The appropriate 
18 
regulatory agencies, with the Commission as the lead agency, shall adopt all 
19 
other appropriate measures as may be necessary or desirable for the effective 
20 
implementation and enforcement of this Law, taking into full account declaration 
21 
of policy contained in Section 2. 
22 
The coordination shall cover such concems as, but not limited to: 
23 
(a) Ensuring that avoidable market failures are prevented; 
24 
(b) Instilling measures that nurture systemic stability; 
25 
(c) Providing equal access to relevant market information to stakeholders; 
26 
and 
27 
(d) Overseeing the conduct of CIS issuers to institutionalize consumer 
28 
protection and address anti-competitive behavior. 
29 
SECTION 58. Effect on Existing Laws and Contracts. - The rights and 
30 
remedies provided by this Law shall be in addition to any and all other rights and 
31 
remedies that exist under existing laws. 
32 
Nothing in this Law shall impair the obligation of existing contracts nor 
33 
affect or be construed to affect existing criminal, civil or administrative cases. 
34 
SECTION 59. Separability Clause. - Any portion or provision of this Law 
35 
that may be declared unconstitutional or invalid shall not have the effect of 
36 
nullifying other portions or provisions hereof as long as such remaining portion or 
41 


1 
provision can still subsist and be given effect in their entirety. 
2 
SECTION 60. Suppletory Effect - This Law shall apply suppletorily to 
3 
any law that may be hereinafter enacted on collective investment schemes 
4 
governing specialized products or investments. 
5 
SECTION 61. Repealing Clause. - All acts, laws, executive orders and/or 
6 
rules and regulations or any part thereof which are inconsistent with the 
7 
provisions of this Law are hereby repealed or modified accordingly. 
8 
SECTION 62. Effectivity Clause. - This Law shall take effect upon its 
9 
approval. 
10 
Approved, 
42