FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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SENATE 
S. No. _----'4=9"--
'::r'"",T! 
UfF~CE t',~, "\,-'i 
StCBE I t\RV 
Introduced by SENATOR EDGARDO J. ANGARA 
EXPLANATORY NOTE 
The worldwide trend in the regulation of collective investment schemes ("CIS) is 
to have single law to regulate all types of CIS. Countries such as the United Kingdom, 
Japan, Australia, Korea and Singapore have adopted this approach. In the Philippines 
however, investment companies (mutual funds) and unit investment trust funds 
("UITFs"), the most common forms of CIS, are still governed by varying laws and 
regulations. As such, there are differences in regulatory requirements (regulatory 
arbitrage) and taxation among the different forms of CIS, even though the investment 
products they offer to the public are essentially the same. It is believed that this 
regulatory arbitrage gives rise to an uneven playing field which will prove unfavorable to 
the growth of the industry. More importantly, such regulatory arbitrage will result in 
uneven levels of protection to the investing public. 
This bill proposes to establish a comprehensive regulatory framework for all 
forms of CIS that seeks to eliminate existing differences in regulatory treatment. This bill 
also seeks to balance the interests of the investors, 'by incorporating mechanisms that 
would safeguard the public interest, at the same time recoguizing the interests of the other 
parties involved in the CIS industry, by giving them flexibility to expand their CIS 
businesses. 
With the passage of this bill, it is anticipated that even middle to low income 
individuals will explore more investment opportunities in CIS, thereby gaining access to 
the capital markets. The economy, in tum, is expected to benefit greatly from an 
expanded capital base. 
In view of the foregoing, the urgent passage of the proposed measure is requested. 
EDGARDO J. ANGARA 


'~&"" I' • i t 
FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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SENATE 
Senate Bill No. 
~19 
Introduced by SENATOR EDGARDO J. ANGARA 
COLLECTIVE INVESTMENT SCHEMES LAW 
Be it enacted by the Senate and the House of Representatives in Congress 
assembled: 
TITLE I - GENERAL PROVISIONS 
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SECTION 1. Short Title - This Law shall be known as the "Collective 
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Investment Schemes Law". 
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SECTION 2. Declaration of Policy - The policy of the state is to: 
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(a)Promote investor protection by applying high governance standards in the 
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establishment, registration, sale, management and operation of collective 
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investment schemes in order to prevent abuse and protect the interests of the 
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investing public, including but not limited to, the setting of standards for the 
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eligibility of persons who establish, sell, manage or operate collective 
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investment schemes; the prevention, disclosure and elimination of all conflicts 
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of interest which may prejudice the investing public; and the provision of 
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independent third party supervision over the operations of collective 
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investment schemes; 
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(b) Promote the growth of pooled investments and the development of the capital 
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market by providing a favorable framework for collective investment schemes 
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to facilitate the flow of investment capital from sources within the country and 
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abroad; 
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(c )Encourage the participation in the collective investment scheme industry of the 
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best qualified fund managers and investment advisers regardless of origin; 
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(d) Broaden participation by Filipinos in ownership of securities and other assets 
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allowed in this Law so that more are able to share in economic growth; and 
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(e) Provide equal protection to investors in all similar collective investment 
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schemes, impose the same requirements and provide the same competitive 
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environment for such schemes and the participants therein. 
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SECTION 3. Purpose - The purpose of this Law is to establish a comprehensive 
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regulatory and tax framework to enable collective investment schemes and all the 
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participants therein to playa key role in the development of the capital market in a 
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manner consistent with the policy declared in Section 2 hereof. 
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SECTION 4. Coverage - This Law shall apply to the establishment, registration, 
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sale, management and operation of all collective investment schemes in the Philippines. 
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SECTION 5. Definitions - When used in this Law, unless the context otherwise 
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requires: 
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(a) "Affiliate" of another person means: 
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1. 
any person directly or indirectly owning, controlling or holding with 
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power to vote, ten per centum (10%) or more of the outstanding voting 
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securities of such other person; 
2. 
any person ten per centum (10%) or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with power 
to vote, by such other person; 
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any person directly or indirectly controlling, controlled by, or under 
common control with, such other person; 
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any officer, director, partner, or employee of such other person; and 
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if such other person is a corporate CIS, any investment adviser, fund 
manager, CIS distributor, CIS solicitor and custodian thereof. 
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(b) 
"Appropriate regulatory agency" refers to: 
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1. the Bangleo Sentral ng Pilipinas, in the case of banks, trust entities and 
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other financial institutions supervised by the Bangleo Sentral ng 
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Pilipinas; 
2. the Insurance Commission, in the case of insurance companies and other 
persons regulated by the Insurance Commission; and 
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3. 
the Securities and Exchange Commission, in the case of investment 
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companies or other persons not under the regulation of the Bangleo 
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Sentral ng Pilipinas or the Insurance Commission. 
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(c) 
"Bank" means an entity engaged in the lending of funds obtained from the 
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public through the receipt of deposits of any kind and duly authorized to operate 
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as a bank by the Monetary Board of the Bangleo Sentral ng Pilipinas 
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(d) 
"Broker" means any juridical person duly licensed by the appropriate 
regulatory agency and accredited by the appropriate self regulatory organization 
to engage in the business of buying and selling securities for the account of 
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others, but does not include a bank or any person solely by reason of the fact that 
such person is a CIS or a distributor of CIS securities. 
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(e) 
"CIS"means a collective investment scheme 
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(f) 
"CIS distributor" means any stock corporation or broker licensed by the 
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appropriate regulatory agency to engage in the selling of CIS securities. 
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(g) 
"CIS investor" means any person who purchases or otherwise invests in CIS 
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securities. 
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(h) 
"CIS plan" means the plan for the CIS registered with the Commission in 
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accordance with Sections 24 and 27 hereof. 
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(i) 
"CIS securities" means, units of participation or similar interests in a 
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contractual CIS or shares of stock or similar interests in a corporate CIS. 
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(j) 
"CIS solicitor" means a natural person who is duly licensed as such [or a 
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broker who is duly accredited] by the appropriate regulatory agency to sell CIS 
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securities. 
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(k) 
"Collective investment scheme" shall have the meaning given in Section 6 
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hereof. 
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(1) 
"Commission" means the Securities and Exchange Commission. 
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(m) 
"Common stock" of a corporation means a class of shares with general voting 
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rights. 
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(n) 
"Company" means a corporation, partnership, trust, or an association duly 
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registered with the Commission and lawfully transacting business in the 
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Philippines. 
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(0) 
"Contractual CIS" means a CIS: 
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1. organized pursuant to a contract, such as a trust indenture, or as part of an 
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insurance contract; 
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2. engaged, or holds itself out as being engaged, or proposes to engage, in the 
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business of investing, reinvesting, andlor trading in securities or other 
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investment assets allowed under this Law; and 
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3. issues units of participation each of which represents an undivided interest 
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in a pool of investment assets. 
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(p) 
"Control" is presumed to exist when the parent owns, directly or indirectly 
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through subsidiaries, more than one half of the voting power of an entity unless, 
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in exceptional circumstances, it can be clearly demonstrated that such ownership 
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does not constitute control. Control also exists even when the parent owns half or 
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less of the voting power of an entity when there is: 
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1. power over more than one half of the voting rights by virtue of an 
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agreement with other investors; 
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2. power to govern the financial and operating policies of an entity under a 
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statute or an agreement; 
3. power to appoint or remove the majority of the members of the board of 
directors or equivalent governing body and control of the entity is by that 
board or body; 
4. power to cast the majority of votes at meetings of the board of directors or 
equivalent governing body and control of the entity is by that board or 
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body; or 
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5. any other arrangement similar to any of the above. 
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(q) 
"Convicted" includes being the subject of a verdict, judgment, or plea of 
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guilty in the first instance, if such verdict, judgment or plea has not been 
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reversed, set aside, or withdrawn, whether or not sentence has been served. 
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(r) "Corporate CIS" means a CIS: 
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1. organized as a stock corporation; 
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2. engaged, or holds itself out as being engaged, or proposes to engage, in 
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the business of investing, reinvesting, andlor trading in securities or other 
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investment assets allowed under this Law; and 
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3. issues common stock each of which represents an undivided interest in a 
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pool of investment assets. 
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(s) 
"Corporation Code" means the Corporation Code of the Philippines, B.P. 68, 
enacted on May 1, 1980, as may be amended from time to time, or any law 
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subsequently enacted in replacement or substitution thereof. 
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(t) 
"Custodian" means an entity duly authorized by the Monetary Board to 
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(u) 
engage in the business of safekeeping investment assets, which is appointed and 
acts as the custodian of the investment assets of a CIS pursuant to this Law and 
the relevant regulations of the Monetary Board andlor the Commission. 
"Dealer" means any person duly licensed by the appropriate regulatory 
agency and accredited by the appropriate self regulatory organization to buy and 
sell securities for his own account, in the ordinary course of business whether 
through a broker or otherwise. The term excludes banks, insurance companies, 
or CIS, or any person insofar as he is engaged in investing, reinvesting, or 
trading in securities, or in owning or holding securities, for his own account, 
either individually or in some fiduciary capacity, but not as a part of regular 
business. 
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(v) 
"Director" means a director of a corporation or any person performing 
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similar functions with respect to any organization. 
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(w) 
"Exchange" means an organized marketplace or facility duly licensed by the 
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Commission that brings together buyers and sellers and executes trades of 
securities andlor commodities. 
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(x) 
"Fund manager" means a juridical person engaged in the business of 
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managing the investment assets of a CIS and/or engaged in the business of 
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(y) 
providing administrative and ancillary services for such CIS as licensed by the 
appropriate regulatory agency in accordance with Section 7, and having the 
duties and responsibilities enumerated in Section 8. 
"General Banking Law" means Republic Act No. 8791, as may be amended 
from time to time, or any law subsequently enacted in replacement or 
substitution thereof. 
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(z) 
"Implementing Rules and Regulations" means the uniform rules and 
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regulations jointly formulated and issued by the appropriate regulatory agencies 
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to implement the provisions of this Law, in accordance with Section 64 hereof. 
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(aa) 
"Independent auditor" means the independent external certified public 
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accountant referred to in Section 18 hereof. 
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(bb) 
"Independent director" refers to a person other than an officer or employee of 
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the corporation, its affiliates, or any other individual having any relationship with 
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the corporation which would materially interfere with the exercise of 
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independent judgment in carrying out the responsibilities of a director. An 
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independent director shall possess all the qualifications and none of the 
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disqualifications for independent directors as defined in the Securities Regulation 
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Code and its implementing rules. 
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(cc) 
"Independent oversight body" refers to the body or entity referred to III 
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Section 52 (b) (2) hereof. 
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(dd) 
"Insurance Code Of the Philippines" means Presidential Decree No. 1460 
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otherwise known as 'The Insurance Code of 1978', as amended, or any law 
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subsequently enacted in replacement or substitution thereof. 
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(ee) 
"Insurance company" means a company engaged in the insurance or 
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reinsurance business and duly issued by the Insurance Commission with a 
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certificate of authority to transact such business, as specifically defined under the 
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Insurance Code of the Philippines. 
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(ft) 
"Investment adviser" means any person who regularly advises or 
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recommends investment decisions with regard to the securities or other portfolio 
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of a CIS pursuant to an advisory contract with such CIS through the fund 
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manager or trustee.i 
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(gg) 
"Investment assets" means the securities and other assets in which the funds 
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of a CIS may be invested in accordance with Section 39 hereof. 
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(hh) 
"Investment company" means the stock corporation organized pursuant to a 
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corporate CIS, which is engaged, or holds itself out as being engaged, or 
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proposes to engage, in the business of investing, reinvesting, andlor trading in 
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securities allowed under this Law. 
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(ii) 
"Investment house" means any enterprise which engages in the underwriting 
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of securities of other companies, as defined in Section 2 of the Investment 
Houses Law, Presidential Decree No. 129, as may be amended from time to 
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time, and is registered pursuant to said law. 
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Cij) 
"Net asset value" means the value of all assets less all liabilities of a CIS as 
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determined in accordance with generally accepted accounting principles and the 
provisions of this Law and its implementing rules and regulations. 
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(kk) 
"Organized Market" refers to an exchange or an over-the-counter market 
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governed by transparent and binding market conventions on price transparency, 
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trade reporting, market surveillance and fair and orderly conduct/operations of 
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the market. 
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(11) 
"Person" means a natural or juridical person as defined in the Civil Code of 
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the Philippines. 
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(mm) 
"Redemption" refers to the liquidation of a CIS security by returning it 
16. 
to the issuer in exchange for its net asset value. 
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(un) "Registrar" means the fund manager or trustee or such other person or persons 
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as may from time to time be appointed by the trustee, or the fund manager with 
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the prior approval of the trustee, to perform all or any of the duties and 
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functions of the registrar under Section 23 hereof. 
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(00) 
"Sale", "sell" troffer to sell" or troffer for sale" means every contract of sale 
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or disposition of, attempt or offer to dispose of, or solicitation of an offer to buy 
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a security or property or interest therein, for value. Any such security, property 
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or interest therein, given or delivered with, or as a bonus on account of, any 
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purchase of securities or any other thing, shall be conclusively presumed to 
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constitute a part ofthe subject of such purchase and to have been sold for value. 
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(pp) 
"Security" means any instrument or product defined as such by the Securities 
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Regulation Code and its implementing rules. 
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(qq) 
"Securities Regulation Code" or "SRC" means Republic Act No. 8799, 
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enacted on July 17, 2002, as may be amended from time to time. 
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(rr) "Separate account fund" - means the segregated portfolio of investments 
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established, maintained and invested in by an insurance company [or its variable 
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life insurance contracts and accounted for separately and apart from its other 
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investments and accounts, pursuant to the Insurance Code of 1978, as amended 
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(P.D. No. 1460), under which the income, gains and losses (whether or not 
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realized) from, and expenses incurred on the acquisition, disposal and 
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management of assets allocated to such account, are credited to or charged 
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against such account without regard to the other income, gains, losses and other 
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expenses of the insurance company. The Separate AccoUnt Fund shall be deemed 
, 
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a contractual CIS, and the units of participation therein shall be deemed as CIS 
, 
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securities, subject to this Law. The assets held in any sllch separate account shall 
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be applied exclusively for the benefit of the owner~ or beneficiaries of the 
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variable life insurance contracts. 
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(ss) "Shareholder" means a stockholder of a corporate CIS.: 
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(tt) 
"Trust institution" -
means any bank, investment house or a stock 
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corporation duly authorized by the Monetary Bo~rd to engage in trust, 
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investment management and fiduciary business. 
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(uu) "Trustee" means a trust institution appointed and acting as the trustee of a 
contractual CIS pursuant to this Law. 
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(vv) 
"Unit Holder" - means an investor in a contractual CCIS. 
(ww) "Value" means the market value or fair value ~f securities as may be 
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determined in accordance with such rules and regularions as the Commission 
may prescribe. 
I 
TITLE II - COLLECTIVE INVESTMENT S~HEMES 
I 
Chapter 1 - Nature and Structure of Collective Inv~stment Schemes 
SECTION 6. Collective Investment Schemes -
(a) 
(b) 
, 
A Collective Investment Scheme (CIS) is any arrangement whereby funds 
, 
are solicited from the investing public for the purpose of investing, re-
, 
investing and/or trading in securities or other assets allowed under this 
Law. All CIS shall be covered by and regulated pursuant to this Law. A 
CIS may have a corporate structure, sllch as an investment company, or a 
contractllal structure, sllch as a unit investm9nt trust fllnd or similar 
scheme held by a trust institlltion or a separate' account fund established 
pursuant to a variable unit linked life insurapce policy isslled by an 
insurance company. All CIS shall be governed by and shall comply with 
the requirements of this Law and the pertinent provisions of the SRC and 
, 
the pertinent and the pertinent provisions ofthe ~RC. 
None of the following arrangements shall be deemed a collective 
I 
investment scheme subject to regulation under tnis 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 \nake a public offering of 
such securities. For purposes of this paragr~ph, beneficial ownership 
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by a company shall be deemed to be bendicial ownership by one 
person; except that, if such company owns twenty-five per centum 
(25%) or more of the outstanding voting securities of the issuer, the 
beneficial ownership shall be deemed to be that of the holders of such 
company's outstanding securities; 
2. Any insurance company in the conduct of its ordinary business; 
provided, however, that a separate account fund established by an 
insurance company shall be deemed a contractual CIS as defined under 
this Law. 
3. Any employees' stock, bonus, pension, retirement, 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 
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(c) 
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 [redeemable] securities are 
offered and are redeemable by the CIS; and 
2. "Closed-end CIS" means a CIS where a fixed number of securities are 
offered in an initial public offering and thereafter may be traded in an 
organized market as detennined by the appropriate regulatory agency 
in an initial public offering and thereafter may be traded in an initial 
public offering and thereafter may be traded in an organized market as 
detennined by the appropriate regulatory agency, but may not be 
redeemed by the CIS. A closed-end CIS shall not be allowed to 
increase its number of securities. 
Chapter 2 - Parties Involved In Collective Investment Schemes 
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SECTION 7. FUlId mallager- No company shall act as a fund manager FOR A 
18 
CIS unless duly licensed by the appropriate regulatory agency, and no company shall be 
19 
licensed as a fund manager for purposes of this Law, unless: 
20 
(a) It is organized as a stock corporation; 
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(b) It has a minimum paid-up capital of not less than one hundred million pesos 
22 
(PIOO,OOO,OOO.OO); Provided, however, that the appropriate regulatory agency 
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may prescribe a higher minimum paid-up capital taking into consideration, 
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among other factors: 
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1. the risk-based principles on capital adequacy based on internationally 
26 
accepted standards; and 
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2. the number and/or of CIS managed; 
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(c) At least one-third (1/3) of the entire membership of the Board of Directors of 
29 
the fund manager shall be independent directors; and 
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(d) It has complied with such other requirements as may be prescribed by the 
31 
appropriate regulatory agency. 
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In licensing a fund manager, the appropriate regulatory agency shall 
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ensure that the requirements under this Law and its implementing rules and 
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regulations are complied with. 
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SECTION 8. Duties alld Respollsibilities of the FUlld Mallager - The fund 
37 
manager shall have the following duties and responsibilities: 
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(a) Manage the investment assets of the CIS and perform its functions in 
accordance with the CIS plan, the provisions of this Law and its implementing 
rules and regulations for the exclusive interest ofthe CIS investors; 
(b) Provide copies of financial and other records of CIS investments to the CIS 
investors, trustee, CIS and auditor; 
(c) Ensure that the fund and the CIS securities are accurately valued or priced; 
(d) Ensure that all payments out of CIS funds, assets and properties are made in 
accordance with the CIS plan, this Law and its implementing rules and 
regulations; 
(e) Comply with the instructions of the corporate CIS or the trustee to remedy a 
breach of the provisions or covenants of the CIS plan, its contract with the 
corporate CIS or trustee, the provisions of this Law or its implementing rules 
and regulations; 
(f) Furnish the corporate CIS or the trustee with all contracts and agreements 
relating to the operation and management ofthe CIS; 
(g) Report to the corporate CIS or the trustee and the CIS investors results of the 
CIS operations; 
(h) Call for and attend annual or special meetings of the unit holders of a 
contractual CIS, or attend meetings of stockholders of a corporate CIS; 
(i) Monitor the activities ofthe CIS distributors in the sale of the CIS securities; 
(j) Facilitate the redemption of CIS securities; 
(k) Maintain proper accounting records and other records to: 
1. enable a complete and accurate review of the CIS funds, assets and 
properties; and 
2. ensure that the CIS funds, assets and properties 
are managed and 
administered in accordance with the CIS plan, its contract with the 
corporate CIS or trustee, this Law and its implementing rules and 
regulations; 
(1) Propose amendments to the CIS plan and secure approval for those 
amendments which require investor approval in accordance with the 
provisions of this Law; 
(m)Report to the appropriate regulatory agency, as soon as practicable, any 
material development or breach of the provisions or covenants of the CIS 
plan, the provisions of this Law or its implementing rules and regulations, 
that: 
1. relates to the establislunent, distribution, management, operation or 
dissolution of the CIS, and 
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2. has had or is likely to have a material adverse effect on the interests of 
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the CIS investors; and 
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(n) Such other duties and responsibilities that the appropriate regulatory agency 
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may prescribe. 
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SECTION 9. Prohibited Acts of the Fund Manager. - The fund manager shall 
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not: 
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(a) Purchase securities and investment assets for its own account which may 
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conflict with its obligations as fund' manager; 
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(b) Invest CIS funds in any securities, property and assets in which such fund 
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manager or any of its directors, officers, employees and affiliates have a 
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substantial financial interest, subject to such exceptions and/or guidelines as 
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may be prescribed by (he Commission; 
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(c) Engage in a business other than the business of managing, administering, 
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marketing and distributing CIS funds and securities, provided that this 
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prohibition shall not apply if the fund manager is the trust department of a 
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bank or a non-bank financial institution; 
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(d) Payor cause to be paid out of the CIS funds any fees, commissions and other 
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similar expenses that have not been, or exceed what have been, provided for 
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in the CIS plan, this Law and its implementing rules and regulations or any 
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other applicable laws and regulations; 
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(e) Retain any rebate from, or otherwise share in any commission with, any 
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broker or dealer in consideration of transactions or investments of the CIS 
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funds. Accordingly, any rebates or shared commissions shall be for the 
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account of the CIS fund concerned; and 
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(f) Engage in such other acts as may be prohibited by rule or order of the 
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appropriate regulatory agency. 
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SECTION 10. Fund Management Agreement - (a) The agreement between the 
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fund manager and the trustee or the corporate CIS shall contain, among others, provisions 
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pertaining (0: 
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1. Extent of services to be rendered; 
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2. Any restrictions or prohibitions regarding the performance of the functions 
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of the fund manager; 
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3. All compensation to be paid thereunder which shall be clearly described in 
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a transparent mauner, and which shall be in accordance with such 
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requirements and limitations as the implementing rules and regulations 
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may prescribe; 
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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. 
(b) 
In all cases where the trustee or insurance company functions as a fund 
9 
manager, the foregoing provisions which should otherwise be contained in the fund 
10 
management agreement with the fnnd manager shall be contained in the CIS plan. 
11 
12 
SECTION 11. The Trustee - Only a trust institution shall act as a trustee of a 
13 
CIS. In authorizing a trust institution to engage in CIS activities, the Monetary Board 
14 
shall ensure that all relevant requirements under this Law or implementing rules and 
15 
regulations shall be complied with. The following, in addition to those prescribed under 
16 
existing laws and regulations, shall be the duties and responsibilities of a trustee of a CIS: 
17 
(a) Monitor the activities of the CIS distributors in the sale and/or redemption of 
18 
the CIS units and ensure that the provisions of any marketing document 
19 
relating to the sale or offer for sale of the CIS securities do not contain any 
20 
matter which is inconsistent with the provisions of the CIS plan, this Law and 
21 
its implementing rules and regulations; 
22 
(b) Ensure that the management and investments of the CIS funds by the fund 
23 
manager are in accordance with the CIS plan; 
24 
(c) Ensure that the fund manager remedies any breach of the CIS plan or the 
25 
terms of its appointment as fund manager, or any contravention of the 
26 
provisions of this Law or its implementing rules and regulations; 
27 
(d) Appoint an independent third-party custodian; 
28 
(e) Ensure that CIS funds, assets and properties are clearly identified and held 
29 
separately from its own properties and other properties held in trust; 
30 
(f) Ensure that all payments out of CIS funds, assets and properties are made in 
31 
accordance with the CIS plan, this Law and its implementing rules and 
32 
regulations; 
33 
(g) Monitor the existence of conflict of interest situations and address the same 
34 
for the best interests of the CIS investors; 
35 
(h) Report to the Commission and the appropriate regulatory agency, as soon as 
36 
practicable, any material development or breach of the provisions or 
37 
covenants of the CIS plan, the provisions of this Law or its implementing 
38 
rules and regulations that: 
12 


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3 
4 
5 
6 
7 
8 
9 
10 
1. relates to the establishment, operation or dissolution of the CIS, and 
2. has had or is likely to have a material adverse effect on the interests of 
the CIS investors; 
(i) Call for annual or special meetings of the CIS investors in the event the fund 
manager fails or refuses to do so; 
(j) Propose amendments to the CIS plan and secure approval for those 
amendments which require investor approval in accordance with the 
provisions ofthis Law; and 
(k) Such other duties and responsibilities that the Commission may prescribe. 
II 
SECTION 12. Corporate CIS - (a) No company shall act as a corporate CIS 
12 
unless duly licensed by the Commission, and no company shall be licensed as a corporate 
13 
CIS for purposes of this Law, unless it shall: 
14 
15 
16 
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25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
1. 
2. 
3. 
4. 
5. 
6. 
Be organized in the form of a stock corporation; 
Issue shares of stock consisting solely of common stock; 
Provide in its articles of incorporation that shareholders shall not be 
entitled to pre-emptive rights; 
Have, at the time of registration, an initial subscribed and paid-up capital 
of at least fifty million pesos (P50,000,000.00) provided, however, that the 
Commission may prescribe a higher paid-up capital. The Commission may 
prescribe a lower minimum paid-up capital for any subsequent corporate 
CIS that is established and managed by the same fund manager; 
Maintain unimpaired its initial paid-up capital for a period of twelve (12) 
months following its registration with the Commission as a corporate CIS, 
or such other period as the Commission may prescribe; and 
Maintain at all times, if an open-end company, a reserve in liquid or semi-
liquid assets, equal to at least ten per centum (10%) of the total assets of 
such company, or such other percentage and in such form as the 
Commission may prescribe. 
(b) Notwithstanding any provision of the Corporation Code (0 the contrary, no 
corporate CIS shall be required to comply with the minimum subscribed and 
paid-up capital relative to an increase in its authorized capital stock. 
(c) The incorporators of a corporate CIS shall, at incorporation, fully pay in cash 
their respective subscriptions. 
(d) The Commission may prescribe such other or additional requirements under 
subsection (a) of this section respecting the form, share structure, and level of 
restrictions on capitalization and reserves, as necessary or appropriate in the 
13 


I 
public interest or for the protection of investors. 
2 
(e) At least one-third (1/3) of the entire membership of the board of directors of a 
3 
corporate CIS shall be independent directors. 
4 
5 
SECTION 13. Custodian - Only entities duly licensed by the Monetary Board 
6 
may act as custodian of assets of a CIS. Unless otherwise authorized by the appropriate 
7 
regulatory authority taking into account the interest of the investing public, all CIS must 
8 
appoint an independent third party custodian which shall have custody of the investment 
9 
assets of the CIS. The following, in addition to those prescribed under existing laws and 
10 
regulations, shall be the duties and responsibilities of a custodian: 
11 
(a) Hold the property of a CIS in accordance with its agreement with the trustee 
12 
or the corporate CIS; and 
13 
(b) Such other duties and responsibilities that the Monetary Board may prescribe, 
14 
which shall include: 
15 
1. Eannarking, segregation and hypothecation of the investment assets of the 
16 
CIS; and 
17 
2. Provisions for periodic or other inspections by employees and agents of 
18 
the Monetary Board. 
19 
20 
SECTION 14. Appointment of Custodian -
The agreement between the 
21 
custodian and the corporate CIS or the trustee of a contractual CIS shall contain, among 
22 
others, provisions pertaining to: 
23 
I. 
Extent of services to be rendered by the custodian; 
24 
25 
26 
27 
28 
2. 
3. 
4. 
Fees, remuneration and other expenses of the custodian; 
Any restrictions or prohibitions regarding the perfonnance by the 
custodian of its functions; and 
RepOlting requirements of the custodian. 
29 
SECTION 15. CIS Distributor - (a) No entity shall be licensed as a distributor of 
30 
CIS securities, unless: 
31 
32 
33 
34 
35 
36 
37 
38 
1. 
2. 
3. 
It is organized as a stock corporation; 
It has a minimum paid-up capital of not less than ten million pesos 
(P I 0,000,000.00), or such higher capitalization to be prescribed by the 
appropriate regulatory agency taking into consideration (i) the risk-based 
principles on capital adequacy based on internationally accepted 
standards, and (ii) the number andlor value of CIS distributed; and 
It has complied with such other requirements as may be prescribed by the 
appropriate regulatory agency. 
14 


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20 
21 
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25 
26 
27 
28 
29 
30 
31 
32 
33 
(b) For purposes of this Law, the following juridical persons may be licensed as a 
CIS distributor by the appropriate regulatory agency, provided that the requirements 
under this section and the implementing rules and regulations are complied with: 
1. Any fund manager; 
2. Any investment house; 
3. Any bank, financial institution or trust institution under the supervision of the 
Bangko Sentral ng Pilipinas; 
4. Any insurance broker under the supervision of the Insurance Commission; 
5. Stockbrokers duly accredited by the Commission; and. 
6. Other persons as may be hereinafter allowed by the Commission. 
(c) A corporate CIS is not permitted to act as a distributor of securities of which it 
is the issuer, unless it complies with such rules and orders as the appropriate regulatory 
agency may prescribe as necessary or appropriate in the public interest or for the 
protection of investors. 
(d) Whenever a fund manager and/or its affiliate shall act as a CIS distributor of 
the CIS of which it is the fund manager, and whenever a trustee and/or its affiliate shall 
act as a CIS distributor of the CIS of which it is the trustee, the prior written consent of 
the appropriate regulatory agency shall be secured. 
(e) The CIS distributor shall be principally responsible for marketing, distributing 
and selling CIS securities. It shall perform such other duties and responsibilities as the 
implementing rules and regulations may prescribe. 
SECTION 16. Marketing and Distribution Agreement - (a) The agreement 
between the CIS distributor and the corporate CIS or the trustee of a contractual CIS shall 
contain, among others, provisions pertaining to: 
1. 
Extent of services to be rendered by the CIS distributor; 
2. 
Fees, remuneration and other expenses of the CIS distributor; 
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 
Commission; and 
Reporting requirements. 
34 
(b) In all cases where the trustee or insurance company functions as a CIS 
35 
distributor, the foregoing provisions which should otherwise be contained in the 
36 
marketing and distribution agreement with the CIS shall be contained in the CIS plan. 
37 
15 


1 
SECTION 17. CIS Solicitor - No person shall be allowed to solicit, sell or offer 
2 
to sell CIS securities unless duly licensed by the appropriate regulatory agency after 
3 
compliance with such requirements and standards for eligibility as may prescribed in This 
4 
law and its implementing rules and regulations. 
5 
6 
SECTION 18. Accountants and Auditors.- (a) The financial statements of every 
7 
corporate CIS, fund manager and contractual CIS shall be audited and certified by an 
8 
independent auditor duly accredited by the appropriate regulatory agency. 
9 
(b) The following, in addition to those prescribed under existing laws and 
10 
regulations, shall be the duties and responsibilities of the independent auditor: 
11 
1. 
Report to the Board of Directors or Trustee of the CIS any irregularity or 
12 
undesirable practice in the operation of the CIS which has come to its 
13 
knowledge. Any material finding shall be reported by the independent 
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 
2. 
3. 
auditor to the appropriate regulatory agency; 
Report to the appropriate regulatory agency non-compliance by the fund 
manager and trustee with its contractual and regulatory requirements; and 
Report to the appropriate regulatory agency whether the internal control 
and audit structures in the operation ofthe CIS are at an acceptable level. 
SECTION 19. Common Duties and Responsibilities of Parties - In addition to 
their specific duties and responsibilities, each of the corporate CIS, fund manager, trustee, 
CIS distributor, CIS solicitor, and the CIS custodian shall have the following common 
duties and responsibilities: 
(a) 
Carryon and manage its business and the CIS in a proper, diligent and 
efficient maImer; 
(b) 
Observe honesty, due care and diligence, utmost good faith and high 
standards of integrity; 
(c) 
(d) 
(e) 
(i) 
Act in the best interests of the CIS investors; 
Establish systems, procedures and processes to be observed by its officers 
and employees to ensure compliance with this Law and its implementing 
rules and regulations and to protect the interests ofthe CIS investors; 
Take responsibility for all actions and omissions of any third party to 
whom it delegates any of its duties and responsibilities, except for any 
resulting daIllage or liability arising from force majeure or other similar 
occurrence beyond the control of such third party; 
Ensure that any person appointed or employed by it is of good repute, 
having relevant expertise and experience to act in the capacity so 
appointed or employed; 
16 


1 
2 
3 
4 
5 
6 
7 
8 
(g) 
(h) 
(i) 
G) 
Refrain from using its position to gain, directly or indirectly, an advantage 
for itself or for any other person or to cause detriment to the interests of 
CIS investors; 
Avoid and eliminate conflicts of interest in the performance of their 
functions, which may be identified by the appropriate regulatory agency as 
prejudicial to the interests of the investing public; 
Disclose all conflicts of interest in the performance of their functions; and 
Comply with orders, rules and regulations as may be prescribed by the 
9 
appropriate regulatory agency. 
10 
Any contractual provision which protects or purports to protect the fund manager, 
11 
corporate CIS, trustee, CIS distributor, CIS solicitor, or CIS custodian against any 
12 
liability for willful misfeasance, malfeasance, fraud, bad faith, or gross negligence in 
13 
the performance of their duties shall be void. 
14 
15 
SECTION 20. Revocation, Refusal or Suspension of License of the Fund 
16 
Manager, Corporate CIS, Trustee, Insurance Company, Custodian, CIS Distributor 
17 
and CIS Solicitor. - The licensing or authorization of a fund manager, corporate CIS, 
18 
trustee, insurance company, custodian, CIS distributor or CIS solicitor to engage in CIS 
19 
business under this Law may be refused, or any license granted thereunder may be 
20 
revoked, suspended, or limitations placed thereon by the appropriate regulatory agency if, 
21 
after due notice and hearing, the appropriate regulatory agency which granted the license 
22 
determines that the applicant or licensee: 
23 
(a) Has willfully violated any provision of this Law, any rule, regulation or order 
24 
made hereunder, or any other law administered by the appropriate regulatory 
25 
agency, or has failed to supervise, with a view to preventing such violation, 
26 
another person who commits such violation; 
27 
(b) Has willfully made or caused to be made a materially false or misleading 
28 
statement in any application for license or report filed with the appropriate 
29 
regulatory agency, or has willfully omitted to state any material fact that is 
30 
required to be stated therein or necessary to make the statement therein not 
31 
misleading; 
32 
(c) Has failed to satisfy the qualifications or requirements for licensing prescribed 
33 
under this Law and its implementing rules and regulations; 
34 
(d) Any of its directors or officers has been convicted by a competent body of an 
35 
offense 
involving fraud, 
embezzlement, 
counterfeiting, 
theft, 
estafa, 
36 
misappropriation, forgery, bribery, false oath, perjury, or of a violation of 
37 
securities, commodities, banking, real estate or insurance laws; 
38 
(e) Is enjoined or restrained by a competent body from engaging in securities, 
17 


1 
commodities, banking, real estate, insurance or similar activities; 
2 
(f) Is subj ect to an order of a competent body refusing, revoking or suspending 
3 
any license or other permit under this Law, the implementing rules and 
4 
regulations, any other law or regulation administered by the appropriate 
5 
regulatory agency or any other governmental authority; 
6 
(g) Has been found by a competent body to have violated any provlslOns of 
7 
securities, commodities, banking, real estate or insurance laws, or has aided, 
8 
abetted, counseled, commanded, induced or procured such violation; or 
9 
(h) Has been judicially declared insolvent. 
10 
For purposes of this subsection, the term "competent body" shall include 
II 
a foreign court of competent jurisdiction and a foreign financial regulator. 
12 
13 
SECTION 21. Fit and Proper Rule. To maintain the quality of management of 
14 
the CIS and afford better protection to CIS investors, the appropriate regulatory agency 
15 
shall prescribe or pass upon and review the qnalifications and disqualifications of 
16 
individuals elected or appointed as directors or officers of fund managers, trustees, 
17 
insurance companies, corporate CIS or CIS distributors and disqualify those found 
18 
unfit. The appropriate regulatory agency may disqualify, suspend or remove any director 
19 
or officer who commits or omits an act which render him unfit for the position. 
20 
In determining whether an individual is fit and proper to hold the position of a 
21 
director or officer of the fund manager, trustee, insurance company, corporate CIS or CIS 
22 
distributor, regard shall be given to his integrity, experience, education, training, and 
23 
competence: Provided, however, that the following persons, and those determined by the 
24 
appropriate regulatory agency to be unfit, shall in no case be allowed to serve or act in 
25 
the capacity of officer, director, consultant, of any fund manager, trustee, insurance 
26 
company, corporate CIS or CIS distributor: 
27 
(a) any person convicted of any crime involving any security or financial product, 
28 
(b) any person convicted of an offense involving fraud or embezzlement, theft, 
29 
estafa or other fraudulent acts or transactions; 
30 
(c) any person who, by reason of any misconduct, is enjoined by order, judgment, 
31 
or decree by any court, quasi-judicial body or administrative agency of 
32 
competent 
jurisdiction from acting as a director, officer, employee, 
33 
consultant, or agent occupying any fiduciary position. 
34 
(d) any person found by the appropriate regulatory agency to have violated, or 
35 
aided, abetted, counseled, commanded, induced, or procured the violation of 
36 
this Law, the General Banking Law, the Insurance Code, the Securities 
37 
Regulation Code, or any related laws and any rules, regulations or orders 
38 
thereunder; 
18 


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30 
31 
32 
33 
34 
35 
(e) any person judicially declared to be insolvent, or incapacitated to contract; and 
(f) any person found guilty by a foreign court, regulatory authority or government 
agertcy of the acts or violations similar to any of the acts or misconduct 
enumerated in the foregoing paragraphs. 
Chapter 3 - Provisions applicable to Contractual CIS 
SECTION 22. Establishment of a Contractual CIS. 
(a) 
Units of participation in a contractual CIS shall not be sold or offered for 
sale or distribution within the Philippines without a CIS plan duly filed 
(b) 
(c) 
(d) 
(e) 
and approved by the Commission. 
Any fund manager may establish, administer and manage one or more 
contractual CIS. Such fund manager shall enter into a fund management 
contract with a trustee or insurance company that is not an affiliate of the 
fund manager; Provided, that no director and/or officer of the fund 
manager shall at the same time serve as director 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 trnst agreement or the 
msurance 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 the trustee 
or insurance company, on the other hand, are performed by the same or 
affiliated entities, there must be an independent oversight body which 
shaH be created pursuant to, and shall perform the oversight duties and 
responsibilities enumerated in Section 52 [0] (b )(2) hereof. 
36 
SECTION 23. Register of CIS Investors - An up-to-date register of all CIS 
37 
investors shall be kept and maintained by or under the control of a registrar, which may 
38 
be kept and maintained either in written form or by other means which are capable of 
19 


1 
being reproduced in written form, including, but not limited to, computer records, 
2 
microfilm, microfiche or electronic recording, as the fund manager shaH from time to 
3 
time determine. There shall be entered into the register such relevant information as may 
4 
be prescribed by the fund manager or the trustee. Information about CIS investors shall 
5 
be considered confidential in nature and may not be inquired or looked into except upon 
6 
order of a court of competent jurisdiction or in the course of examination by the 
7 
appropriate regulatory agency. 
8 
9 
SECTION 24. The COlltractual CIS Plall. In addition to the matters specified in 
10 
Section 32, a Contractual CIS shall contain the following matters: 
11 
(a) In cases where the trustee or its affiliate, or insurance company or its affiliate, 
12 
performs the functions of the fund manager, a description of the independent 
13 
oversight body, as prescribed under Section 22 (e) of this Law. 
14 
(b) Initial unit value and the basis thereof; and 
15 
(c) Basis upon which the CIS may be terminated. The CIS plan shall state the 
16 
rights of participants in case of termination of the CIS. 
17 
18 
19 
20 
Chapter 4 - Provisions Applicable to Corporate CIS 
21 
SECTION 25. Establishmellt of a Corporate CIS. - Shares in a corporate CIS 
22 
shall not be sold or offered for sale or distribution within the Philippines without a CIS 
23 
plan duly filed and approved by the Commission. 
24 
25 
SECTION 26. Ellgagemellt of FUlld Mallager. Corporate CIS shall engage a 
26 
duly registered fund manager to perform the functions prescribed in Section 8 hereof; 
27 
Provided, that a majority of the directors of the corporate CIS are not directors, officers 
28 
or employees of the fund manager; and Provided, further, that nD Chairman, Chief 
29 
Executive officer, President, Chief Operating Officer or equivalent positions may be 
30 
interlocking but officers with lower rank may be CDmmon with prior approval of the 
31 
appropriate regulatDry authority. 
32 
33 
SECTION 27. The Corporate CIS plall - In addition tD the matters specified in 
34 
Section 32, a corpDrate CIS Plan shall contain the follDwing matters: 
35 
36 
37 
38 
(a) 
(b) 
(c) 
Par Value of the shares of stDck ofthe corporate CIS; 
Provision for the external audit of the corporate CIS; 
The dissolution of the corporate CIS and the rights of shareholders in case 
of dissolution of the corporate CIS; 
20 


1 
2 
3 
(d) 
(e) 
Borrowing of money in accordance with the mles and regulations as may 
be prescribed by the Commission; and 
Extension of loans to other persons in accordance with the mles and 
4 
regulations as may be provided by the Commission. 
5 
6 
SECTION 28. Dividends. (a) Dividends shall be declared and paid in accordance 
7 
with the requirements of the Corporation Code and applicable laws and regulations; 
8 
Provided, that the Commission may prescribe other requirements or restrictions in the 
9 
declaration and payment of dividends by the corporate CIS as necessary or appropriate in 
10 
the public interest and for the protection ofthe investors. 
11 
(b) Dividend payments shall be accompanied by a written statement which 
12 
adequately discloses the source or sources of such payment. The Commission may 
13 
prescribe the form of such statement as necessary or appropriate in the public interest and 
14 
for the protection of the investors. 
15 
16 
SECTION 29. Proxies; Voting Trust. The Commission may prescribe rules and 
17 
regulations for the solicitation of proxies and the issuance and transfer of voting trust 
18 
certificates in accordance with the requirements of the Corporation Code and applicable 
19 
laws and regulations; Provided, that the Commission may prescribe other requirements Of 
20 
restrictions as may be necessary or appropriate in the public interest and for the 
21 
protection of the investors; Provided, further, that no proxies shall be used as a device to 
22 
control the management of any corporate CIS. 
23 
24 
25 
TITLE III - TAX PROVISIONS 
26 
27 
SECTION 30. Tax Treatment of CIS. All CIS shall be subject only to the 
28 
following national internal revenue taxes: 
29 
30 
A. Imposition of Documentary Stamp Tax for CIS. - Any original issuance of a 
31 
document evidencing interest or participation in a CIS Security as defined under Section 
32 
(5) hereunder shall be subject to documentary stamp tax prescribed under Section 188, 
33 
Title VII of the National Internal Revenue Code of 1997. 
34 
35 
B. Tax on Income or Gross Receipts o/CIS. - The income or gross receipts from 
36 
investments or reinvestments of funds received or accrued by any of CIS shall be subject 
37 
to all applicable taxes imposed under Title II of the National Internal Revenue Code of 
38 
1997. 
21 


C. Tax on Gains Upon Creation, Redemption, Sale, Barter, Exchange or Other 
2 
Disposition of CIS Securities. - Any gains realized by the investor upon redemption, 
3 
sale, barter, exchange or other disposition of CIS Securities shall be governed by Section 
4 
32(B)(7)(h) of the National Internal Revenue Code of 1997. 
5 
6 
The same tax treatment shall apply to gains realized from the transfer of shares of 
7 
stock in exchange for original issuance of CIS secmities. 
8 
9 
D. 
DST on the Creation, Redemption, Sale, Barter or Exchange of CIS 
10 
Securities. The sale, barter, or exchange or other disposition of CIS securities listed and 
II 
traded through a local stock exchange shall be governed by R.A. 9648. If not listed and 
12 
traded, It shall btl subject to Documentary Stamp Tax as provided under Section 188, 
13 
Title VII, of the National Internal Revenue Code of 1997. 
14 
IS 
The same tax treatment shall apply to the shares of stock transferred or exchanged 
16 
for the creation or redemption of CIS Securities. 
17 
18 
19 
TITLE IV - REGISTRATION OF CIS PLAN AND OPERATIONS OF CIS 
20 
21 
22 
Chapter 1 - Registration, Amendment and Suspension of CIS Plan 
23 
SECTION 31. Registration of CIS Plans. -
(a) All CIS must have a CIS plan 
24 
which should be registered with the Commission before any securities of such CIS can be 
25 
sold or offered for sale. All CIS plans shall be registered with the Commission by filing a 
26 
sworn statement with respect to such CIS plan, in such form and containing such 
27 
information and documents as prescribed by this Law, the implementing rules and 
28 
regulations or the Commission. The CIS plan shall include any prospectus as required or 
29 
permitted by the Commission to be delivered to CIS investors. It shall be unlawful for 
30 
any person to sell or offer for sale CIS securities unless the corresponding CIS plan has 
31 
been duly registered under this section. 
32 
(b) The CIS plan shall be signed by the executive officer, principal operating 
33 
officer, principal financial officer, comptroller, principal accounting officer, corporate 
34 
secretary or persons performing similar functions of the corporate CIS, or the fund 
35 
manager, trustee or insurance company in the case of a contractual CIS, accompanied by 
36 
a duly verified resolution of the board of directors. The written consent of the expert 
22 


1 
named as having certified any part of the CIS plan or any document used in connection 
2 
therewith shall also be filed. 
3 
( c) Upon effectivity of the CIS plan, the corporate CIS, fund manager, trustee or 
4 
insurance company shall state in every sales material that all registration requirements 
5 
have been met and that all information are true and correct as represented by the 
6 
corporate CIS, fund manager, trustee or insurance company or the person making the 
7 
statement. Any untrue statement of fact or omission to state a material fact required to be 
8 
stated therein or necessary to make the statement therein not misleading shall constitute 
9 
fraud. 
10 
(d) The Commission may refuse the registration of a CIS plan if: 
II 
1. It contains a false or misleading statement; 
12 
2. It omits to state a material fact required to be stated therein or necessary to 
13 
make the statement therein not misleading; 
14 
3. It does not comply with the requirements of this Law and applicable laws 
15 
and regulations; or 
16 
4. It is in the public interest to refuse the registration of such CIS plan. 
17 
(e) If any change occurs in the facts set forth in the CIS plan, the corporate CIS, 
18 
fund manager, trustee or insurance company shall file an amendment thereto setting forth 
19 
the change. 
20 
21 
SECTION 32. Contents of the CIS Plan. The CIS Plan shall contain the 
22 
following matters: 
23 
(a) Title of the CIS plan. This shall correspond to the product or brand name by 
24 
which the CIS is proposed to be known and made available to its investors; 
25 
(b) Name ofthe fund manager; 
26 
(c) A statement of the CIS's investment objectives and policies including 
27 
limitations, if any, and risk factors in investing in the CIS; 
28 
(d) Investment powers of the fund manager with respect to the CIS, including the 
29 
character and kind of investments which maybe purchased by the CIS; 
30 
(e) Profile of the proposed investors; 
31 
Cf) Total value to be issued in case of closed-end CIS; 
32 
(g) Its classification, whether an open-end or closed-end fund; 
33 
(h) Terms and conditions governing the issuance and redemption of CIS 
34 
securities; 
35 
(i) Provision for the external audit of the CIS; 
36 
(j) Liabilities of the corporate CIS and the fund manager to the unit holders or 
37 
shareholders; 
23 


1 
(k) Amount of fees, commissions and other charges and expenses to be deducted 
2 
from the fund, in the case of a contractual CIS, or to be paid by the 
3 
shareholders, in the case of corporate CIS; 
4 
(1) Annual meetings of unit/policy holders or shareholders; 
5 
(m)Public disclosures and reports; 
6 
(n) plan of distribution of CIS assets in case of dissolution; and 
7 
(0) Such other matters as the Commission may prescribe. 
8 
9 
A copy of the CIS plan shall be made available to any interested person at the 
10 
principal office of the fund manager, and the trustee in case of contractual CIS, or 
11 
insurance company during regular office hours. 
12 
13 
SECTION 33. Revocation of Registration or Suspension of Offer and Sale of 
14 
Securities - The Commission may revoke the registration of the CIS plan in accordance 
15 
with Section 13.1 of the SRC or order the suspension of the offer and sale of the CIS 
16 
securities in accordance with Section 13.4 of the SRC and their implementing rules and 
17 
regulations. 
18 
19 
20 
Chapter 2 - Dealings in CIS Securities 
21 
SECTION 34. Rights and Privileges of CIS Investors. Each share of stock of a 
22 
corporate CIS and each unit of participation of a contractual CIS shall be equal in all 
23 
respects to every other share or unit belonging to the same class of shares or units. 
24 
25 
SECTION 35. Payment for CIS Securities. No CIS shall Issue any of its 
26 
securities for services or for property other than cleared funds. 
27 
28 
SECTION 36. Distribution, Redemption and Pricing of CIS Securities. (a) 
29 
Unless otherwise allowed in this Law, CIS Securities shall be sold only through a 
30 
licensed CIS Distributor and by licensed CIS Solicitors. Notwithstanding the pertinent 
31 
provision of Section 65 of the Corporation Code, CIS Securities may be issued at the net 
32 
asset value computed in accordance with Section 44. 
33 
(b) CIS investors have the right to surrender their securities for redemption in 
34 
accordance with the CIS plan. Redemption shall not be suspended except pursuant to the 
35 
CIS plan as approved by the Commission in the public interest or for the protection of 
36 
investors. 
The redemption price of CIS Securities shall be at the applicable price 
37 
described in the CIS Plan. 
38 
24 


1 
SECTION 37. Transferability of Securities. No CIS shall restrict the 
2 
transferability or negotiability of its CIS securities except as provided in the CIS plan or 
3 
by any rule or regulation prescribed by the Commission. 
4 
5 
6 
Chapter 3 - Operations of CIS 
7 
SECTION 38. Custody of Investment Assets. Every CIS shall place and maintain 
8 
its investment assets in the custody of a custodian in accordance with Sections 13 and 14 
9 
hereof. 
10 
II 
SECTION 39. Investment Limitations. (a) The CIS funds may be invested only 
12 
in the following liquid or semi-liquid assets tradeable through an organized market, 
13 
subject to limitations as may be provided by this Law, the implementing rules and 
14 
regulations or the appropriate regulatory agency: 
15 
I. Bank deposits; 
16 
2. Securities issued by or guaranteed by the Philippine government, or the 
17 
Bangko Sentral ng Pilipinas; 
18 
3. Tradable securities issued by the government of a foreign country, any 
19 
political subdivision of a foreign country or any supranational entity; 
20 
4. Exchange-listed securities; 
21 
5. Marketable instruments that are traded in an organized exchange or 
22 
market; 
23 
6. Loans traded in an organized market; 
24 
7. Exchange traded funds; 
25 
8. Derivatives as may be authorized by the appropriate regulatory agency; 
26 
9. Real estate investment trusts or companies; 
27 
10. Other CIS; and 
28 
11. Such other investments or instruments as the appropriate regulatory 
29 
agency may allow. 
30 
Provided, however. that no CIS shall, directly or indirectly: 
31 
32 
33 
34 
35 
I. 
2. 
acquire more than ten per centum (10%) of another CIS or any 
one company; or 
acquire securities of any issuer having an aggregate value in excess 
of twenty per centum (20%) of the net asset value of the acquiring 
CIS, or the weight of the security in a recognized benchmark or 
36 
index, whichever is higher. 
37 
(b) The appropriate regulatory agencies may jointly issue such implementing rules 
38 
and regulations, in accordance with Section 64 hereof, as may be necessary or 
25 


I 
appropriate in the public interest or for the protection of investors, that provide for 
2 
different percentages or further restrictions with respect to investments in other CIS or 
3 
the concentration of investments by a CIS. 
4 
5 
SECTION 40. Prohibited Acts a/CIS. -
6 
(a) It shall be unlawful for any CIS to -
7 
1. Purchase any security on margin, except such short-term credits as are 
8 
necessary for the clearance of transactions; 
9 
11. Participate on a joint or a joint and several basis in any trading account in 
10 
securities; 
11 
iii. generate funds for promoting the private business or industry of any 
12 
employee, officer, director, promoter or stockholder thereof; or 
13 
IV. allow any of its employees, officers, directors, organizers, incorporators or 
14 
stockholders to sell real estate, personal property or any other kind of 
IS 
property to the CIS at a price higher than the procurement cost or the 
16 
market value thereof, or sell to any of the aforementioned persons any 
17 
property of the corporate CIS, or a portion thereof, at a price below the 
18 
market value thereof. 
19 
(b) The appropriate regulatory agency may, by rules and regulations prohibit CIS 
20 
from engaging in such other acts as it may deem necessary or appropriate in the public 
21 
interest or for the protection of investors, taking into account the policy and purpose of 
22 
this Law. 
23 
24 
SECTION 41. Meetings a/CIS Investors. (a) Meetings of CIS investors shall be 
25 
held at least annually. The following matters shall be presented to the CIS investors: 
26 
1. 
Proposals to change investment policies in the CIS plan which shall 
27 
require the approval ofthe CIS investors; 
28 
29 
30 
2. 
3. 
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 ofthe financial condition of the fund and results 
31 
of its operations; and 
32 
4. 
Any other matter pertaining to the management and operation of the CIS. 
33 
(b) CIS investors may attend meetings in person or by proxy. A quorum at meetings 
34 
shall consist of unit holders or stockholders owning or representing at least ten 
35 
percentum (10%) of the total number of units in the fund or the outstanding capital 
36 
stock, respectively, or such other percentage as the Commission may prescribe taking 
37 
into account the size of the CIS and the number of its CIS investors. At least a 
26 


I 
majority vote of those present or represented shall be required to constitute a valid act 
2 
of the CIS investors. 
3 
(c) The Commission shall prescribe by rule or regulation the requirements for the 
4 
conduct of meetings. 
5 
6 
SECTION 42. Requirements for selling materials and advertisements. Sales and 
7 
marketing documents and advertisements shall be subj ect to such requirements as the 
8 
implementing rules and regulations or the Commission may prescribe. All sales and 
9 
marketing documents, and advertisements shall: 
10 
(a) Not contain any untrue statement of fact or omit to state any fact that is 
11 
necessary in order to prevent the statements made, in the light of the 
12 
circumstances in which they were made, from being misleading; 
13 
(b) The CIS performance information in advertisements should be calculated and 
14 
presented from the viewpoint of the average investor to whom the CIS IS 
15 
targeted; 
16 
(c) All CIS should calculate and present their performance information in 
17 
advertisements in a substantially similar manner so that CIS investors may (i) 
18 
make meaningful comparisons among various CIS, and (ii) not be misled by 
19 
differences in the method of calculation and presentation; and 
20 
(d) Comply with such other terms and conditions prescribed by the appropriate 
21 
regulatory agency which are necessary or appropriate in the public interest or 
22 
for the protection of CIS investors. 
23 
24 
SECTION 43. Reports and Financial Statements of CIS. (a) Every CIS shall 
25 
file with the appropriate regulatory agency, if any: 
26 
I. Such information and documents including financial statements as the 
27 
implementing rules and regulations and the appropriate regulatory agency 
28 
may require, to keep reasonably current the information and documents 
29 
contained in the CIS plan filed under this Law; and 
30 
2. 
Copies of every periodic or interim report or similar communication 
31 
transmitted to the CIS investors. 
32 
(b) Every CIS shall transmit to its CIS investors, at least annually, reports containing such 
33 
of the following information and financial statements or their equivalent, as of the latest 
34 
fiscal year, which reports shall not be misleading in any material respect in the light of 
35 
the reports required to be filed pursuant to subsection (a): 
36 
I. a balance sheet accompanied by a statement of the aggregate value of 
37 
investments on the date of such balance sheet; 
27 


I 
2. a list showing the amounts and values of securities owned on the date of 
2 
such balance sheet; 
3 
3. a statement of income, for the period covered by the report, which shall be 
4 
itemized at least with respect to each category of income and expense 
5 
representing more than five per centum (5%) of total income or expense; 
6 
4. a statement of surplus, which shaH be itemized at least with respect to each 
7 
charge or credit to the surplus account which represents more than five per 
8 
centum (5%) of the total charges or credits during the period covered by 
9 
the report; 
10 
5. a statement of the aggregate fees or remuneration paid by the CIS during 
11 
the period covered by the report to (i) the fund manager, trustee, CIS 
12 
distributor and independent auditor; and (ii) each director and all officers 
13 
as regular or special compensation; and 
14 
6. a statement of the aggregate amounts of purchases and sales of investment 
15 
assets made during the period covered by the report. 
16 
Provided, That the implementing rules and regulations may permit, in lieu of any 
17 
item required under this subsection which may be inapplicable or inappropriate to any 
18 
specified type or types of CIS, the inclusion of such item of a comparable character as it 
19 
may deem applicable or appropriate to such type or types of CIS. 
20 
Provided, further, that the reports and financial statement mentioned above, or 
21 
such other important information as the appropriate regulatory agency or commission 
22 
may determine, shall also be posted in the website, publication and/or other mode of 
23 
information dissemination of the appropriate regulatory agency and the CIS. 
24 
The appropriate regulatory agencies shall jointly prescribe the fonns of the 
25 
repOiis and financial statements, or such other important information as the regulatory 
26 
agency may determine, so that CIS investors may make meaningful comparisons among 
27 
various CIS, and will not be misled by differences in the method of calculation and 
28 
presentation. 
29 
30 
SECTION 44. Net Asset Value. (a) A CIS shall compute and post its net asset 
31 
value per share/unit at such frequency as may be prescribed by the implementing rules 
32 
and regulations or the Commission. 
33 
(b) The computation of the net asset value per share or unit shall be made in 
34 
accordance with the valuation method prescribed by the implementing rules and 
35 
regulations or the appropriate regulatory agency and shall be applied consistently. 
36 
37 
SECTION 45. Accounts and Records. (a) Every CIS, and every fund manager 
38 
and trustee shaH maintain and preserve for such period or periods as the may be 
28 


I 
prescribed by the implementing rules and regnlations, such accounts, books, and' other 
2 
documents as constituting the record forming the basis for financial statements required 
3 
to be filed pursuant to this Law, 
4 
(b) 
All accounts, books and other records required to be maintained and 
5 
preserved by any person pursuant to subsection (a) shall be subject to examination by the 
6 
appropriate regulatory agency, 
7 
8 
SECTION 46. 
Management and Trust Fees; Expenses Chargeable to 
9 
Fund/CIS Investors. The Management and Trust fees shall cover the CIS' fair and 
10 
equitable share of the routine administrative expenses ofthe fund manager, trustee andlor 
II 
insurance company such as directors' fees, salaries and wages, supplies, credit 
12 
investigation, collateral appraisal, security, messengerial and janitorial services, 
13 
information technology expenses, annual report preparation, supervision fees, regulatory 
14 
reporting expenses, and internal audit fees. Marketing, advertising, and other publiciting 
15 
or promotional related expenses shall be for the account of the fund manager, trustee, and 
16 
insurance company and shall be considered covered by the management or trust fee, 
17 
However, the fund manager, trustee, and insurance company may charge special 
18 
or reimbusible expenses from the CIS in case such expenses are (1) necessary to preserve 
19 
or enhance the value of the CIS, (2) payable to an independent or non-related third party 
20 
covered by a separate contract, and (3) disclosed to CIS investors, The fund manager, 
21 
trustee, and insurance company shall secure prior approval of the appropriate regulatory 
22 
agency for outsourcing services provided under existing regulations of the concerned 
23 
regulatory agency, 
No other fees shall be charged to the fundlCIS investors, except in 
24 
case of a corporate CIS, the directors fees shall be chargeable to the fund. 
25 
26 
SECTION 47. Changes in Investment Policy - Proposals to change the 
27 
investment policies shall be subject to approval by the CIS investors pursuant to Section 
28 
42 hereof and by the Commission. The fund manager, trustee or insurance company shall 
29 
disseminate to all CIS investors all material information pertaining to proposals to amend 
30 
the investment policies and objectives. The Commission shall prescribe by rule or 
31 
regulation the requirements for changes in investment policies. 
32 
33 
SECTION 48. Dissolution - (a) The corporate CIS, trustee or insurance company 
34 
shall cause the dissolution of the CIS whenever any of the following grounds is present: 
35 
1, Dissolution is required by the CIS plan, when the specified conditions or 
36 
time for dissolution have been met or reached; 
37 
2, Dissolution is agreed upon in a resolution of the CIS investors owning at 
38 
least two-thirds (2/3) of the outstanding CIS Securities in a CIS at a 
29 


1 
meeting duly called for the purpose; Provided, that, the implementing 
2 
rules and regulations may prescribe a different percentage interest taking 
3 
into account the nature and size of the CIS and the number of CIS 
4 
investors; Provided, finally, that there has been prior pUblication of the 
5 
notice of time, place and object of the meeting for two (2) consecutive 
6 
weeks in a newspaper of general circulation in the Philippines; 
7 
3. Dissolution is required by a final and executory order ofthe court; 
8 
4. Dissolution is ordered by the appropriate regulatory agency for non-
9 
compliance with the conditions for the lifting of a suspension or 
10 
revocation order previously issued; provided that the appropriate 
11 
regulatory agency or Commission shall not issue an order of dissolution 
12 
within six months from the issuance of the suspension or revocation order; 
13 
and 
14 
5. Dissolution IS deemed necessary in view of the dissolution or the 
15 
revocation of the license of the fund manager, trustee or insurance 
16 
company; 
17 
Provided, that the CIS may not be dissolved whenever: 
18 
(i) The appropriate regulatory agency orders the transfer of the CIS to a 
19 
willing and qualified fund manager, trustee or insurance company; 
20 
(ii) The dissolution or the loss oflicense of the trustee, insurance company 
21 
or fund manager is due to a merger and the surviving company in such 
22 
merger is also an authorized trustee, insurance company or fund 
23 
manager, as the case may be; or 
24 
(iii)The new company that is established as a result of the consolidation of 
25 
hust institutions, insurance companies or fund managers promptly 
26 
obtains a license to act as trustee, insurance company or fund manager, 
27 
as the case may be. 
28 
(b) Upon dissolution, the fund manager, trustee or 1l1surance company shall 
29 
distribute the CIS assets to the CIS investors as prescribed by the CIS plan and in 
30 
accordance with the implementing rules and regulations. 
31 
32 
SECTION 49. Merger or Consolidation - No merger or consolidation of CIS 
33 
will be authorized by the appropriate regulatory agency or Commission unless the 
34 
following conditions are met: 
35 
(a) The merger or consolidation plan has been prepared in accordance with the 
36 
requirements as may be prescribed by the appropriate regulatory agency or 
37 
Commission; and 
30 


1 
(b) The merger plan has been approved by the CIS investors owning at least two-
2 
thirds (2/3) of the outstanding CIS Securities in each of the CIS to be merged 
3 
or consolidated in a meeting duly called for the purpose; 
4 
The implementing rules and regulations shall prescribe the procedures and 
5 
requirements for merger or consolidation in the public interest and for the protection of 
6 
investors. 
7 
8 
TITLE V - SPECIAL RULES GOVERNING ESTABLISHMENT OF 
9 
CONTRACTUAL CIS BY TRUST INSTITUTIONS AND INSURANCE 
10 
COMPANIES 
11 
12 
SECTION 50. Establishment of Contractual CIS by Trust Institutions and 
13 
Insurance Companies- (a) Any trust institution or insurance company may establish a 
14 
contractual CIS, subject to the following provisions: 
15 
The trust institution or insurance company may engage the services of a fund 
16 
manager; Provided, that no director andlor officer of the trust institution or insurance 
17 
company shall at the same time serve as director andlor officer of the fund manager; 
18 
Provided, further, that the trust institution or insurance company shall not engage a fund 
19 
manager which is an affiliate of the trust institution or insurance company, unless it 
20 
complies with the requirements of paragraph (b) (2) of this Section. 
21 
(b) The engagement of a fund manager shall not be required in cases where: 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
1. 
2. 
In addition to the functions of a trustee prescribed under this Law, the trust 
institution or insurance company shall comply with and observe the duties, 
responsibilities and prohibitions of a fund manager under Sections 8 and 9 
hereof; 
The CIS plan provides for the creation of an Independent Oversight Body. 
The independent oversight body shall be composed of at least three (3) 
members who shall be appointed in accordance with such rules as the 
implementing rules and regulations shall prescribe, all of whom shall have 
the qualifications and none of the disqualifications of an independent 
director, or may be a juridical entity organized and existing pursuant to the 
implementing rules and regulations. 
34 
The independent oversight body shall have the following duties and 
35 
responsibilities: 
36 
37 
38 
i. 
Monitor the activities ofthe CIS distributors in the sale andlor redemption 
of the CIS units and ensure that the provisions of any marketing document 
31 


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 
I!. 
iii. 
IV. 
v. 
VI. 
Vl1. 
V111. 
relating to the sale or offer for sale of the CIS units do not coritain 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 
identified and 
held separately from the trust institution's or insurance company's own 
properties and other properties held in trust; 
Ensure that all payments out of CIS funds, assets and properties are made 
in accordance with the CIS plan, this Law and its implementing rules and 
regulations; 
Monitor the existence of conflict of interest situations and address the 
same for the best interests of the CIS investors; 
Instruct the trust institution or insurance company to remedy a breach of 
the provisions or covenants of the CIS plan, the provisions of this Law or 
its implementing rules and regulations; and 
Report to the appropriate regulatory agency any breach of the provisions 
or covenants of the CIS plan, the provisions of this Law or its 
implementing rules and regulations that (i) relates to the establishment, 
operation or dissolution of the CIS, and (ii) has had or is likely to have a 
material adverse effect on the interests of the CIS investors. 
TITLE VI - CIS INVESTORS PROTECTION FUND 
29 
SECTION 51. Establishment of the CIS Investors Protection Fund -The 
30 
Commission shall define the rules and procedures for the creation and management of an 
31 
investors protection fund, the contribution to which shall be determined as a proportion of 
32 
the CIS, which shall be segregated from the CIS, for the purpose of compensating 
33 
investors who suffer material loss in investment due to fraud, gross negligence or 
34 
mismanagement; Provided that, any contribution to the investor's protection fund shall 
35 
not be chargeable to the CIS. A CIS that maintains an existing fund for the same purpose 
36 
shall not be required to make contributions to the CIS investors protection fund; Provided 
37 
that, the Commission has determined that the existing fund is of equivalent purpose, and 
32 


1 
the contributions (0 such fund are of equivalent value, as that of the CIS investors 
2 
protection fund established pursuant to this Section. 
3 
4 
5 
TITLE VII - SUPERVISION AND ENFORCEMENT 
6 
7 
SECTION 52. Powers and Functions of the Commission and Appropriate 
8 
Regulatory Agencies - The Commission shaH, at aH times, act with transparency and 
9 
dispatch and shaH have, among others, the foHowing powers and functions: 
10 
(a) Primary jurisdiction and supervision over the registration, distribution and sale 
11 
of aH CIS securities; 
12 
(b) Approve, amend, renew or deny any license, registration or certificate issued 
13 
by the Commission under this Law; 
14 
(c) Fix and assess fees and/or charges as it may find reasonable in the exercise of 
15 
regulation; 
16 
(d) Regulate, supervise and monitor, in coordination with the appropriate 
17 
regulatory agency, the operations, management and/or activities of aH CIS, 
18 
fund managers, CIS distributors and CIS solicitors to ensure compliance with 
19 
the provisions of this Law, the implementing rules and regulations and other 
20 
applicable laws, rules and regulations, including but not limited to the power 
21 
to revoke or nullify CIS investments which are contrary to existing laws and 
22 
regulations; and 
23 
(e) Order the refund or return of any monies or investments to CIS investors in 
24 
appropriate cases or in accordance with such rules and regulations as the 
25 
Commission may prescribe and in coordination with the appropriate 
26 
regulatory agency; 
27 
(f) In coordination with the appropriate regulatory agency, issue cease and desist 
28 
orders to prevent fraud and injury to the investing public; 
29 
(g) Issue subpoena duces tecum and ad testificandum, order the examination, 
30 
search and seizure of documents, papers, files, tax returns, books of accounts 
31 
and other records, in whatever form, of any entity or person under 
32 
investigation; 
33 
(h) Punish for contempt of the Commission, both direct and indirect, in 
34 
accordance with the pertinent provisions of and penalties prescribed by the 
35 
Rules of Court; 
36 
(i) Impose sanctions, institute cases and/or prosecute offenders for violation of 
37 
this Law, related laws, rules, regulations and orders issued pursuant thereto; 
38 
(j) Suspend or revoke registrations and/or licenses issued by the Commission; 
33 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
(k) Enlist the aid and support of and/or deputize any and all enforcement agencies 
of the Government in the implementation of its powers and exercise of its 
functions under this Law; 
(I) Take over a CIS or fund manager which fails to comply with this Law, related 
laws, rules, regulations and orders issued pursuant thereto, either through the 
appointment of a conservator, receiver or liquidator; 
(m)JointIy issue, amend or repeal implementing rules and regulations in 
accordance with Section 64 and orders for the proper enforcement of this 
Law, and issue opinions and provide guidance on and supervise compliance 
with such rules, regulations and orders; 
(n) Formulate policies and recommendations on issues concerning CIS, including 
proposed legislation; 
(0) Retain and utilize, in addition to its annual budget, an amount up to One 
Hundred Million Pesos (PlOO,OOO,OOO.OO) of the fees, charges and other 
income derived from the regulation of CIS; and 
(p) Exercise such other powers as may be provided by law as well as those which 
may be implied from, or which are necessary or incidental to carry out the 
express powers granted the Commission to achieve the objectives and 
purposes of this Law. 
22 
TITLE IX. -REMEDIAL PROVISIONS 
23 
24 
SECTION 53. Solidary Liability -
(a) The fund manager, trustee and/or 
25 
insurance company shall be jointly and severally liable for actual losses and damages that 
26 
CIS investors may directly suffer as a result of bad faith, gross negligence andlor wilful 
27 
misconduct by the fund manager, trustee and/or insurance company resulting in the 
28 
violation of any of the provisions of this Law, its implementing rules and regulations, or 
29 
their failure to observe and comply with the terms and conditions of the CIS plan. 
30 
(b) The directors andlor officers of the corporate CIS, fund manager, trustee 
31 
andlor insurance company shall also be jointly and severally liable for all losses and 
32 
damages that CIS investors may suffer as a result of bad faith, gross negligence andlor 
33 
willful misconduct by the corporate CIS, fund manager, trustee andlor insurance 
34 
company resulting in the violation of any of the provisions of this Law, its implementing 
35 
rules and regulations, or their failure to observe and comply with the terms and 
36 
conditions of the CIS plan. Notwithstanding any provision of law to the contrary, in no 
37 
case shall such directors and officers recover their liability from the corporate CIS, fund 
38 
manager, trustee andlor insurance company. 
34 


1 
2 
SECTION 54. Investigations, Injunctions and Prosecution of Offences. (a) The 
3 
Commission may, in its discretion, and in coordination with the appropriate regulatory 
4 
agency, make such investigations as it deems necessary to determine whether any person 
5 
has violated or is about to violate any provision of this Law, any rule, regulation or order 
6 
. thereunder, and may require or permit any person to file with it a statement in writing, 
7 
under oath or otherwise, as the Commission shall determine, as to all facts and 
8 
circumstances concerning the matter to be investigated. The Commission may publish 
9 
information concerning any such violations, and to investigate any fact, condition, 
10 
practice or matter which it may deem necessary or proper to aid in the enforcement of the 
11 
provisions of this Law, in the prescribing of rules and regulations thereunder, or in 
12 
securing information to serve as a basis for recommending further legislation concerning 
13 
the matters to which this Law relates: Provided, however, That any person requested or 
14 
subpoenaed to produce documents or testify in any investigation shall simultaneously be 
15 
notified in writing of the purpose of such investigation: Provided, further, That all 
16 
criminal complaints for violations of this Law, and the implementing rules and 
17 
regulations enforced or administered by the Commission shall be referred to the 
18 
Department of Justice for preliminary investigation and prosecution before the proper 
19 
court: Provided, furthermore, That in instances where the law allows independent civil 
20 
action arising from the same act shall continue to apply; Provided, finally, That the 
21 
investigation, prosecution, and trial of such cases shall be given priority. 
22 
(b) For the purpose of any such investigation, or any other proceeding under this 
23 
Law, the Commission or any officer designated by it is empowered to administer oaths 
24 
and affirn1ations, subpoena witnesses, compel attendance, take evidence, require the 
25 
production of any book, paper, correspondence, memorandum, or other record which the 
26 
Commission deems relevant or material to the inquiry, and to perform such other acts 
27 
necessary in the conduct of such investigation or proceedings. 
28 
(c) Whenever it shall appear to the Commission that any person has engaged or is 
29 
about to engage in any act or practice constituting a violation of any provision of this 
30 
Law, any rule, regulation or order thereunder, it may issue an order to such person to 
31 
desist from committing such act or practice. After finding that such person has engaged 
32 
in any such act or practice and that there is a reasonable likelihood of continuing, further 
33 
or future violations by such person, the Commission may issue ex-parte a cease and 
34 
desist order for a maximum period of ten (10) days, enjoining the violation and 
35 
compelling compliance with such provision. The Commission may transmit such 
36 
evidence as may be available concerning any violation of any provision of this Law, or 
37 
any rule, regulation or order thereunder, to the Department of Justice, which may institute 
38 
the appropriate criminal proceedings under this Law. 
35 


1 
(d) Any person who, within his power but without cause, fails or refuses to 
2 
comply with any lawful order, decision or subpoena issued by the Commission shall after 
3 
due notice and hearing, be guilty of contempt of the Commission. Such person shall be 
4 
fined in such reasonable amount as the Commission may determine, or when such failure 
5 
or refusal is a clear and open defiance of the Commission's order, decision or subpoena, 
6 
shall be detained under an arrest order issued by the Commission, until such order, 
7 
decision or subpoena is complied with. 
8 
9 
SECTION 55. Cease and Desist Order. 
(a) The Commission, after proper 
10 
investigation or verification, motu proprio, or upon verified complaint by any aggrieved 
11 
party, may issue a cease and desist order without the necessity of a prior hearing if in its 
12 
judgment the act or practice, unless restrained, will operate as a fraud on investors or is 
13 
otherwise likely to cause grave or irreparable i11iury or prejudice to the investing public. 
14 
(b) Until the Commission issues a cease and desist order, the fact that an investigation 
15 
has been initiated or that a complaint has been filed, including the contents of the 
16 
complaint, shall be confidential. Upon issuance of a cease and desist order, the 
17 
Commission shall make public such order and a copy thereof shall be immediately 
18 
furnished to each person subject to the order. 
19 
(c) Any person against whom a cease and desist order was issued may, within five (5) 
20 
days from receipt of the order, file a formal request for a lifting thereof. Said request shall 
21 
be set for hearing by the Commission not later than fifteen (15) days from its filing and 
22 
the resolution thereof shall be made not later than ten (10) days from the termination of 
23 
the hearing. If the Commission fails to resolve the request within the time herein 
24 
prescribed, the cease and desist order shall automatically be lifted. 
25 
26 
SECTION 56. Administrative Sanctions. (A) If, after due notice and hearing, the 
27 
Commission or appropriate regulatory agency finds that: (l) there is a violation of this 
28 
Law and its implementing rules and regulations or the rules or orders of the Commission 
29 
or appropriate regulatory agency; (2) any fund manager, trustee, insurance company, 
30 
corporate CIS, CIS distributor or CIS solicitor has failed reasonably to supervise, with a 
31 
view to preventing violations, another person subject to supervision who commits any 
32 
such violation; (3) any person has, in a CIS plan or in other reports, applications, 
33 
accounts, records or documents required by this law and its implementing rules and 
34 
regulations to be filed with the Commission, made any untrue statement of a material 
35 
fact, or omitted to state any material fact required to be stated therein or necessary to 
36 
make the statements therein not misleading; or (4) any person has refused to permit any 
37 
lawful examination into its affairs, including the refusal to produce books, records or 
38 
documents upon demand by the CIS investor or the Commission or appropriate 
36 


2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
regulatory agency, it shall, in its discretion, and subject only to the limitations hereinafter 
prescribed, impose any or all of the following sanctions as may be appropriate in light of 
the facts and circumstances: 
(a) 
A fine of no less than Ten thousand pesos (PIO,OOO.OO) nor more than One 
million pesos (Pl,OOO,OOO.OO); 
(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; 
(c) 
(d) 
(e) 
Suspension of the license of such person; 
Revocation of the license of such person; and 
Other penalties within the power of the appropriate regulatory agency to 
12 
impose. 
13 
(B) The imposition of the foregoing administrative sanctions shall be without 
14 
prejudice to the filing of criminal charges and civil cases against the entities and 
15 
individuals responsible for the violation. 
16 
(C) The appropriate regulatory agency shall have the power to issue writs of 
17 
execution to enforce the provisions of this section and to enforce payment of the 
18 
fines, penalties, fees and other dues collectible under this Law. 
19 
(D) If the offender is a corporation or other juridical entity, the administrative 
20 
sanctions may in the discretion of the Commission be imposed upon such corporation 
21 
or 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 
23 
administrative fines, the Commission may, in its discretion, impose such fines solely 
24 
upon the officer or director responsible for the violation; and Provided further that, if 
25 
such officer is an alien, he shall, in addition to the penalties prescribed, be deported 
26 
without further proceedings after service of sentence. 
27 
(E) The directors and other officer/s of a corporation held administratively liable 
28 
under this Section shall in no case recover the administrative liability from the CIS or 
29 
corporation of which he/they is/are a director/s or officer/so 
30 
31 
SECTION 57. Criminal penalties. [A] The following acts are criminal in nature 
32 
and shall be penalized as follows: 
33 
(a) Refusal to comply with the orders of the appropriate regulatory agency for the 
34 
production of books, records or documents, or to undergo an examination 
35 
shall be penalized by imprisonment of one (1) month to six (6) months or fine 
36 
in the amount of One Hundred Thousand Pesos (PIOO,OOO.OO) to Two Million 
37 
(P2,000,000.00) Pesos, or both imprisonment and fine, at the discretion of the 
38 
Court; 
37 


1 
(b) Selling or offering for sale a CIS security by unregistered sellers, distributors 
2 
or solicitors shall be penalized by imprisonment of six (6) years and one day 
3 
to twelve (12) years or fine equivalent to triple the contract price of each of 
4 
the CIS securities sold, or both imprisonment and fine, at the discretion of the 
5 
Court; 
6 
(c) Selling or offering for sale by the issuer of CIS securities of a CIS plan that 
7 
has not been registered pursuant to this Law shall be penalized by 
8 
imprisonment of six (6) years and one day to twelve (12) years or fine 
9 
equivalent to triple the contract price of each of the CIS securities sold or 
10 
offered for sale, or both imprisonment and fine, at the discretion ofthe Court; 
II 
(d) Any negligent act or omission that is prejudicial or injurious to the CIS 
12 
investors shall be penalized by imprisonment of one (I) year and one (I) day 
13 
to six (6) years and fine in the amount of fifty thousand pesos (P50,000.00) to 
14 
five million pesos (P5,000,000.00), or both imprisonment and fine, at the 
15 
discretion of the Court; 
16 
(e) Any fraudulent act or omission that is prejudicial or injurious to the CIS 
17 
investors shall be penalized by imprisonment of six (6) years and one (I) day 
18 
to twelve (12) years and fine in the amount of five hundred thousand pesos 
19 
(P500,000.00) to ten million pesos (p1O,000,000.00), or both imprisonment 
20 
and fine, at the discretion of the Court; and 
21 
(f) Violation of the provisions of this Law, the implementing rules and 
22 
regulations or orders of the appropriate regulatory agency shall be penalized 
23 
by imprisonment of six (6) years and one (1) day to twelve (12) years and a 
24 
fine in the amount of one hundred thousand pesos (PIOO,OOO.OO) to five 
million pesos (p5,000,000.00); Provided that, repeated violations shall 
constitute prima facie evidence against the offender. 
25 
26 
27 
[B] 
If the offender is a corporation is a corporation or other juridical entity, the 
28 
criminal penalties may in the discretion of the Court be imposed upon such corporation or 
29 
other juridical entity and upon the officer or officers of the corporation or entity 
30 
responsible for the violation, Provided that, in case of the imposition of fines, the Court 
3 I 
may, in its discretion, impose such fines solely upon the officer or director responsible for 
32 
the violation; and Provided further that, if such officer is an alien, he shall in addition to 
33 
the penalties prescribed, be deported without further proceedings after service of 
34 
sentence. 
35 
36 
[C] 
The directors and other officer/s of a corporation held administratively 
37 
liable under this Section shall in no case recover the administrative liability from the CIS 
38 
or corporation of which he/they is/are a director/s or officer/so 
38 


I 
2 
SECTION 58. Small Claims Clause. (a) The Commission shall have the power 
3 
to adjudicate any and all claims involving CIS amounting to not more than One Million 
4 
Pesos (PI,OOO,OOO.OO) or such higher amount as may be determined by the Commission 
5 
for each CIS Investor. The proceedings before the Commission shall be summary in 
6 
nature, and the decision of the Commission shall be final and immediately executory, 
7 
unless restrained by the Court of Appeals or the Supreme Court. 
8 
(b) Claims filed with the Commission shall not be subject to the payment of filing 
9 
fees. 
10 
(c) The authority to adjudicate granted to the Commission under this section shall 
II 
be concurrent with that of the civil courts, but the filing of a complaint with the 
12 
Commission shall preclude the civil courts from taking cognizance of a suit involving the 
13 
same subject matter. 
14 
(d) The Commission, having due regard to the facts and circumstances of each 
15 
claim, may refer the claim to compulsory arbitration, under such rules and regulations as 
16 
the Commission may prescribe. 
17 
18 
SECTION 59. Duty of the Regulator - In view of the nature of the CIS as one 
19 
impressed with public interest, the officers and employees of the appropriate regulatory 
20 
agencies are strictly enjoined to monitor, enforce and ensure compliance with the 
21 
provisions of this Law and its implementing rules and regulations. Failure to do so shall 
22 
be dealt with under existing laws and regulations in the gravest degree. 
23 
24 
25 
TITLE IX - MISCELLANEOUS PROVISIONS 
26 
27 
SECTION 60. Transitory Provisions. - Any CIS which at the time of the 
28 
effectivity of this Law has been established, authorized, licensed or registered by the 
29 
Commission or the appropriate regulatory agency and has continued to exist, shall be 
30 
deemed to have been authorized, licensed and registered under the provisions of this Law 
31 
and its implementing rules and regulations and shall be subject to and governed by the 
32 
provisions hereof; Provided however that, where any such CIS is affected by the new 
33 
requirements of this Law and its implementing rules and regulations, said CIS shall, 
34 
unless otherwise herein provided, be given a period of not more than two (2) years from 
35 
the effectivity of the implementing rules and regulations within which to comply with 
36 
such new requirements. 
37 
38 
SECTION 61. Implementing Rules and Regulations. -
The appropriate 
39 
regulatory agencies, with the Commission as the lead agency, shall coordinate and jointly 
39 


I 
issue the implementing rules and regulations to implement this Law. In adopting and 
2 
issuing the implementing rules and regulations, the Commission and the appropriate 
3 
regulatory agencies shall be guided by and adhere to the declaration of policy contained 
4 
in Section 2 and the other relevant provisions of this Law. The implementing rules and 
5 
regulations shall pertain to the following matters, in addition to other matters in 
6 
connection with which other provisions of this Law may require the appropriate 
7 
regulatory agencies to issue rules and regulations: 
8 
a. Registration, amendment and suspension of CIS plans; 
9 
b. Distribution, sale and marketing of CIS securities; 
10 
c. Qualification and disqualification standards for directors and officers of the 
II 
fund manager, corporate CIS, CIS distributors, independent oversight 
12 
committee, CIS solicitor and other parties involved in CIS; 
13 
d. Qualified and/or eligible CIS investments; 
14 
e. Disclosure requirements on the terms and conditions ofthe CIS investments 
15 
and material information regarding CIS operations; 
16 
f. 
Minimum requirements for inculcating financial literacy in investors; 
17 
g. Ascertainment of client suitability for CIS securities; 
18 
h. Record-keeping, reporting and audit requirements of the fund manager, 
19 
corporate CIS, trustee, custodian and other relevant parties in the CIS 
20 
pertaining to records of all contributions, earnings, total account balances and 
21 
other matters; 
22 
1. 
Regulation, supervision and monitoring the operations, management and/or 
23 
activities of all CIS, fund managers, CIS distributors, CIS solicitors and other 
24 
parties involved in CIS; 
25 
J. 
Proper and effective enforcement ofthe provisions of this Law; and 
26 
k. Such other matters necessary and desirable for the proper and effective 
27 
implementation of this Law. 
28 
The implementing rules and regulations may be repealed, amended or 
29 
supplemented at any time in the same manner as the original implementing rules and 
30 
regulations are adopted and issued pursuant to this Section. 
31 
The implementing rules and regulations and its amendments or supplements shall 
32 
be published once a week for two (2) consecutive weeks in two newspapers of general 
33 
circulation. 
34 
35 
SECTION 62. Cooperation and Coordination. - The appropriate regulatory 
36 
agencies, with the Commission as the lead agency, shall adopt all other appropriate 
37 
measures as may be necessary or desirable for the effective implementation and 
40 


I 
enforcement of this Law, taking into full account declaration of policy contained in 
2 
Section 2. 
3 
The coordination shall cover such concerns as, but not necessarily limited to: 
4 
(a) Ensuring that avoidable marker failures are prevented; 
5 
(b) Instilling measures that nurture systemic stability; 
6 
(c) Providing equal access to relevaut market information to stakeholders; aud 
7 
(d) Overseeing the conduct of CIS issuers to institutionalize consumer protection 
8 
and address auti-competitive behavior. 
9 
10 
SECTION 63. Effect on Existing Laws and Contracts. 
-
The rights and 
II 
remedies provided by this Law shall be in addition to any and all other rights and 
12 
remedies that exist under existing laws. 
13 
Nothing in this Law shall impair the obligation of existing contracts nor affect or 
14 
be construed to affect existing criminal, civil or administrative cases. 
IS 
16 
SECTION 64. Separability clause. - Any portion or provision of this Law that 
17 
may be declared unconstitutional or invalid shall not have the effect of nullifying other 
18 
portions or provisions hereof as long as such remaining portion or provision cau still 
19 
subsist aud be given effect in their entirety. 
20 
21 
SECTION 65. Suppletory Effect - This Law shall apply supp1etorily to any law 
22 
that may be hereinafter enacted on collective investment schemes governing specialized 
23 
products or investments. 
24 
25 
SECTION 66. Repealing Clause. - All acts, laws, executive orders aud/or rules 
26 
aud regulations or any part thereof which are inconsistent with the provisions of this Law 
27 
are hereby repealed or modified accordingly. 
28 
29 
SECTION 67. Effectivity Clause. - This Law shall take effect upon its approval. 
30 
31 
Approved, 
41