Republic of the Philippines RECEIV
HOUSE OF REPRESENTATIVES P ED
Quezon City = ale:

TIME:

EIGHTEENTH CONGRESS
First Regular Session

House BILLNO._4739

Introduced by Rep. Mohamad Khalid Q. Dimaporo

EXPLANATORY NOTE

The objective of this legislative measure is to provide for a harmonized
regulatory and taxation framework, as well as highlight the inter-operability of
Collective Investment Schemes (CIS) products that are currently offered in the
Philippine market.

With the passage of this law, this representation is hoping for a steady
growth of the CIS industry in our country, and in turn, boost and promote a stable
economic growth. This will also ensure uniformity in the protection of our
investing public from uneven regulatory constraints and make way for a more
competitive playing field in terms of better CIS products offered to the public.

In view of these premises, the prompt approval of this bill is earnestly
sought and recommended.

REP. LID Q. DIMAPORO
I" District, Lanao del Norte


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Eighteenth Congress
First Regular Session

4739
House Bill No.

Introduced by Rep. Mohamad Khalid Q. Dimaporo

COLLECTIVE INVESTMENT SCHEMES LAW

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
TITLE |- GENERAL PROVISIONS

SECTION 1. Short Title - This Law shall be known as the "Collective
Investment Schemes Law”.

‘SEC. 2. Declaration of Policy — The policy of the state is to:

(a) Promote investor protection by applying high governance standards
in the establishment, management and operation of collective investment
schemes (CIS) and the registration and sale of CIS securities in order to prevent
abuse and protect the interests of the investing public, including but not limited to,
the setting of standards for the eligibility of persons who establish, manage or
operate collective investment schemes and register and sell CIS securities; the
prevention, disclosure and elimination of all conflicts of interest which may
prejudice the investing public; and the provision of independent third party
supervision over the operations of collective investment schemes;

(b) Promote the growth of pooled investments and the development of
the capital market by providing a favorable framework for CIS to facilitate the flow
of investment capital from sources within the country and abroad;

(c) Encourage the participation in the collective investment scheme
industry of the best qualified fund managers regardless of place of incorporation,
and the best qualified investment advisers regardless of nationality;


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(d) Broaden participation by Filipinos in ownership of securities and
other investment assets allowed in this law so that more are able to share in
economic growth;

(©) Provide equal protection to investors in all similar CIS, impose the
same requirements and provide the same competitive environment for such
schemes and the participants therein; and,

() Encourage responsible investing through the dissemination of
information on the opportunities and risks involved in investments.

SEC.3. Purpose - The purpose of this Law is to establish a
comprehensive regulatory and tax framework to enable CIS and all the
participants therein to play a key role in the development. of the capital market in
a manner consistent with the policy declared in Section 2 hereof.

SEC.4. Coverage-This Law shall apply to the establishment,
management and operation of all collective investment schemes and the
registration and sale of CIS securities in the Philippines

SEC. 5. Definitions-When used in this Law, unless the context otherwise
requires
(a) “Affiliate” of another person means:

1. any person directly or indirectly owning, controlling or holding with
power to vote, ten per centum (10%) or more of the outstanding
voting securities of such other person;

2. any person ten per centum (10%) or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held
with power to vote, by such other person;

3. any person directly or indirectly controlling, controlled by, or under
common control with, such other person;
any officer, director, partner, or employee of such other person;

5. if such other person is a juridical CIS, any investment adviser, fund
manager, CIS distributor, CIS solicitor and custodian thereof.

6. if a juridical CIS, any other corporation or partnership having
interlocking directors, managing partners, or officers with the


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juridical CIS, except in cases involving independent director as
defined under existing regulations, provided that, for juridical CIS
that are not corporations or partnerships, the clause shall apply to
such persons with equivalent duties or functions as directors or
officers of corporations, or managing partners in a partnership;

if a juridical CIS, organized as a stock corporation, any other
corporation having common stockholders owning at least ten
percent (10%) of the outstanding voting stock of the juridical CIS or
any partnership having partners who own at least ten percent (10%)
of the interest in the juridical CIS, provided that, for juridical CIS that
are not corporations or partnerships, this clause shall refer to the
form of security ownership in the said entity;

having a management contract or any arrangement granting power
to one corporation, partnership or entity to direct or cause the
direction of management and policies of the other corporation,
partnership or entity, or vice-versa; or

having permanent proxy or voting trusts in favor of the corporation,
partnership or entity constituting at least ten percent (10%) of the
outstanding voting stock or voting power of the other corporation,
partnership or entity, or vice versa.

(b) “Appropriate regulatory agency” refers to:

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the Bangko Sentral ng Pilipinas (BSP), in the case of banks, trust
entities and other financial institutions supervised by the BSP;

the Insurance Commission (IC), as may be provided by law or by
the order of any competent authority, in the case of insurance
companies and other persons regulated by the IC ; and

the Securities and Exchange Commission (SEC), in the case of
investment companies, Real Estate investment Trusts (REITS),
Exchange-Traded Funds (ETFs), Special Purpose Corporations or
partnerships or other persons or other entities not under the
regulation of the BSP or the IC.

(c) "Bank" means an entity engaged in the lending of funds obtained in the
form of deposits and duly authorized to operate as one by the BSP.
(d) "Broker" means any person duly licensed by the appropriate regulatory


agency and, if required, accredited by the appropriate self regulatory
organization to engage in the business of buying and selling securities for
the account of others, but does not include a bank or any person solely by
reason of the fact that such person is a CIS or a distributor of CIS
securities.

(e) “CIS distributor” means any stock corporation or broker licensed by the
appropriate regulatory agency to engage in the offering or selling of CIS
securities

(f “CIS investor” means any person who purchases or otherwise invests in
CIS securities.

(g) “CIS plan” means the plan for the registration and sale of CIS securities
filed with the appropriate regulatory agency in accordance with Sections
24, 26, 28 and 30 hereof, which shall be in lieu of the registration
statement required to be filed pursuant to the Securities Regulation Code
(SRC) for the sale and offer for sale of securities to the public.

(h) “CIS. securities” mean units of participation or similar interests in a
contractual CIS or shares of stock or similar interests in a juridical CIS.

(i) “CIS Security Holder” means a stockholder, partner or other security
holder, as applicable, of a juridical CIS.

(i) “CIS solicitor” means a natural person who is duly licensed as such by
the appropriate regulatory agency to sell CIS securities.

(k) “Collective investment scheme” or “CIS” shall have the meaning given
in Section 6 hereof.

() “Commission” means the Securities and Exchange Commission.

(m)“Common stock” of a corporation means a class of shares with general
voting rights.

(n) “Company” means a corporation, partnership, trust, or an association
duly registered with the SEC and lawfully transacting business in the

Philippines.

(0) “Contractual CIS” means a CIS.

1. organized pursuant to a contract, such as a Unit Investment Trust
Fund (UITF), REITs in a trust form, ETFs or a Separate Variable
‘Account of a variable insurance contract;

2. engaged, or holds itself out as being engaged, or proposes to


engage. in the business of invasting, rainvesting, and/or trading in

securities or other investment assets allowed under this Law; and

3. that issues units of participation each of which represents an
undivided interest in a pool of investment assets.

(p) "Control" is presumed to exist when the parent owns, directly or
indirectly through subsidiaries, more than one half of the voting power of
an entity unless, in exceptional circumstances, it can be clearly
demonstrated that such ownership does not constitute control. Control is
also presumed to exists even when the parent owns half or less of the
voting power of an entity when there is:

1. power over more than one half of the voting rights by virtue of an
agreement with other investors;

2. power to govern the financial and operating policies of an entity
under a statute or an agreement,

3. power to appoint or remove the majority of the members of the
board of directors, partners, or other equivalent governing body and
control of the entity is by that board or body;

4. power to cast the majority of votes at meetings of the board of
directors, partners or other equivalent governing body and control of
the entity is by that board or body; or

5. any other arrangement similar to any of the above.

(q) “Convicted” includes being the subject of a verdict, judgment, or plea of
guilty in the first instance, if and such verdict, judgment or plea has not
been reversed, set aside, or withdrawn, whether or not sentence has
been served.

() “Creation” refers to the issuance of CIS securities upon its due
registration or recognition by the appropriate regulatory agency.

(s) "Corporation Code” refers to the Corporation Code of the Philippines,
Batas Pambansa Big. 68, enacted on May 1, 1980, as may be amended
from time to time, or any law subsequently enacted in replacement or
substitution thereof,

() “Custodian” means an entity duly authorized by the BSP which is
appointed to engage in the business of safekeeping investment assets,
and act as the custodian of the investment assets of a CIS pursuant to


this Law and the relevant regulations of the BSP, IC, and/or the SEC.

(u) “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.

(v) “Director” means a director of a corporation or any person performing
similar functions with respect to any organization.

(w) "Exchange" means an organized marketplace or facility duly licensed by
the SEC that brings together buyers and sellers and executes trades of
securities and/or commodities.

(x) “Fund manager” means a juridical person engaged in the business of
managing the investment assets of a CIS and/or engaged in the business
of providing administrative and ancillary services for such CIS as licensed
by the appropriate regulatory agency in accordance with Section 8, and
having the duties and responsibilities enumerated in Section 9 hereof.

{y) “General Banking Law” refers to Republic Act No. 8791, as may be
amended from time to time, or any law subsequently enacted in
replacement or substitution thereof,

(2) “Implementing Rules and Regulations” refer to the uniform rules and
regulations jointly formulated and issued by the appropriate regulatory
agencies to implement the provisions of this Law, in accordance with
Section 57 hereof.

(aa) “Independent auditor” means the independent extemal certified public
accountant referred to in Section 18 hereof.

(bb) “Independent director” refers to a person other than an officer or
employee of the corporation, its affiliates, or any other individual having
any relationship with the corporation which would materially interfere with
the exercise of independent judgment in carrying out the responsibilities
of a director. An independent director shall possess the degree of
independence and all the qualifications and none of the disqualifications

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for independent directors as defined in the SRC and its implementing
rules and regulations

(co) “Independent oversight body” refers to the body or entity referred to
in Section 48(b) (2) hereof.

(dd) “Insurance Code of the Philippines” refers to Presidential Decree No.
612 otherwise known as ‘The Insurance Code’, as amended, or any law
subsequently enacted in replacement or substitution thereof.

(ee) "Insurance company” means a company engaged in the insurance
business and duly issued by the IC with a certificate of authority to
transact such business, as specifically defined under the Insurance Code
of the Philippines.”

(ff) “Investment adviser” means any person who regularly advises or
recommends investment decisions with regard to the securities or other
portfolio of a CIS pursuant to an advisory contract with such CIS through
the fund manager, trustee or insurance company.

(ag) “Investment assets” means the securities and other assets in which
the funds of a CIS may be invested in accordance with Section 37 hereof

(hh) “Investment company” means the stock corporation organized as
a juridical CIS, which is engaged, or holds itself out as being engaged, or
proposes to engage, in the business of investing, reinvesting, and/or
trading in securities allowed under this Law.

(ji) “Investment house” means any enterprise which engages in the
underwriting of securities of other companies, as defined in Section 2 of
the Investment Houses Law, Presidential Decree No. 129, as may be
amended from time to time, and is registered pursuant to said law

(j) “10SCO” means the International Organization Of Securities

Commissions.

(kk) “Juridical CIS” means a CIS:

1. organized as a stock corporation such as an investment company
or a partnership, including limited partnerships and limited liability
companies whether incorporated in or outside the Philippines, or
such other entity as the SEC shall allow in accordance with
1OSCO principles or the implementing rules and regulations of this,
law;


2. is also known as an investment company that pools the funds of
investors to form a massive asset base which is then entrusted to
a full time professional fund manager who develops and maintains
a diversified portfolio of security investments; provided that limited
partnerships that are managed by a general partner and pools the
investments of limited partners who are either qualified institutional
investors or qualified individual investors shall be deemed
“Juridical CIS”

3. engaged, or holds itself out as being engaged, or proposes to
‘engage, in the business of investing, reinvesting, and/or trading in
securities or other investment assets allowed under this Law; and

4. that issues common stock or units of participation each share or
unit of which represents an undivided interest in a pool of
investment assets or, as may be allowed by the appropriate
regulatory agency, represents underlying securities.

(ll) "Net asset value” means the value of all assets less all liabilities of a
CIS as determined in accordance with generally accepted accounting
principles and the provisions of this Law and its implementing rules and
regulations.

(mm) “Organized Marketplace” is an exchange, an over-the- counter
market, alternative trading system, or otherwise recognized as such by
the SEC, and governed by, among others, transparent and binding rules
and market conventions on membership, trading, price transparency,
trade reporting, market monitoring and orderly conduct/operation of the
market which are enforceable on the members and participants

(nn) “Person” means a natural or juridical person as defined in the Civil
Code of the Philippines.

(00) “Real Estate Investment Trust’ or “REIT” is a Collective Investment
Scheme formed principally for the purpose of acquiring, owning or
operating income-generating real estate assets, as specifically defined in
the Real Estate Investment Trust Act (REITA). For the purpose of clarity,
a REIT in contractual or trust form organized under this act shall, to the
extent applicable, be governed by the REITA

(pp) “Real Estate Investment Trust Act” refers to Republic Act No. 9856


otherwise known as ‘The Real Estate Investment Trust (REIT) Act of
2009’, or any law subsequently enacted in replacement or substitution
thereof.

(qq) “Redemption” refers to the liquidation of a CIS security through its

surrender to the issuer in exchange for its net asset value or the
underlying securities it represents.

(mf) “Registrar” means the fund manager or trustee or such other person or

persons as may from time to time be appointed by the trustee, or the
fund manager with the prior approval of the trustee, to perform all or any
of the duties and functions of the registrar under Section 23 hereof.

(ss) "Sale", "sell" “offer to sell” or “offer for sale” means every contract of

sale or disposition of, attempt or offer to dispose of, or solicitation of an
offer to buy a unit of participation, including security and interest therein,
for value. Any such security, unit of participation or interest therein,
given or delivered with, or as a bonus on account of, any purchase of
securities, unit of participation or any other thing, shall be conclusively
presumed to constitute a part of the subject of such purchase and to
have been sold for value

(tt) “Security” means any instrument or product defined as such by the

SRC and its implementing rules and regulations.

(uu) “Securities Regulation Code” Or “SRC” refers to Republic Act No.

8799, enacted on July 17, 2002, as may be amended from time to time.

(vw) “Securitization Act” refers to Republic Act No. 9267, otherwise known

as ‘The Securitization Act of 2004’, or any law subsequently enacted in
replacement or substitution thereof.

(ww) “Separate Variable Account Fund” — means the segregated portfolio

of investments established, maintained and invested in by an insurance
company for its variable insurance contracts and accounted for separately
and apart from its other investments and accounts, pursuant to the
Insurance Code of the Philippines, under which the income, gains and
losses (whether or not realized) from, and expenses incurred on the
acquisition, disposal and management of investment assets allocated to
such account, are credited to or charged against such account without
regard to the other income, gains, losses and other expenses of the


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insurance company. The Separate Variable Account Fund shall be
deemed a contractual CIS, and the units of participation therein shall be
deemed as CIS securities, subject to this Law. The investment assets
held in any such separate variable account shall be applied exclusively
for the benefit of the owners or beneficiaries of the variable insurance
contracts.

(xx) “Special Purpose Corporation” refers to a juridical person created in
accordance with the Corporation Code of the Philippines solely for the
purpose of securitization and to which the seller makes a true and
absolute sale of assets, as specifically defined in the Securitization Act.

(yy) “Special Purpose Trust’ means a trust administered by an entity
duly licensed to perform trust functions under the General Banking Law,
and created for a special purpose such as but not limited to securitization of
assets.

(zz) “Trust Entity” — means any bank, non-bank financial institution or a
stock corporation duly authorized by the Monetary Board of the BSP to
engage in trust, investment management and fiduciary business.

(aaa) “Trustee” means a trust entity appointed and acting as the trustee of

a contractual CIS pursuant to this Law.

(bbb) “Unit of Participation” means an undivided interest in the pool of

investment assets of the CIS.”

(ccc) "Value" means the market value or fair value of securities as may be

determined in accordance with such rules and regulations as the
appropriate regulatory agency may prescribe.

TITLE Il - COLLECTIVE INVESTMENT SCHEMES
Chapter 1 - Nature and Structure of Collective Investment Schemes

SEC. 6. Collective Investment Schemes —

(a) A Collective Investment Scheme is any arrangement whereby funds are
solicited from the investing public and pooled together for the purpose of
investing, re-investing and/or trading in securities or other investment assets or
different classes thereof as allowed under this Law. All CIS shall be covered by
and regulated by this law and its implementing rules and regulations. A CIS may

10


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either be a juridical CIS, or have a contractual structure such as a unit investment
trust fund, @ special purpose trust, or similar scheme held by a trust entity or a
separate account fund established pursuant to a variable unit linked life insurance
policy issued by an insurance company. All CIS shall be governed by and shall
comply with the requirements of this Law, the pertinent provisions of the SRC and
other applicable laws not inconsistent with this law. For purposes of clarity, a
REIT, ETF & other forms of investment arrangements existing and accepted in
other international markets, consistent with the IOSCO objectives and principles
of Securities Regulation, and allowed by the appropriate regulatory agency may
be formed or organized in this law.

(b) Subject to the regulation under this law, none of the following
arrangements shall be deemed a CIS:

1. Any arrangement whereby securities are issued to not more than
nineteen (19) beneficial owners within any twelve-month period, and
there is no current offering or intention to make a public offering of such
securities, provided, however, that within ten (10) calendar days from
the issuance of said security, the issuer shall notify the appropriate
regulatory agency of the said transaction. For purposes of this
paragraph, beneficial ownership by a company shall be deemed to be
beneficial ownership by one person; except that, if such company owns
twenty-five per centum (25%) or more of the outstanding voting
securities of the issuer, the beneficial ownership shall be deemed to be
that of the holders of such company's outstanding securities;

2. Any insurance company in the conduct of its ordinary business;
provided, however, that a separate account fund established by an
insurance company shall be deemed a contractual CIS as defined
under this Law;

3. Any employees’ stock, bonus, pension, retirement, provident or profit
sharing plans which were transacted or contracted in the regular
conduct of their ordinary business;

4. Any fund which is employed by the trust entity solely as an aid to the
administration of existing trust or fiduciary accounts covered by
agreements separate from those in connection with the CIS; provided
that interests in such fund are not advertised or offered for sale to the


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general public;

5. Any arrangement whereby an investment house, dealer, or broker,

registered as such with the SEC, primarily engaged in the business of
underwriting securities issued by other persons, purchases and sells
securities for its own account, or effects transactions in securities for
the account of others;

6. Any arrangement whereby a company primarily engages in the

business of factoring or mortgage financing, by purchasing or
otherwise acquiring accounts receivable and similar obligations or
making loans in respect of goods or services of a business, or by
purchasing or otherwise acquiring mortgages and other liens on or
interests in real estate; provided that such arrangement does not
include the business of issuing redeemable securities;

7. Any arrangement organized and operated by an entity exclusively for

religious, educational, benevolent, fraternal, charitable, or reformatory
purposes, where no part of the net earnings from such arrangement
inures to the benefit of any shareholder or member of such entity;

8. Any arrangement whereby an issuer is primarily engaged in investing

in securities issued by a majority-owned subsidiary or subsidiaries of
such issuer, where each such subsidiary is not a CIS; and

9. Any other arrangement that, pursuant to rule or order issued by the

appropriate regulatory agency, is determined not to be a CIS, or is
excluded from the definition thereof as not necessary in the public
interest and for the protection of investors.

(c) ACIS may either be open-end or closed-end, defined as follows:

(a)

1. "Open-end CIS" means a CIS where securities are offered and are
always redeemable by the CIS ; and

2. "Closed-end CIS" means a CIS where a fixed number of securities are

offered in an initial public offering and thereafter may be traded in an
organized market as determined by the SEC, but may not be
redeemed by the CIS. A closed-end CIS shall not be allowed to
increase its number of securities.

‘A CIS may be constituted as a single compartment or as a multiple

compartment CIS, defined as follows:

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20
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n
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24
25
2%

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4. Single compartment CIS is @ single CIS plan comprising of only one
compartment or CIS or fund.

2. Multiple compartment CIS or otherwise known as umbrella CIS is a
single CIS plan comprising of two or more compartments or sub-CIS or
sub-funds,

SEC. 7. Juridical CIS —

(a) No company, partnership, or entity shall act as a juridical CIS unless duly
licensed by the SEC, and no company, partnership, or entity shall be licensed as
a juridical CIS for purposes of this Law, unless it shall:

4. Be organized in the form of a stock corporation, such as an investment
company or a partnership, including limited partnerships and limited
liability companies whether incorporated in or outside the Philippines,
or such other entity as the SEC shall allow in accordance with |OSCO
principles or the implementing rules and regulations of this law;

2. Issue shares of stock consisting of common stock or units of
participation, if a corporation, or issue units of interest, or other similar
security, in the case of a partnership or other allowed structure or
entity;

3. In the case of a corporation, to provide in its articles of incorporation that
shareholders shall not be entitled to pre-emptive rights;

4. 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 SEC may prescribe a higher paid-up capital, The
SEC may prescribe a lower minimum paid-up capital for any
subsequent juridical CIS that is established and managed by the same
fund manager; the SEC shall also prescribe the minimum required
capital for juridical CIS that are organized as partnerships or other
structures that may be allowed by the SEC;

5, Hold the original subscription of securities and maintain unimpaired its
initial paid-up capital for a period of twelve (12) months following its
registration with the SEC as a juridical CIS, or such other period as the
SEC may prescribe; and


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24
25

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6. Maintain at all times, if an open-ended CIS, @ reserve in liquid or semi-
liquid assets, equal to at least ten per centum (10) % of its total
investment assets, or such other percentage and in such form as the
SEC may prescribe.

(b) Notwithstanding any provision of the Corporation Code to the contrary, no
juridical CIS that is organized as a stock corporation shall be required to comply
with the minimum subscribed and paid-up capital relative to an increase in its
authorized capital stock.

(c) The incorporators or partners of a juridical CIS shall, at incorporation or
recording, fully pay in cash their respective subscriptions

(d) The SEC may prescribe such other or additional requirements under
subsection (a) of this section respecting the form, share structure, and level of
restrictions on capitalization and reserves, as necessary or appropriate in the
public interest or for the protection of investors.

(e) At least one third (1/3) of the entire membership of the board of directors
of a juridical CIS organized as a stock corporation shall be independent directors
but in no case less than three (3) or as may be required by the appropriate
regulatory agency.

Chapter 2 — Parties Involved In Collective Investment Schemes

Participants in the CIS:

1 Fund Manager,

Trustee or/Board of Directors (BOD), Partners, or other persons
exercising similar functions, as appropriate;

Custodian;

CIS Distributor;

CIS Solicitor, and

Investment Adviser , as deemed appropriate

XN

ane

SEC. 8. Fund manager- No company shall act as a fund manager for a
CIS unless duly licensed by the appropriate regulatory agency, and no company
shall be licensed as a fund manager for purposes of this Law, unless

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(a) It is organized

(b) It has a minimum paid-up capital of not less than One Hundred Million
Pesos (P100,000,000.00);

() Provided, However, that the appropriate regulatory agency may

‘a stock corporation;

prescribe a higher minimum paid-up capital taking into consideration, among
other factors:
1. the risk-based principles on capital adequacy based on
internationally accepted standards; and
2. the number and/or total net asset values of all CIS managed;

(d) At least one-third (1/3) of the entire membership of the BOD of the
fund manager but in no case less than three (3) or as may be required by the
appropriate regulatory agency; and

(e) Ithas complied with such other requirements as may be prescribed by
the appropriate regulatory agency

In licensing a fund manager, the appropriate regulatory agency shall
ensure that the requirements under this Law and its implementing rules and
regulations and other pertinent laws not inconsistent with this law are complied
with

SEC. 9. Duties and Responsibilities of the Fund Manager - The fund
manager shall have the following duties and responsibilities:

(a) Manage the investment assets of the CIS and perform its functions in
accordance with the CIS plan, the provisions of this Law and its implementing
rules and regulations for the exclusive interest of the CIS investors;

(b) Provide copies of financial and other records of CIS investments to the
CIS investors, trustee/BOD, 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 and investment assets are
made in accordance with the CIS plan, this Law and its implementing rules and
regulations;

(e) Comply with the instructions of the juridical CIS or the trustee to
remedy a breach of the provisions or covenants of the CIS plan, its contract with


6

the juridical CIS or trustee, the provisions of this Law or its implementing rules
and regulations;

() Fumish the juridical CIS or the trustee with all contracts and
agreements relating to the operation and management of the CIS;

(g) Report to the juridical CIS or the trustee and the CIS investors results
of the CIS operations;

(h) Facilitate the redemption of CIS securities where applicable;

(i) Maintain proper accounting records and other records to:

1. enable a complete and accurate review of the CIS funds and
investment assets; and

2. ensure that the CIS funds and investment assets are managed and
administered in accordance with the CIS plan, its contract with the
juridical CIS or trustee, this Law and its implementing rules and
regulations;

() Propose and secure approval from the respective regulatory agency for
the establishment and amendment of the CIS plan in accordance with this Law
and its implementing rules and regulations. In the event that the appropriate
regulatory agency fails to approve or deny the proposed CIS plan within thirty
(30) calendar days from receipt thereof, the proposed CIS plan is deemed
approved;

(k) File such information and documents to keep reasonably current the
information and documents contained in the CIS Plan; and ,

() Such other duties and responsibilities that the appropriate regulatory
agency may prescribe.

SEC.10. Prohibited Acts of the Fund Manager. - The fund manager
shall not
(a) Invest CIS funds in any securities, property and investment assets in
which such fund manager or any of its directors, officers, employees and affiliates
have a substantial financial interest, subject to such exceptions and/or guidelines
as may be prescribed by the appropriate regulatory agency;
(b) Engage in a business other than the business of managing,
administering, marketing and distributing CIS funds and securities, provided that

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this prohibition shall not apply if the fund manager is, or a trust entity or if the fund
manager is an insurance company;

(c) Pay or cause to be paid out of the CIS funds any fees, commissions
and other similar expenses that have not been, or exceed what have been,
provided for in the CIS plan, this Law and its implementing rules and regulations
‘or any other applicable laws and regulations;

(@) Retain any rebate from, or otherwise share in any commission with,
any broker or dealer in consideration of transactions or investments of the CIS
funds. Accordingly, any rebates or shared commissions shall be for the account
of the CIS fund concemed; and

(e) Engage in such other acts as may be prohibited by rule or order of the
appropriate regulatory agency.

SEC. 11. Fund Management Agreement - (a) The agreement between
the fund manager and the trustee or the juridical CIS or the insurance company
shall contain, among others, provisions pertaining to:

Extent of services to be rendered;

2. Any restrictions or prohibitions regarding the performance of the
functions of the fund manager;

3. All compensation to be paid thereunder which shall be clearly
described in a transparent manner, and which shall be in accordance
with such requirements and limitations as the implementing rules and
regulations may prescribe;

4. The term of the engagement and the manner of termination thereof,
which shall be in accordance with such requirements or limitations as
this law and its implementing rules and regulations may prescribe;

5. Reporting requirements to the trustee, juridical CIS, CIS investors and
the appropriate regulatory agencies; and

6. Such other terms or conditions as the implementing rules and
regulations may prescribe

(b) In all cases where the trustee or insurance company functions as a

fund manager, the foregoing provisions which should otherwise be contained in
the fund management agreement with the fund manager shall be contained in the
CIs plan


SEC. 12. Board of Directors (BOD) - The BOD of a juridical entity or an
independent shall act as the BOD of a CIS. With respect to Contractual CIS
under trust arrangements, the duties and responsibilities of the BOD of CIS
pertain to and shall be performed by the Trustees. The following, in addition to
those prescribed under existing laws and regulations, shall be the duties and
responsibilities of a BOD of a CIS:

(a) Monitor the activities of the CIS distributors in the sale and/or
redemption of the CIS units and ensure that the provisions of any marketing
document relating to the sale or offer for sale of the CIS securities do not contain
any matter which is inconsistent with the provisions of the CIS plan, this Law and
its implementing rules and regulations,

(b) Ensure that the management and investments of the CIS funds by the
fund manager are in accordance with the CIS plan;

(c) Ensure that the fund manager remedies any breach of the CIS plan or
the
terms of its appointment as fund manager, or any contravention of the provisions
of this Law or its implementing rules and regulations;

(d) Appoint an independent third-party custodian;

(e) Ensure that CIS funds and investment assets are clearly identified and
held separately from its own properties and other properties held in trust;

(f) Ensure that all payments out of CIS funds and investment assets are
made in accordance with the CIS plan, this Law and its implementing rules and
regulations;

(g) Monitor the existence of conflict of interest situations and address the
same for the best interests of the CIS investors;

(h) Report to the appropriate regulatory agency, as soon as practicable,
any material development or breach of the provisions or covenants of the CIS
plan, the provisions of this Law or its implementing rules and regulations that

1. relates to the establishment, operation or dissolution of the CIS or
to the registration and sale of CIS securities, and

2. has had or is likely to have a material adverse effect on the
interests of the CIS investors;


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(i) File such information and documents to keep reasonably current the
information and documents contained in the CIS Plan ;

() Send, either by registered mail or other means authorized by the
appropriate regulatory agency, annual reports for the investors as appropriate,
which may be annual holding statements for UITFs as required by BSP, separate
financial statements as required by IC for Insurance Companies, and in the case
of Mutual Funds (MFs), the annual report as required by the SEC;

(k) Propose and secure approval from the respective regulatory agency for
the establishment or amendment of the CIS plan in accordance with the
provisions of this Law and its implementing rules and regulations; and

(!) Such other duties and responsibilities that the appropriate regulatory
agency may prescribe

SEC.13. Custodian -Only entities duly authorized to engage in
investment management or trust business by the BSP or authorized by their
home regulator may be licensed by the BSP to act as custodian of investment
assets of a CIS. Unless otherwise authorized by the appropriate regulatory
authority taking into account the interest of the investing public, all CIS must
appoint an independent third party custodian which shall have custody of the
investment assets of the CIS. The following, in addition to those prescribed
under existing laws and regulations, shall be the duties and responsibilities of a
custodian

(a) Hold the investment assets of a CIS in accordance with its agreement
with the trustee or the juridical CIS; and
(b) Such other duties and responsibilities that the BSP may prescribe,
which shall include:
1. Earmarking, segregation and hypothecation of the investment
assets of the CIS; and
2. Provisions for periodic or other inspections by employees and
agents of the BSP.

SEC. 14. Appointment of Custodian — The agreement between the
custodian and the juridical CIS or the trustee or the insurance company of a
contractual CIS shall contain, among others, provisions pertaining to:


1 1. Extent of services to be rendered by the custodian;

Fees, remuneration and other expenses of the custodian;
3 3. Any restrictions or prohibitions regarding the performance by the
4 custodian of its functions; and

4. Reporting requirements of the custodian.

6 SEC.1. CIS Distributor — (a) No entity shall be licensed by the

7 appropriate regulatory agency as a distributor of CIS securities, unless:

8 1. Itis organized as a stock corporation;

9 2. It has a minimum paid-up capital of at least Ten Million Pesos
10 (P10,000,000.00), or such higher capitalization to be prescribed by the
HW appropriate regulatory agency taking into consideration (j) the risk-
2 based principles on capital adequacy based on internationally accepted
13 standards, and (ii) the number and/or total net asset value of all CIS
4 distributed; and
1s 3. thas complied with such other requirements as may be prescribed by
16 the appropriate regulatory agency.

7 (b) For purposes of this Law, the following juridical persons may be
18 licensed as a distributor of all types of CIS by the appropriate regulatory agency,
19 provided that the requirements under this section and the implementing rules and
20 regulations are complied with:

21 1. Any fund manager;

n 2. Any investment house;

3 3. Any bank, financial institution or trust entity under the supervision of the
24 BSP;

25 4. Any insurance broker or their agents under the supervision of the IC;

26 5. Securities brokerage firms or their agents and sales persons duly
27 licensed by the SEC; and

28 6. Other persons as may be hereinafter allowed by the appropriate
29 regulatory agency.

30 (c) A juridical CIS is not permitted to act as a distributor of securities of

31 which it is the issuer, unless it complies with such rules and orders as the
32 appropriate regulatory agency may prescribe as necessary or appropriate in the
33. public interest or for the protection of investors.

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(d) The CIS distributor shall be principally responsible for marketing,
distributing, selling CIS securities and safekeeping of identification documents as
well as the minimum information required by existing Anti-Money Laundering
laws, rules and regulations. It shall perform such other duties and responsibilities
as the implementing rules and regulations may prescribe.

SEC.16. Marketing and Distribution Agreement - (a) The agreement
between the CIS distributor and the juridical CIS or the trustee or insurance
company of a contractual CIS shall contain, among others, provisions pertaining
to:

1. Extent of services to be rendered by the CIS distributor,

Fees, remuneration and other expenses of the CIS distributor,

3. Any restrictions or prohibitions regarding the performance of the

functions by the CIS distributor;

4, Undertaking to employ or appoint only CIS solicitors duly licensed by

the appropriate regulatory agency; and

5. Reporting requirements.

(b) In all cases where the trustee or insurance company functions as a CIS
distributor, the foregoing provisions which should otherwise be contained in the
marketing and distribution agreement with the CIS shall be contained in the CIS
plan

SEC.17. CIS Solicitor - No person shall be allowed to solicit, sell or offer
to sell CIS securities unless duly licensed by the appropriate regulatory agency
after compliance with such requirements and standards for eligibility as may be
prescribed in this law and its implementing rules and regulations and the SRC
and its implementing rules and regulations

SEC.18. Accountants and Auditors.- (a) The financial statements of
every juridical CIS, fund manager and contractual CIS shall be audited and
certified by an independent auditor duly accredited by the appropriate regulatory
agency.

(b) The following, in addition to those prescribed under existing laws and
regulations, shall be the duties and responsibilities of the independent auditor.

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1 1. Report to the BOD or the trustee of the CIS any irregularity or

2 undesirable practice in the operation of the CIS which has come to its
3 knowledge. Any material finding shall be reported by the independent
4 auditor to the appropriate regulatory agency;

5 2. Report to the appropriate regulatory agency non-compliance by the
6 fund manager and trustee with its contractual and regulatory
7 requirements; and

8 3. Report to the appropriate regulatory agency whether the intemal
9 control and audit structures in the operation of the CIS are at an

10 acceptable level.

W SEC.19. Common Duties and Responsibilities of Parties — \n addition
12 to their specific duties and responsibilities, each of the juridical CIS, fund
13. manager, trustee, CIS distributor, CIS solicitor, and the CIS custodian shall have
14 the following common duties and responsibilities:

1s (a) Carry on and manage its business and the CIS in a proper, diligent and
16 efficient manner;

7 (b) Observe honesty, due care and diligence, utmost good faith and high
18 standards of integrity;

19 (©) Act in the best interests of the CIS investors;

2» (d) Establish systems, procedures and processes to be observed by its
a officers and employees to ensure compliance with this Law and its

n implementing rules and regulations and to protect the interests of the
23 CIS investors;

4 (e) Take responsibility for all actions and omissions of any third party to
2s whom it delegates any of its duties and responsibilities, except for any
%6 resulting damage or liability arising from force majeure or other similar
27 ‘occurrence beyond the control of such third party;

28 (f) Ensure that any person appointed or employed by it is of good repute,
2 has relevant expertise and experience to act in the capacity so
30 appointed or employed;

3 (g) Refrain from using its position to gain, directly or indirectly, an
32 advantage for itself or for any other person or to cause detriment to the

33 interests of CIS investors;

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(h) 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;

(i) Disclose all conflicts of interest in the performance of their functions;
and

() Comply with orders, rules and regulations as may be prescribed by the
appropriate regulatory agency.

‘Any contractual provision which protects or purports to protect the fund manager,

juridical CIS, trustee, CIS distributor, CIS solicitor, or CIS custodian against any

liability for willful misfeasance, malfeasance, fraud, bad faith, or gross negligence
in the performance of their duties shall be void

SEC.20. Revocation, Refusal or Suspension of License of the Fund
Manager, Juridical CIS, Trustee, Insurance Company, Custodian, CIS
Distributor and CIS Solicitor. - The licensing or authorization of a fund
manager, juridical CIS, trustee, insurance company, custodian, CIS distributor or
CIS solicitor to engage in CIS business under this Law may be refused, or any
license granted thereunder may be revoked, suspended, or limitations placed
thereon by the appropriate regulatory agency if, after due notice and hearing, the
appropriate regulatory agency which granted the license determines that the
applicant or licensee:

(a) Has willfully violated any provision of this Law, any rule, regulation or
order made hereunder, or any other law administered by the appropriate
regulatory agency, or has failed to supervise, with a view to preventing such
violation, another person who commits such violation;

(b) Has willfully made or caused to be made a materially false or
misleading statement in any application for license or report filed with the
appropriate regulatory agency, or has willfully omitted to state any material fact
that is required to be stated therein or necessary to make the statement therein
not misleading;

(c) Has failed to satisfy the qualifications or requirements for licensing
prescribed under this Law and its implementing rules and regulations;
(d) Is enjoined or restrained by a competent body from engaging in


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securities, commodities, banking, real estate, insurance or similar activities;

(e) Is subject to an order of a competent body refusing, revoking or
suspending any license or other permit under this Law, the implementing rules
and regulations, any other law or regulation administered by the appropriate
regulatory agency or any other governmental authority;

(f) Has been found by a competent body to have violated any provisions
of securities, commodities, banking, real estate or insurance laws, or has aided,
abetted, counseled, commanded, induced or procured such violation; or

(g) Is insolvent as may be determined by the appropriate regulatory
agency

For purposes of this subsection, the term "competent body" shall include a
foreign court of competent jurisdiction and a foreign financial regulator.

SEC.21. Fit and Proper Rule. To maintain the quality of management of
the CIS and afford better protection to CIS investors, the appropriate regulatory
agency shall prescribe or pass upon and review the qualifications and
disqualifications of individuals elected or appointed as directors or officers,
partners or other equivalent personnel, of fund managers, trustees, insurance
companies, juridical CIS or CIS distributors and disqualify those found unfit. The
appropriate regulatory agency may disqualify, suspend or remove any director,
partner, officer or other person performing similar functions who commits or omits
an act which renders him unfit for the position,

In determining whether an individual is fit and proper to hold the position of
a director, partner, officer or other similar position of the fund manager, trustee,
insurance company, juridical CIS or CIS distributor, regard shall be given to his
integrity, experience, education, training, and competence: Provided, however,
that the following persons, and those determined by the appropriate regulatory
agency to be unfit, shall in no case be allowed to serve or act in the capacity of
officer, director, partner, consultant, or similar position of any fund manager,
trustee, insurance company, juridical CIS or CIS distributor:

(a) any person convicted of any crime involving any security or financial

product;

(b) any person convicted of an offense involving fraud or embezzlement,

theft, estafa or other fraudulent, dishonest acts or transactions;


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(e) any person who, by reason of any misconduct, Ie enjoined by order,
judgment, or decree by any court, quasi-judicial body or administrative
agency of competent jurisdiction from acting as a director, officer,
‘employee, consultant, or agent occupying any fiduciary position;

(d) any person found by the appropriate regulatory agency to have
violated, or aided, abetted, counseled, commanded, induced, or
procured the violation of this Law, the General Banking Law, The Anti-
Money Laundering Act (AMLA) and the rules thereto, the Insurance
Code, the SRC, or any related laws and any rules, regulations or
orders thereunder;

(e) any person who is insolvent, or incapacitated to contract;

(f) any person found guilty by a foreign court, regulatory authority or
government agency of the acts or violations similar to any of the acts or
misconduct enumerated in the foregoing paragraphs;

(g) any person convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six (6) years; and

(h) any person convicted by final judgment of violation of the Corporation
Code committed within five (5) years prior to the date of his election or
appointment.

Chapter 3 - Provisions applicable to Contractual CIS

‘SEC. 22. Establishment of a Contractual CIS.

(a) Any fund manager may establish, administer and manage one or
more contractual CIS. Such fund manager shall enter into a fund management
contract with a trustee or insurance company. In case the functions of the fund
manager, on the one hand, and the trustee or insurance company, on the other
hand, are performed by the same or affiliated entities, there must be an
independent oversight body which shall be created pursuant to and shall perform
the oversight duties and responsibilities enumerated in section 48(b)(2) hereof.

(b) In a contractual CIS, the trust agreement shall be between the
trustee and the CIS investors, and the insurance contract shall be between the
insurance company and policy holders. The trust agreement or the insurance

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contract, as the case may be, shall define the rights and obligations of the
parties.

(c) Notwithstanding any provision of law to the contrary, the investment
assets of each contractual CIS shall be deemed separate and independent of the
investment assets of the fund manager, trustee and/or insurance company, and
shall not be available to the creditors of such fund manager, trustee and/or
insurance company in the event of attachment, gamishment, execution,
bankruptey, insolvency or rehabilitation or any form of action or claim against the
fund manager, trustee and/or insurance company.

SEC.23. Register of CIS Investors — An up-to-date register of all CIS
investors shall be kept and maintained by or under the control of a registrar,
which could be the fund manager, trustee, distributor or insurance company,
which may be kept and maintained either in written form or by other means which
are capable of being reproduced in written form, including, but not limited to,
computer records, microfilm, microfiche or electronic recording, as the registrar
shall from time to time determine. There shall be entered into the registry such
relevant information as may be prescribed by the fund manager or the trustee.
Information about CIS investors shall be considered confidential in nature and
may not be inquired or looked into except upon order of a court of competent
jurisdiction or in the course of examination by the appropriate regulatory agency
or for purposes of complying with existing Anti-Money Laundering ACT (AMLA)
such as, but not limited to, the reporting of covered transactions or suspicious
transactions to the Anti-Money Laundering Council (AMLC) AND the power of the
AMLC to examine or inquire into the details of the CIS account including the
personal information of the CIS investors; provided, that the processing of
personal information shall only be to the minimum extent necessary for the
achievement of the above purposes, and in a manner mindful of the data privacy
rights of cis investors,

SEC.24. The Contractual CIS Plan. \n addition to the matters specified in
Section 30, a Contractual CIS Plan shall contain the following matters:

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(a) In cases where the trustee or its affiliate, or insurance company or its
affiliate, performs the functions of the fund manager, a description of the
independent oversight body, as prescribed under Section 48 (b)(2) of this Law.

(b) Initial unit value and the basis thereof;

(c) Basis upon which the CIS may be terminated. The CIS plan shall state
the rights of participants in case of termination of the CIS; and

(a) Such other matters as the appropriate regulatory agency may
prescribe.

Chapter 4 - Provisions Applicable to Juridical CIS

SEC. 25. Engagement of Fund Manager. Juridical CIS shall engage a
duly registered fund manager to perform the functions prescribed in Section 9
hereof; Provided, That a majority of the directors, partners of other persons
performing similar functions of the juridical CIS are not directors, officers or
employees of the fund manager; and Provided, Further that no Chairman, Chief
Executive Officer (CEO), President, Chief Operating Officer (COO) or equivalent
positions may be interlocking but officers with lower rank may be common with
prior approval of the appropriate regulatory authority.

SEC.26. The Juridical CIS Plan - (a) In addition to the matters specified
in Section 30, a juridical CIS plan shall contain the following matters

1. Par value of the CIS securities issued by the juridical CIS;

2. The dissolution of the juridical CIS and the rights of CIS security holders
in case of dissolution of the juridical CIS;

3. Borrowing of money in accordance with the rules and regulations as
may be prescribed by the SEC;

4. Extension of loans to other persons in accordance with the rules and
regulations as may be provided by the SEC; and

5. Such other matters as the SEC may prescribe.
(b) The juridical CIS shall file such information and documents to keep
reasonably current the information and documents contained in the CIS Plan.

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SEC.27. Dividends. (a) Dividends (or their equivalent, in the case of
partnerships or other structures) shall be declared and paid in accordance with
the requirements of the CIS plan, the Corporation Code and applicable laws and
regulations; Provided, that the SEC may prescribe other requirements or
restrictions in the declaration and payment of dividends (or their equivalent) by
the juridical CIS as necessary or appropriate in the public interest and for the
protection of the investors.

(b) Dividend payments (or their equivalent) shall be accompanied by a
written statement which adequately discloses the source or sources of such
payment. The SEC may prescribe the form of such statement as necessary or
appropriate in the public interest and for the protection of the investors.

TITLE Ill - TAX PROVISIONS

SEC.28 . Tax treatment of the CIS. Without prejudice to the exemptions
under existing laws, all CIS shall be subject only to the following national intemal
revenue taxes:

(a) Tax on Income or Gross Receipts of CIS. - The income or gross
receipts from investments or reinvestments of funds received or accrued by any
of CIS shall be subject to all applicable taxes imposed under Title II of the
National Internal Revenue Code (NIRC) of 1997.

(b) Tax on gains upon Creation, Redemption, Sale, Barter, Exchange or
other disposition of CIS Securities. - Any gains realized by the investor from the
redemption of any form of CIS securities shall be covered by Section 32(B)(7)(H)
of the NIRC of 1997. The sale, barter, exchange or other disposition of listed CIS
securities through a local stock exchange, shall be exempt from the stock
transaction tax under Section 127(A) of the NIRC of 1997, where forty-five (45%)
percent or more in value of the underlying assets are listed and traded in the local
stock exchange. If not listed and traded through a local stock exchange, any such
gains shall be subject to applicable capital gains tax imposed under Title Il of the
NIRC of 1997.

The same tax treatment shall apply to gains realized from the transfer of

securities and commodity products in exchange for original issuance of CIS
securities.


ae

(©) A CIS that complies with the requirements of Republic Act No. 9856,
otherwise known as “The Real Estate Investment Trust Act of 2009", shall also be
entitied to all the tax and other incentives under this law. In the event where there
are two tax incentives available, that which is more favorable to the taxpayer shall
apply.

TITLE IV - REGISTRATION OF CIS SECURITIES AND OPERATIONS OF CIS
Chapter 1 - Registration and Suspension of Offer and Sale of CIS Securities

SEC.29. Filing of CIS Plans. — (a) No CIS securities shall be sold or
offered for sale within the Philippines unless such securities have been registered
through the filing of a CIS plan which has been rendered effective by the
appropriate regulatory agency. The CIS Plan shall be filed together with a
registration statement, in such form and containing such information and
documents as prescribed by this Law, the implementing rules and regulations or
the appropriate regulatory agency. The CIS plan shalll include any prospectus as
required or permitted by the appropriate regulatory agency to be delivered to CIS
investors. It shall be unlawful for any person to sell or offer for sale CIS securities
unless the corresponding CIS plan has been duly filed with and rendered
effective by the appropriate regulatory agency.

(b) The CIS plan shall be signed by the executive officer, principal
operating officer, principal financial officer, comptroller, principal accounting
officer, corporate secretary, designated managing partner, or persons performing
similar functions of the juridical CIS, or the fund manager, trustee or insurance
company in the case of a contractual CIS, accompanied by a duly verified
resolution of the BOD.

(c) Upon effectivity of the CIS plan, the juridical CIS, fund manager,
trustee or insurance company shall state in every sales material that all
registration requirements of the CIS securities have been met and that all
information are true and correct as represented by the juridical CIS, fund
manager, trustee or insurance company or the person making the statement. Any
untrue statement of fact or omission to state a material fact required to be stated
therein or necessary to make the statement therein not misleading shall
constitute fraud


(d) The appropriate regulatory agency may refuse the registration of a CIS
security if
4. It contains a false or misleading statement;
2. It omits to state a material fact required to be stated therein or
necessary to make the statement therein not misleading;
3. It does not comply with the requirements of this Law and applicable
laws and regulations; or
4. It is in the public interest to refuse the registration of such CIS
securities
(e) If any change occurs in the facts set forth in the CIS plan, the juridical
CIS, fund manager, trustee or insurance company shall file an amendment
thereto setting forth the change.

SEC. 30. Contents of the CIS Plan. The CIS plan shall contain the
following matters:

a) Title of the CIS plan. This shall correspond to the product or brand
name by which the CIS is proposed to be known and made available to its
investors;

b) Name of the fund manager and/or Trustees;

c) A statement of the CIS’ investment objectives and policies including
limitations, if any, and risk factors in investing in the CIS;

d) Investment powers of the fund manager with respect to the CIS,
including the character and kind of investments which may be purchased by the
cis;

) Profile of the proposed investors;

f) Its classification, whether an open-end or closed-end fund;

g) Total value of the CIS securities to be issued in case of closed-end
cis;

h) Terms and conditions governing the issuance and redemption of CIS
securities;

i) Provision for the extemal audit of the CIS;

}) Liabilities of the juridical CIS and the fund manager to the CIS security
holders;

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k) Amount of fees, commissions and other charges and expenses to be
deducted from the fund, in the case of a contractual CIS, or to be paid by the CIS
security holders, in the case of juridical CIS;

1) Annual reports for the investors as appropriate, which may be annual
holding statements for UITFs as required by BSP, separate financial statements
for Insurance Companies as required by IC, and in the case of MFs, the annual
report as required by the SEC;

m) Public disclosures and reports;

n) Plan of distribution of CIS investment assets in case of dissolution; and

0) Such other matters as the appropriate regulatory agency may
prescribe

A copy of the CIS plan shall be made available during regular office hours
to any interested person at the principal office of the fund manager and juridical
CIS in case of a juridical CIS, and the fund manager or trustee in case of
contractual CIS. The CIS plan shall also be distributed to prospective investors
and posted in the website, publication and/or other mode of information
dissemination as required by the appropriate regulatory agency.

SEC.31. Revocation of Registration or Suspension of Offer and Sale
of Securities The appropriate regulatory agency may revoke the registration of
the CIS securities in accordance with Section 13.1 of the SRC or order the
suspension of the offer and sale of the CIS securities in accordance with Section
13.4 of the SRC and their implementing rules and regulations

Chapter 2 — Dealings in CIS Securities

SEC. 32. Rights and Privileges of CIS Investors. Each CIS security
shall be equal in all respects to every other CIS security belonging to the same
class of CIS securities.

SEC. 33. Proxies; Voting Trust. The appropriate regulatory agency may
prescribe rules and regulations for the solicitation of proxies and the issuance
and transfer of voting trust certificates in accordance with the requirements of the


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Corporation Code and applicable laws and regulations; Provided, That the SEC
may prescribe other requirements or restrictions as may be necessary or
appropriate in the public interest and for the protection of the investors; Provided,
Further, that no proxies shall be used as a device to control the management of
any CIS.

SEC. 34. Payment for CIS Securities. Except as provided by law or
regulation, no CIS shall issue any of its securities for services or for property
other than cleared funds. instalment sales are expressly prohibited

SEC.36. Distribution, Redemption and Pricing of CIS Securities. (a)
Unless otherwise allowed in this law, CIS securities shall be sold only through a
licensed CIS distributor and by licensed CIS solicitors. Notwithstanding the
pertinent provision of Section 65 of the Corporation Code, CIS securities may be
issued at the net asset value computed in accordance with Section 42.

(b) CIS investors have the right to surrender their securities for
redemption, except in the case of closed-end CIS, in accordance with the CIS
plan. Redemption shall not be suspended except pursuant to the CIS plan as
approved by the appropriate regulatory agency in the public interest or for the
protection of investors. The redemption price of CIS securities shall be at the
applicable price described in the CIS plan.

Chapter 3 - Operations of CIS.

SEC. 36. Custody of Investment Assets. Every CIS shall place and
maintain its investment assets in the custody of a custodian in accordance with
Sections 13 and 14 hereof.

SEC. 37. Investment Limitations. (a) The CIS funds may be invested
only in the following liquid or semi-liquid assets tradeable through an organized
market, subject to limitations as may be provided by this Law, the implementing
rules and regulations or the appropriate regulatory agency:

1. Bank deposits;

2. Securities issued by or guaranteed by the Philippine government, or
the BSP;

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3. Tradable securities issued by the government of a foreign country, any
political subdivision of a foreign country or any supranational entity;

4. Exchange-listed securities;

5. Marketable instruments that are traded in an organized exchange or
market;

6. Loans traded in an organized market;

7. Exchange traded funds;

8. Derivatives as may be authorized by the appropriate regulatory

agency;

9. Real Estate Investment Companies under the REITA;

40. Real estate investment trusts or companies;

14. Other CIS; and

42. Such other investments or instruments existing and accepted in other
intemational markets, such as those consistent with the IOSCO objectives and
principles of Securities Regulation, as the appropriate regulatory agency may
allow.

Provided, however, that no CIS shall, directly or indirectly:

1. acquire more than ten per centum (10%) of another CIS; or

2. acquire securities of any issuer having an aggregate value in excess
of twenty per centum (20%) of the net asset value of the acquiring CIS, or the
weight of the security in a recognized benchmark or index, whichever is higher.

(b) The appropriate regulatory agencies may jointly issue such
implementing rules and regulations, in accordance with Section 57 hereof, as
may be necessary or appropriate in the public interest or for the protection of
investors, that provide for different percentages or further restrictions with respect
to investments in other CIS or the concentration of investments by a CIS.

SEC. 38. Prohibited Acts of CIS. |t shall be unlawful for any CIS to -

(a) Purchase any security on margin, except such short-term credits as are
necessary for the clearance of transactions;

(b) Participate on a joint or a joint and several basis in any trading account in


‘securities; or
(©) Generate funds for promoting the private business or industry of any
employee, officer, director, partner, promoter or stockholder thereof; or
(d) Allow any of its employees, officers, directors, organizers and
incorporators, stockholders, partners, or CIS security holder in the case of
juridical CIS to sell real estate, personal property or any other kind of CIS
property to the CIS at a price higher than the procurement cost or the
market value thereof, or sell to any of the aforementioned persons any
property of the CIS, or a portion thereof, at a price below the market value
thereof.
The appropriate regulatory agency may, by rules and regulations prohibit
CIS from engaging in such other acts as it may deem necessary or appropriate in
the public interest or for the protection of investors, taking into account the policy
and purpose of this Law.

SEC. 39. Meetings of CIS Investors. (a) Meetings of juridical CIS
investors, as may be appropriate, shall be held annually for the purpose of
electing directors. Notice shall be sent to all CIS investors by registered mail or
other modes as may be authorized by the appropriate regulatory agency.

(b) CIS investors may attend the meetings in person or by proxy. A
quorum at SAID meeting shall consist of CIS secutity holders or stockholders
‘owning or representing at least ten per centum (10%) of the total number of units
in the fund or the outstanding capital stock, respectively, or such other
percentage as the appropriate regulatory agency may prescribe taking into
account the size of the CIS and the number of its CIS investors. At least a
majority vote of those present or represented shall be required to constitute a
valid act of the CIS investors.

(c) All other matters, such as changing the investment policy, may be
adopted with prior written notice to the CIS investors but will be effective only
after approval by the appropriate regulatory agency.

(@) The appropriate regulatory agency shall prescribe by rule or regulation
the requirements for the conduct of meetings.


SEC. 40. Requirements for selling materials and advertisements
Sales and marketing documents and advertisements shall be subject to such
requirements as the implementing rules and regulations or the appropriate
regulatory agency may prescribe. All sales and marketing documents, and
advertisements shall:

(a) Not contain any untrue statement of fact or omit to state any fact
that is necessary in order to prevent the statements made, in the light of the
circumstances in which they were made, from being misleading;

(b) The CIS performance information in advertisements should be
calculated and presented from the viewpoint of the public to whom the CIS is
targeted;

(©) _ All CIS should calculate and present their performance information
in advertisements in a substantially similar manner so that CIS investors may (i)
make meaningful comparisons among various CIS, and (ji) not be misled by
differences in the method of calculation and presentation; and

(4) Comply with such other terms and conditions prescribed by the
appropriate regulatory agency which are necessary or appropriate in the public
interest or for the protection of CIS investors.

SEC. 41. Reports and Financial Statements of CIS. (a) Every CIS shall
file with the appropriate regulatory agency, if any:

1. Such information and documents including financial statements as the
implementing rules and regulations and the appropriate regulatory
agency may require, to keep reasonably current the information and
documents contained in the CIS plan filed under this Law; and

2. Copies of every periodic or interim report or similar communication
transmitted to the CIS investors.

(b) Every CIS shall transmit to its CIS investors, at least annually, reports
containing such of the following information and financial statements or their
equivalent, as of the latest fiscal year, which reports shall not be misleading in
any material respect in the light of the reports required to be filed pursuant to
subsection (a):

1. a balance sheet accompanied by a statement of the aggregate
value of investments on the date of such balance sheet;

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2. a list showing the amounts and values of securities owned on the
date of such balance sheet;

3. a statement of income, for the period covered by the report, which
shall be itemized at least with respect to each category of income
and expense representing more than five per centum of total
income or expense;

4. a statement of surplus, which shall be itemized at least with respect
to each charge or credit to the surplus account which represents
more than five per centum of the total charges or credits during the
period covered by the report;

5. a statement of the aggregate fees or remuneration paid by the CIS
during the period covered by the report to (i) the fund manager,
trustee, CIS distributor and independent auditor; and (ji) each
director officer, partner, or other person performing similar
functions, as the case may be, as regular or special compensation;
and

6. a statement of the aggregate amounts of purchases and sales of
investment assets made during the period covered by the report,

Provided, That the implementing rules and regulations may permit, in liew
of any item required under this subsection which may be inapplicable or
inappropriate to any specified type or types of CIS, the inclusion of such item of a
comparable character as it may deem applicable or appropriate to such type or
types of CIS.

Provided, further, that the reports and financial statements mentioned
above, or such other material information as the appropriate regulatory agency
may determine, shall also be posted in the website, publication and/or other
mode of information dissemination of the appropriate regulatory agency and the
cis.

The appropriate regulatory agency shall prescribe the forms for the reports
and financial statements, or such other material information as the appropriate
regulatory agency may determine, so that CIS investors may make meaningful
comparisons among various CIS, and will not be misled by differences in the
method of calculation and presentation.


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SEC. 42. Net Asset Value. (a) A CIS shall compute and post its net asset
value per share/unit at such frequency as may be prescribed by the implementing
rules and regulations.

b) The computation of the net asset value per share or unit shall be made
in accordance with the valuation method prescribed by the implementing rules
and
regulations and shall be applied consistently.

SEC. 43. Accounts and Records. (a) Every CIS, and every fund
manager and trustee shall maintain and preserve for such period or periods as
may be prescribed by the implementing rules and regulations, such accounts,
books, and other documents as constituting the record forming the basis for
financial statements required to be filed pursuant to this Law.

(b) All accounts, books and other records required to be maintained and
preserved by any person pursuant to subsection (a) shall be subject to
examination by the appropriate regulatory agency.

SEC. 44, Management and Trust Fees; Expenses Chargeable to
Fund/CIS Investors. The management or trust fees shall cover the CIS’ fair and
equitable share of the routine administrative expenses of the fund manager,
trustee and/or insurance company such as directors’ fees, salaries and wages,
supplies, credit investigation, collateral appraisal, security, messengerial and
janitorial services, information technology expenses, annual report preparation,
supervision fees, regulatory reporting expenses, and intemal audit fees.
Marketing, advertising, and other publicity or promotional related expenses shall
be for the account of the fund manager, trustee, and insurance company and
shall be considered covered by the management or trust fee.

However, the fund manager, trustee, and insurance company may charge
special or reimbursable expenses from the CIS in case such expenses are (1)
necessary to preserve or enhance the value of the CIS, (2) payable to an
independent or non-related third party covered by a separate contract, and (3)
disclosed to CIS investors. the fund manager, trustee, and insurance company
shall secure prior approval of the appropriate regulatory agency for outsourcing
services provided under existing regulations of the concerned regulatory

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agency.no other fees shall be charged to the fund/CIS investors, except in case
of a juridical CIS, the fees of directors, managing partners, or others persons
performing similar functions shall be chargeable to the fund.

Provided further that, the total operating expenses shall not exceed ten
(10%) percent of its average investment fund or net worth as shown in its
previous audited financial statements covering the immediately preceding fiscal
year.

SEC. 45. Dissolution - (a) The juridical CIS, trustee or insurance
company shall cause the dissolution of the CIS whenever any of the following
grounds is present:

4. Dissolution is required by the CIS plan, when the specified
conditions or time for dissolution have been met or reached;

2. Dissolution is agreed upon in a resolution of the CIS investors
owning at least two-thirds (2/3) of the outstanding CIS securities in
a CIS at a meeting duly called for the purpose; Provided, that the
implementing rules and regulations may prescribe a different
percentage interest taking into account the nature and size of the
CIS and the number of CIS investors; Provided, Finally, that there
has been prior publication of the notice of time, place and object of
the meeting for two (2) consecutive weeks in a newspaper of
general circulation in the Philippines;

3. Dissolution is required by a final and executory order of the court;

4. Dissolution is ordered by the appropriate regulatory agency for non-
compliance with the conditions for the lifting of a suspension or
revocation order previously issued; and

5. Dissolution is deemed necessary in view of the dissolution or the
revocation of the license of the fund manager, trustee or insurance
company;

Provided, that the CIS may not be dissolved whenever:

(i) The appropriate regulatory agency orders the transfer of the CIS
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(ii) loss of license of the trustee, insurance company or fund
manager is due to a merger and the surviving company in such
merger is also an authorized trustee, insurance company or fund
manager, as the case may be; or

(iii)The new company that is established as a result of the
consolidation of trust entities, insurance companies or fund
managers promptly obtains a license to act as trustee, insurance
company or fund manager, as the case may be.

(b) Upon dissolution, the fund manager, trustee or insurance company
shall distribute the proceeds and investment assets of the CIS to the CIS
investors as prescribed by the CIS plan and in accordance with the implementing
rules and regulations.

SEC. 46. Merger or Consolidation — No merger or consolidation of CIS
will be authorized by the appropriate regulatory agency unless the following
conditions are met:

(a) _ The merger or consolidation plan has been prepared in accordance
with the requirements as may be prescribed by the appropriate regulatory
agency; and

(b) The merger pian has been approved by the CIS investors owning at
least two-thirds (2/3) of the outstanding CIS securities in each of the CIS to be
merged or consolidated in a meeting duly called for the purpose;

The implementing rules and regulations shall prescribe the procedures
and requirements for merger or consolidation in the public interest and for the
protection of investors.

TITLE V- CIS INVESTORS PROTECTION FUND

SEC. 47. Establishment of the CIS Investors Protection Fund -The
appropriate regulatory agency shall, define the rules and procedures for the
creation and management of an investors protection fund, the contribution to
which shall be determined as a proportion of the CIS, which shall be segregated
from the CIS, for the purpose of compensating investors who suffer material loss

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in investment due to fraud, gross negligence or mismanagement; provided that,
any contribution to the investor's protection fund shall not be chargeable to the
CIS. A CIS that maintains an existing fund for the same purpose shall not be
required to make contributions to the CIS investors protection fund, provided, that
the appropriate regulatory agency has determined that the existing fund is of
equivalent purpose, and the contributions to such fund are of equivalent value, as
that of the CIS investors protection fund established pursuant to this section.

TITLE VI- SPECIAL RULES GOVERNING ESTABLISHMENT OF
CONTRACTUAL CIS BY TRUST ENTITIES AND INSURANCE COMPANIES

SEC. 48. Establishment of Contractual CIS by Trust Entities and
Insurance Companies- (a) Any trust entity or insurance company may establish
a contractual CIS, subject to the following provisions:

The trust entity or insurance company may engage the services of a fund
manager, Provided, that no director and/or officer of the trust entity or insurance
company shall at the same time serve as director and/or officer of the fund
manager, Provided, further, that the trust entity or insurance company shall not
engage a fund manager which is an affiliate of the trust entity or insurance
company, unless it complies with the requirements of paragraph (b) (2) of this
Section.

(b) The engagement of a fund manager shall not be required in cases
where:

1. In addition to the functions of a trustee prescribed under this Law, the
trust entity or insurance company shall comply with and observe the
duties, responsibilities and prohibitions of a fund manager under
Sections 8 and 9 hereof,

2. The CIS plan provides for the creation of an Independent Oversight
Body. The independent oversight body shall be composed of at least
three (3) members who shall be appointed subject to the implementing
rules and regulations and approval of appropriate regulatory agency in
accordance with such rules as the implementing rules and regulations
shall prescribe, all of whom shall have the degree of independence, As
may be determined by the appropriate regulatory agency using

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international best practices like the ASEAN CIS, or may be a juridical
entity organized and existing pursuant to the implementing rules and
regulations,

The independent oversight body shall have the following duties and
responsibilities:

i. Monitor the activities of the CIS distributors in the sale and/or
redemption of the CIS units and ensure that the provisions of
any marketing document relating to the sale or offer for sale of
the CIS units do not contain any matter which is inconsistent
with the provisions of the CIS plan, this Law and its
implementing rules and regulations;

ii, Ensure that the management and investments of the CIS funds
are in accordance with the CIS plan;

iii, Ensure that the trust entity 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;

iv. Ensure that CIS funds, investment assets and properties are
clearly _ identified and held separately from the trust entity's or
insurance company's own properties and other properties held
in trust;

Vv. Monitor conflict of interest and adoption of measures to address
the same for the best interest of the CIS investors.

TITLE Vil "SANCTIONS AND SMALL CLAIMS

‘SEC. 49. Administrative Sanctions. (a) If, after due notice and hearing,
the
appropriate regulatory agency finds that:

(1) there is a violation of this Law and its implementing rules and
regulations, or the rules or orders of the appropriate regulatory agency:

(2) any fund manager, trustee, insurance company, juridical CIS, CIS
distributor or CIS solicitor has failed reasonably to supervise, with a view to

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preventing violations, another person subject to supervision who commits any
‘such violation;

(3) any person has, in a CIS plan or in other reports, applications,
accounts, records or documents required by this law and its implementing rules
and regulations to be filed with the appropriate regulatory agency, made any
untrue statement of a material fact, or omitted to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
or

(4) any person has refused to permit any lawful examination into its affairs,
including the refusal to produce books, records or documents upon demand by
the CIS investor or the appropriate regulatory agency, it shall, in its discretion,
and subject only to the limitations hereinafter prescribed, impose any or all of the
following sanctions as may be appropriate in light of the facts and circumstances:

(i) A fine of no less than ten thousand pesos (P10,000.00) nor more than
one million pesos (P1,000,000.00); Provided, that the fine herein
prescribed may be increased by the appropriate regulatory agency
every five (5) years based on the current price index, to maintain its
Punitive value;

(ii) Disqualification from being an officer, member of the BOD, partner, or
any person performing similar functions, of the fund manager, trustee,
insurance company, juridical CIS or CIS distributor;

(iii) Suspension the license of such person;

(iv)Revocation of the license of such person; and

(v) Other penalties within the power of the appropriate regulatory agency
to impose.

(b) The imposition of the foregoing administrative sanctions shall be without
Prejudice to the filing of criminal charges and civil cases against the entities and
individuals responsible for the violation.

(c) The appropriate regulatory agency shall have the power to issue writs of
execution to enforce the provisions of this section and to enforce payment of the
fines, penalties, fees and other dues collectible under this Law.

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(d) If the offender is a corporation, partnership, or other juridical entity, the
administrative sanctions may in the discretion of the appropriate regulatory
agency be imposed upon such corporation, partnership, or other juridical entity
and upon the officer or officers, or other persons performing similar functions, of
the corporation, partnership, or entity responsible for the violation, Provided,
That in case of the imposition of administrative fines, the appropriate regulatory
agency may, in its discretion, impose such fines solely upon the officer, director,
managing partner, or other persons performing similar functions, responsible for
the violation; and Provided, Further, that if such officer is an alien, he shall in
addition to the penalties prescribed, be deported without further proceedings
after service of sentence.

(e) The directors, officers, managing partner, or other persons performing
similar functions, of a corporation, partnership or other entity held
administratively liable under this section shall in no case recover the
administrative liability from the CIS corporation partnership or entity.

SEC. 50. Criminal penalties. (a) The following acts are criminal in nature
and shall be penalized as follows:

(1) Refusal to comply with the orders of the appropriate regulatory agency,
for the production of books, records or documents, or to undergo an
examination shall be penalized by imprisonment of one (1) month to six
(6) months or fine in the amount of one hundred thousand pesos
(P100,000.00) to two million pesos (P2,000,000.00), or both
imprisonment and fine, at the discretion of the court;

(2) Selling or offering for sale a CIS security by unregistered sellers,
distributors or solicitors shall be penalized by imprisonment of six (6)
years and one day to twelve (12) years or fine equivalent to triple the
contract price of each of the CIS securities sold, or both imprisonment
and fine, at the discretion of the court;

(3) Selling or offering for sale CIS securities by the issuer of a CIS plan
that has not been registered pursuant to this Law shall be penalized by
imprisonment of six (6) years and one day to twelve (12) years or fine
equivalent to triple the contract price of each of the CIS securities sold

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or offered for sale, or both imprisonment and fine, at the discretion of
the court;

(4) Any negligent act or omission that is prejudicial or injurious to the CIS
investors shall be penalized by imprisonment of one (1) year and one
(1) day to six (6) years and fine in the amount of fifty thousand pesos
(P50,000.00) to five million pesos (P5,000,000.00), or both
imprisonment and fine, at the discretion of the court;

(6) Any fraudulent act or omission that is prejudicial or injurious to the CIS
investors shall be penalized by imprisonment of six (6) years and one
(1) day to twelve (12) years and fine in the amount of five hundred
thousand pesos (500,000.00) to ten million pesos (P10,000,000.00), or
both imprisonment and fine, at the discretion of the court; and

Violation of the provisions of this Law, its implementing rules and
regulations or orders of the appropriate regulatory agency unless already
provided in the above enumeration of this law shall be penalized by imprisonment
Of six (6) years and one (1) day to twelve (12) years and a fine in the amount of
one hundred thousand pesos (P100,000.00) to five million Pesos
(P5,000,000.00), Provided, That repeated violations shall constitute prima facie
evidence against the offender.

(b) Solidary Liability —

1) The fund manager, trustee and/or insurance company shall be
jointly and severally liable for actual losses and damages that CIS investors may
directly suffer as a result of bad faith, gross negligence and/or willful misconduct
by the fund manager, trustee and/or insurance company resulting in the violation
of any of the provisions of this Law, its implementing rules and regulations, or
their failure to observe and comply with the terms and conditions of the CIS plan.

2) The directors, managing partners, officers or other persons
Performing similar functions of the Juridical CIS, fund manager, trustee and/or
insurance company shall also be jointly and severally liable for all losses and
damages that CIS investors may suffer as a result of bad faith, gross negligence
and/or willful misconduct by the juridical CIS, fund manager, trustee and/or
insurance company resulting in the violation of any of the provisions of this Law,


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its implementing rules and regulations, or their failure to observe and comply with
the terms and conditions of the CIS plan. Notwithstanding any provision of law to
the contrary, in no case shall such directors, managing partners, officers or other
persons performing similar functions, recover their liability from the Juridical CIS,
fund manager, trustee and/or insurance company.

(c) If the offender is a corporation, partnership, or other juridical entity, the
criminal penalties shall be imposed upon the officer or officers of the corporation
or entity responsible for the violation; Provided, That in case of the imposition of
the fines, the court may, in its discretion, impose such fines solely upon the
officer, director, managing partners, general partner or other persons performing
similar functions who is responsible for the violation; Provided, Further, that if
such person is an alien, he shall in addition to the penalties prescribed, be
deported without further proceedings after service of sentence.

(d) The director/s, officer/s managing partner/s, or other person/s
performing similar functions, of the corporation, partnership or entity held
criminally liable under this section shall in no case recover the administrative
liability from the CIS or corporation, partnership or entity.

Except if their failure to observe and comply with the terms and conditions
of the CIS plan arises solely from incidents of force majeure or acts of god.

SEC. 51. Small Claims Clause.

(a) The appropriate regulatory agency under this provision shall have the
Power to adjudicate any and all claims involving CIS amounting to not more than
‘one million pesos (P1,000,000.00) or such higher amount as may be determined
by the appropriate regulatory agency, for each CIS Investor. The proceedings
before the appropriate regulatory agencyshall be summary in nature, and the
decision of the appropriate regulatory agency shall be final and immediately
executory, unless restrained by the Court of Appeals or the Supreme Court

(b) Claims filed with the appropriate regulatory agency shall not be
subject to the payment of filing fees.

(c) The authority to adjudicate granted to the appropriate regulatory
agency under this section shall be concurrent with that of the civil courts, but the

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filing of a complaint with the appropriate regulatory agency shall preclude the civil
courts from taking cognizance of a suit involving the same subject matter.

(d) The appropriate regulatory agency, having due regard to the facts
and circumstances of each claim, may refer the claim to compulsory arbitration,
under such rules and regulations as the appropriate regulatory agency may
prescribe.

SEC. 52. Full Disclosure and Transparency. Require all CIS whether
contractual or juridical, to disclose all relevant and important information, such as
but not limited to the investment plan, attendant risks, insurance coverage (if any)
and alll costs to be charged by the company on investors subscribing to the fund.
All CIS distributors and solicitors should be required to fully explain the
investment instrument and conduct due diligence on the suitability of prospective
investors to understand rules attendant to investments before obtaining funds
from them.

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TITLE Vill - MISCELLANEOUS PROVISIONS

SEC. 53. Cross Border Transactions. Cross offering or selling by
authorized CIS in the Philippines or in another economy shall be subject to the
regulations provided in a mutual or multilateral agreement/s which the Philippines
is a signatory thereof.

SEC. 54. Transitory Provisions.- Any CIS which at the time of the
effectivity of this Law has been established, authorized, licensed or registered by
the appropriate regulatory agency and has continued to exist, shall be deemed
to have been authorized, licensed and registered under the provisions of this Law
and its implementing rules and regulations and shall be subject to and governed
by the provisions hereof, Provided, however, that where any such CIS is affected
by the new requirements of this law and its implementing rules and regulations,
said CIS shall, unless otherwise herein provided, be given a period of not more
than two (2) years from the effectivity of the implementing rules and regulations
within which to comply with such new requirements.

For a period of three (3) years from the effectivity of the implementing
rules and regulations of the act, the SEC shall undertake capacity building
measures to enable it to exercise the powers and perform the functions presently
being exercised and performed by the other regulatory agencies with respect to
CIS products presently under their jurisdiction. upon expiration of this period, the
SEC shall exercise the powers and perform the functions given to the Bangko
Sentral Ng Pilipinas and Insurance Commission for CIS products by this act, and
shall be considered the sole appropriate regulatory authority referred to in this
act.

SEC. 55. Partial Use of Income. To carry out the purposes of this Act, the
SEC is hereby authorized, in addition to its annual budget, to retain and utilize
five (5%) of its annual income.

SEC. 56. Congressional Oversight Committee. - To oversee the
implementation of this Act, there shall be created a Congressional Oversight


Committee on CIS (COCCIS) to be composed of the Chairpersons of the Senate
Committee on Economic Affairs, Banks, Financial Institutions and Currencies,
and Trade, Commerce and Entrepreneurship, the Chairpersons of the House of
Representatives Committees on Economic Affairs, Banks and Financial
Intermediaries, and Trade and Industry and two (2) members each from the
Senate and the House of Representatives who shall be designated by the Senate
President and the Speaker of the House of Representatives: Provided, That one
(1) of the two (2) Senators and one (1) of the two (2) House Members shall be
nominated by the respective Minority Leaders of the Senate and the House of
Representatives. The Congressional Oversight Committee shall be jointly chaired
by the Chairpersons of the Senate and House Committees on Economic Affairs.
The Vice Chairperson of the Congressional Oversight Committee shall be jointly
held by the Chairpersons of the Senate Committee on Banks, Financial
Institutions and Currencies and the House of Representatives’ Committee on
Banks and Financial Intermediaries.

The Secretariat of the COCCIS shall be drawn from the existing personnel of the
Senate and House of Representatives committees comprising the Congressional
Oversight Committee.

SEC. §7 Implementing Rules and Regulations. Consistent with the
declaration of policy contained in Section 2 and the other relevant provisions of
this law, the appropriate regulatory agencies, with the SEC as lead agency, shall
coordinate and jointly establish uniform rules and regulations implementing this
law, including but not limited to the following matters:

(@) Qualification and disqualification standards for fund managers, CIS
distributors and CIS solicitors;

(b) Qualification and disqualification standards for directors and Officers,
managing partners, or other similar positions of fund managers,
trustees, insurance companies, juridical CIS or CIS distributor;

(c) Revocation, refusal or suspension of licenses of the fund manager,

juridical CIS, trustee, insurance company, custodian, CIS distributor
and CIS solicitor,

(d) Filing, amendment and suspension of CIS plans;
(e) Registration, distribution, sale and marketing of CIS securities;

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The implementing rules and regulations and its amendments or
supplements shall be published once a week for two (2) consecutive weeks in
two newspapers of general circulation

SEC. 58. Cooperation and Coordination. - The appropriate regulatory
agencies, with the SEC as the lead agency, shall adopt all other appropriate
measures as may be necessary or desirable for the effective regulation of the
products and uniform implementation and enforcement of this Law, taking into full
account declaration of policy contained in Section 2.

The coordination shall cover such concems as, but not limited to:

(a) Ensuring that avoidable market failures are prevented;

(b) Instilling measures that nurture systemic stability;

(c) Providing equal access to relevant market information to stakeholders;

and

(d) Overseeing the conduct of CIS issuers to institutionalize consumer

protection and address anti-competitive behavior.

SEC. 59. Effect on Existing Laws and Contracts. - The rights and
remedies provided by this Law shall be in addition to any and all other rights and
remedies that exist under existing laws.

Nothing in this Law shall impair the obligation of existing contracts nor
affect or be construed to affect existing criminal, civil or administrative cases.

SEC. 60. Separability Clause. — Any portion or provision of this Law that
may be declared unconstitutional or invalid shall not have the effect of nullifying
other portions or provisions hereof as long as such remaining portion or provision
can still subsist and be given effect in their entirety.

SEC. 61. Suppletory Effect ~ This Law shall apply suppletorily to any law
that may be hereinafter enacted on collective investment schemes governing
specialized products or investments.

SEC. 62. Repealing Clause. - All acts, laws, executive orders and/or
rules and regulations or any part thereof which are inconsistent with the
provisions of this Law are hereby repealed or modified accordingly.

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SEC.
approval.

Approved,

63. Effectivity Clause. - This Law shall take effect upon its