Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City, Metro Manila
Sixteenth Congress
Third Regular Session

6071

House Bill No.

Introduced by Congressman Dakila Carlo E. Cua

EXPLANATORY NOTE

The Philippines, in recent years has received a couple of credit rating upgrades, the
latest of which was in July when the country received a "BBB" to "BBB+" from the Japan
Credit Rating Agency (JCR) and Fitch ratings. These accomplishments were the output
of a generally stable political situation, strong remittances from abroad and improving
fiscal position. Hence, to further strengthen and improve economic stability, the Aquino
government is committed to implement stronger administrative reforms and pass
identified priority legislative measures that will help ease the investments constraints
and facilitate simplicity in doing business in the country.

One of these priority measures is the need to harmonize the regulatory and tax
framework for all forms of Collective Investment Schemes (CIS). Countries, including
the United Kingdom, Japan, Australia, Korea and Singapore, have adopted a single law
to regulate all types of CIS. Presently, the Philippines has various laws governing
investment companies (mutual funds), unit investment trust funds (“UITFs"), and
separate account funds or variable unit linked insurance products.

These investment products are basically the same but differ in regulatory requirements
(regulatory arbitrage) and taxation mainly because of differences in their governing
laws. This regulatory and tax arbitrage give rise to an uneven playing field which will
prove unfavorable to the growth of the industry. More importantly, such arbitrage will
result in uneven levels of protection to the investing public.


Establishing a comprehensive regulatory and tax framework for all CIS products will
eventually lead to a more competitive environment for the CIS industry and provide
enhanced and uniform levels of protection to the investing public.

This is also relevant in making the Philippines competitive in the light of ASEAN
integration. The ASEAN CIS framework allows units of an ASEAN CIS authorized in its
domicile of the CIS (home jurisdiction) to be offered in other participating countries (host
jurisdiction) under a streamlined authorization process, provided that the ASEAN CIS.
satisfies the set of common standards.

In view of the foregoing, approval of this bill is earnestly sought.

Dal Carlo E. Cua


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

Sixteenth Congress
Third Regular Session

6071

House Bill No.

Introduced by Congressman Dakila Carlo E. Cua

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

(@) __ 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;

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

© 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;

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


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growth;

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

f) 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 collective investment
schemes and all the participants therein to play a key role in the development of
the capital market in a manner consistent with the policy declared in Section 2
hereof.

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:
(2) “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 having interlocking directors
or officers with the juridical CIS, except in cases involving
independent directors as defined under existing regulations;

7. if a juridical CIS, having common stockholders owning at least ten
percent (10%) of the outstanding voting stock of each juridical CIS
and the other corporation;

8. having a management contract or any arrangement granting power


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to one corporation to direct or cause the direction of management
and policies of the other corporation, or vice-versa: or

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

(b) “Appropriate regulatory agency” refers to:

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

2. 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

3. the Securities and Exchange Commission (SEC), in the case of
investment companies or other persons not under the regulation of
the BSP or the IC.

(c) "Bank" means an entity engaged in the lending of funds obtained from
the public through the receipt of deposits of any kind and duly authorized
to operate as a bank by the BSP.

(@) "Broker" means any person duly licensed by the appropriate regulatory
agency and accredited by the appropriate self regulatory organization to
engage in the business of buying and selling securities for the account of
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, 29 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.

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

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


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

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

(m) “Company” means a corporation, partnership, trust, or an association
duly registered with the SEC and lawtully transacting business in the
Philippines.

(n) “Contractual CIS” means a CIS:

4. organized pursuant to a contract, such as a trust indenture, or as
an investment component of an insurance contract;

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

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

(0) "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 govem the financial and operating policies of an entity
under a statute or an agreement;

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

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

5. any other arrangement similar to any of the above

(p) “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.

(q) “Creation” refers to the issuance or delivery of CIS securities upon the
delivery of the underlying securities or investment assets.

() "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.

(s) “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 andlor the SEC.

() “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.

(u) "

similar functions with respect to any organization

rector” means a director of a corporation or any person performing

(v) "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.

(w) “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 7, and
having the duties and responsibilities enumerated in Section 8 hereof.

(x) “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.

(y) “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 56 hereof,

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

(aa) “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


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of a director. An independent director shall possess the degree of
independence and all the qualifications and none of the disqualifications
for independent directors as defined in the SRC and its implementing
rules and regulations.

(bb) “Independent oversight body” refers to the body or entity referred
to in Section 50(b) (2) hereof.

(cc) “Insurance Code of the Philippines” refers to the Presidential

Decree No. 1460 otherwise known as ‘The Insurance Code of 1978’, as
amended, or any law subsequently enacted in replacement or substitution
thereof

(dd) “Insurance company” means a company engaged in the insurance
or reinsurance business and duly issued by the Insurance Commission
with a certificate of authority to transact such business, as specifically
defined under the Insurance Code of the Philippines.”

(ee) “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

( “Investment assets” means the securities and other assets in
which the funds of a CIS may be invested in accordance with Section 38
hereof.

(gg) “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.

(hh) “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.

(i) “Juridical CIS” means a CIS:

1. organized as a stock corporation or a partnership;

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

3. that issues common stock or (units of) interest in the partnership
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.


(i) "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.

(kk) “Organized Marketplace” is an exchange, an over-the-counter
market, altemative trading system, or otherwise recognized as such by
the SEC, and govemed 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 not enforceable on the members and participants.

(l) “Person” means a natural or juridical person as defined in the Civil

Code of the Philippines.

(mm) “Redemption” refers to the liquidation of a CIS security through the
surrender of the CIS security to the issuer in exchange for its net asset
value or the underlying securities it represents

(nn) “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,

(00) "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 security or property or interest therein, for
value. Any such security, property or interest therein, given or delivered
with, or as a bonus on account of, any purchase of securities or any
other thing, shall be conclusively presumed to constitute a part of the
subject of such purchase and to have been sold for value.

(pp) "Security” means any instrument or product defined as such by the
SRC and its implementing rules and regulations.

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

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

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


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

(ss) “Shareholder” means a stockholder of a juridical CIS.

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

(uu) “Trustee” means a trust institution appointed and acting as the

trustee of a contractual CIS pursuant to this Law.

(w) “Unit Holder” — means a CIS investor in a contractual CIS.

(ww) "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 4 — 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 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
either have a corporate structure such as an investment company, or a
contractual structure such as a unit investment trust fund or similar scheme held

by a trust institution or a separate account fund established pursuant to a
variable unit linked life insurance policy issued by an insurance company. All
CIS shall be govemed 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.

(b) Subject to the regulation under this law. none of the following

arrangements shall be deemed a collective investment scheme:
4. 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


BARRE

such securities. For purposes of this paragraph, beneficial ownership
by a company shall be deemed to be beneficial ownership by one
person: except that, if such company owns twenty-five per centum
(25%) or more of the outstanding voting securities of the issuer, the
beneficial ownership shall be deemed to be that of the holders of such
company’s outstanding securities;

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;

Any employees’ stock, bonus, pension, retirement, provident or profit
sharing plan or fund, engaged in the regular conduct of their ordinary
business;

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

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;

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

. Any arrangement organized and operated by an entity exclusively for

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

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


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SEC, 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.
(©) ACIS may either be open-end or closed-end, defined as follows:
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.
(d) A CIS may be constituted as a single compartment or as a multiple
compartment CIS, defined as follows:
1. Single compartment CIS is a 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-ClS or
sub-funds.

SEC. 7. Juridical CIS ~
(a) No company shall act as a juridical CIS unless duly licensed by the SEC,
and no company shall be licensed as a juridical CIS for purposes of this Law,
unless it shall
1, Be organized in the form of a stock corporation;

2. Issue shares of stock consisting solely of common stock;

3. 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:

5. Hold the original subscription of securities and maintain unimpaired its
initial paid-up capital for 2 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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6. Maintain at all times, if an open-end CIS, a reserve in liquid or semi-
liquid assets, equal to at least ten per centum (10%) of its total 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 shall be required to comply with the minimum subscribed and paid-
up capital relative to an increase in its authorized capital stock.

(©) The incorporators of a juridical CIS shall, at incorporation, 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 shall be independent directors 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,
2.” Trustee;

3. Custodian;

4. CIS Distributor; and
5. CIS Solicitor

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:

(a) tis organized as a stock corporation;

(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

prescribe a higher minimum paid-up capital taking into consideration, among

other factors:
4. the risk-based principles on capital adequacy based on
intemationally accepted standards: and
2. the number and/or total net asset values of all CIS managed,

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(d) At least one-third (1/3) of the entire membership of the Board of
Directors of the fund manager or as may be required by the appropriate
regulatory agency: and

(@) It has 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, CIS and auditor,

(©) Ensure that the fund and the CIS securities are accurately valued or
priced;

(4) 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
femedy a breach of the provisions or covenants of the CIS plan, its contract with
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;

() 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;


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() Propose amendments to the CIS plan and secure approval for those
amendments which require investor approval in accordance with the provisions
of this Law;

(®) File such information and documents to keep reasonably current the
and

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

information and documents contained in the CIS Pla

SEC.10. Prohibited Acts of the Fund Manager. - The fund manager
shall not

(2) Invest CIS funds in any securities, property and assets in which such
fund manager or any of its directors, officers, employees and affiliates have a
substantial financial interest, subject to such exceptions and/or guidelines as may
be prescribed by the appropriate regulatory agency;

(b) Engage in a business other than the business of managing,
administering, marketing and distributing CIS funds and securities, provided that
this prohibition shall not apply if the fund manager is, or a trust
corporation/institution;

(©) 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;

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

(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:

1. Extent of services to be rendered;

2. Any restrictions or prohibitions regarding the performance of the

functions of the fund manager;

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


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

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

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

()_ 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. The Trustee — Only a trust institution shall act as a trustee of a
CIS. In authorizing a trust institution to engage in CIS activities, the Monetary
Board of the BSP shall ensure that all relevant requirements under this Law or its
implementing rules and regulations shall be complied with. The following, in
addition to those prescribed under existing laws and regulations, shall be the
duties and responsibilities of a trustee of a CIS:

(a) Monitor the activities of the CIS distributors in the sale 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:

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

(©) 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;

() 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

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


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(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;

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

() Call for annual or special meetings of the CIS investors;

(k) Propose amendments to the CIS plan and secure approval for those
amendments which require investor approval in accordance with the provisions
of this Law; and

() 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 may be licensed by the BSP or
authorized by their home regulator may act as custodian of 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:

(@) 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. Extent of services to be rendered by the custodian;

2. Fees, remuneration and other expenses of the custodian:


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3. Any restrictions or prohibitions regarding the performance by the
custodian of its functions; and
4. Reporting requirements of the custodian

SEC.15. CIS Distributor — (a) No entity shall be licensed by the
appropriate regulatory agency as a distributor of CIS securities, unless

4. Itis organized as a stock corporation;

2. It has a minimum paid-up capital of at least Ten Million Pesos
(P10,000,000.00), or such higher capitalization to be prescribed by the
appropriate regulatory agency taking into consideration (i) the risk-
based principles on capital adequacy based on intemationally
accepted standards, and (i) the number and/or total net asset value of
all CIS distributed; and

3. It has complied with such other requirements as may be prescribed by
the appropriate regulatory agency.

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

4. Any fund manager,

2. Any investment house;

3. Any bank, financial institution or trust institution under the supervision

of the BSP;

4. Any insurance broker or their agents under the supervision of the
Insurance Commission;

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

6. Other persons as may be hereinafter allowed by the appropriate

regulatory agency.

(©) A juridical CIS is not permitted to act as a distributor of securities of
which it is the issuer, unless it complies with such rules and orders as the
appropriate regulatory agency may prescribe as necessary or appropriate in the
public interest or for the protection of investors.

(d) Whenever a fund manager and/or its affiliate shall act as a CIS
distributor of the CIS of which it is the fund manager, and whenever a trustee
and/or its affiliate shall act as a CIS distributor of the CIS of which it is the
trustee, the prior written consent of the appropriate regulatory agency shall be
secured.

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1 (©) The CIS distributor shall be principally responsible for marketing,
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distributing [and], 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.

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

9 to:

10 1. Extent of services to be rendered by the CIS distributor.
1 2. Fees, remuneration and other expenses of the CIS distributor;
12 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

16 5. Reporting requirements.

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

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

25 and its implementing rules and regulations.

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

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

32 1. Report to the Board of Directors or the trustee of the CIS any
33 irregularity or undesirable practice in the operation of the CIS which
34 has come to its knowledge. Any material finding shall be reported by

35 the independent auditor to the appropriate regulatory agency;

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

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

acceptable level.

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

(a) Carry on and manage its business and the CIS in a proper, diligent and

efficient manner,

(b) Observe honesty, due care and diligence. utmost good faith and high

standards of integrity:

(©) Act in the best interests of the CIS investors:

(@) Establish systems, procedures and processes to be observed by its
officers and employees to ensure compliance with this Law and its
implementing rules and regulations and to protect the interests of the
CIS investors

(€) Take responsibility for all actions and omissions of any third party to
whom it delegates any of its duties and responsibilities, except for any
resulting damage or liability arising from force majeure or other similar
occurrence beyond the control of such third party:

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

(@) Refrain from using its position to gain, directly or indirectly, an
advantage for itself or for any other person or to cause detriment to the
interests of CIS investors;

(h) Avoid and eliminate cont

'S of interest in the performance of their
functions, which may be identified by the appropriate regulatory
agency as prejudicial to the interests of the investing public;

() Disclose all confiicts of interest in the performance of their functions:
and

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


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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 wilfully 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 wilfully 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 wilfully omitted to state any material fact
that is required to be stated therein or necessary to make the statement therein
not misleading;

(©) 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
securities, commodities, banking, real estate, insurance or similar activities;

(@) 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

(9) Has been judicially deciared insolvent.

For purposes of this subsection, the term “competent body” shall include a

foreign court of competent jurisdiction and a foreign financial regulator.

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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 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 or officer 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 or officer 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,
consultant, 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;

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

(4) any person found by the appropriate regulatory agency to have
violated, or aided, abetted, counseled, commanded, induced, or
Procured the violation of this Law, the General Banking Law, the
Insurance Code, the SRC, or any related laws and any rules,
regulations or orders thereunder;

(€) any person judicially declared to be insolvent, or incapacitated to
contract; and

() 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.

(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

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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 50(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
contract, as the case may be, shall define the rights and obligations of the
parties.

(©). Notwithstanding any provision of law to the contrary, the assets of
each contractual CIS shall be deemed separate and independent of the assets of
the fund manager, trustee andlor 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, bankruptcy, insolvency or
rehabilitation or any form of action or claim against the fund manager, trustee
and/or insurance company.

(d) In case the functions of the fund manager, on the one hand, and
the trustee or insurance company, on the other hand, are performed by the same
or affiliated entities, there must be an independent oversight body which shall be
created pursuant to, and shall perform the oversight duties and responsibilities
enumerated in Section 50(b)(2) hereof

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 [fund
manager] REGISTRAR shall from time to time determine. There shall be entered
into the registry such relevant information as may be prescribed by the fund


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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 Laws such as, but not limited to, the power of the Anti Money
Laundering Council (AMLC) to examine or inquire into the details of the CIS
‘account including the personal information of the CIS investors, the reporting of
covered transactions or suspicious transactions to the AMLC.

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

(@) In cases where the trustee or its affiliate, or insurance company or its
affiliate, performs the functions of the fund manager, @ description of the
independent oversight body, as prescribed under Section 22 (d) of this Law.

() 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

() 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 8
hereof; Provided, That a majority of the directors 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 shalll contain the following matters:

1. Par value of the shares of stock of the juridical CIS;

2. The dissolution of the juridical CIS and the rights of shareholders 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


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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.

SEC.27. Dividends. (a) Dividends shall be declared and paid in
accordance with the requirements of 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 by the juridical CIS as
necessary or appropriate in the public interest and for the protection of the
investors.

(b) Dividend payments 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:

(@) Imposition of Documentary Stamp Tax for CIS. - Any issuance of a
document evidencing interest, ownership or participation in a CIS Security as
defined under Section (5) hereunder shall be subject to documentary stamp tax
at fifty percent of the rate prescribed under Section 188, Title VII of the National
Internal Revenue Code (NIRC) of 1997.

(b) 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 Il of the NIRC
of 1997,

(©) Tax on gains upon Creation, Redemption, Sale, Barter, Exchange or
other disposition of CIS Securities. - Any gains realized by the investor the
redemption of CIS securities, or from the sale, barter, exchange or other
disposition of listed and unlisted CIS Securities through a local stock exchange,
shall be excluded from gross income and exempt from taxation governed by
‘Section 32(8)(7)(h) of the NIRC of 1997.


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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.

(d) DST on the creation, Redemption, Sale, Barter or Exchange of CIS
Securities. The creation, redemption, sale, barter, or exchange or other
disposition of CIS securities listed and traded through a local stock exchange
shall be exempt from documentary stamp tax. If not listed and traded through a
local stock exchange, it shall be subject to Documentary Stamp Tax at fifty
percent of the rate as provided under Section 188, Title VII, of the NIRC of 1997.

The same tax treatment shall apply to the shares of stock transferred or
‘exchanged for the creation or redemption of CIS securities.

(e) 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
entitled to alll the tax and other incentives under this law.

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
‘sworn 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 shall 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 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 board of

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directors. The written consent of the expert named as having certified any part of
the CIS plan or any document used in connection therewith shall also be filed
(©) 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:
1. Itcontains 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,
(©) 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:

) 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;

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

4d) Investment powers of the fund manager with respect to the CIS,
including the character and kind of investments which may be purchased by the
cls;

€) Profile of the proposed investors;

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

9) Total value of the CIS securities to be issued in case of closed-end
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h) Terms and conditions governing the issuance and redemption of CIS
‘securities;

’) Provision for the extemal audit of the CIS;

j) Liabilities of the juridical CIS and the fund manager to the unit holders
or shareholders;

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
shareholders, in the case of juridical CIS;

1) Annual meetings of unit/policy holders or shareholders;

m) Public disclosures and reports;

1n) Plan of distribution of CIS assets in case of dissolution; and

©) 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 posted in the website, publication
and/or other mode of information dissemination of the SEC and the CIS.

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 share of stock of
a juridical CIS and each unit of participation of a contractual CIS shall be equal in
all respects to every other share or unit belonging to the same class of shares or
units.

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
Corporation Code and applicable laws and regulations: Provided, That the SEC
May prescribe other requirements or restrictions as may be necessary or

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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, no CIS
shall issue any of its securities for services or for property other than cleared
funds. Instalment sales are expressly prohibited.

SEC.35. 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 43.

(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.

SEC.36. Transferability of Securities. No CIS shall restrict the
transferability or negotiability of its CIS securities except as provided in the CIS
plan or by any rule or regulation prescribed by the appropriate regulatory agency

Chapter 3 - Operations of CIS

SEC.37. 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.38. 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
tules 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 goverment 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 trusts or companies;

10. Other CIS; and

11. Such other investments or instruments as the appropriate regulatory
agency may allow.

Provided, however, that no CIS shall, directly or indirectly
1. acquire more than ten per centum (10%) of another CIS; or
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 56 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.39. Prohibited Acts of CIS. It 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, promoter or stockholder thereof; or

(@) Allow any of its employees, officers, directors, organizers, incorporators
or stockholders to sell real estate, personal property or any other kind of
property to the CIS at a price higher than the procurement cost or the
market value thereof, or sell to any of the aforementioned persons any
property of the CIS, or a portion thereof, at a price below the market

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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.40. Meetings of CIS Investors. (a) Meetings of CIS investors shall
be held at least annually. Notwithstanding any provision of the Corporation Code
to the contrary, the following matters shall be presented to the CIS investors:

1. Proposals to change investment policies in the CIS plan which shall
require the approval of the CIS investors;

2. Report to the CIS investors of the engagement or replacement of the
fund manager, trustee, CIS distributor, custodian and independent
auiditors:

3. Report of the fund manager of the financial condition of the fund and
results of its operations: and

4. Any other matter pertaining to the management and operation of the
cls.

(©) CIS investors may attend meetings in person or by proxy. A quorum at
meetings shall consist of unit holders or stockholders owning or representing
at least ten 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.

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

SEC.41. 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

(2) 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 (ii) 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.42.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;

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,

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trustee, CIS distributor and independent auditor, and (ji) each
director and all officers 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
cls.

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,

SECTION 43. 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
jin accordance with the valuation method prescribed by the implementing rules
and regulations and shall be applied consistently.

SEC.44. 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.45. Management and Trust Fees; Expenses Chargeable to
Fund/CIS Investors. The management or trust fees shall cover the CIS’ fair and

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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
agency.no other fees shall be charged to the fund/CIS investors, except in case
of a juridical CIS, the directors fees shall be chargeable to the fund

SEC.48. Changes in Investment Policy - Proposals to change the
investment policies shall be subject to approval by the CIS investors pursuant to
Section 40 hereof and by the appropriate regulatory agency. The fund manager,
trustee or insurance company shall disseminate to all CIS investors all material
information pertaining to proposals to amend the investment policies and
objectives. The appropriate regulatory agency shall prescribe by rule or
regulation the requirements for changes in investment policies.

‘SEC.47. Dissolution - (a) The juridical CIS, trustee or insurance company
shall cause the dissolution of the CIS whenever any of the following grounds is
present
1. Dissolution is required by the CIS plan, when the specified
conditions or time for dissolution have been met or reached;
2. 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


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the meeting for two (2) consecutive weeks in a newspaper of

general circulation in the Philippines;

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; provided that the appropriate
regulatory agency shall not issue an order of dissolution within six
months from the issuance of the suspension or revocation order;
and

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

Provided, that the CIS may not be dissolved whenever:

(i) The appropriate regulatory agency orders the transfer of the CIS
to a willing and qualified fund manager, trustee or insurance
company;

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

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

(b) Upon dissolution, the fund manager, 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.48, Merger or Consolidation — No merger or consolidation of CIS
will be authorized by the appropriate regulatory agency unless the following
conditions are met:

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

(b) The merger plan has been approved by the CIS investors owning at
least 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;


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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.49. 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
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 INSTITUTIONS AND INSURANCE
COMPANIES

SEC.50. Establishment of Contractual CIS by Trust Institutions and
Insurance Companies- (a) Any trust institution or insurance company may
establish a contractual CIS, subject to the following provisions:

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

(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 institution or insurance company shall comply with and observe

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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
and possess all the qualifications and none of the disqualifications of
an independent director, or may be a juridical entity organized and
existing pursuant to the implementing rules and regulations,

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;

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

ii, Ensure that the trust institution or insurance company remedies
any breach of the CIS plan or any contravention of the
provisions of this Law or its implementing rules and regulations;

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

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

SEC.51. Administrative Sanctions. (a) |f, 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:

()) A fine of no less than Ten thousand Pesos (P 10,000.00) nor more than
One million Pesos (P1,000,000.00);

(ii) Disqualification from being an officer, member of the board of directors,
or 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.

(©) 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.

(@) If the offender is a corporation or other juridical entity, the administrative
sanctions may in the discretion of the appropriate regulatory agency be
imposed upon such corporation or other juridical entity and upon the officer or
officers of the corporation, 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 or director 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.


1 (e) The directors and other officers of a corporation held administratively
2 liable under this section shall in no case recover the administrative liability

from the CIS or corporation of which they are directoris or officers.

4 ‘SEC. 52. Criminal penalties. (a) The following acts are criminal in nature
and shall be penalized as follows:

6 (1) Refusal to comply with the orders of the appropriate regulatory agency,
for the production of books, records or documents, or to undergo an
8 examination shall be penalized by imprisonment of one (1) month to
9 six (6) months or fine in the amount of One Hundred Thousand Pesos
10 (P100,000.00) to Two Million Pesos (P2,000,000.00), or both
ul imprisonment and fine, at the discretion of the court;
12 (2) Selling or offering for sale a CIS security by unregistered sellers,
B 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
1s contract price of each of the CIS securities sold, or both imprisonment
16 and fine, at the discretion of the court;
7 (3) Selling or offering for sale CIS securities by the issuer of a CIS plan
18 that has not been registered pursuant to this Law shall be penalized by
19 imprisonment of six (6) years and one day to twelve (12) years or fine
20 equivalent to triple the contract price of each of the CIS securities sold
21 or offered for sale, or both imprisonment and fine, at the discretion of
2 the court;
2B (4) Any negligent act or omission that is prejudicial or injurious to the CIS
24 investors shall be penalized by imprisonment of one (1) year and one
25 (1) day to six (6) years and fine in the amount of Fifty Thousand Pesos
26 (P50,000.00) to Five Million Pesos (P5,000,000.00), or both
27 imprisonment and fine, at the discretion of the court;
28 (6) Any fraudulent act or omission that is prejudicial or injurious to the CIS
29 investors shall be penalized by imprisonment of six (6) years and one
30 (1) day to twelve (12) years and fine in the amount of Five Hundred
31 Thousand Pesos (500,000.00) to Ten Million Pesos (P10,000,000.00),
322 or both imprisonment and fine, at the discretion of the court; and
33 Violation of the provisions of this Law, the implementing rules and

34 regulations or orders of the appropriate regulatory agency shall be penalized by
35 imprisonment of six (6) years and one (1) day to twelve (12) years and a fine in
36 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 and/or officers 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, its implementing rules and regulations, or their failure
to observe and comply with the terms and conditions of the CIS plan.
Notwithstanding any provision of law to the contrary, in no case shall such
directors and officers recover their liability from the Juridical CIS, fund manager,

trustee and/or insurance company.

(0) If the offender is a corporation or other juridical entity, the criminal
penalties may in the discretion of the court be imposed upon such corporation or
other juridical entity and upon the officer or officers of the corporation or entity
responsible for the violation; Provided, That in case of the imposition of the fines,
the court may, in its discretion, impose such fines solely upon the officer or
director responsible for the violation; 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.

(d) The director/s and other officer's of a corporation held administratively
liable under this section shall in no case recover the administrative liability from
the CIS or corporation of which helthey is a directoris or officer/s.

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

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SEC. 53. Small Claims Clause.

(2) 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.

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

(4) 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
presoribe.

SEC. 54, MANDATORY DISCLOSURE AND TRANSPARENCY. Require
all CIS whether contractual or corporate, to disclose all relevant and important
information, such as but not limited to the investment plan, attendant risks,
insurance coverage (if any) and all 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.

TITLE Vil - MISCELLANEOUS PROVISIONS

SEC. 55. 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

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28
29
30

aoe gee

than two (2) years from the effectivity of the implementing rules and regulations
within which to comply with such new requirements.

SEC. 56. 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:

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

(b) Qualification and disqualification standards for directors and officers of
fund managers, trustees, insurance companies, juridical CIS or CIS
distributor,

(©) Revocation, refusal or suspension of licenses of the fund manager,
juridical CIS, trustee, insurance company, custodian, CIS distributor
and CIS solicitor;

(@) Filing, amendment and suspension of CIS plans;

(€) Registration, distribution, sale and marketing of CIS securities;

(f) Disclosure requirements relating to the CIS;

(@) Regulation, supervision and monitoring of the operations, management
and/or activities of all CIS, fund managers, CIS distributors, CIS
solicitors and other parties involved in CIS:

(h) Ascertainment of client suitability for CIS securities;

() Limitations or restrictions on the investment of CIS funds and on the
other activities in which a CIS may engage;

() Requirements for selling materials and advertisements;

(k) Record-keeping, reporting and audit requirements for CIS fund
manager and trustees:

(). A minimum set of performance presentation standards including but
not limited to:

4. Standardized methodology for calculation of measures of risk and
retum appropriate for each type of CIS and the underlying assets

2. Construction of composites for each investment strategy defined by
asset manager

3. Minimum rules for benchmark selection

4 Calculation and disclosure of all fees, charges and total expense

ratios

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5. Minimum contents and frequency of presentation.
(m)A separate code of conduct to be adopted by each of the parties
involved in CIS;
(n) Requirements for changing investment policies;
(0) Requirements for merger or consolidation of CIS;
(p) Establishment of the CIS investors protection fund;
(q) Minimum requirements for inculcating financial literacy in investors;
(—) Recognition of accreditation or license extended by the appropriate
regulatory authority pursuant to this law; and
(8) Other pertinent matters to be determined by the regulatory authorities.
The implementing rules and regulations may be repealed, amended or
supplemented at any time in the same manner as the original implementing rules
and regulations are adopted and issued pursuant to this Section.
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

ulation.

SEC. 57. 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) Instiling measures that nurture systemic stability;
(©) 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. 58. Effect on Existing Laws and Contracts. - The rights and
remedies provided by this Law shall be in addition to any and alll 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. 59. 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

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can stil subsist and be given effect in their entirety

SEC. 60. 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. 61. Repealing Clause. - All acts, laws, executive orders and/or
ules and regulations or any part thereof which are inconsistent with the
provisions of this Law are hereby repealed or modified accordingly.

‘SEC.62. Effectivity Clause. - This Law shall take effect upon its approval.

Approved,

2