Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

Introduced by HONORABLE JUAN EDGARDO “SONNY” M. ANGARA

EXPLANATORY NOTE

The worldwide trend in the regulation of collective investment schemes
CIS") is to have single law to regulate all types of CIS. Countries such as
the United Kingdom, Japan, Australia, Korea and Singapore have adopted
this approach. In the Philippines however, investment companies (mutual
funds) and unit irivestment trust funds (“UITFs"), the most common forms of
CIS, are still governed by varying laws and regulations. As such, there are
differences in regulatory requirements (regulatory arbitrage) and taxation
among the different forms of CIS, even though the investment products they
offer to the public are essentially the same. It is believed that this regulatory
arbitrage gives rise to an uneven playing field which will prove unfavorable
to the growth of the industry. More importantly, such regulatory arbitrage
will result in uneven levels of protection to the investing public.

This bill proposes to establish a comprehensive regulatory framework
for all forms of CIS that secks to eliminate existing differences in regulatory
treatment. This bill also seeks to balance the interests of the investors, by
incorporating mechanisms that would safeguard the public interest, at the
same time recognizing the interests of the other parties involved in the CIS
industry, by giving them flexibility to expand their CIS businesses.

With the passage of this bill, it is anticipated that even middle to low
income individuals will explore more investment opportunities in CIS,
thereby gaining access to the capital markets. The economy, in turn, is
expected to benefit greatly from an expanded capital base.

In view of the foregoing, the urgent passage of the proposed measure is
recuested.

JUAN EDGARDO “SONNY” M. ANGARA
Representa
Lone District, Province of Aurora


FIFTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

OTB. No.2

Introduced by Honorable JUAN EDGARDO “SONNY” M. ANGARA

COLLECTIVE INVESTMENT SCHEMES LAW

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

1 TITLE I - GENERAL PROVISIONS

2

3 SECTION 1. Short Title - This Law shall be known as the

4 "Collective Investment Schemes Law".

5

6 SECTION 2. Declaration of Policy — The policy of the state is to:

7 (a) Promote investor protection by applying high governance standards
8 in the establishment, sale, management and operation of collective
9 investment schemes in order to prevent abuse and protect the
10 interests of the investing public, including but not limited to, the
il setting of standards for the eligibility of persons who establish, sell,
12 manage or operate collective investment schemes; the prevention,
13 disclosure and elimination of all conflicts of interest which may
14 projudice the investing public; and the provision of independent
15 third party supervision over the operations of collective investment
16 schemes;
W (b) Promote the growth of pooled investments and the development of
18 the capital market by providing a favorable framework for collective
19 investment schemes to facilitate the flow of investment capital from
20 sources within the country and abroad;
2 (Encourage the participation in the collective investment scheme
2 industry of the best qualified fund managers and investment
23 advisers regardless of origin;
24 @ Broaden participation by Filipinos in ownership of securities and

1


other assets allowed in this Law so that more are able to share in

economic growth; and

(e) Provide equal protection to investors in all similar collective

investment schemes, impose the same requirements and provide
the same competitive environment for such schemes and the
participants therein.

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

hereof.

SECTION 4. Coverage ~ This Law shall apply to the establishment,

sale, management and operation of all collective investment schemes in the
Philippines. i

SECTION 5. Definitions — When used in this Law, unless the context
otherwise requires: ,

(a) "Affiliate" of another person means:

)

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

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

3. any person directly or indirectly controlling, controlled by, or
under common control with, such other person;

4. any officer, director, partner, or employee of such other person;
and

5. if such other person is a corporate CIS, any investment

adviser, fund manager, CIS distributor, CIS solicitor and
custodian thereof. ii

“Appropriate regulatory agency” refers to:

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


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Bangko Sentral ng Pilipinas;

2. the Insurance Commission, in the case of insurance companies;
and.

8. the Securities and Exchange Commission, in the case of
investment companies or other persons not under the
regulation of the Bangko Sentral ng Pilipinas or the Insurance
Commission. ,

(© "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 Monetary Board of the Bangko
Sentral ng Pilipinas. iti

(@ "Broker" means any person engaged in the business of buying and
selling securities for the account of others, but does not include a bank
or any person solely by reason of the fact that such person is a CIS or a
distributor of CIS securities. iv

(e) “CIS” means a collective investment scheme

( — “CIS-distributor” means any stock corporation liconsed by the
appropriate regulatory agency to engage in the selling of CIS
securities.

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

(h) “CIS plan” means the plan for the CIS registered with the
Commission in accordance with Sections 24 and 27 hereof.

() “CIS securities” means, units of participation in a contractual CIS
or shares of stock in a corporate CIS.

@) “CIS solicitor” means natural person who is duly liconsed as
euch or a broker who is duly accredited by the appropriate regulatory
agency to sell CIS securities.v

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

( "Commission" means the Securities and Exchange Commission.

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

(2) "Company" means a corporation, partnership, trust, or an
association duly registered with the Commission and lawfully

transacting business in the Philippines.


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©

)

“Contractual CIS” means a CIS:

1. organized pursuant to a contract, such as a trust indenture, or
as part of an insurance contract;

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

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

"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
also exists when the parent owns half or less of the voting power of an

entity when there isv:

@

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

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

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

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

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

"Convicted" includes being the subject of a verdict, judgment, or

plea of guilty, if such verdict, judgment or plea has not been reversed,
set aside, or withdrawn, whether or not sentence has been

imposed.viii

(x) “Corporate CIS” means a CIS:

1. organized as a stock corporation;
2, engaged, or holds itself out as being engaged, or proposes to
engage, in the business of investing, reinvesting, and/or trading

in securities or other investment assets allowed under this

‘Law; and


8. issues common stock each of which represents an undivided
interest in a pool of investment assets.

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

() “Custodian” means an entity duly authorized by the Monetary
Board to engage in the business of safekeeping investment assets,
which is appointed and acts as the custodian of the investment assets
of a CIS pursuant to this Law and the relevant regulations of the
Monetary Board and/or the Commission.

(a) “Dealer” means any person who buys and sells securities for his
own account, in the ordinary course of business whether through a
broker or otherwise, The term excludes banks, insurance companies,
or CIS, or any person insofar as he is engaged in investing,
reinvesting, or trading in securities, or in owning or holding
securities, for his own account, either individually or in some fiduciary
capacity, but not as a part of regular businessix.

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

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

(x) “Fund manager” means a juridical person engaged in the
business of managing the investment assets of a CIS or engaged in
the business of providing administrative and ancillary services for
such CIS as licensed by the appropriate regulatory agency in
accordance with Section 7, and having the duties and responsibilities
enumerated in Section 8.xii

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

(@) “Implementing Rules and Regulations” or “IRR” means the
‘uniform rules and regulations jointly formulated and issued by the
appropriate regulatory agencies to implement the provisions of this

Law, in accordance with Section 62 hereof.


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

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

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

(dd) “Insurance Code of the Philippines” means Presidential Decree
No. 1460 otherwise known as ‘The Insurance Code of 1978’, as
amended, or any law subsequently enacted in replacomont or
substitution thereof.

(ee) “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. "xiii

(f) "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 or trustee.xiv

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

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

(i) “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.


a

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Gi) "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. xv

(kk) "Person" means a natural or juridical person as defined in the Civil
Code of the Philippines.xvi

(i) “Registrar” means the fund manager or trustee ox such other person
or persons as may from time to time be appointed by the trustee, or
the fund manager with the prior approval of the trustee, to perform
all or any of the duties and functions of the registrar under Section
24 hereof.

(mm) "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. xvii

(an) "Security” means any instrument or product defined as such by the
Securities Regulation Code and its implementing rules.

(oo) “Securities Regulation Code” means Republic Act No. 8799,
enacted on July 17, 2002, as may be amended from time to time. xviii

(pp) “Separate account fund”xix - means the segregated portfolio of
investments established, maintained and invested in by an insurance
company for its variable life insurance contracts and accounted for
separately and apart from its other investments and accounts,
pursuant to the Insurance Code of 1978, as amended (PD 1460), under
which the income, gains and losses (whether or not realized) from, and
expenses incurred on the acquisition, disposal and management of
assets allocated to such account, are credited to or charged against
such account without regard to the other income, gains, losses and
other oxpenses of the insurance company. The Separate Account Fund
shall be deemed a contractual CIS, and the units of participation
therein shall be deemed as CIS securities, subject to this Law. The
assets held in any such separate account shall be applied exclusively


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for the benefit of the owners or beneficiaries of the variable life
insurance contracts.xx
(aq) “Shareholder” means a stockholder of a corporate CIS.

(x) “Trust institution” — means any bank, investment house or a

stock corporation duly authorized by the Monetary Board to engage in

trust, investment management and fiduciary business.

(ss)

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

trustee of a contractual CIS pursuant to this Law.

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

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

be determined in accordance with such rules and regulations as the

Commission may prescribe.

TITLE I - COLLECTIVE INVESTMENT SCHEMES

Chapter 1 - Nature and Structure of Collective Investment Schemes

SECTION 6. Collective Investment Schemes —

(@)

)

A Collective Investment Scheme (CIS) is any arrangement
whereby funds are solicited from the investing public for the
purpose of investing, re-investing and/or trading in securities or
other assets allowed under this Law. All CIS shall be covered by
and regulated pursuant to this Law, A CIS may have a
corporate structure, such as an investment company, or a
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 governed by and shall comply with the requirements of this
Law.
None of the following arrangements shall be deemed a collective
investment scheme subject to regulation under this Law:
1. Any arrangement whereby securities are issued to not more
than nineteen (19)xxi beneficial owners within any twelve-
month period, and there is no current offering or intention to

make a public offering of such securities. For purposes of this


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ad

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paragraph, beneficial ownership by a company shall be
deemed to he 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 securitios;

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 or profit
sharing plan or fund, engaged in the conduct of their
ordinary business;

. Any fund which is employed by the trust entity solely as an

aid to the administration of existing trust or fiduciary
accounts covered by agreements separate from those in
connection with the CIS; provided that interests in such fund
are not advertised or offered for sale to the general public.

. Any arrangement whereby an investment house, dealer, or

broker, registered as such with the Commission, primarily
engaged in the businoss 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
earnings from such arrangement inures to the benefit of any


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shareholder or member of such entity;

8. Any arrangement whereby an issuer is primarily engaged in
investing in securities issued by a majority-owned subsidiary
or subsidiaries of such issuer, where each such subsidiary is
not a CIS; and

9. Any other arrangement that, pursuant to rule or order issued
by the Commission, is determined not to be a CIS, or is
excluded from the definition thereof as not necessary in the
public interest and for the protection of investors.

() ACIS may either be open-end or closed-end, defined as follows:
1, "Open-end CIS" means a CIS where redeemable securities
are offered or are outstanding such as but not limited to
mutual funds; and
2, "Closed-end CIS" means a CIS where the securities offered or
outstanding are not redeemable securities.

Chapter 2 ~ Parties Involved In Collective Investment Schemes

SECTION 7. Fund manager- No company shall act as a fund
manager unless duly licensed by the appropriate regulatory agency, and no
company shall be licensed as a fund manager for purposes of this Law,
unless: °

(a) It is organized as a stock corporation;

(b) It has a minimum paid-up capital of not less than Fifty Million
Pesos (P50,000,000.00); Provided, however, that the appropriate
regulatory agency may prescribe a higher minimum paid-up capital
taking into consideration, among other factors:

1. the risk-based principles on capital adequacy based on
internationally accepted standards; and
2, the number of CIS managed;

(©) The majority of the members of the Board of Directors of the fund
manager shall be independent directors, provided that this
requirement shall not apply if the fund manager is the trust
department of a bank or an insurance company; and

(@ It has complied with such other requirements as may be prescribed


Cer aAunon

by the Commission or the appropriate regulatory agency.

In licensing a fund manager, the appropriate regulatory agency
shall ensure that the requirements under this Law and the IRR are
complied with.

SECTION 8. Duties and Responsibilities of the Fund Manager -
The fund manager shall have the following duties and responsibilities:

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

(b) Provide copies of financial and other records of CIS investments to
the CIS investors, trustee, corporate CIS and auditor;

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

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

(e) Comply with the instructions of the corporate CIS or the trustee to
remedy a breach of the provisions or covenants of the CIS plan, its
contract with the corporate CIS or trustee, the provisions of this
Law or its implementing rules and regulation:

(® Furnish the corporate CIS or the trustee with all contracts and
agreements relating to the operation and management of the CIS;

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

(h) Call for and attend annual or special meetings of the unit holders of
a contractual CIS, or attend meetings of stockholders of a corporate
CIS;

(@) Monitor the activities of the CIS distributors in the sale of the CIS
securities;

( Facilitate'the redemption of CIS securities;

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

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

and properties; and

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

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

(m) Report to the Commission, as soon as practicable, any material
development or breach of the provisions or covenants of the CIS
plan, the provisions of this Law or its implementing rules and
regulations, that:

1, relates to the establishment, distribution, management,
operation or dissolution of the CIS, and

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

(n) Such other duties and responsibilities that the Commission may
prescribe.

SECTION 9. Prohibited Acts of the Fund Manager. - The fund
manager shall not:

(a) Purchase securities and investment assets for its own account;

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

(©) Engage in a business other than the business of managing,
administering, marketing and distributing CIS funds and
securities, provided that this prohibition shall not apply if the fund
manager is the trust department of a bank or an insurance
company;

(@) 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
peen, provided for in the CIS plan, this Law and its implementing
rules and regulations or any other applicable laws and regulations;


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(e) Retain any rebate from, or otherwise share in any commission with,

any broker or dealer in consideration of transactions or investments
of the CIS funds. Accordingly, any rebates or shared commissions
shall be for the account of the CIS fund concerned; and

(® Engage in such other acts as may be prohibited by rule or order of

the Commission

SECTION 10. Fund Management Agreement - (a) The agreement
betweon the fund manager and the trusteo or the corporate CIS shall contain,
among others, provisions pertaining to:

1. Extent of services to be rendered;

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

8, All compensation to be paid thereunder which shall be clearly
described in a transparent manner, and which shall be in
accordance with such requirements and limitations as the IRR
may prescribe;

4. The term of the engagement and the manner of termination
thereof, which shall be in accordance with such requirements or
limitations as the IRR may prescribe;

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

6. Such other terms or conditions as the IRR may prescribe.

(b) In all cases where the trustee or insurance company functions as a
fund manager, the foregoing provisions which should otherwise be contained
in the fund management agreement with the fund manager shall be

contained in the CIS plan.

SECTION 11. The Trustee — Only a trust institution shall act as a
trustee of a CIS. In authorizing a trust institution to engage in CIS activities,
the Monetary Board shall ensure that all relevant requirements under this
Law or the IRR shall be complied with. The following, in addition to those
prescribed under existing laws and regulations, shall be the duties and
responsibilities of a trustee of a CIS:

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

(@) Appoint an independent third-party custodian;

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

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

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

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

1, relates to the establishment, operation or dissolution of the
CIS,and

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

(i Call for annual or special meetings of the CIS investors in the event
the fund manager fails or refuses to do so;

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

(k) Such other duties and responsibilities that the Commission may

prescribe.


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SECTION 12. Corporate CIS — (a) No company shall act as a
corporate CIS unless duly licensed by the Commission, and no company shall

be licensed as a corporate CIS for purposes of this Law, unless it shall:

1
2.
3.

Be organized in the form of a stock corporation;
Issue shares of stock consisting solely of common stock;

Provide in its articles of incorporation that shareholders shall
not be entitled to pre-emptive rights;

Have, at the time of registration, an initial subscribed and paid-
up capital of at least fifty million pesos (P50,000,000.00)
provided, however, that the Commission may prescribe a higher
paid-up capital. The Commission may prescribe a lower
minimum paid-up capital for any subsequent corporate CIS that
is established and managed by the same fund manager;

Maintain unimpaired its initial paid-up capital for a period of
twelve (12) months following its registration with the
Commission as a corporate CIS, or such other period as the
Commission may prescribe; and

Maintain at all times, if an open-end company, a reserve in
liquid or semi-liquid assets, equal to ten per centum (10%) of the
total assets of such company, or such other percentage and in

such form as the Commission may prescribe.

(b) Notwithstanding any provision of the Corporation Code to the

contrary, no corporate CIS shall be required to comply with the
minimum subscribed and paid-up capital relative to an increase in
its authorized capital stock.

(© The incorporators of a corporate CIS shall, at incorporation, fully

pay in cash their respective subscriptions.

(a) The Commission may prescribe such other or additional

requirements under subsection (a) of this section respecting the
form, share structure, and level of restrictions on capitalization and
reserves, as necessary or appropriate in the public interest or for

the protection of investors.

(e) The majority of the members of the board of directors of a corporate

CIS shall be independent directors.


SECTION 13. Custodian - Only entities duly licensed by the
Monetary Board may act as custodian of assets of a CIS. Unless otherwise
authorized by the appropriate 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 investmont assets of the CIS.

The following, in addition to those prescribed under existing laws and

regulations, shalll be the duties and responsibilities of a custodian:

(a) Hold the property of a CIS in accordance with its agreement with
the trustee or the corporate CIS; and

(b) Such other duties and responsibilities that the Monetary Board
may prescribe, which shall include:

1,

Earmarking, segregation and hypothecation of the investment
assets of the CIS; and

. Provisions for periodic or other inspections by employees and

agents of the Monetary Board.

SECTION 14. Appointment of Custodian — The agreement between

the custodian and the corporate CIS or the trustee of a contractual CIS shall
contain, among others, provisions pertaining to:

1
2.
3.

Extent of services to be rendered by the custodian;

Fees, remuneration and other expenses of the custodian;

Any restrictions or prohibitions regarding the performance by
the custodian of its functions; and

Reporting requirements of the custodian.

SECTION 15. CIS Distributor ~ (a) No entity shall be licensed as a
distributor of CIS securities, unless:

c
2.

It is organized as a stock corporation;

It has a minimum paid-up capital of not less than ten million
pesos (P10,000,000.00), or such higher capitalization to be
prescribed by the Commission taking into consideration (i) the
risk-based principles on capital adequacy based on
internationally accepted standards, and (ii) the number of CIS
distributed; and

Tt has complied with such other requirements as may be

prescribed by the Commission.


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

1. Any fund manager;

2. Any investment house;

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

supervision of the Bangko Sentral ng Pilipinas;
4, Any insurance company under the supervision of the Insurance

Commission; and

5. Other persons as may be hereinafter allowed by the Commission.

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

(a) 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 trusteo, the prior written consent of the Commission shall be secured.

(e) The CIS distributor shall be principally responsible for marketing,
distributing and selling CIS securities. It shall perform such other duties and
responsibilities as the IRR may prescribe.

SECTION 16. Marketing and Distribution Agreement — (a) The
agreement between the CIS distributor and the corporate CIS or the trustee
of a contractual CIS shall contain, among others, provisions pertaining to:

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

2. ees, remuneration and other expenses of the CIS distributor;

3. ‘Any restrictions or prohibitions regarding the performance of

the functions by the CIS distributor;

4, Undertaking to employ or appoint only CIS solicitors duly

licensed by the Commission; and

5. Reporting requirements.


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

SECTION 17. CIS Solicitor — No person shall be allowed to solicit,
sell or offer to sell CIS securities unless duly licensed by the appropriate

regulatory agency after compliance with such requirements and standards for
el

ity as may prescribed in the IRR.

SECTION 18. Accountants and Auditors. (a) The financial
statements of every corporate CIS, fund manager and contractual CIS shall
be audited and certified by an independent certified public accountant duly
accredited by the Commission.

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

b Report to the fund manager any irregularity or undesirable
practice in the operation of the CIS which has come to its
knowledge. Any inaction by the fund manager, irregularity or
undesirable practice shall be reported by the independent
auditor to the Commission;

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

3. Report to the Commission whether the internal control and
audit structures in the operation of the CIS are at an acceptable

level.

SECTION 19. Common Duties and Responsibilities of Parties —
In addition to their specific duties and responsibilities, each of the corporate
CIS, fund manager, trustee, CIS distributor, CIS solicitor, and the CIS
custodian shall have the following common duties and responsibilities:
(@) 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;


©
@

(h)

@

1)

Act in the best interests of the CIS investors;

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

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

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

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

Avoid and eliminate conflicts of interest in the performance of
their functions, which may be identified by the appropriate
regulatory agency as prejudicial to the interests of the investing
public;

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

Comply with orders, rules and regulations as may be prescribed
by the Commission or other appropriate regulatory agency.

Any contractual provision which protects or purports to protect the fund
manager, corporate CIS, trustee, CIS distributor, CIS solicitor, or CIS
custodian against any liability for wilful misfeasance, malfeasance, fraud,

bad faith, or gross negligence in the performance of their duties shall be

void.

SECTION 20. Revocation, Refusal or Suspension of License of
the Fund Manager, Corporate CIS, Trustee, Insurance Company,
Custodian, CIS Distributor and CIS Solicitor. —The licensing or
authorization of a fund manager, corporate CIS, trustee, insurance company,
custodian, CIS distributor or CIS solicitor to engage in CIS business under
this Law may be refused, or any license granted thereunder may be revoked,

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suspended, or limitations placed thereon by the appropriate regulatory
agency if, after due notice and hearing, the appropriate regulatory agency
which granted the license determines that the applicant or licensee:

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

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

(©) Has failed to satisfy the qualifications or requirements for licensing
prescribed under this Law and the IRR;

(@ Any of its directors or officers has been convicted by a competent
body of an offense involving fraud, embezzlement, counterfeiting,
theft, estafa, misappropriation, forgery, bribery, false oath, perjury,
or of a violation of securities, commodities, banking, real estate or
insurance laws;

() Is enjoined or restrained by a competent body from engaging in
securities, commodities, banking, real estate or insurance activities;

@® Is subject to an order of a competent body refusing, revoking or
suspending any license or other permit under this Law, the IRR,
any other law or regulation administered by the Commission, the
Bangko Sentral ng Pilipinas, the Insurance Commission, or any
other governmental authority;

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

(h) Has been judicially declared insolvent.

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

20


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

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

(@) any person convicted of any crime involving any security or
financial product,

(b) any person convicted of an offense involving fraud or embezzlement,
theft, estafa or other fraudulent acts or transactions;

(¢) 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.

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

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

(® any person found guilty by a foreign court, regulatory authority or
government agency of the acts or violations similar to any of the

acts or misconduct enumerated in the foregoing paragraphs.

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A conviction in the first instance shall be considered sufficient ground
for disqualification.

Chapter 3 - Provisions applicable to Contractual CIS

SECTION 22. Establishment of a Contractual CIS.

(a)

)

©

(a)

13}

Units of participation in a contractual CIS shall not be sold or
offered for sale or distribution within the Philippines without a
CIS plan duly filed and approved by the Commission.

Any fund manager may establish, administer and manage one
or more contractual CIS. Such fund manager shall enter into a
fund management contract with a trustee or insurance company
that is not an affiliate of the fund manager; Provided, that no
director and/or officer of the fund manager shall at the same
time serve as director and/or officer of the trustee or insurance

company;

In a contractual CIS, the trust agreement shall be between the

trustee and the CIS investors, and the insurance contract shall

be between the insurance company and policy holders. The

trust agreement or the insurance contract, as the case may be,

shall define the rights and obligations of the parties.

‘The assets of each contractual CIS shall be deemed separate and

independent of the assets of the fund manager, trustee and/or

insurance company, and shall not be available to the creditors of
such fund manager, trustee and/or insurance company in the

event of attachment, garnishment, execution, bankruptcy,

insolvency or rehabilitation or any form of action or claim
against the fund manager, trustee and/or insurance company.

In case the functions of the fund manager, on the one hand, and
the trustee or insurance company, on the other hand, are
performed by the same or affiliated entities, there must be an
independent oversight body which shall be created pursuant “i
and shall perform the oversight duties and responsibilities

enumerated in Section 50 (b)(2) hereof.

22


Ce aan wn

SECTION 23. Register of CIS Investors — An up-to-date register of
all CIS investors shall be kept and maintained by or under the control of a
yegistrar, which may be kept and maintained either in written form or by
other means which are capable of being reproduced im written form,
including, but not limited to, computer records, microfilm, microfiche or
electronic recording, as the fund manager shall from time to time determine.
‘There shall be entered into the register such relevant information as may be
prescribed by the fund manager or the trustee.

SECTION 24, The Contractual CIS Plan. A Contractual CIS shall
be established upon the registration of its CIS plan with the Commission.
The CIS plan shall contain the following matters:

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

(b) Names of the fund manager and the trustee;

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

(@A statement of the fund’s investment objectives and policies
including limitations, if any, and risk factors in investing in the
fund;

(©) A profile of the proposed investors;

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

(g) Initial unit value and the basis thereof;

(h) Total value to be issued in case of closed-end funds;

@ Terms and conditions governing the issuance and redemption of
units of participation in the fund;

@) Provision for the external audit of the fund;

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

() Liabilities of the fund manager and the trustee or insurance

company to the unit or policy holders;

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(m) Amount of fees, commissions and other charges to be deducted
from the fund;

(n) Ceiling for marketing or other promotional expenses;

(©) Annual meetings of unit or policy holders;

(p) Public disclosures and reports; and

(q Such other matters as the Commission may prescribe.

A copy of the CIS plan shall be made available to any interested person
at the principal office of the fund manager and the trustee or insurance
company during regular office hours.

Chapter 4 - Provisions Applicable to Corporate CIS

SECTION 26. Establishment of a Corporate CIS. - Shares in a
corporate CIS shall not be sold or offered for sale or distribution within the
Philippines without a CIS plan duly filed and approved by the Commission.

SECTION 26. Engagement of Fund Manager. Corporate CIS shall
engage a duly registered fund manager to perform the functions prescribed in
Section 8 hereof; Provided, that a majority of the directors of the corporate
CIS are not directors, officers or employees of the fund manager; and
Provided, further, that no Chairman, Chief Executive officer, President, Chief
Operating Officer or equivalent positions may be interlocking but officers
with lower rank may be common with prior approval of the appropriate
regulatory authority.

SECTION 27. The Corporate CIS plan - The CIS plan of corporate
CIS shall contain the following matters:

(a) Title of the CIS plan. This shall correspond to the product or brand
name by which the CIS is proposed to be known;

(b) Name of the fund manager;

(©) A statement of the corporate CIS's investment objectives and
policies including limitations, if any, and risk factors in investing in
the corporate CIS;

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

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(© Profile of the proposed investors;

(® Par Value of the shares of stock of the corporate CIS;

(g Total value to be issued in case of closed-end corporate CIS;

(h) Terms and conditions governing the issuance and redemption of
shares of stock;

(@ Provision for the external audit of the corporate CIS;

(@ The dissolution of the corporate CIS and the rights of shareholders
in case of dissolution of the corporate CIS;

(k) Liabilities of the corporate CIS and the fund manager to the
sharoholders;

) Amount of fees, commissions and other charges and expenses to be
paid by the shareholders;

(m) Ceiling for marketing or other promotional expenses;

(a) Annual meetings of shareholders;

(0) Public disclosures and reports;

(p) Its classification, whether an open-end or closed-end company;

@ Borrowing of money in accordance with the rules and regulations
as may be prescribed by the Commission;

(z) Issuance of senior securities, if any;

(©) Extension of loans to other persons in accordance with the rules
and regulations as may be provided by the Commission; and

(t) Such other matters as the Commission may prescribe.

SECTION 28. 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 Commission may prescribe other
requirements or restrictions in the declaration and payment of dividends by
the corporate CIS as necessary or appropriate in the public interest and for
the protection of the investors.

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

SECTION 29. Proxies; Voting Trust. The Commission may

prescribe rules and regulations for the solicitation of proxies and the issuance

25


and transfer of voting trust certificates in accordance with the requirements
of the Corporation Code and applicable laws and regulations; Provided, that
the Commission may prescribe other requirements or restrictions as may be
necessary or appropriate in the public interest and for the protection of the
investors; Provided, further, that no proxies shall be used as a device to

control the management of any corporate CIS.

TITLE I1- REGISTRATION OF CIS PLAN AND OPERATIONS OF
cis

Chapter 1 - Registration, Amendment and Suspension of CIS Plan

SECTION 80, Registration of CIS Plans. — (a) All CIS must have a
CIS plan which should be registored with tho Commission bofore any
securities of such CIS can be sold or offered for sale. All CIS plans shall be
rogistered with the Commission by filing a sworn statement with respect to
such CIS plan, in euch form and containing such information and documents
as prescribed by this Law, the IRR or the Commission. ‘The CIS plan shall
include any prospectus as required or permitted by the Commission to bo
delivered to CIS investors. It shall be unlawful for any person to sell or offer
for sale CIS securities unless the corresponding CIS plan has been duly
registered under this section.

(b) The CIS plan shall be signed by the executive officer, principal
operating officer, principal financial officer, comptroller, principal accounting
officer, corporate secretary or persons performing similar functions of the
corporate CIS, or the fund manager, trustee or insurance company in the case
of a contractual CIS, accompanied by a duly verified resolution of the board of
directors, The written consent of the expert named as having certified any
part of the CIS plan or any document used in connection therewith shall also
be filed.

(© Upon effectivity of the CIS plan, the corporate CIS, fand manager,
trustee or insurance company shall state in every sales material that all
registration requirements have been mot and that all information are true
and correct as represented by the corporate CIS, fund manager, trustee or
isurance company or the person making the statement, Any untrue

statement of fact or omission to state a material fact required to be stated

6


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

SECTION 31. Revocation of Registration or Suspension of Offer
and Sale of Securities — (a) The Commission may revoke the registration
of the CIS plan, or order the suspension of the offer and sale of the CIS
securities, in accordance with the Securities and Regulation Code and other
applicable laws and regulations, provided that the Commission may cause
the publication or dissemination of the order of suspension or revocation at
the expense of the CIS, and provided further, that any sale of the subject CIS
securities during the effectivity of the suspension or revocation order shall be
void, and the Commission shall have the power to order the return of the
purchase price and/or earnings arising from such sales subject to applicable
laws and regulations,

(b) The Commission may conduct an examination, and, after due notice
and hearing, issue an order revoking or suspending the effectivity of the cis
plan and the offer and sale of CIS securities.

(©) In making such examination the Commission or any officer or
officers designated by it may administer oaths and affirmations and shall
have access to, and may demand the production of any books, records or
documents relevant to the examination. Failure of the fund manager, the
corporate CIS, trustee, insurance company, CIS distributor, CIS solicitor or
any other person to cooperate, or his obstruction or refusal to undergo an

examination, shall be a ground for the issuance of a suspension order.

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Chapter 2 ~ Dealings in CIS Securities

SECTION 32, Rights «nd Privileges of CIS Investors. Each share
of stock of a corporate CIS and each unit of participation of a contractual CIS

shall be equal in all respects to every other share or unit belonging to the
same class of shares or units.

SECTION 383. Payment for CIS Securities. No CIS shall issue any

of its securities for services or for property other than cleared funds,

SECTION 34. Distribution and Redemption of CIS Securities. (a)
Unless otherwise allowed in this Law, securities of a CIS shall be sold
through a licensed CIS distributor and by licensed CIS solicitors.

(b) CIS investors have the right to surrender their securities for
redemption in accordance with the CIS plan. Redemption shall not be
suspended except pursuant to the CIS plan as approved by the Commission
in the public interest or for the protection of investors.

SECTION 85. Transferability of Securities. No CIS shall restrict
the transferability or negotiability of its CIS securities except as provided in

the CIS plan or by any rule or regulation prescribed by the Commission.
Chapter 3 ~ Operations of CIS

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

SECTION 37. Investment Limitations. (a) The CIS funds may be
invested only in the following assets, subject to limitations as may be
provided by this Law or by the IRR:

1. Bank deposits;
2, Securities issued by or guaranteed by the Philippine
government, or the Bangko Sentral ng Pilipinas;

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

4. Exchange-listed securities;

ea

. Marketable instruments that are traded in an organized

exchange or market;

. Loans traded in an organized market;

. Exchange traded funds;

. Derivatives;

). Real estate investment trusts or companies;

10, Commercial papers, bonds or loans which are registered with
the Commission, or are exempt from registration with the
Commission;

11. Other CIS; and

12.Such other investments or instruments as the appropriate

regulatory agency may allow.

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

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

or any one company; or

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, whichever is higher.

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.

(o) The appropriate regulatory agencies may jointly issue such IRR, in
accordance with Section 62 hereof, as may be necessary or appropriate in the

SECTION 38. Liquidity Requirement. Unless otherwise prescribed
by the IRR, at least ten percent (10%) of the assets of a CIS shall be invested
in liquid/semi-liquid assets such as, but not limited to:

(a) Treasury notes or bills, certificates of indebtedness issued by the

Bangko Sentral ng Pilipinas, and other government securities or

bonds and such other evidence of indebtedness or obligations, the

29


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servicing and repayment of which are fully guaranteed by the
Republic of the Philippines; and

(b) Savings or time deposits with government owned banks or
commercial banks, provided that in no case shall any such savings
or time deposit accounts be accepted or allowed under a “bearer” or
“numbered” account or other similar arrangoment;

Provided that the requirement under this Section shall not apply to a
closed-end CIS.

SECTION 39. Prohibited Acts of CIS. - (a) Unless it complies with
the IRR and orders which the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors, a
registered corporate CIS is not permitted to:

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

2. Participate on a joint or a joint and several basis in any trading
account in securities; or

3. Effect a short sale of any security.

(b) It shall be unlawful for any CIS to -

1. generate funds for promoting the private business or industry of
any employee, officer, director, promotor or stockholder thereof;
or

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

(©) Tho IRR may probibit CIS from engaging in such other acts as may
defeat the policy and purpose of this Law.

SECTION 40. Meetings of CIS Investors. (a) Meetings of unit
holders in a contractual CIS or stockholders in a corporate CIS shall be held
at least annually. The following matters shall be presented to the CIS

investors:

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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 auditors;

8. 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 CIS.
(b) CIS investors may attend meetings in person or by proxy. A quorum at
meetings shall consist of unit holders or stockholders owning or
representing at least ten percentum (10%) of the total number of units in
the fund or the outstanding capital stock, respectively, or such other
percentage as the Commission may prescribe talting 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 Commission shall prescribe by rule or regulation the

requirements for the conduct of meetings.

SECTION 41. Requirements for selling materials and
advertisements. Sales and marketing documents and advertisements shall
be subject to such requirements as the IRR or the Commission may prescribe.
All sales and marketing documents, and advertisements shall:

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

(b) The CIS performance information in advertisoments should be
calculated and presented from the viewpoint of the average investor
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

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

SECTION 42. Reports and Financial Statements of CIS. (a) Every
CIS shall file with the Commission and the appropriate regulatory agency, if
any:

1, Such information and documents including financial statements as
the IRR and the Commission and/or appropriate regulatory agency
may require, to keep reasonably current the information and
documents contained in the CIS plan filed under this Law; and

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

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

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

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

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

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

5. a statement of the aggregate fees or remuneration paid by the
CIS during the period covered by the report to (i) the fund
manager, trustee, CIS distributor and independent auditor; and
Gi) each director and all officers as regular or special

compensation; and

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6. a statement of the aggregate amounts of purchases and sales of

investment assets made during the period covered by the
veport.

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

SECTION 43. Net Asset Value. (a) A CIS shall compute and post its
net asset value per share/unit at such frequency as may be prescribed by the
IRR or the Commission.

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

SECTION 44. Accounts and Records. (a) Bvery CIS, and every fund
manager and trustee shall maintain and preserve for such period or periods
as the may he prescribed by the IRR, such accounts, books, and other
documents as constituting the record forming the basis for financial
statements required to be filed pursuant to this Law.

(b) All accounts, books and other records required to be maintained and
preserved hy any person pursuant to subsection (a) shall be subject to

oxamination by the appropriate regulatory agency.

SECTION 45. Salaries and Emoluments. - No member of the board
of directors or any executive officer of a CIS, fund manager, trustee,
insurance company or CIS distributor shall receive, directly or indirectly, any
salary or emolument from the CIS at a rate higher than that fixed by the
appropriate regulatory agency after taking into consideration the experience
and qualifications of the director or officer concerned; the amount and nature
of securities issued; the size and standing of the CIS in the business
community; the volume of business done by the CIS; the number of years the
CIS has been in business; and other pertinent conditions and circumstances

that the appropriate regulatory agency may prescribe.

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SECTION 46. . Marketing, Operational and Promotional
Expenses and fees charged to CIS investors. - In no case shall the
marketing, operational and promotional expenses of the CIS, and the fees
charged to the CIS investors, exceed such limitations as the appropriate
regulatory agency may prescribe pursuant to the IRR.

SECTION 47. Changes in Investment Policy - Proposals to change
the investment policies shall be subject to approval by the CIS investors
pursuant to Section 40 hereof and by the Commission. The fund manager,
trustee or insurance company shall disseminate to all CIS investors all
material information pertaining to proposals to amend the investment
policies and objectives. The Commission shall prescribe by rule or regulation
the requirements for changes in investment policies,

SECTION 48, Dissolution - (a) The corporate CIS, trustee or
insurance company shall cause the dissolution of the CIS whenever any of the
following grounds is present:

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

2. In CIS other than a separate account fund, dissolution is agreed
upon in a resolution of the CIS investors owning at least the
majority interest in a CIS at a meeting duly held; Provided, that
the IRR may prescribe a different percentage interest taking
into account the nature and size of the CIS and the number of
CIS investors; Provided, further, that there has been prior
publication of the notice of time, place and object of the meeting
for two (2) consecutive weeks in a newspaper of general
circulation; and Provided, finally, that dissolution of separate
account funds shall be governed by the relevant rules and
regulations of the Insurance Commission;

bod

Dissolution is required by a lawful order of the court;
4, Dissolution is ordered by the appropriate regulatory agency for
non-compliance with the conditions for the lifting of a
suspension or revocation order previously issued; provided that
the appropriate regulatory agency shall not issue an order of

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dissolution within six months from the issuance of the
suspension or revocation order; and
5. Dissolution is deemed necessary in view of the dissolution or the
revocation of the license of the fund manager, trustee or
insurance company;
Provided, that the CIS may not be dissolved whenever:

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

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

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

(b) Upon dissolution, the fund manager shall transfer the CIS property

to the CIS investors as prescribed by the CIS plan and in accordance with the
IRR.

SECTION 49. Merger or Consolidation - No merger or
consolidation of CIS will be authorized by the appropriate regulatory agency
unless the following conditions are met:

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

(b) The merger plan has been approved by the CIS investors owning at
least a majority interest in each of the CIS to be merged or
consolidated in a meeting duly called for the purpose;

‘The IRR shall prescribe the procedures and requirements for merger or

consolidation in the public interest and for the protection of investors.

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TITLE IV - SPECIAL RULES GOVERNING ESTABLISHMENT OF
CONTRACTUAL CIS BY TRUST INSTITUTIONS AND INSURANCE
COMPANIES

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

‘The trust institution or insurance company may engage the services of
a fund manager; Provided, that no director and/or officer of the trust
institution or insurance company shall at the same time serve as director
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 () (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 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
in accordance with such rules as the IRR shall prescribe, all of
whom shall have the qualifications and none of the
disqualifications of an independent director, or may be a
juridical entity organized and existing pursuant to the IRR.

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

i. Monitor the activities of the CIS distributors in the sale
andlor redemption of the CIS units and ensure that the
provisions of any marketing document relating to the sale
or offer for sale of the CIS units do not contain any matter

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iii.

iv.

vi,

viii.

which is inconsistent with the provisions of the CIS plan,
this Law avd its implementing rules and regulations;
Ensure that the management and investments of the CIS
funds are in accordance with the CIS plan;

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

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

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

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

Instruct the trust institution or insurance company to
remedy a breach of the provisions or covenants of the CIS
plan, the provisions of this Law or its implementing rules
and regulations; and

Report to the Commission and/or appropriate regulatory
agency any breach of the provisions or covenants of the
CIS plan, the provisions of this Law or its implementing
rules and regulations that (i) relates to the establishment,
operation or dissolution of the CIS, and (ii) has had or is
likely to have a material adverse effect on the interests of
the CIS investors.

‘TITLE V- ASSOCIATION OF CIS

SECTION 51. Membership in the Association of CIS- For the

further protection of the CIS investors, all corporate CIS, and all fund

managers, trustees, and insurance companies engaged or involved in CIS

shall be members of the association of CIS duly accredited by the Commission

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within one (1) year from the approval of this Law. Such corporate CIS, fund
managers, trustees and insurance companies which are newly established or
authorized to engage in CIS shall be registered members of the association
within sixty (60) days after the Commission and/or appropriate regulatory
agency shall have approved their registration or authorization. The
association shall work with the regulators and Congress to ensure that the
best laws and regulations are enacted and enforced for the protection of the
investors and to promote the growth of the CIS induatry.

TITLE VI - CIS INVESTORS PROTECTION FUND

SECTION 52. Establishment of the CIS Investors Protection
Fund -The Commission may, in consultation with the other appropriate
regulatory agencies, establish or facilitate the establishment of a CIS
investors protection fund, for the purpose of compensating CIS investors for
the extraordinary losses or damage they may suffer due to fraud or
mismanagement or business failure other than market decline in the
investment portfolio, subject to such rules and regulations as the Commission
may from time to time prescribe or approve in the public interest. The
Commission, having due regard for the public interest and the protection of
investors, shall regulate, supervise, examine, suspend or otherwise
discontinue such funds under rules which the Commission may prescribe. In
the performance of such functions, the Commission may take over custody
and management of the fund itself as well as investments in and
disbursements from the fund under such forms of control and supervision by
the Commission as it may from time to time require. The authority granted
to the Commission under this section shall also apply to all funds established
for the protection of CIS investors, whether established by the Commission or
otherwise,

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TITLE VI - SUPERVISION AND ENFORCEMENT

SECTION 53. Powers and Functions of the Commission and
Appropriate Regulatory Agencies - The Commission shall, at all times, act
with transparency and dispatch and shall have, among othors, the following
powers and functions:

(a) Primary jurisdiction and supervision over the registration,
distribution and sale of all CIS securities;

(b) Approve, amend, renew or dony any license, registration or
certificate issued by the Commission under this Law;

(©) Fix and assess fees and/or charges as it may find reasonable in the
exercise of regulation;

(@) Regulate, supervise and monitor, in coordination with the
appropriate regulatory agency, the operations, management and/or
activities of all CIS, fund managers, CIS distributors and CIS
solicitors to ensure compliance with the provisions of this Law, the
IRR and other applicable laws, rules and regulations, including but
not limited to the power to:

1. Revoke or nullify CIS investments which are contrary to
existing laws and regulations; and

2. Demand the conversion of CIS investments into cash or other
liquid assets to protect the interests of the CIS investors.

(©) In coordination with the appropriate regulatory agency, order the
refund or return of any monies or investments to CIS investors in
appropriate cases or in accordance with such rules and regulations
as the Commission may prescribe and in coordination with the
appropriate regulatory agency;

( In coordination with the appropriate regulatory agency, issue cease
and desist orders to prevent fraud and injury to the investing
public;

(@) In coordination with the appropriate regulatory agency, issue
subpoena duces tecum and ad testificandum, order the
examination, search and seizure of documents, papers, files, tax
returns, books of accounts and other records, in whatever form, of
any entity or person under investigation;

(h) Punish for contempt of the Commission, both direct and indirect, in

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accordance with the pertinent provisions of and penalties
prescribed by the Rules of Court;

@ In coordination with the appropriate regulatory agency, impose
sanctions, institute cases and/or prosecute offenders for violation of
this Law, related laws, rules, regulations and orders issued
pursuant thereto, in coordination with the appropriate regulatory
agency;

(@ Suspend or revoke registrations and/or licenses issued by the
Commission;

(&) Enlist the aid and support of and/or deputize any and all
enforcement agencies of the Government in the implementation of
its powers and exercise of its functions under this Law;

( In coordination with the appropriate regulatory agency, take over a
CIS or fund manager which fails to comply with this Law, related
Jaws, rules, regulations and orders issued pursuant thereto, either
through the appointment of a conservator, receiver or liquidator, in
coordination with the appropriate regulatory agency;

(m) Jointly with the other appropriate regulatory agencies, issue,
amend or.repeal implementing rules and regulations in accordance
with Section 62 and orders for the proper enforcement of this Law,
and issue opinions and provide guidance on and supervise
compliance with such rules, regulations and orders;

(n) Formulate policies and recommendations on issues concerning CIS,
including proposed legislation;

(0) Retain and utilize, in addition to its annual budget, an amount up
to One Hundred Million Pesos (P 100,000,000.00) of the fees,
charges and other income derived from the regulation of CIS;.and

(p) Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or
incidental to carry out the express powers granted the Commission
to achieve the objectives and purposes of this Law.

‘TITLE VIII -REMEDIAL PROVISIONS

SECTION 54. Solidary Liability — (a) The fund manager, trustee

and/or insurance company shall be jointly and severally liable for all losses

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and damages that CIS investors may suffer as a result of any violation by the
fund manager, trustee and/or insurance company of this Law, its
implementing rules and regulations, or their failure to observe and comply
with the terms and conditions of the CIS plan.

() The directors and/or officers of the CIS, fund manager, trustee
and/or insurance company shall also be liable jointly and severally liable for
all losses and damages that CIS investors may suffer as a result of any
violation by the corporate CIS, trustee and/or insurance company of this Law,
its implementing rules and regulations, or their failure to observe and comply
with the terms and conditions of the CIS plan. Notwithstanding any
provision of law to the contrary, in no case shall such directors and officers
recover their liability from the CIS, fund manager, trustee and/or insurance
company.

(©) If the offender is a corporation or other juridical entity, the
administrative sanctions and/or criminal penalties may in the discretion
of the Commission or the court be imposed upon such corporation or other
juridical entity and upon the officer or officers of the corporation or entity
responsible for the violation, and if such officer is an alien, he shall in
addition to the penalties prescribed, be deported without further
proceedings after service of sentence.

SECTION 55. Investigations, Injunctions and Prosecution of
Offences. (a) The Commission may, in its discretion, and in coordination
with the appropriate regulatory agency, make such investigations as it deems
necessary to determine whether any person has violated or is about to violate
any provision of this Law, any rule, regulation or order thereunder, and may
yequire or permit any person to file with it a statement in writing, under oath
or otherwise, as the Commission shall determine, as to all facts and
circumstances concerning the matter to be investigated. The Commission
may publish information concerning any such violations, and to investigate
any fact, condition, practice or matter which it may deem necessary or proper
to aid in the enforcement of the provisions of this Law, in the prescribing of
rules and regulations thereunder, or in securing information to serve as &
basis for recommending further legislation concerning the matters to which
this Law relates: Provided, however, That any person requested or
gubpoenaed to produce documents or testify in any investigation shall

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simultaneously be notified in writing of the purpose of such investigation:
Provided, further, That all criminal complaints for violations of this Law, and
the implementing rules and regulations enforced or administered by the
Commission shall be referred to the Department of Justice for preliminary
investigation and prosecution before the proper court: Provided, furthermore,
That in instances where the law allows independent civil or criminal
proceedings of violations arising from the same act, the Commission shall
take appropriate action to implement the same: Provided, finally, That the
investigation, prosecution, and trial of such cases shall be given priority.

() For the purpose of any such investigation, or any other proceeding
under this Law, the Commission or any officer designated by it is empowered
to administer oaths and affirmations, subpoena witnesses, compel
attendance, take evidence, require the production of any book, paper,
correspondence, memorandum, or other record which the Commission deems
relevant or material to the inquiry, and to perform such other acts necessary
in the conduct of such investigation or proceedings.

(c) Whenever it shall appear to the Commission that any person has
engaged or is about to engage in any act or practice constituting a violation of
any provision of this Law, any rule, regulation or order thereunder, it may
issue an order to such person to desist from committing such act or practice.
After finding that such person has engaged in any such act or practice and
that there is a reasonable likelihood of continuing, further or future
violations by such person, the Commission may issue ex-parte a cease and
desist order for a maximum period of ten (10) days, enjoining the violation
and compelling compliance with such provision. The Commission may
transmit such evidence as may be available concerning any violation of any
provision of this Law, or any rule, regulation or order thereunder, to the
Department of Justice, which may institute the appropriate criminal

proceedings under this Law.

(@ Any person who, within his power but without cause, fails or refuses to
comply with any lawful order, decision or subpoena issued by the Commission
shall after due notice and hearing, be guilty of contempt of the Commission.

Such person shall be fined in such reasonable amount as the Commission

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may determine, or when such failure or refusal is a clear and open defiance of
the Commission's order, decision or subpoena, shall be detained under an
arrest order issued by the Commission, until such order, decision or subpoena
is complied with.

SECTION 56. Cease and Desist Order. (a) 'The Commission, after
Proper investigation or verification, motu proprio, or upon verified complaint
by any aggrieved party, may issue a cease and desist order without the
necessity of a prior hearing if in its judgment the act or practice, unless
restrained, will operate as a fraud on investors or is otherwise likely to cause

grave or irreparable injury or prejudice to the investing public.

(b) Until the Commission issues a cease and desist order, the fact that an
investigation has been initiated or that a complaint has been filed, including
the contents of the complaint, shall be confidential. Upon issuance of a cease
and desist order, the Commission shall make public such order and a copy
thereof shall be immediately furnished to each person subject to the order.

(c) Any person against whom a cease and desist order was issued may,
within five (5) days from receipt of the order, file a formal request for a lifting
thereof. Said request shall be set for hearing by the Commission not later
than fifteen (15) days from its filing and the resolution thereof shall be made
not later than ten (10) days from the termination of the hearing. If the
Commission fails to resolve the request within the time herein prescribed, the

cease and desist order shall automatically be lifted.

SECTION 57. Administrative Sanctions. (a) If, after due notice and
hearing, the appropriate regulatory agency finds that: (a) there is a violation
of this Law, its rules, or its orders; (b) any fund manager, trustee, insurance
company, corporate CIS, CIS distributor or CIS solicitor has failed reasonably
to supervise, with a view to preventing violations, another person subject to
supervision who commits any such violation; (¢) any person has, in a CIS plan
or in other reports, applications, accounts, records or documents required by
Jaw or rules to be filed with the Commission, made any untrue statement of a
material fact, or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; or (4)

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any person has refused to permit any lawful examinations into its affairs, it
shall, in its discrotion, 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:

(1) Suspension or revocation of the license of such person;

(@) A fine of no less than Ten thousand pesos (P'10,000.00) nor more
than One million pesos (P1,000,000.00) plus not more than Two
thousand pesos (P2,000.00) for each day of continuing violation;

(8) Disqualification from being an officer, member of the board of
directors, or person performing similar functions, of the fund
manager, trustee, insurance company, corporate CIS or CIS
Distributor; and

(4) 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 against the individuals
responsible for the violation.

(©) The appropriate regulatory agency shall have the power to issue
writs of oxecution to enforce the provisions of this section and to enforce
payment of the feed and other dues collectible under this Law.

SECTION 58. Criminal penalties. The following acts are criminal in
nature and shall be penalized as follows:

(a) Refusal to comply with the orders of the appropriate regulatory
agency for the production of books, records or documents, or to
undergo an examination shall be penalized by imprisonment of one
(1) month to six (6) months and fine in the amount of fifty thousand
pesos (P50,000.00) to five hundred thousand pesos (P500,000.00).

(b) Selling or offering for sale a CIS security by unregistered persons
shall be penalized by imprisonment of one (1) year and fine
equivalent to triple the contract price of each of the CIS securities
sold;

© Selling or offering for sale CIS securities of a CIS plan that has not
been registered pursuant to this Law shall be penalized by

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imprisonment of one (1) year and fine equivalent to triple the
contract price of each of the CIS securities sold or offered for sale;

@ Any negligent act or omission that is prejudicial or injurious to the
CIS investors shall be penalized by imprisonment of one (1) yoar
and one (1) day ic six (6) years and fine in the amount of fifty
thousand pesos (P50,000.00) to five hundred thousand pesos
(P500,000.00);

©) Any fraudulent act or omission that is prejudicial or injurious to the
CIS investors shall be penalized by imprisonment of six (6) years
and one (1) day to twelve (12) years and fine in the amount of one
hundred thousand pesos (P100,000,00) to one million pesos
(P1,000,000.00); and

@ Violation of the provisions of this Law, the IRR or orders of the
appropriate regulatory agency, provided that repeated violations
shall constitute prima facie evidence against the offender, shall be
penalized by imprisonment of six (6) years and one (1) day to twelve
(12) years and a fine in the amount of one hundred thousand pesos
(P100,000.00) to one million pesos (P1,000,000.00).

SECTION 59. Adjudicatory power. (a) The Commission shall have
the power to adjudicate any and all claims involving CIS amounting to not
more than One Million Pesos (P1,000,000.00) for each CIS Investor. The
proceedings before the Com:nission shall be summary in nature, and the
decision of the Commission shall be final and executory if the amount
granted does not exceed Five Hundred Thousand Pesos (P 500,000.00).

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

(© The authority to adjudicate granted to the Commission under this
section shall be concurrent with that of the civil courts, but the filing of a
complaint with the Commission shall preclude the civil courts from taking
cognizance of a suit involving the same subject matter.

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

SECTION 60. Duty of the Regulator — In view of the nature of the
CIS as one impressed with public interest, the officers and employees of the

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appropriate regulatory agencies are strictly enjoined to monitor, enforce and
ensure compliance with the provisions of this Law and its implementing rules
and regulations. Failure to do so shall be dealt with under existing laws and
regulations in the gravest degree.

TITLE IX ~ MISCELLANEOUS PROVISIONS

SECTION 61. Transitory Provisions. - Any corporate or contractual
CIS which at the time of the effectivity of this Law has been established and
has continued to exist, shall be considered registered and licensed under the
provision of this Law and its implementing rules and regulations and shall be
subject to and governed by the provisions hereof; provided, however, that
compliance with the applicable provisions of the Law, may be deferred for
such reasonable time as the Commission may determine but not to exceed
two (2) years from approval of this Law.

SECTION 62. Implementing Rules and Regulations. - The
appropriate regulatory agencies, with the Commission as the lead agency,
shall coordinate and jointly issue the IRR to implement this Law. In
adopting and issuing the IRR, the Commission and the appropriate
regulatory agencies shall be guided by and adhere to the declaration of policy
contained in Section 2 and the other relevant provisions of this Law. The IRR
shall pertain to the following matters, in addition to other matters in
connection with which other provisions of this Law may require the
appropriate regulatory agencies to issue rules and regulations:

a, Registration, amendment and euspension of CIS plans;

b. Distribution, sale and marketing of CIS securities;

c. Qualification and disqualification standards for directors and
officers of the fund manager, corporate CIS, CIS distributors,
independent oversight committee, CIS solicitor and other parties
involved in CIS;

. Qualified and/or eligible CIS investments;

=

fe. Disclosure requiremonts on the terms and conditions of the CIS
investments and material information regarding CIS operations;
{, Minimum requirements for inculeating financial literacy in

investors;

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g. Ascertainment of client suitability for CIS securities;

h. Record-keeping, reporting and audit requirements of the fund
manager, corporate CIS, trustee, custodian and other relevant
parties in the CIS pertaining to records of all contributions,

earnings, total account balances and other matters;

i, Regulation, supervision and monitoring the operations,
management and/or activities of all CIS, fund managers, CIS
distributors, CIS solicitors and other parties involved in CIS;

j. Proper and effective enforcement of the provisions of this Law;
and

k, Such other matters necessary and desirable for the proper and
effective implementation of this Law.

The IRR may be repealed, amended or supplemented at any time in

the same manner as the originel IRR are adopted and issued pursuant to this
Section.

‘The IRR and its amendments or supplements shall be published once a

week for two (2) consecutive weeks in two newspapers of general circulation.

SECTION 63. Cooperation and Coordination. — The appropriate
regulatory agencies, with the Commission as the lead agency, shall adopt all
other appropriate measures as may be necessary or desirable for the effective
implementation and enforcement of this Law, taking into full account
declaration of policy contained in Section 2.

SECTION 64. Effect on Existing Laws and Contracts. - The
rights and remedies provided by this Law shall be in addition to any and all
other rights and remedies that exist under existing laws.

Nothing in this Law shall impair the obligation of existing contracts
il or administrative

nor affect or be construed to affect existing criminal,

cases.

SECTION 65. Separability clause. - Any portion or provision of this
Law that may be declared unconstitutional or invalid shall not have the effect

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of nullifying other portions or provisions hereof as long as such remaining

portion or provision can still subsist and be given effect in their entiroty.

SECTION 66. Suppletory Effect — This Law shall apply suppletorily
to any law that may be hereinafter enacted on collective investment schemes

governing specialized products or investments.

SECTION 67. Repealing Clause. ~ All acts, laws, executive orders
and/or rules and regulations or any part thereof which are inconsistent with
the provisions of this Law are hereby repealed or modified accordingly.

SECTION 68. Effectivity Clause.
its approval.

This Law shall take effect upon

Approved,

{ Section 4, COVERAGE - SEC proposal adopted (April 21, 2006) ; add “Securities Market Professionals" in

Dalinition of tarms, agsignod to SEC

{Affiliated person" = TWG adopted the definition in SBN 211 na is (April 21, 2006)

‘is "Bank’ - Based on the definition undar the General Banking Law (R.A No. 8191); BSP proposal adopted (Aprit
21, 2006)

iv “Broker” ~ PSE proposal adopted (April 21, 2006)

‘¥"Cartified Investment Solicitor” Adopted ICAP proposal (April 21, 2006)

‘vi *Common Stock” - Definition based on TWG diacuasion (April 21,2006)

-vii"Conteol” - SEC proposal adopted (April 21, 2006)

vili*Convictod" The TWG decided to maintala the definition provided under SBN 211, subject to further

doliboration

ix"Dealor" PSE proposal adopted (Aprit 21, 2006)

x “Director” + Chairman Lim stressed that the torm “director” may mean a "trustee" for it refers to any person

performing similar functions with reapect to the organization. (April 21, 2000)

si "Bxchango" -PSB proposal adopted (April 2, 2006)

i "nvettent company Manage? = AfoptedYEAP propotl (psi 23, 200), for futher icuason
“it“Tnourance Company Manager" Adopted ICAP proposal (April 21, 206)

xiv "Tnvestmont Adviser” — Contained in Atty. Callangan’s email dated 18 July 08.

Xv ‘Net Anset Valuo" Based on tho provisioas ofthe Mastal of Regulations for Banks regarding Not Asset Value of
{he UTIF, BSP proposal adopted (April 2, 2008). Te definition wae further revised on Sune 16, 2008,

Sv "Porson" ~ definition retained from SDN 211 (April 21,2006)

Zrii“Sele", “sll “oor to soll -Definiti adopted from SBN 211 (lune 16, 2006)

Jil "Socurities Regulation Code" ~ Definition adopted June 16, 2006

Ze -Sapnat Acnant Fund = erm nro by TCAP on Sune 20,2008

3x IC propor, adopted on September 15, 2006. ‘ _
eer aettet ocx ascxement company ~(()~ suggestion by SEC to change to “insten pero
tvlopted by the TWE (une 80, 2008)

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