THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
) 
First Regular Session 
1 
i 
. !  
n 
SEN 
S. No. 
Introduced by Senator S. R. Osmena 111 
EXPLANATORY NOTE 
The Philippines’ gross domestic savings as a percentage of Gross Domestic 
Product is projected by the Asian Development Bank at 19.5% in 2003. This has 
risen somewhat from 18% in 1996, but still trails behind Singapore’s 45.7%, 
Malaysia’s 41 %, Thailand’s 25.5%, Republic of Korea’s 31 YO, 
HongKong’s 34.7% 
and Taiwan’s 25.5%. 
This bill proposes to establish the regulatory framework for investment 
companies or mutual funds operating in the Philippines as a way of improving the 
country’s savings rate. Mutual, funds facilitate the pooling of middle- to low-income 
savers’ funds, allowing them to access the country’s capital markets and lending 
them the expertise needed to evaluate financial risks and participate in the profits of 
such risk taking. 
From the unregulated heyday for the 1950’s, Philippine mutual funds shifted 
to the highly restrictive tenor of Republic Act No. 2629 (the Investment Company Act 
of 1960), which was a reaction of the 1950’s fiasco. The industry lay dormant 
throughout the 1970s especially when the Securities and Exchange Commission 
suspended the licensing of new mutual funds. In 1989, the SEC tried, albeit 
unsuccessfully, to revive the industry through the issuance of Implementing Rules 
and Regulations for R.A. 2629. 
The proposed provisions of this bill aims to put up mechanisms that would 
safeguard the public interest, while allowing some flexibilities to allow the growth of 
investment companies. This bill seeks to democratize economic opportunities in our 
financial market by paving the way for the development of investment companies or 
mutual funds in the Philippines. Then middle income savers will develop access to 
the country’s capital markets, and the economy will benefit from an expanded capital 
base. 
In view of the foregoing, early passage of this bill is earnestly requested. 
SERGIO OSMENA 111 
Senator 


SENATE 
S. No. 
,
,
 
~ 
~ 
~~ 
~~ 
-~ 
~ 
~ 
Introduced by Senator S. R. Osmena 111 
REVISED INVESTMENT COMPANY ACT 
Be it enacted by the Senate and House of Representatives of the Philippines 
in Congress assembled: 
1 
SEC.l. Short Title. -- This Act may be cited as the "Revised Investment 
2 
Company Act" 
3 
SEC. 2. Declaration of Policy. - It is the declared policy of the State to foster 
4 
and promote a fair, orderly and efficient capital market in order to provide the private 
5 
and public sectors with access to funds that are vital to the development of the national 
6 
economy. 
An important component in implementing this policy is to provide a 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
favorable framework in which investment companies can operate to facilitate the flow of 
investment capital from sources within the country and abroad, and to broaden 
participation in securities ownership by Filipinos so that a greater number are able to 
share in economic growth. 
It is recognized, however, that an investment company, by its nature, brings 
together large concentrations of funds from the public which are entrusted for 
investment to the management of others. This condition inherently presents an 
increased threat of involvement of unsuitable persons in the conduct of investment 
companies, and for self-dealing, conflicts of interest, inadequate disclosure and other 
unsound, inequitable or abusive practices by those who manage or are otherwise 
affiliated with them. 
The purpose of this Act, accordingly, is to establish a comprehensive scheme of 


1 
1 
2 
3 
4 
5 
8 
9 
10 
I 1  
12 
13 
14 
I5 
16 
17 
18 
regulation to permit investment companies to serve their role in the capital formation 
process, and at the same time seek to prevent abuses and protect the interests of the 
public who are investors in such companies. 
SEC. 3. 
Definitions.- When used in this Act, unless the context otherwise 
requires 
a) "Affiliated person" 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, copartner, or employee of such other person; and (5) if 
such other person is an investment company, any investment adviser thereof or 
investment company manager thereof. 
b) "Bank" means (1) a banking institution organized under the laws of the 
Philippines, or (2) any other banking institution or trust company, doing business under 
the laws of the Philippines, engaged in the lending of funds obtained from the public 
through the receipt of deposits of any kind and duly authorized to operate as such by 
19 
20 
21 
22 
23 
companies. 
24 
the Monetary Board of the Bangko Sentral Ng Pilipinas. 
c) "Broker" means any person engaged in the business of effecting transactions in 
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 an underwriter for one or more investment 
d) "Commission" means the Securities and Exchange Commission. 
25 
e) "Common stock" of a registered investment company means the one class of 
26 
shares which is permitted under this Act to be issued by such company, and which 
27 
must possess exclusive voting rights. 
28 
9 "Company" means a corporation, a registered partnership, trust, or an 
2 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
association lawfully transacting business in the Philippines. 
g) "Control" 
means the power to exercise a controlling influence over the 
management or policies of a company through the beneficial ownership either directly 
or through one or more controlled companies, of more than thirty per centum (30%) of 
the voting securities of such company. Any person who does not so own more than 
thirty per centum (30%) of the voting securities of any company shall be presumed not 
to control such company. A natural person shall be presumed not to be a controlled 
person within the meaning of this Act. Any such presumption may be rebutted by 
evidence satisfactory to the Commission, by order of the Commission either on its own 
motion or on application by an interested person. 
h) "Convicted" includes 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. 
i) "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. 
j) "Dealer" means any person regularly engaged in the business of buying and 
selling securities for his own account, through a broker or otherwise. 
The term 
excludes banks, insurance companies, or investment companies, or any person insofar 
as he is engaged in investing, reinvesting, or trading in securities, or in owning or 
holding securities, for his own account, either individually or in some fiduciary capacity, 
but not as a part of regular business. 
k) "Director" means any director of a corporation or any person performing similar 
functions with respect to any organization. 
I) "Exchange" means any organization, association, or group of persons which 
constitutes, maintains, or provides a market place or facilities for bringing together 
purchasers and sellers of securities or for otherwise performing the functions commonly 
performed by a stock exchange as that term is generally understood with respect to 
securities. The term includes the market place and the market facilities maintained by 
3 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
such exchange. 
m) "Government security" means any security issued or guaranteed as to principal 
or interest by the Republic of the Philippines, or by a person controlled or supervised 
by and acting as an instrumentality of the Government of the Republic of the Philippines 
pursuant to authority granted by the Congress of the Philippines; or any certificate of 
deposit for any of the foregoing 
n) "Insurance Company" means a company which is organized for the primary and 
predominant business of writing 
insurance or 
reinsuring risks underwritten by 
insurance companies, and which is subject to supervision by the Insurance 
Commission; or any receiver or similar official or any liquidating agent for such a 
company, in his capacity as such. 
0 )  "Investment Adviser" means any person who, regularly furnishes advice or 
recommends investment decisions with regard to the securities portfolio of an 
investment company pursuant to an advisory contract with such investment company or 
investment company manager. 
p) "Investment House" means any enterprise which engages in the underwriting of 
securities of other corporations as defined in section two of the Investment Houses 
Law, P.D. No. 129, as may be amended from time to time, and is registered pursuant to 
said law. 
q) "Investment Company Manager" means a person engaged in the business of 
managing the investment assets of an investment company or engaged in the business 
of prgviding administrative and ancillary services for such company. 
r) "Investment Management Contract" means a contract between an investment 
company and an investment company manager, on which basis the latter manages 
the investment of the assets of, andlor provides administrative and ancillary services for 
such investment company. 
s) "Issuer" means any person who issues or proposes to issue any security or has 
outstanding any security which it has issued. 
4 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
t) "Lend" includes a purchase coupled with an agreement by the vendor to 
repurchase; "borrow" includes a sale coupled with an agreement by the vendee to 
resell. 
u) "Majority-owned subsidiary" of a person means a company fifty per centum 
(50%) or more of the outstanding voting securities of which are owned by such person. 
v) "Net asset value" means the value of all assets less all liabilities of an 
investment company as determined in accordance with this Act and the rules and 
regulations thereunder, and with supplemental application of generally accepted 
accounting principles and practices uniformly applied. 
w) "Person" means a natural person, a company or other juridical entity. 
x) "Promoter" of a company or a proposed company means a person who is 
initiating or directing, or has within one year initiated or directed, the organization of 
such company, acting alone or in concert with other persons. 
y) "Redeemable security" means any security, other than short-term paper, under 
the terms of which the holder is entitled to receive approximately his proportionate 
share of the issuer's current net assets, or the cash equivalent thereof, upon its 
presentation to the issuer or to a person designated by the issuer. 
z) "Reorganization" means (1) a reorganization under the supervision of a court of 
competent jurisdiction; (2) a merger or consolidation; (3) a sale of seventy-five per 
centum (75%) or more in value or the assets of a company; (4) a restatement of the 
capital of a company, or an exchange of securities issued by a company for any of its 
own outstanding securities; (5) a voluntary dissolution or liquidation of a company; (6) a 
re-capitalization or other procedure or transaction which has for its purpose the 
alteration, modification, or elimination of any of the rights, preferences, or privileges of 
any class of securities issued by a company, as provided in its charter or other 
instrument creating or defining such rights, preferences, and privileges; (7) an 
exchange of securities issued by another company or companies, preliminary to and for 
the purpose of effecting or consummating any of the foregoing; or (8) any exchange of 
5 


I 
securities by a company which is not an investment company for securities issued by a 
z company which is a registered investment company. 
3 
4 
aa)"Revised Securities Act" means B.P. 178, enacted July 27, 1981, as may be 
amended from time to time. 
5 
bb)"Sale", "sell" "offer to sell" or "offer for sale" includes every contract of sale or 
6 
disposition of, attempt or offer to dispose of, or solicitation of an offer to buy, a security 
7 
or interest in security, for value. Any such security given or delivered with, or as a 
8 
bonus on account of, any purchase of securities or any other thing, shall be 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
conclusively presumed to constitute a part of the subject of such purchase and to have 
been sold for value. 
cc)"Sales load" includes: ,(I) the fees and expenses for sales and promotional 
activities that are charged in connection with the sale of a security issued by an 
investment company, and deducted from the payment received from a purchaser on the 
selling price at which the security was sold to the public; (2) promotional or sales fees 
paid by an investment company in connection with a specific sale of its securities to an 
investor; and (3) any fee deducted from redemption proceeds to an investor on account 
of sales or promotional activities; provided that any tax paid or payable on the issuance, 
purchase, sale or redemption of the securities of the investment company, such as the 
value added tax, shall not be considered part of the sales load. 
dd)"Security means any note, check, stock, 
treasury stock, bond, debenture, 
evidence of indebtedness, certificate of interest or participation in any profit-sharing 
agreement, collateral-trust certificate, pre-organization certificate 
or subscription, 
transferable share, investment contract, voting trust certificate, certificate of deposit for 
a security, fractional undivided interest in oil, gas or other mineral rights, commercial 
papers, any option or privilege on any security (including a certificate of deposit), or, in 
general, any interest or instrument commonly known as "security" or any certificate of 
interest or participation in, temporary or interim certificate for, receipt for, guarantee of, 
or warrant or right to subscribe to or purchase, any of the foregoing. 
6 


1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
ee)"Short-term paper" means any note, draft, bill of exchange, or banker's 
acceptance payable on demand or having maturity at the time of issuance of one year 
or less, exclusive of days of grace, or any renewal thereof payable on demand or 
having maturity likewise limited; and such other classes of securities, of commercial 
rather than an investment character, as the Commission may designate by rules and 
reg ulations. 
ff) "Underwriter" means any person who has purchased or sells any security from 
an issuer in connection with the distribution of any security or who participates directly 
or indirectly in any such undertaking. The term shall not include a person whose 
interest is limited to a commission from an Underwriter or dealer within the usual and 
customary distributor's or seller's commission. As used in this paragraph the term 
"issuer" shall include, in addition to an issuer, any person directly or indirectly 
controlling or controlled by the issuer, or any person under direct or indirect common 
control with the issuer. Such person shall cease to be an underwriter in respect of such 
securities or the issuer thereof when the distribution of the securities in respect of which 
any person is an underwriter is completed. 
Under this Act, "underwriter of or for any investment company or of any security 
issued by such a company", means any underwriter who as principal, purchases from 
such company, or has the right (whether absolute or conditional) pursuant to contract to 
purchase any such security for distribution from such company from time to time, or 
who as agent for such company sells or has the right to sell any such security to a 
dealer or to the public or both. The term does not include a dealer who purchases 
from such company through the underwriter acting as agent for such company. 
gg)"Unit Investment Trust" means an investment company which 1) is organized 
under a trust indenture, contract or custodianship or agency or similar instrument; 2) 
does not have a board of directors, and 3) issues only redeemable securities each of 
which represents an undivided interest in a unit of specified securities, but does not 
include a voting trust. 
7 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
I5 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2s 
hh)"Value" with respect to an investment company, in each case as of such time 
prescribed by this Act or the rules of the Commission, means: (I) 
with respect to 
securities for which market quotations are readily available, the market value of such 
securities; and (2) with respect to other securities and assets, fair value as determined 
in good faith by the board of directors. The market value of a security shall be its 
closing price and if there is no closing price, the average of the last bid and ask price. 
In the case of an option or other right, the market value shall be the daily mark-to- 
market price, if available. 
ii)"Voting security" means any security presently entitling the owner or holder 
thereof to vote for the election of directors of a company. 
jj)"Wholly-owned subsidiary" of a person means a company ninety-five per centum 
or more of the outstanding voting securities of which are owned by such person, or by 
a company. 
No provision of this Act shall apply to, or be deemed to include, the Philippines or 
any political subdivision thereof, or any agency, authority, or instrumentality of any one 
or more of the foregoing, or any corporation which is wholly-owned directly or indirectly 
by any one or more of the foregoing, or any officer, agent, or employee of any of the 
foregoing acting as such in the course of his official duty, unless such provision makes 
specific reference thereto. 
SEC. 4. Definition oflnvestment Company. - (a) (1) When used in this Act 
"investment company" means any issuer which is or holds itself out as being engaged 
primarily, or proposes to engage primarily, in the business of investing, reinvesting, or 
trading in securities; 
(2) An issuer shall be deemed to be primarily engaged or 
proposing to engage primarily in the business of investing in securities if it owns or 
proposes to acquire securities (other than Government securities, securities of majority- 
owned subsidiaries that are not investment companies, and those issued by any 
employees' stock, bonus, pension, or profit sharing plan or fund) having a value 
exceeding forty pet- centum (40%) of such issuer's unconsolidated total assets 
8 


2 
3 
4 
5 
10 
1 1  
12 
13 
14 
15 
16 
17 
IS 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
(exclusive of Government securities and cash items); (3) For purposes of this section, 
the value of securities owned at the end of the last fiscal quarter means (i) with respect 
to securities for which market quotations are readily available, the market value of such 
securities; and (ii) with respect to other securities, the fair value thereof as determined 
in good faith by the board of directors. The market value of a security shall be its 
closing price and if there is no closing price, the average of the last bid and ask price. 
In the case of an option or other right, the market value shall be the daily mark-to- 
market price, if available. The value of securities acquired after the end of the last fiscal 
quarter shall be the cost thereof. 
(b) Notwithstanding subsection (a) of this Section, none of the following persons 
is an investment company subject to regulation under this Act: 
(I) 
any issuer whose outstanding securities (other than short-term paper) are 
beneficially owned by not more than fifty (50) persons, and which is not presently 
making or intends to make a public offering of its securities. For purposes of this 
paragraph, beneficial ownership by a company shall be deemed to be beneficial 
ownership by one person; except that, if such company owns 
twenty-five per 
centum (25%) or more of the outstanding voting securities of the issuer, the 
beneficial ownership shall be deemed to be that of the holders of such company's 
outstanding securities (other than short-term paper); 
(2) any bank engaged in the conduct of its ordinary business, or any common 
trust fund administered by a bank for collective investment of funds held by the bank 
in a fiduciary capacity; 
(3) any insurance company, or any employees' stock, bonus, pension, or profit 
sharing plan or fund, engaged in the conduct of its ordinary business; 
(4) 
any broker, dealer, or investment house, registered as such with the 
Commission, primarily engaged in the business of underwriting securities issued by 
other persons, purchasing and selling securities for its own account, or effecting 
transactions in securities for the accounts of others; 
9 


1 
2 
3 
4 
5 
6 
7 
S 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
1s 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
(5) any company that 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 company does not engage in the business of issuing 
redeemable securities; 
(6) any company organized and operated exclusively for religious, educational, 
benevolent, fraternal, charitable, or reformatory purposes, no part of the net 
earnings of which inures to the benefit of any shareholder of such company; 
(7) any issuer primarily engaged in investing in securities issued by a majority- 
owned subsidiary or subsidiaries of such issuer, where each such subsidiary is not 
an investment company; 
(8) any issuer, all of the outstanding securities of which (other than short term 
paper and directors' qualifying shares) are beneficially owned, directly or indirectly, 
by a person excepted by this subparagraph (b) from the definition of investment 
company; and 
(9) any issuer or class of issuers that, pursuant to rule or order issued by the 
Commission, is determined not to be an investment company, or is excepted from 
the definition thereof as not necessary in the public interest and for the protection of 
investors. 
SEC. 5. C/assificafion of lnvesfmenf Companies- For the purposes of this 
Act, investment companies are divided into open-end and closed-end companies, 
defined as follows: 
(a) "Open-end company" means an investment company commonly known as a 
mutual fund which is offering for sale or has outstanding any redeemable security of 
which it is the issuer; and 
(b) "Closed-end company" means an 'investment company which is offering for 
sale or has outstanding securities of which it is the issuer, none of which are 
I O  


1 
redeemable securities. 
2 
3 
4 
5 
6 
investment trust units. 
SEC. 6. Unit hvestment Trusts.--The Commission may permit unit investment 
trusts to operate in the Philippines pursuant to rules the Commission may prescribe as 
necessary or appropriate in the public interest and for the protection of investors for the 
registration and regulation of unit investment trusts and of the public offering of 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
I6 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
SEC. 7. 
Transactions by lnvestment Companies- (a) An investment 
company organized or otherwise created under the laws of the Philippines is permitted 
to engage, directly and indirectly, in the following enumerated acts, only if registered 
under Sec. 25: Provided That nothing herein shall be deemed to authorize the 
investment company to act as underwriter of securities of another person: 
(1) Offer for sale, sell, or deliver after sale, any security or any interest in a 
security, whether the issuer of such security is such investment company or another 
person; 
(2) Purchase, redeem, retire, or otherwise acquire, or attempt to acquire any 
security, or any interest in a security, whether the issuer of such security is such 
investment cotnpany or another person; 
(3) Control any investment company which does any of the acts enumerated in 
paragraphs (I) 
and (2) of this Subsection. 
An investment company, organized and registered as such under this Act, may 
engage in the acts enumerated in paragraphs (1) and (2) of this subsection (a) without 
the need of obtaining a separate license as dealer in securities under the Revised 
Securities Act. 
(b) No promoter or underwriter for an investment company organized or 
otherwise created under the laws of the Philippines is permitted to engage in the acts 
enumerated in paragraphs (1) and (2) of subsection (a) of this section in respect of any 
security issued by such company, and no such underwriter shall sell or purchase for the 
account of such company the security of any issuer, unless such company is registered 
I 1  


~ 
~ 
I 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
under Sec. 25 of this Act. 
The provisions of subsections (a) and (b) shall not apply to transactions which 
are merely incidental to the dissolution of an investment company. 
(c) An investment company organized or otherwise created under the laws of a 
foreign country shall comply with the registration requirements of Sec. 25 of this Act 
before it can make a public offer of its securities in the Philippines. The Commission 
may, by rule or order, require that a portion of such funds raised from any public offer 
by a foreign investment company of its securities in the Philippines be invested in the 
Philippines. 
The Commission may likewise issue an order imposing such other 
conditions respecting the offer for sale, sale and delivery after sale, in connection with 
any such public offering by a foreign investment company of its securities within the 
Philippines, if it finds that the issuance of such order is necessary or appropriate in the 
public interest or for the protection of investors. 
SEC. 8 Funcfions and Acfivifies of lnvesfmenf Companies. - (a) 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 registered 
investment company is not permitted - 
(I) 
to purchase any security on margin, except such short-term credits as are 
necessary for the clearance of transactions; 
(2) to participate on a joint or a joint and several basis in any trading account in 
securities, except in connection with an underwriting in which such registered 
company is a participant; or 
(3) to effect a short sale of any security, except in connection with an 
underwriting in which such registered company is a participant. 
(b) A registered investment company, 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, is not permitted to act as a distributor of 
securities of which it is the issuer, except through an underwriter. 
12 


2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
(c) It shall be unlawful for any investment company to - 
( A )  
generate funds for promoting the private business or industry of any 
employee, officer, director, promoter or stockholder thereof; 
(2) allow any of its employees, officials, directors, organizers, incorporators or 
stockholders to buy real estate, personal property or any other kind of property and sell 
the same to the company at a price higher than the procurement cost or sell any 
property of the Company, or a portion thereof, at a price below the market-value thereof 
to any of the aforementioned persons. 
(d) 
(I) No registered investment company, directly or indirectly, shall-- 
(A) acquire more than three per centum (3%) of the common stock of 
another investment company; or have more than ten per centum (10%) of its 
12 
13 
14 
15 
16 
assets invested in shares of other investment companies; 
(6) acquire more than ten per centum (10%) of the outstanding securities 
of any one issuer that is not an investment company; or 
(C) acquire securities of any one issuer having an aggregate value in 
excess of ten per centum (10%) of the net asset value of such investment 
17 
company. 
18 
(2) The Commission may issue such rules, as necessary or appropriate in the 
19 
public interest or for the protection of investors, that provide for different percentages or 
20 
further restrictions with respect to investments in other investment companies or the 
2 1 
concentration of investments by a registered investment company. 
22 
23 
24 
25 
SEC. 9 Changes in Investment Policy. - (a) Unless authorized by the vote of a 
majority of its outstanding common stock, no registered investment company shall, -- 
(I) 
Borrow money, issue senior securities, undeiwrite securities issued by other 
persons, purchase or sell real estate or commodities or make loans to other 
26 
27 
28 
persons, except in each case in accordance with the recitals of policy contained in 
its registration statement in respect thereto; 
(2) Deviate from its policy .in respect of concentration of investments in any 
13 


I 
2 
3 
4 
5 
particular industry or group of industries as recited in its registration statement, or 
deviate from any fundamental policy (which includes any investment objectives) 
recited in its registration statement pursuant to Sec. 25 (d) (3); or 
(b) Where the change will involve an amendment of the organization papers of 
the investment company, the pertinent provisions of law on the vote necessary and 
6 
7 
(c) Notwithstanding any provision of the Corporation Code to the contrary, a 
8 
change in investment policy duly authorized by requisite vote of the outstanding 
other requisites to effectuate the same, shall likewise be complied with. 
9 
10 
I I  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2s 
common stock shall become effective twenty (20) days after filing with the Commission 
of an amendment setting forth such policy change to the registration statement and 
prospectus of the registered investment company, unless the Commission, prior to the 
lapse of such period, institutes proceedings to disapprove such policy change. The 
Commission may by order, after hearing, disapprove a policy change if it finds it to be in 
contravention of the Act or the Commission's rules. 
(d) The Commission is authorized to issue rules prohibiting any investment policy 
or conditioning any investment policy of a registered investment company as necessary 
or appropriate in the public interest and for the protection of investors 
SEC. IO. Disfribufion, Redemption, and Repurchase of Securifies - (a) No 
registered investment company shall sell any redeemable security issued by it to any 
person except either to or through an underwriter for distribution or at a current public 
offering price described in the prospectus, and, if such class of security is being 
currently offered to the public by or through an underwriter, no underwriter of such 
security and no dealer shall sell any such security to any person except a dealer, an 
underwriter or the issuer, except at a current public offering price described in the 
prospectus: Provided, however, That nothing in this subsection shall prevent a sale 
made (i) pursuant to clause (1) or (2) of Sec. 12 (b); 
(ii) pursuant to an offer made 
solely to all registered holders of the securities, or of a particular class or series of 
securities issued by the company proportionate to their holdings or proportionate to any 
14 


5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
I6 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
cash distribution made to them by the company (subject to appropriate qualifications 
designed solely to avoid issuance of fractional securities); or (iii) in accordance with 
rules and regulations of the Commission made pursuant to Sec. 8 (b); Provided Furfher, 
That no redemption of any security held by any person affiliated with the investment 
company manager or underwriter shall be made if the paid-in capital is less than the 
amount prescribed by Sec. 15 (a)(4). 
(b) Notwithstanding any provision of the Corporation Code to the contrary or of 
subsection (a) of this Section, no registered investment company shall suspend the 
right of redemption or postpone the date of payment or satisfaction upon redemption of 
any redeemable security in accordance with its terms as appears in its prospectus, for 
more than seven (7) banking days, or such other period as the Commission by rule may 
prescribe, after the tender of such security to the company or its agent designated for 
that purpose for redemption except - 
(I) 
for any period (A) during which the Philippine Stock Exchange is closed 
other than the customary weekend and holiday closing or (B) during which trading 
on the Philippine Stock Exchange is restricted; 
(2) for any period during which an emergency exists as a result of which (a) 
disposal by the company of securities owned by it is not reasonably practicable or 
(b) it is not reasonably practicable for such company fairly to determine the value of 
its net assets; or 
(3) for such other periods as the Commission may by order permit for the 
protection of security holders of the company. 
The Commission shall by rules and regulations determine the conditions 
under which (i) trading shall be deemed to be restricted and (ii) an emergency shall 
be deemed to exist within the meaning of this subsection. 
(c) No registered open-end company shall restrict the transferability or 
negotiability of any security of which it is the issuer except in conformity with the 
statements with respect thereto contained in its registration statement nor 
in 
15 


4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
21 
24 
25 
26 
27 
28 
contravention of such rules an'd regulations as the Commission may prescribe in the 
interests of the holders of all of the outstanding securities of such investment company. 
(d) No registered open-end company shall issue any of its securities (I) for 
services; or (2) for property other than cash or for securities (including securities of 
which such registered company is the issuer), except as a dividend or distribution to its 
security holders or in connection with a reorganization. 
(e) The provisions of the Corporation Code or any other provision of the said law 
in conflict with this section, shall not apply to a registered open-end company. 
(9 The Commission may issue such rules applicable to registered open-end 
companies, and to underwriters of, and dealers in, the redeemable securities of any 
registered open-end company, prohibiting the price at which such security is offered 
and sold to the public from including an excessive sales load as determined by the 
Commission. 
SEC. 1 1, 
Distribution and Repurchase 
of Securities: Closed-end 
Companies. - (a) No registered closed-end company shall issue any of its securities 
(I) 
for services; or (2) for property other than cash or for securities (including securities 
of which such registered company is the issuer), except as a dividend or distribution to 
its security holders or in connection with a reorganization. 
(b) No registered closed-end company shall sell any common stock of which it is 
the issuer at a price below the current net asset value of such stock, exclusive of any 
distributing commission or discount (which net asset value shall be determined as of a 
time within forty-eight (48) hours, excluding Sundays and holidays, next preceding the 
time of such determination), except (I) 
in connection with an offering to the holders of 
its capital stock; (2) with the consent of a majority of its capital stockholders; (3) upon 
conversion of a convertible security in accordance with its terms; 
(c) No registered closed-end company shall purchase any securities of which it 
is the issuer except- 
(1) on a securities exchange or such other open market as the Commission may 
I6 


4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
1s 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
designate by rules and regulations or orders; Provided, That if such securities are 
stock, such registered company shall, within the preceding six (6) months, have 
informed stockholders of its intention to purchase such stock by letter or report 
addressed to stockholders of such class; or 
(2) pursuant to tenders, after reasonable opportunity to submit tenders have 
been given to all holders of securities to be purchased; or 
(3) under such other circumstances as the Commission may permit by rules and 
regulations or orders for the protection of investors in order to insure that such 
purchases are made in a manner or on a basis which does not unfairly discriminate 
against any holders of the securities to be purchased. 
SEC. 12. Offers of Exchange Securities. - (a) It shall be unlawful for any 
registered open-end company or any underwriter for such a company to make or cause 
to be made an offer to the holder of a security of such company or of any other open- 
end investment company to exchange his security for a security in the same or another 
such company on any basis other than the relative net asset values of the respective 
securities to be exchanged, unless the terms of the offer have first been submitted to 
and approved by the Commission or are in accordance with such rules and regulations 
as the Commission may have prescribed in respect of such offers which are in effect at 
the time such offer is made. For the purposes of this Section, (I) 
an offer by an 
underwriter means an offer communicated to holders of securities of a class or series 
but does not include an offer made by such underwriter to individual investors in the 
course of a retail business conducted by such underwriter, and (2) the net asset value 
means the net asset value which is in effect for the purpose of determining the price at 
which the securities, or class or series of securities involved are offered for sale to the 
public either (A) at the time of the receipt by the offer or of the acceptance of the offer 
or (6) at such later time as is specified in the offer. 
(b) The provisions of this section shall not apply to any offer made 
pursuant to (1) any plan of reorganization, which is submitted to and requires the 
17 


 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
I9 
20 
21 
22 
23 
24 
25 
26 
27 
28 
approval of the holders of at least a majority of the outstanding shares of class or series 
to which the security being offered belongs; (2) the right of conversion, at the option of 
the holder, from one class or series into another class or series of securities issued by 
the same company upon such terms as are specified in the charter, certificate of 
incorporation, articles of association or by-laws subject to which the securities to be 
converted were issued or are to be issued. 
SEC. 13. Loans by Investment Companies - It shall be unlawful for any 
registered investment company to lend money or property to any person directly or 
indirectly, if - 
(a) the investment policies of such registered company, as recited in its 
registration statement and reports filed under this Act, do not permit such a loan; or 
(b) 
such person controls or is under common control with such registered 
company; egcept that the provision of this paragraph shall not apply to any loan from a 
registered company to a company which owns all of the outstanding securities of such 
registered company, except director's qualifying shares. 
SEC. 14. Prohibitions Against Guarantee of Obligations by an Investment 
Company. - It shall be unlawful for any investment company to guarantee any 
obligation of whatever kind or nature. 
SEC. 15. Structure and Capitalization of Investment Companies. - (a) Until 
the Commission shall otherwise, by regulation prescribe, every registered investment 
company shall - 
(I) 
Be organized in the form of a stock corporation. 
(2) Issue shares of stock consisting solely of common stock. 
(3) Provide, if an open-end company, in its Articles of Incorporation, and 
notwithstanding any provision of the Corporation Code to the contrary, that 
shareholders shall not be entitled to pre-emptive rights. 
(4) Have, at the time of registration, an initial subscribed and paid-up capital from 
the promoter of such company, and maintain a paid-up capital which shall remain 
I8 


9 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
I5 
16. 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
unimpaired at all times thereafter, of no less than fifty million pesos 
(P50,000,000.00) or as may otherwise be prescribed by rules or regulations of the 
Commission. 
In prescribing the amount of paid-up capital for an investment 
company, the Commission shall take into account whether a lesser amount is 
appropriate where the investment company is one of a group of investment 
companies under management by the same investment company manager. 
(5) Require that initial paid-up capital not be withdrawn for a period of twelve (12) 
months following registration, or such other period as the Commission by rule may 
prescribe. 
(6) 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 by rule prescribe. 
(b) Notwithstanding any provision of the Corporation Code to the contrary, no 
registered investment company shall be required to have paid-up capital for the 
issuance of initial or additional shares of common stock in excess of the amount 
specified in subsections (a) (4) and (5) of this Section. 
(c) The Commission by rule may prescribe such other or additional requirements 
under subsection (a) of this Section respecting the form, share structure, and level and 
restrictions on capitalization and reserves, as necessary or appropriate in the public 
interest or for the protection of investors. 
(d) No registered investment company or underwriter for such company shall 
make a public offering of such company's securities unless such company is in 
compliance with the provisions of this section. 
SEC. 16 
Debf Structure of lnvesfmenf Companies- 
(a) A registered 
investment company shall not incur any indebtedness, through issuance of a debt 
security or otherwise, unless, immediately after incurring such indebtedness, it has an 
asset coverage of at least three hundred per centum (300%) for all the borrowings of 
such company; 
19 


_ _ _
 
1 
(b) A registered open-end company shall not issue any debt securities, but is 
2 
3 
4 
5 
6 
7 
8 
permitted to borrow from a bank. In the event that asset coverage for such borrowings 
at any time falls below three hundred per centum (300%), such open-end company 
shall, within three (3) days thereafter, reduce its borrowings to the extent that the asset 
coverage shall be at least three hundred per centum (300%); 
(c) A registered closed-end company shall not declare a dividend or distribution 
on its common stock unless, at the time of such declaration, it has asset coverage of at 
least three hundred per centum (300%) for all its indebtedness, after deducting the 
9 
amount of such dividend. 
10 
1 1  
SEC. 17. Dividends - It shall be unlawful for any investment company to pay any 
dividend, or make any distribution in the nature of a dividend payment, wholly or partly 
12 
13 
(a) 
such company's accumulated undistributed net income, determined in 
14 
accordance with good accounting practice and including profits or losses realized 
IS 
upon the sale of securities or other properties; or 
16 
(b) such company's earned surplus so determined for the current or preceding 
17 
fiscal year; unless such payment is accompanied by a written statement which 
from any source other than - 
18 
adequately discloses the source or sources of such payment. The Commission 
19 
may prescribe the form of such statement by rules and regulations or by order in 
20 
21 
the public interest and for the protection of investors. 
It shall likewise be unlawful to advertise such dividends in terms of centavos or 
22 
pesos per share without also stating the percentage they bear to the par value per 
23 
share. 
24 
SEC. 18. Board of Direcfors; Election; Term; Vacancies; and Salaries. - 
25 
26 
Notwithstanding any provision of the Corporation Code to the contrary -- (a) Not later 
than ninety (90) days from the effective date of this Act, at least a majority of the board 
27 
of directors of a registered investment company shall be disinterested persons. For 
28 
purposes of this Sec. 18, a "disinterested person'' is a person who is not an affiliated 
20 


I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I1 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
person of the investment company (other than solely by reason of being a director or as 
stockholder who does not have control of its voting securities as defined in this Act); not 
an affiliated person of such company's investment company manager, investment 
adviser, underwriter, or custodian; not a legal counsel or accountant to such company; 
not any person who has acted in any such capacity at any time during the past two (2) 
years; not a person who has had a material business or professional relationship with 
such investment company during the past two years; not a legal counsel to the 
investment company manager of such investment company during the past two years; 
or not the spouse, sibling, parent or child of any of the foregoing persons. 
(b) No person shall serve as a director of a registered investment company 
unless elected to that office by the holders of the outstanding voting securities of such 
company at a meeting of holders of such voting securities duly called for that purpose 
at least every three (3) years, except that vacancies occurring between such meeting 
may be filled in any otherwise legal manner if immediately after filling any such vacancy 
at least two-thirds of the directors then holding office shall have been elected to such 
office by the holders of the outstanding voting securities of the company at such 
meeting; Provided, however, That a majority of the members of the board of directors of 
such company shall be residents of the Philippines, unless the Commission by rule may 
otherwise prescribe. 
(c) The operational expenses of a registered investment company, including 
salaries, fees and emoluments received by members of the board of directors from 
such company, shall not exceed ten per centum (10%) annually of the total funds 
invested in such company by investors, or such other amount the Commission by rule 
may prescribe. 
SEC. 19. 
Investment Managers of lnvestmenf Companies; Investment 
Management and Investment Company Underwriter Contracts. - 
(a) No person shall serve as an investment company manager of a registered 
investment company, or enter into an investment management contract with such 
21 


+ 
1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
11 
12 
13 
14 
I5 
16 
17 
IS 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
company, unless registered with the Commission as an investment company manager. 
(b) An investment 
company manager may be registered by filing with the 
Commission an application for registration in such form and containing such information 
and documents as the Commission by rule may prescribe. Within sixty (60) days after 
the filing of such application (or such longer period if the applicant consents), the 
Commission shall (1) 
institute proceedings to 
determine whether to deny registration. 
by order grant registration, or (2) 
(c) 
The Commission may by order, after hearing, deny an application for 
registration as an investment company manager filed pursuant to subsection (b), or 
suspend or revoke any such registration, if it finds that- 
(I) 
The investment company manager or any affiliated person thereof is subject 
to any disability enumerated in Sec. 20 (a) of this Act. 
(2) The investment 
company manager is not organized in the form of a 
corporation or such other form as the Commission by rule may prescribe. 
(3) The investment company manager did not have at the time of filing of its 
application for registration, or continuously maintain at all times thereafter, an 
unimpaired net worth, exclusive of revaluation surplus, of at least ten million pesos 
(P 
it, 
0,000,000.00) or such other amount as the Commission by rule may prescribe. 
(4) The investment company manager, and any natural persons associated with 
lave not satisfied such standards of training, experjence, competence and other 
qualifications that the Commission by rule may prescribe in the public interest and 
for the protection of investors. 
(5) The investment company manager has failed to pay the initial or annual fee 
for registration. 
(d) No investment company manager shall serve or act in such capacity for a 
registered investment company except pursuant to a written investment management 
contract that shall, without limitation, contain the following: 
(1) a precise description of the services to be provided by the investment 
22 


~ 
__ 
? 
1 
2 
3 
4 
investment company manager; 
company manager, the management fee and other compensation to be paid to the 
investment company manager and any affiliated person thereunder; 
(2) the allocation of expenses between the investment company and the 
5 
6 
1 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
2s 
26 
27 
28 
(3) a statement of the investment objectives of the investment company and 
other investment policies (with a designation as to which are deemed fundamental), 
including concentrations of investments in equity, debt and other instruments, and in 
securities of issuers in industry groups; 
(4) a provision providing for termination of such contract at any time by the 
investment company on not more than sixty days notice to the investment company 
manager; 
(5) a prohibition on assignment of such contract, or any functions thereunder, 
except to a registered investment company manager and only with the consent of 
the investment company; 
(6) the conditions, if any, under which the investment company may be 
liquidated; 
(7) the period of the contract which shall not be more than two (2) years, subject 
to renewal upon approval by the Board of Directors of the investment company; 
(e) No underwriter for a registered open-end company shall offer for sale, sell, or 
deliver after sale any security for which such company is the issuer except to a 
registered investment manager and only with the consent of such company, pursuant 
to a written contract with such company that shall contain a prohibition on assignment. 
(9 (1) No registered investment company shall initially (A) enter into an 
investment management contract; or (6) in the case of an open-end company enter 
into a contract with an underwriter; or (C) renew an investment management contract 
or such contract with the underwriter, unless such contract in each case is approved by 
the vote of a majority of the board of directors of such company, which vote shall 
consist of a majority of directors who are disinterested persons as defined in Sec. 18 of 
23 


1 
2 
3 
4 
5 
6 
7 
S 
9 
I O  
I I  
12 
13 
14 
15 
16 
17 
1s 
19 
20 
21 
22 
this Act. 
(2) No investment management contract and in the case of an open end 
company, no contract with an underwriter, shall be terminated except (A) by the vote 
of a majority of the board'of directors, which vote shall consist of a majority of 
directors who are disinterested persons, or (B) by vote of a majority of the 
outstanding common stockholders of such company. 
(3) No registered investment company shall approve (A) an increase in the 
management fee and other compensation provided under the investment management 
contract with such company, (El) an assignment of the investment management 
contract, or any advisory functions thereunder, or (C) a new investment management 
contract following termination by such company of an existing investment management 
contract, except by vote of a majority of the outstanding common stockholders of such 
company. 
SEC. 20. Ineligibilify of Certain Affiliated Persons and Undewrifers. - (a) It 
shall be unlawful for any of the following persons to serve or act in the capacity of 
officer, employee, director, investment 
company manager, investment adviser, 
underwriter or custodian of any registered investment company: 
(I) 
Any person who has been convicted by a competent judicial or administrative 
body of any crime, after trial, or upon plea of guilty, involving the purchase or sale of 
any security, or proprietary or non-proprietary membership certificate, commodity 
futures contract, pre-need plan, pension plan, or life plan, or out of such person's 
conduct as underwriter, broker, dealer, investment company manager, investment 
23 
company, investment adviser, futures commission merchant, commodity trading 
24 
advisor, floor broker, bank, investment house, insurance company, real estate 
25 
broker or as an affiliated person, salesman, or other employee of any of the 
26 
foregoing ; 
27 
28 
(2) Any person who, by reason of any misconduct, after hearing or trial, or upon 
consent, is permanently or temporarily enjoined by order, judgment, or decree of the 
24 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
Commission or any court or other administrative body of competent jurisdiction from 
acting as an underwriter, broker, dealer, investment company, investment company 
manager, investment adviser, futures commission merchant, commodity trading 
advisor, floor broker, bank, investment house, insurance company, real estate 
broker or as an affiliated person, salesman, or other employee of any of the 
foregoing, or from engaging in or continuing any conduct or practice in connection 
with any such activity or willfully violating laws governing securities, commodities, 
banking, insurance or real estate activities; or is subject to a currently effective order 
of the Commission or other competent judicial or administrative body refusing, 
revoking, or suspending any registration, license or permit under this Act, the rules 
and regulations promulgated thereunder, any other law administered by the 
Commission, or otherwise required to engage in any activity involving securities, 
commodities, banking, insurance or real estate; or is subject to a currently effective 
order of a self-regulatory organization suspending or expelling him from membership 
or participation therein or from association with a member or participant thereof. 
(3) Any person convicted judicially or administratively of an offense involving 
moral turpitude or involving fraud, or embezzlement, theft, estafa, counterfeiting , 
misappropriation, forgery, bribery, false oath, or perjury, or other fraudulent acts or 
transactions; 
(4) 
Any person found by the Commission or other competent judicial or 
administrative body to have willfully violated, or willfully aided, abetted, counseled, 
commanded, induced, or procured the violation of any provision of this Act, the 
Revised Securities Act, or any other laws administered by the Commission and any 
Commission rules or orders thereunder, or who has filed a materially false or 
misleading application, report or registration statement with the Commission 
required to be filed under this Act, the Revised Securities Act, or other laws 
administered by the Commission or any rules or order thereunder; 
(5) Any person judicially declared to be insolvent, a spendthrift or incapacitated 
2s 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
to contract; 
(6) Any person found guilty by a foreign court or equivalent financial regulatory 
authority of the acts or violations similar to any of the acts or misconduct 
enumerated in paragraphs (1) to (5) above; 
(7) A company, any affiliated person of which is ineligible, by reason of 
paragraphs (I) 
to (5), to serve or act in the foregoing capacities. 
(b) Any person who is ineligible, by reason of Subsection (a) of this Section, to 
serve or act in the capacities enumerated in such subsection, may file with the 
Commission an application for an exemption from the provisions of such subsection. 
The Commission shall by order grant such application, either unconditionally or on an 
appropriate temporary or other conditional basis, if it is established that the prohibitions 
of such subsection, as applied to such person, are unduly or disproportionately severe 
or that the conduct of such person has been such as not to make it against the public 
interest or protection of investors to grant such application. 
SEC. 21. 
Affiliafions of Direcfors, Officers and Employees. - 
(a) 
No 
registered investment company shall - 
(1) Have as director, officer or employee any broker or dealer, or any affiliated 
person of a broker or dealer; 
(2) Use as underwriter of securities issued by it any 
director, 
officer or 
employee of such registered company or any person of which any such director, 
officer or employee is an affiliated person; or 
(3) Have as director, officer or employee any affiliated person of an investment 
house. 
For the purpose of this paragraph, a person shall not be deemed an 
affiliated person of an investment house solely by reason of his being an affiliated 
person of any of the following: (A) a company all of whose outstanding securities 
(other than short-term paper, securities representing bank loans and directors 
qualifying shares) are, or after such acquisition will be owned by one or more 
registered investment companies; and (B) a company which is primarily engaged in 
26 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
the business of underwriting and distributing securities issued by other persons, 
selling securities to customers, or any one or more of such or related activities, and 
whose gross income is normally derived principally from such business or related 
activities. 
(b) No registered investment company shall have a majority of its board of 
directors consisting of persons who are officers or directors of any one bank. 
(c) If by reason of the death, disqualification, or bona fide resignation of any 
director or directors, the requirements of the foregoing provisions of this section in 
respect to directors shall not be met by a registered investment company, the operation 
of such provision shall be suspended as to such registered company for a period of 
thirty (30) days if the vacancy or vacancies may be filled by action of the board of 
directors, and for a period of sixty (60) days if a vote of stockholders is required to fill 
the vacancy or vacancies, or for such longer period as the Commission may prescribe, 
by rules and regulations upon its own motion or by order upon application, as not 
inconsistent with the protection of investors. 
(d) No registered investment company shall knowingly purchase or otherwise 
acquire, during the existence of any underwriting or selling syndicate, any security 
(except a security of which such company is the issuer) an underwriter of which is an 
officer, director, investment company manager, investment adviser, or employee of 
such registered company, or is a person (other than a company of the character 
described in paragraphs (A) and (€3) of Subsection (a) (3) of which any such officer, 
22 
director, investment 
company manager, investment adviser, or employee is an 
23 
affiliated person) unless in acquiring such security such registered company is itself 
24 
acting as an underwriter for the issuer. The Commission, by rules and regulations upon 
25 
its own motion or by order upon application, may conditionally or unconditionally 
26 
exempt any transaction or classes of transactions from any of the provisions of this 
27 
subsection, if and to the extent that such exemption is consistent with the protection of 
28 
investors. 
27 


 
1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
1.5 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
SEC. 
22. Prohibited Transactions of Certain Affiliated Persons and 
Underwriters. - (a) It shall be unlawful for any affiliated person or promoter of or 
underwriter for a registered investment company (other than a company of the 
character prescribed in Sec. 21 (a)(3)) or any affiliated person of such a person, 
promoter, or underwriter, acting as principal 
(I) 
to knowingly sell any security or 
other property to such registered company or to any company controlled by such 
registered company, unless such sale involves solely (A) securities of which the buyer 
is the issuer, or (B) securities of which the seller is the issuer and which are part of a 
general offering to the holders of a class of its securities; 
(2) to knowingly purchase from such registered company, or from any company 
controlled by such registered company, any security or other property (except 
securities of which the seller is the issuer); or 
(3) to borrow money or other property from such registered company or from any 
company controlled by such registered company ( unless the borrower is controlled by 
the lender) except as permitted in Sec. 20 (b). 
(b) Notwithstanding Subsection (a), any person may file with the Commission an 
application for an order exempting a proposed transaction of the applicant from one or 
more provisions of said subsection. The Commission shall grant such application and 
such order of exemption if evidence establishes that- 
(1) the terms of the proposed transaction, including the consideration to be paid 
or received, are reasonable and fair and do not involve overreaching on the part of 
any person concerned; 
(2) the proposed transaction is consistent with the policy of each registered 
investment company concerned, as recited in its registration statement and reports 
filed under this Act; and 
(3) the proposed transaction is consistent with the general purposes of this Act. 
(c) Notwithstanding subsection (a), a person may, in the ordinary course of 
business, sell to or purchase merchandise from any company or may enter into a 
28 


, 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
I3 
14 
15 
16 
17 
I8 
19 
20 
21 
22 
23 
24 
2s 
26 
27 
28 
lessor-lessee relationship with any person and furnish the services incident thereto. 
(d) It shall be unlawful for any affiliated person of, or underwriter for a registered 
investment company (other than a company of the character described in Sec. 21 (a)(3) 
) or any affiliated person of such a person or underwriter, acting as principal to effect 
any transaction in which such registered company, or a company controlled by such 
registered company, is a joint or a joint and several participant with such person, 
underwriter, or affiliated person, in contravention of such rules and regulations as the 
Commission may prescribe for the purpose of limiting or preventing participation by 
such registered or controlled company on a basis different from or less advantageous 
than that of such other participant. 
Nothing contained in this subsection shall be 
deemed to preclude any affiliated person from acting as manager of any underwriting 
syndicate or other group in which such registered or controlled company is a participant 
and receiving compensation therefor. 
(e) It shall be unlawful for any affiliated person of a registered investment 
company, or any affiliated person of such person- 
(1) acting as agent, to accept from any source any compensation for the 
purchase or sale of any property to or for such registered company or any controlled 
company thereof other than a regular salary or wages from such registered company, 
and except in the course of such person's business as an underwriter or broker; or 
(2) acting as broker, in connection with the sale of securities to or by such 
registered company or any controlled company thereof, to receive from any source a 
commission, fee, or other remuneration for affecting such transaction which exceeds 
(A) the usual customary broker's commission if the sale is effected on a securities 
exchange, or (B) two per centum (2%) of the sales price if the sale is effected in 
connection with a secondary distribution of such securities, or (C) one per centum (1 Oh) 
of the purchase or sale price of such securities if the sale is otherwise effected unless 
the Commission shall, by rules and regulations or order in the public interest and 
consistent with the protection of investors, permit a larger commission. 
29 


1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
(9 Every registered investment company shall place and maintain its securities 
and similar investments in the custody of a bank or such other categories of persons 
as the Commission by rule may designate as qualifying to act as a custodian, which in 
every case shall satisfy the requirements prescribed for custodians in rules, regulations 
or orders issued by the Commission. 
(9) The Commission is authorized to require by rules and regulations or orders 
for the protection of investors that any officer and employee of a registered investment 
company who may singly, or jointly with others, have access to securities or funds of 
any registered company, either directly or through authority to draw upon such funds or- 
to direct generally the disposition of such securities, be bonded by a reputable fidelity 
insurance company against larceny and embezzlement in such reasonable minimum 
amounts as the Commission may prescribe. 
(h) Neither the charter, certificate of incorporation, articles of association, nor the 
by-laws of any registered investment company, nor any other instrument pursuant to 
which such a company is organized or administered, shall contain any provision which 
protects or purports to protect any director or officer of such company against any 
liability to the company or to its security holders to which he would otherwise be subject 
by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of 
the duties involved in the conduct of his office. 
(i) No contract or agreement under which any person undertakes to act as 
investment company manager or investment adviser of, or underwriter for, a registered 
investment company shall contain any provision which protects or purports to protect 
such person against any liability to such company or its security holders to which he 
would otherwise be subject by reason of willful misfeasance, bad faith, or gross 
negligence in the performance of his duties, or by reason of his reckless disregard of 
his obligations and duties under such contract or agreement. 
SEC. 23. Proxies; Voting Trust. - 
(a) 
Every solicitation of a proxy, 
consent, or authorization with respect to any security of a registered investment 
30 


1 
2 
3 
4 
company shall be conducted in compliance with such rules and regulations as the 
Commission may prescribe under this Act and the Revised Securities Act to regulate 
such solicitations. Notwithstanding any provision of the Corporation Code to the 
contrary: (i) a proxy, consent or authorization that is solicited with respect to any 
5 
6 
7 
security of a registered investment company shall not be valid for any matter requiring 
shareholder approval under subsections (a) and (b) of SEC 9, and under subsections 
(f)(2) and (f)(3) of SEC. 19, unless it has been solicited expressly for the meeting at 
8 
which such matter is to be acted upon (in the case of a proxy), or for action on such 
9 
matter without a meeting (in the case of a consent or authorization), and (ii) no proxy 
I O  
shall be valid and effective for a period longer than two (2) years. No solicitation of a 
1 1  
proxy or consent shall be made by means of a proxy statement, form of proxy or 
12 
consent, notice of meeting or other communication, written or oral, which is materially 
13 
false or misleading, or which fails to disclose material facts necessary to correct any 
14 
statement in an earlier communication made with respect to the solicitation of.proxy or 
I S  
consent for the same meeting or subject matter, which has become false or misleading. 
I6 
It shall be unlawful for any registered investment company or affiliated 
17 
person thereof, any issuer of a voting-trust certificate relating to any security of a 
18 
registered investment company, or any underwriter of such a certificate to offer for 
(b) 
19 
sale, sell, or deliver after sale, in connection with a public offering, any such voting-trust 
20 
certificate. 
21 
SEC. 24. Reorganization Plans, Reports by Commission.- 
(a) Any person 
22 
who solicits or permits the use of his name to solicit any proxy, consent, authorization, 
23 
power of attorney, ratification, deposit, or dissent in respect to any plan of 
24 
reorganization of any registered investment company shall within twenty-four (24) hours 
25 
after the commencement of any such solicitation, file with, or mail to, the Commission 
26 
for its information, a copy of such plan and any deposit agreement relating thereto, if or 
27 
to the extent that such documents shall not already have been filed with the 
28 
Commission. 
31 


1 
(b) No plan for the reorganization of a registered investment company shall be 
2 
carried out without the prior approval of the Commission. 
3 
.SEC. 25. Registration Requirements for Investment Companies. - (a) Any 
4 
investment company organized or otherwise created under the laws of the Philippines 
5 
may register for purposes of this Act by filing with the Commission an application for 
6 
7 
registration under oath in such form as the Commission by rule may prescribe. The 
application shall contain the following information and documents and such other 
8 
9 
I O  
information as the Commission by rule may prescribe: 
( I )  The names, addresses and business experience for the last five years, of the 
promoters, directors and officers of the investment company; 
1 1  
(2) The name, address and business experience for the last five years of the 
12 
13 
affiliated persons thereof; 
14 
proposed investment company manager, investment adviser, underwriter, and any 
(3) The name and address of the proposed custodian; 
15 
(4) A statement whether any of the persons referred to in paragraphs (I), 
(2) or 
16 
(3) are subject to any disability enumerated in Sec. 20 (a) of this Act; 
17 
(5) The Articles of Incorporation and By-Laws of the investment company; 
18 
(6) The proposed investment management contract, custodian agreement and in 
19 
the case of an open-end company, the proposed contract with any underwriter; 
20 
(7) Evidence that the investment company is or, when registered, will be in 
21 
compliance with the structural and capital requirements set forth in Sec. 15 of this 
22 
Act. 
23 
(b) (I) 
Within sixty (60) days after the filing of such application for registration (or 
24 
such longer period if the applicant consents) the Commission shall (A) by order, grant 
25 
registration, or (B) institute proceedings to determine whether to deny registration. 
26 
(2) The order of the Commission granting registration shall become effective 
27 
after publication thereof, at the expense of the registrant, once in each of two 
28 
consecutive weeks in two newspapers of general circulation in the Philippines. 
32 


 
' 
I 
2 
3 
4 
5 
G 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
(c) The Commission may by order, after hearing, deny an application for 
registration as an investment company filed pursuant to subsection (a) of this Section if 
it finds that - 
(1) The investment company made or caused to be made a materially false or 
misleading statement in its application for registration, or omitted to state in such 
application a material fact which was required to be stated therein; 
(2) The investment company, any affiliated person thereof, the investment 
company manager, investment adviser, underwriter, promoter or custodian is not in 
compliance with the provisions of the Act or the rules of the Commission thereunder, 
or in the case of an affiliated person would be subject to a disability enumerated in 
Sec. 20 (a) of this Act if such company was a registered investment company; or 
(3) The investment company has not paid the registration fee prescribed by the 
Commission. 
(d) No later than forty-five (45) days after the grant of registration, the investment 
company shall file with the commission a registration statement pursuant to the 
Revised Securities Act and the rules of the Commission thereunder appertaining to the 
registration statements and public offerings of securities, except that, instead of the 
information and documents required by Sec. 8 of said Act, such investment company 
shall file a registration statement (which shall include a prospectus) containing the 
following information and documents and such other information and documents as the 
Commission by rule may prescribe: 
(I) 
A statement set forth on the outside front cover page of the prospectus in 
bold letters as follows: 
"These securities have not been approved or disapproved by the 
Securities and Exchange Commission nor has the Commission passed 
upon the accuracy or adequacy of this prospectus. Any representation 
to the contrary is a criminal offense."; 
(2) A description of the investment company and its classification; 
33 


I 
(3) The fundamental investment policies of the investment company, which shall 
2 
include its investment objectives, investment concentration by issuer or industry 
3 
4 
5 
group, liquidity standards, and portfolio mix and other investment policies; 
(4) Terms and pricing of the common stock to be offered by the investment 
company, sales load, minimum purchase requirements, income distribution policy 
G 
7 
and procedures in the purchase and sale of such securities; 
(5) In the case of redeemable securities, the method and basis of computation of 
8 
9 
10 
(6) The names and business experience for the past five (5) years and 
net asset value; manner and method of redemption, authorized redemption centers 
and redemption charges, if any; 
1 1  
12 
13 
14 
compensation of the directors and officers of the investment company, including 
past and present affiliations; and extent of participation or ownership in the common 
stock or debt securities issued or to be issued by the investment company; 
(7) The names, business experience, affiliations, principal responsibilities, and 
15 
16 
fees and other compensation to be paid to the investment company manager, 
investment adviser, underwriter, selling agents, custodian and independent auditor 
17 
of the investment company; 
I8 
(8) Audited financial statements for the last fiscal year (if applicable) and for the 
19 
20 
21 
quarter ending as of a date not earlier than ninety (90) days from the date of the 
filing of the registration statement; 
(9) Schedule of investments indicating issuer, cost and market value; 
22 
23 
24 
(e) 
No registered investment company shall circulate or distribute any 
(1 0) Risk factors; and 
(I 
1) The maximum sales load. 
25 
advertisement unless the advertisement has been filed with the Commission at least ten 
26 
( I O )  days prior to its proposed use. The Commission is authorized to adopt rules 
27 
governing the content, format and use of advertising material, and may limit, restrict or 
28 
require revision of advertising material if it finds such material to be materially 
34 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
I G  
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
misleading, or not in accordance with the provisions of this Act or of any rules governing 
the 
content, format and use thereof. 
If within ten (IO) days after filing of any 
advertising material the Commission initiates proceedings to determine whether to limit, 
restrict or revise such material, said material may not be used during the pendency of 
such proceeding. For purposes of this subsection (e), the terms "advertising" and 
"advertising material" shall include any notice, circular, letter or other written 
communication addressed to more than one person, or any notice or announcement in 
any publication or by radio or television intended to promote or induce the sale of 
securities of an investment company. 
(f) The Commissjon, in the exercise of its sound judgment and discretion, shall 
have power to limit the registration of investment companies to such number as the 
investment opportunities then obtaining would permit, and to allow the registration of 
new investment companies only when the conditions warrant it. 
(9) If it appears to the Commission that a registered investment company has 
failed to file the registration statement required by this section or a report required 
pursuant to Sec. 26 (a), or (b) of this Act, has filed such registration statement or report 
but omitted therefrom material facts required to be stated therein, or has filed such a 
registration statement or report in violation of Sec. 33 (b), the Commission shall notify 
such company by registered mail of the failure to file such registration statement or 
reports, or of the respects in which such registration or report appears to be materially 
incomplete or misleading, as the case may be, and shall fix a date (in no event earlier 
than thirty (30) days after the mailing of such notice) prior to which such company may 
file such registration statement or report or correct the same. 
If such registration 
statement or report is not filed or corrected within the time so fixed by the Commission 
or any extension thereof, the Commission, after appropriate notice and opportunity for 
hearing, upon such conditions and with such exemptions as it deems appropriate for 
the protection of investors, may by order, suspend the registration of such company 
until such statement or report is filed or corrected, or may, by order, revoke such 
35 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
registration, if the evidence finds that such suspension or revocation is in the public 
interest. 
(h) The Commission may by order, after hearing, suspend, revoke or condition 
the registration of an investment company if it finds that the investment company were 
not duly registered according to the rules of the Commission, its application for 
registration would be subject to denial under Subsection (c). 
(i) Whenever the Commission, on its own motion or upon application, finds that a 
registered investment company has ceased to be an investment company, it shall so 
declare by order and upon the taking effect of such order, the registration of such 
company shall cease to be in effect. If necessary for the protection of investors, an 
order under this subsection may be made upon appropriate conditions. 
SEC. 26 
Reporforial Requiremenfs for lnvesfmenf Companies and 
Affiliated Persons. - (a) Every registered investment company shall transmit to its 
stockholders, and shall file under oath with the Commission within ten ( I O )  days after 
such transmission, a semi-annual and annual report containing the following: 
(I) 
a balance sheet, income statement, statement of changes in operations and 
statement of surplus for the period covered by the report, including a statement of 
the aggregate value of investments as of the balance sheet date. The income 
statement shall be itemized with respect to each category of income and expense 
representing more than five per centum (5%) of total income or expense, and the 
statement of surplus shall be itemized with respect to each charge or credit to the 
surplus account representing more than five per centum (5%) of the total charges or 
credits for such period. 
These financial statements shall (A) be prepared in 
accordance with generally accepted accounting principles and practices uniformly 
applied and pursuant to such rules as the Commission may prescribe respecting 
financial statement presentation and disclosure, and (B) in the case of the annual 
report be audited and certified by independent certified public accountants whose 
opinion shall state that such independent accountants have verified the securities 
36 


1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
owned, either by actual examination, or by receipt of a certificate from the custodian, 
as the Commission by rule may prescribe. 
(2) a list showing the amount and value of securities owned on the date of the 
balance sheet. 
(3) a statement of the aggregate remuneration paid by such company during the 
period covered by the report to each affiliated person of such company. 
(4) a statement of the aggregate peso amounts of purchases and sales of 
investment securities, other than Government securities, made during the period 
covered by the report. 
(5) a description of transactions between the investment company and any 
affiliated person thereof during the period covered by the report. 
(6) a summary of financial information on a per share basis, and a Statement 
showing the calculation of net asset value per share with comparisons to the same 
period in the three (3) preceding fiscal years, and the total investment return per 
share; and 
(7) such other information as the Commission by rule may prescribe. 
Provided, That, if in the judgment of the Commission any item required under this 
subsection is inapplicable or inappropriate to any specified type of investment 
company, the Commission may by rule permit, in lieu thereof, the inclusion of such item 
of a comparable character a’s it may deem applicable to such type of investment 
com pany . 
(b) Every registered investment company shall file with the Commission such 
other information and documents the Commission by rule may require to keep 
reasonably current in the registration statement of such company filed pursuant to Sec. 
25 of this Act. 
(c) Every person who is directly or indirectly the beneficial owner of more than 
ten per centum (10%) of any class of outstanding securities (other than short-term 
paper) of which a registered closed-end company is the issuer, or who is an officer, 
37 


director, investment company manager, affiliated person of an investment company 
manager of such company, investment adviser, or affiliated person of an investment 
adviser of such a company shall be subject to the same duties and liabilities as those 
imposed by the Revised Securities Act upon certain beneficial owners, directors, and 
officers in respect to their transactions in certain equity securities. 
SEC. 27. Destruction and Falsification of Reports and Records. -(a) It shall 
be unlawful for any person, except as permitted by rule, regulation, or order of the 
Commission, to willfully destroy, mutilate, or alter any account, book, or other document 
9 
the preservation of which has been required pursuant to Sec. 29 (a). 
10 
(b) It shall be unlawful for any person to make any untrue statement of a 
1 I 
material fact in any registration statement, application, report, account, record, or other 
12 
document filed or transmitted pursuant to this Act or the keeping of which is required 
13 
pursuant to Sec. 28 (a). It shall be unlawful for any person so filing, transmitting, or 
14 
keeping any such documents to omit to state therein any fact necessary in order to 
15 
prevent the statements made therein, in the light of the circumstances under which they 
16 
were made, from being materially misleading. For the purposes of this subsection, any 
17 
part of any such document which is signed or certified by an accountant or auditor in 
18 
19 
his capacity as such shall be deemed to be made, filed, transmitted, or kept by such 
accountant or auditor, as well as by the person filing, transmitting, or keeping the 
20 
complete document. 
21 
SEC. 28. Unlawful Represenfations and Names- It shall be unlawful for any 
22 
23 
registered investment company hereafter to adopt as a part of the name or title of such 
company, or of any security of which it is the issuer, any word or words which the 
24 
Commission finds and by order declares to be deceptive or misleading. 
The 
25 
Commission is authorized to deny the registration of an investment company using 
26 
such name or title. 
27 
SEC. 29. Accounts and Records - (a) Every registered investment company, 
28 
and every investment company manager, investment adviser, and underwriter of such 
38 


< 
I 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2s 
company shall maintain and preserve such accounts, books and other documents 
constituting the records of such company or pertaining to actions or transactions by, for 
or on behalf of such company, for a period of five (5) years, the most recent three (3) 
years in a readily accessible place, or for such other periods as the Commission by rule 
may prescribe. 
(b) All accounts, books, and other records maintained and preserved pursuant to 
subsection (a) shall be open 'to periodic or special examination and copying by the 
Commission during regular business hours. 
SEC. 30. Accountants and Audifors.- (a) The financial statements of every 
registered investment company, which are required or permitted to be audited by this 
Act or by rules of the Commission, shall be audited and certified by an independent 
certified public accountant appointed by such company. 
(b) Notwithstanding any provision of the Corporation Code to the contrary, a 
registered investment company shall appoint, remove at any time, and select a 
successor to fill a vacancy caused by the death, resignation or removal of, any 
independent certified public accountant, by a majority vote of the board of directors of 
such company, which majority vote shall be composed of the votes of a majority of 
directors who are disinterested persons. 
(c) The term of engagement of an independent certified public accountant shall 
not exceed twa (2) years. 
SEC. 31. Disclosure of lnformafion Filed with Commission; Copies.- (a) 
The information contained in any registration statement, application, report, or other 
document filed with the Commission pursuant to any provision of the Act or of any rule 
or regulation thereunder (as distinguished from any information or document 
transmitted to the Commission) shall be made available to the public, unless and except 
insofar as the Commission, by rules and regulations upon its own motion, or by order 
upon application, finds that public disclosure is neither necessary nor appropriate in the 
public interest or for the protection of investors. It shall be unlawful for any officer or 
39 


1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
employee of the Commission to use for personal benefit, or to disclose to any person 
other than an official or employee of the Philippine Government, for official use, or for 
any such official or employee to use for personal benefit, any information contained in 
any document so filed or transmitted, if such information is not available to the public. 
(b) Photostatic or other copies of information contained in documents filed with 
the Commission under this Act and made available to the public shall be furnished any 
person at such reasonable charge and under such reasonable limitation as the 
Commission shall prescribe. 
(c) Notwithstanding anything in subsection (a) of this Section to the contrary, on 
request from a foreign securities authority of any country whose laws grant a similar 
reciprocal assistance as herein provided, the Commission may provide assistance in 
accordance with this subsection, including the disclosure of any information filed or 
transmitted to the Commission, if the requesting authority states that it is conducting an 
investigation which it deems necessary to determine whether any person has violated, 
is violating, or is about to violate any laws relating to securities matters that the 
requesting authority administers or enforces. Such assistance may be provided without 
regard to whether the facts stated in the request would also constitute a violation of 
Philippine law. 
SEC. 32. Civil Liability. - (a) Without prejudice to the administrative and penal 
sanctions imposed by this Act, any director or officer of an investment company, or the 
investment company manager, investment adviser, underwriter, custodian or any 
affiliated person of such investment company manager, investment adviser or 
underwriter, or custodian who unlawfully and willfully diverts the funds, securities and 
assets of an investment company to his personal use, or who otherwise willfully 
commits a breach or abuse of trust in respect to the assets of, or transactions with, the 
investment company shall be liable for damages to the investment company. 
(b) The civil liability provided under the Revised Securities Act on any person 
who files any false or misleading registration statement, prospectus or other report shall 
40 


4 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
I 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
investment 
payments of a 
company for management fees, or other compensation for services, or 
material nature, made to the investment company manager, investment 
approve such settlement or compromise; or (2) a final judgment has been entered on 
copies of all 
statement of 
the record, 
pleadings and any written record made in such action, together with a 
the terms of settlement or compromise, if such terms be not included in 
shall be transmitted to the Commission; and any information contained in 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
SEC. 34. Injunctions Against Willful Misconduct and Abuse of Trust - The 
Commission is authorized to require a registered investment company to remove or 
suspend a person serving or acting as officer, director, investment manager, investment 
adviser, custodian, or promoter, or as underwriter who has been found to have 
committed, after proper investigation and hearing by said Commission, any willful 
misconduct or with abuse of trust or any other willful act in reckless disregard of the 
interests of the investment company. 
The suspension shall be for such period of time as the Commission, in its 
discretion, shall deem appropriate. 
SEC. 35. Rules, Regulations, and Orders, General Powers of fhe 
Commission. -(a) The Commission shall have the authority from time to time to make, 
issue, amend, and rescind such rules and regulations and such orders as are 
necessary or appropriate to effectuate the provisions of this Act, including rules and 
regulations defining accounting, technical, and trade terms used in this Act, and 
prescribing the form or forms’in which information required in registration statements, 
applications, and reports to the Commission shall be set forth. For the purposes of its 
rules or regulations the Commission may classify 
persons, securities, and other 
matters within its jurisdiction and prescribe different requirements for different classes of 
persons, securities, or matters. 
(b) No provision of this Act imposing any liability shall apply to any act done or 
omitted in good faith in conformity with any rule, regulation, or order of the Commission 
notwithstanding that such rule, regulation or order may, after such act or omission, be 
amended or rescinded or be determined by judicial or other authority to be invalid for 
any reason. 
(c) The Commission shall have the authority from time to time, by rule or order, 
to conditionally or unconditionally exempt any person, security or transaction, or class 
or classes of persons, securities or transactions, from any or all provisions of this Act, if 
such exemption is necessary or appropriate in the public interest and consistent with 
4 L  


I 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
the protection of investors. 
SEC. 36. Rules and Regulations; Procedure for /ssuance.- The rules and 
regulations of the Commission under this Act, and amendments thereof, shall be 
effective upon publication in the manner which the Commission shall prescribe, or upon 
such later date as may be provided in such rules and regulations. 
SEC. 37. Orders; Procedure for Issuance.- (a) Orders of the Commission 
under this Act shall be issued only after appropriate notice and opportunity for hearing. 
Notice to the parties to a proceeding before the Commission shall be given within a 
reasonable time prior to the hearing by personal service upon each party or by 
registered mail or confirmed telegraphic notice to the party's last known business 
address. Notice to interested persons, if any, other than said parties may be given in 
the same manner. 
(b) The Commission may provide, by appropriate rules and regulations, that an 
application verified under oath may be admissible in evidence in a proceeding before 
the Commission and that the record in such a proceeding may consist, in whole or in 
part, of such application. 
(c) In any proceeding before the Commission, the Commission, in accordance 
18 
19 
20 
with such rules and regulations as it may prescribe, shall admit as a party any 
interested Government agency, and may admit as a party any representative of 
interested security holders, or any person whose participation in the proceeding may be 
21 
22 
in the public interest or for the protection of investors. 
SEC. 38. Hearings by the Cornmission. - Hearings may be public and may be 
23 
held before the Commission or any officer or officers of the Commission designated by 
24 
25 
26 
SEC. 39. Enforcement of this Act. - (a) The Commission may make such 
it, and appropriate records shall be kept. Such hearings shall be in accordance with 
such applicable rules as the Commission shall promulgate for all proceedings before it. 
27 
investigations as it deems necessary to determine whether any person has violated or 
28 
is about to violate any provision of this Act or any rule, regulation, or order thereunder, 
43 


7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
or to determine whether any action in any Court or any proceeding before the 
Commission shall be instituted under this Act against a particular person or persons, or 
with respect to a particular transaction or transactions. The Commission shall permit 
any person to file with it a statement in writing, under oath or otherwise as the 
Commission shall determine, as to all the facts and circumstances concerning the 
matter to be investigated. 
(b) For the purpose of any investigation or any other proceeding under this Act, 
the Commission, or any officer thereof designated by it, is empowered to administer 
oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, 
and require the production of any books, papers, correspondence, memoranda, 
contracts, agreements, or other records which are relevant or material to the inquiry. 
(c) No person shall be excused from attending and testifying or from producing 
books, papers, correspondence, memoranda, contracts agreements, or other records, 
and documents before the Commission, or in obedience to the subpoena of the 
Commission or any officer designated by it, or in any cause of proceeding instituted by 
the Commission, on the grounds that the testimony or evidence, documentary or 
otherwise, required of him may tend to incriminate him or subject him to a penalty or 
forfeiture; but no individual shall be prosecuted or subject to any penalty or forfeiture for 
or on account of any transaction, matter, or thing concerning which he is compelled to 
testify or produce evidence, documentary or otherwise, after having claimed his 
privilege against self-incrimination, except that such individual so testifying shall not be 
exempt from prosecution and punishment for perjury committed in so testifying. 
(d) 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 
Act or of any rule, regulation, or order thereunder, it may, after proper investigation, and 
hearing, order such person to desist from committing such act or practice and enforce 
the same in accordance with its powers under Republic Act Numbered Eleven hundred 
forty-three and Presidential Decree 902-A, as amended. Upon a showing that such 
44 


t 
1 
person has engaged or is about to engage in any such act or practice, the Commission 
2 
may grant a permanent or temporary injunction or decree or restraining order without 
3 
bond. In any proceeding under this subsection to enforce compliance with this Act, the 
4 
Commission may, to the extent it deems necessary or appropriate, take exclusive 
5 
6 
jurisdiction and possession of the investment company or companies involved and the 
books, records, and assets thereof, wherever located; and shall have jurisdiction to 
7 
8 
9 
io 
1 1  
appoint a trustee, who with the approval of the Commission shall have power to 
dispose of any or all of such assets, subject to terms and conditions 
as the 
Commission may prescribe. The Commission may transmit such evidence as may be 
available concerning any violation of the provisions of this Act or of any rule, regulation, 
or order thereunder to the Secretary of Justice, who, in his discretion, may institute the 
12 
13 
14 
appropriate criminal proceedings under this Act. 
(e) If, after proper notice and hearing, the Commission finds that there is a 
violation of this Act, its rules, or its orders, or that any registered investment company 
15 
has made any untrue statement of a material fact in any registration statements, 
16 
application, report, account, record, or other document required under this Act or its 
17 
rules to be filed with the Commission, the Commission shall, in its discretion, impose 
18 
19 
20 
21 
22 
23 
24 
any or ail of the following sanctions: 
(I) 
Suspension for a period of not more than two (2) years, or revocation of 
registration as investment company and permit to offer or sell its securities, or other 
registrations and licenses issued by the Commission under this Act; 
(2) A fine of not less than one thousand pesos (P’l,OOO.OO) nor more than five 
hundred thousand pesos; (P500,OOO.OO) plus not more than ten thousand pesos 
(PI 0,000.00) for each day of continuing violation; 
25 
(3) Disqualification from being an officer, director, employee, investment 
26 
company manager, investment adviser, custodian or underwriter; , 
27 
(4) Other penalties within the power of the Commission under existing law. 
2s 
The imposition of the foregoing administrative sanctions shall be without 
45 


I 
prejudice to the filing of criminal charges against the individuals responsible for the 
2 
violation. 
3 
(f) The powers of the Commission under this Section shall be in addition to any 
4 
other powers granted under existing laws. 
5 
SEC. 40.. - (a) No investment company doing business within the Philippines or 
G 
agent thereof shall pay any commission or other compensation to any person for 
7 
8 
9 
i o  
I I  
service in obtaining investment.s in an investment company unless such person holds a 
certificate of authority issued by the Commission to act as an agent or investment 
solicitor of such company as hereafter provided. No person shall act as an agent, sub- 
agent, or investment solicitor in the solicitation or procurement of an investment or 
application for investment 
in an investment company or receive for services of 
12 
obtaining such investments any commission or other compensation from any 
13 
investment company doing business in the Philippines or from the agent or underwriter 
14 
thereof, without first getting a certificate of authority so to act from the Commission, 
15 
16 
which must be renewed annually on the first day of January and not later than the 
fifteenth day of March. Such certificate shall be issued by the Commission only upon 
I 7 
the written application of the person desiring such authority, such application being 
18 
19 
20 
21 
22 
23 
approved and countersigned by the investment company or its agent or underwriter, 
and shall be upon a form approved by the Commission; Provided, however, That no 
such certificate of authority shall be issued by the Commission unless the applicant for 
agent, sub-agent or investment solicitor shall have passed a written examination given 
for the purpose by the Commission or the said applicant possesses a college degree. 
The Securities and Exchange Commission shall have the right to refuse to issue and to 
24 
revoke any such certificate at its discretion. 
25 
(b) Any person who for compensation solicits or obtains investments on behalf 
26 
27 
2s 
of any investment company or its agents or underwriter or transmits for a person other 
than himself an investment or application for investment in an investment company or 
offers or assumes to act as an agent or investment solicitor of an investment company, 
46 


4 
1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
shall be an investment agent or investment solicitor within the intent of this section and 
shall thereby become liable to all the duties, requirements, liabilities, and penalties to 
which such a person is subject. 
The Commission shall issue such rules and regulations as it may deem 
necessary for the enforcement and implementation of the provisions of this section 
forty. 
SEC. 41. 
Fees; Commission Organization; Compensation- (a) 
The 
Commission is authorized to charge and collect fees in such amounts as the 
Commission shall, by rule or regulation promulgate, for: 
(I) 
registering an investment company, Provided, That if the securities of the 
company are likewise registered, the fee shall not exceed one-tenth of one percent 
of the maximum aggregate price of the securities to be registered; and Provided, 
Further That, in the case of an open-end fund, if the fee prescribed is based on the 
aggregate price of securities actually sold, such fee shall be net of any redemptions 
made during the same period; 
(2) every examination of the financial condition of an investment company. The 
Commission is authorized to conduct such examination as often as may be 
necessary in the public interest or for the protection of investors; 
(3) each exemption; 
(4) every determination granting a right or privilege; 
(5) each certificate of authority issued to an agent or investment solicitor; 
(6) each instrument, document, or paper not required to be filed but which an 
interested party desires to be attached to the records of an investment company. 
Every right, privilege, exemption or registration under this Act shall be sought 
from the Commission in the form of a petition for which the corresponding fee herein 
authorized to be collected shall be paid before any action is taken thereon. The grant 
or denial of the petition shall be in the form of an order issued by the Commission. No 
denial, withdrawal or abandonment of the petition shall be a ground for the refund of the 
47 


4 
r 
1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
2s 
fee paid therefor. 
(b) The Commission shall take charge of the enforcement and implementation of 
the provisions of this Act. The Commission is authorized to establish a separate 
department or division to regulate the conduct of investment companies and shall 
provide such personnel and positions for such department or division to effectively 
implement and enforce the provisions of this Act. 
SEC. 42. Appropriafion; Assessment. - The Commission is hereby authorized 
to spend its income under this Act to carry out the purposes hereof, and to retain not 
more than ten per centum (10%) of its income herein to defray expenses in the 
Commission's regulatory and adjudicative functions. Should the Commission's total 
income under this Act in any year be less than its total expenditures as certified by the 
Chairman of the Commission, the difference shall be pro-rated among all investment 
companies in business in such manner as the Commission shall determine, and the 
Commission is authorized to assess and collect from each of them its corresponding 
share which shall not exceed one half of one per centum (0.5%) of its net asset value. 
SEC. 43. Association of lnvestmenf Companies and AJfiliafes.- The 
Commission may prescribe rules as may be necessary or appropriate in the public 
interest or for the protection of investors to govern any association of registered 
investment companies and affiliated persons who are registered under this Act. Upon 
application of any such association, the Commission may grant such association, a 
registration as an "investment company association'' and, pursuant to rules issued by 
the Commission, confer authority upon such association to act as a self-regulatory 
organization for members of the association, including the power to train, administer 
proficiency examinations, and discipline its members. 
SEC. 44. lnvesfmenf Company Investors Protection Fund.--The Commission 
may establish or facilitate the establishment of an investment company investor 
protection fund which shall be contributed to by investment companies, investment 
company underwriters, investment managers and other persons associated with the 
4s 


L 
7 
8 
9 
I O  
1 1  
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
business activities of investment companies as the Commission may require, for the 
purpose of compensating investment company investors for financial injury they may 
suffer due to reasons prescribed by the Commission other than market decline in the 
investment portfolio of the investment company. 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. 
SEC. 45. Validity of Confracfs. - (a) Any condition, stipulation, or provision 
binding any person to waive compliance with any provision of this Act or with any rule, 
regulation or order thereunder shall be void. 
(b) Every contract made in violation of any provision of this Act or of any rule, 
regulation, or order thereunder, and every contract heretofore or hereafter made, the 
performance of which involves the violation of, or the continuance of any rule, 
regulation, or order thereunder, shall be void (I) 
as regards the rights of any person 
who, in violation of any such provision, rule, regulation, or order, shall have made or 
engaged in the performance of any such contract, and (2) as regards the rights of any 
person who, not being a party to such contract, shall have acquired any right 
thereunder with actual knowledge of the facts by reason of which the making or 
performance of such contract was in violation of any such provision, rule, regulation, or 
order. 
SEC. 46. Procuring Violation of Acf; Obsfrucfing Compliance. - (a) It shall 
be unlawful for any person, directly or indirectly, to cause to be done any act or thing 
through or by means of any other person which it would be unlawful for such person to 
do under the provisions of this Act or any rule, regulation, or order thereunder. 
(b) It shall be unlawful for any person without just cause to hinder, delay, or 
obstruct the making, filing, or keeping of any information, document, report, record, or 
account required to be made, filed, or kept under any provision of this Act or any rule, 
regulation, or order thereunder. 
49 


* 
I 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
I8 
19 
20 
SEC. 47. Penalties.- (a) Whoever steals, unlawfully abstracts, unlawfully and 
willfully converts to his own use or to the use of another, or embezzles any of the 
moneys, funds, securities, credits, property or assets of any registered investment 
company shall be deemed guilty of a crime, and upon conviction thereof shall suffer a 
fine, imprisonment or other penalties as prescribed in subsection (d) of this Section. 
(b) Any person who, without just cause, shall fail or refuse to attend and testify or 
to answer any lawful inquiry or to produce books, papers, correspondence, 
memoranda, contracts, agreements, or other records, if in his or its powers so to do, in 
obedience to the subpoena of the Commission, shall be subject to discipline by the 
Commission as in the case of contempt of court, either by a fine in such reasonable 
amount as the Commission may determine, or when such failure or refusal is a clear 
and open defiance of the Commission's order, decision or subpoena, by detention 
under an arrest order, as may be issued by the Commission at the discretion of the 
Commission, until such order, decision or subpoena is complied with. 
(c) Any person or company violating the 
provisions of Sec. 40 shall upon 
conviction, be subject to a fine of up to fifty thousand pesos (P50,OOO.OO). Upon the 
conviction of any person acting as agent, sub-agent, investment solicitor, or broker for 
the commission of an offense connected with the business of an investment company, 
the Commission shall immediately revoke the certificate of authority issued to him and 
no such certificates shall thereafter be issued to such convicted person. 
21 
(d) Unless otherwise specifically provided elsewhere in this Act, any person who 
22 
violates any provision of this Act or of any rule, regulation, or order thereunder, or any 
23 
person who in any registration statement, application, report, account, record, or other 
24 
document filed or transmitted pursuant to section twenty-seven of this Act makes any 
25 
untrue statement of facts or omits to state any fact necessary in order to prevent the 
26 
statements made therein from being materially misleading in the light 
of the 
27 
28 
circumstances under which they were made, shall upon conviction suffer a fine not less 
than five thousand pesos (P5,OOO.OO) r,or more than five million pesos (P5,000,000.00), 
50 


c . 
1 
2 
3 
4 
5 
6 
7 
8 
9 
I O  
11 
12 
13 
14 
15 
I6 
17 
18 
19 
20 
21 
22 
or imprisonment of not less than seven (7) years nor more than twenty one (21) years, 
or both, in the discretion of the court. If the offender is a corporation, partnership, 
association or other juridical entity, the fine shall be imposed upon the investment 
company, or upon the officer or officers of such entity responsible for the violation, or 
both, and if any such officer is an alien, he shall, in addition to the penalties prescribed, 
be deported without further proceedings after service of sentence. 
SEC. 48. Effect on Existing Law and Repealing Clause.- The rights and 
remedies provided by this Act shall be in addition to any and all rights and remedies 
that may now exist, but no person permitted to maintain a suit for damages under the 
provisions of this Act shall recover, through satisfaction of judgment in one or more 
actions, a total amount in excess of his actual damages on account of the act 
complained of. 
Republic Act No. 2629 is repealed in its entirety. Violations of the said Act 
committed prior to the effectivity of this Act shall be punished in accordance with the 
laws then in force. All laws, Acts, parts of Acts, Rules of Court, Executive Orders, and 
administrative regulations which are inconsistent with this Act are hereby repealed. 
SEC. 49 Separability. - If any provision of this Act shall be held invalid, the 
remainder of the Act shall not be affected thereby. 
SEC. 50. Effectivity Clause. - This Act shall take effect fifteen (15) days from 
the date of its publication in at least two (2) newspapers of general publication in the 
Philippines. 
Approved,