Question & AnswerQ&A (Republic Act No. 2629)
The Act is cited as the "Investment Company Act".
The primary policy objective is to mitigate and eliminate conditions adversely affecting the national public interest and investors by ensuring adequate information disclosure, protecting investors’ rights, and regulating investment companies' operations and management.
An investment company is any issuer primarily engaged or proposing to engage primarily in investing, reinvesting, or trading in securities, with several specific exemptions listed under the Act.
An open-end company offers redeemable securities and has the issuer issue these securities, while a closed-end company does not offer redeemable securities and is any investment company other than an open-end company.
Investment companies must file a registration statement with the Securities and Exchange Commission containing prescribed information. Registration is deemed effective after SEC approval and publication in the Official Gazette and newspapers. Existing companies at the Act's effectivity must register within six months.
Persons convicted within ten years of crimes involving securities, or permanently or temporarily enjoined from securities-related roles due to misconduct, and companies with such affiliated persons are disqualified, subject to possible exemptions by the SEC.
Transactions such as sales, purchases, loans between affiliated persons and the company are unlawful unless involving securities of the issuer, part of general offerings, or exempted by the Commission after ensuring fairness and compliance with policies.
Violators may be fined up to fifty thousand pesos, or imprisoned for up to five years, or both, unless other penalties are specified elsewhere in the Act.
Dividends must be paid only from accumulated undistributed net income or earned surplus and must be accompanied by a written disclosure statement specifying the source of the payment.
The SEC can make rules and regulations, conduct investigations, subpoena witnesses and documents, order persons to desist unlawful acts, suspend or revoke registrations, enforce compliance through court actions, and approve reorganizations among other regulatory and enforcement functions.