QuestionsQuestions (SEC ICA RULE 35-1)
It refers to any issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting and trading in securities, as defined in Section 4 of the Act.
An Open-End Company is an investment company that offers for sale or has outstanding any redeemable security issued by it (as issuer). A Close-End Company is any investment company other than an open-end company.
It must be organized as a stock corporation and comply with the Corporation Code, and must have a minimum subscribed and paid-up capital of at least PHP 50 million (subject to possible Commission reduction if it is part of a group managed by the same investment company manager).
All directors must be Filipino citizens, and all shares of its capital stock shall be common and voting shares. For open-end companies, the Articles of Incorporation must provide for waiver of pre-emptive rights of shareholders.
Yes. Original proponents who subscribed and paid for the original capital are not allowed to sell, transfer, convey, encumber, or otherwise dispose of their shares/securities within 12 months from the registration of the investment company.
Unless the Commission prescribes otherwise, the minimum size of investment by any single investor is PHP 5,000.00. Securities sold must be on a cash basis; installment sales are expressly prohibited.
All proceeds from the sale of shares/securities (including original subscriptions/payments that make up the original paid-in capital) must be held by a custodian bank as required under the Rule.
The maximum investment in any single enterprise shall not exceed 10% of the investment company’s net asset value, except obligations of the Philippine Government and its instrumentalities. Also, the total investment of the fund shall not exceed 10% of the outstanding securities of any one investee company.
At least 10% of the open-end company’s fund must be invested in liquid/semi-liquid assets such as short-term Treasury notes/bills, BSP-issued Certificates of Indebtedness short term, and other fully government-guaranteed evidences of indebtedness; or savings/time deposits with government-owned banks or commercial banks, but not under “bearer,” “numbered,” or similar arrangements.
Until the Commission provides otherwise, no investment company shall sell securities short or invest in: (1) margin purchased securities (partly paid shares excluded), (2) commodity futures contracts, (3) precious metals, (4) unlimited liability investments.
Operational expenses shall not exceed 10% of its total investment fund or total net worth, as shown in the previous year’s audited financial statements (per Section 15 of the Act as cited in the Rule).
No investment company shall incur any further debt/borrowing unless at the time of incurrence or immediately thereafter it has asset coverage of at least 300% for all borrowings. If at any time it falls below 300%, the company must within 3 days reduce borrowings so that asset coverage is again at least 300%.
No investment company shall participate in an underwriting or selling group in connection with a public distribution of securities, except for its own capital stock.
No investment company shall purchase from or sell to its officers or directors (or officers/directors of its investment adviser/manager/distributor, or firms of which any of them are members) any securities other than the capital stock of the investment company.
Redemption price for requests received before the daily cut-off time is the next computed net asset value (NAV) per share. Requests received after the cut-off are deemed received the following day. The cut-off time is 12:00 noon.
Open-end companies must compute and post NAV per share daily, publish daily prices in at least two newspapers of general circulation, and post them daily in a conspicuous place at the principal office and all branches/correspondent offices designated as redemption centers. Payment for redeemed securities must be effected within 7 banking days from receipt of the request.
The Commission may suspend redemption whenever necessary or appropriate in the public interest or for the protection of investors.
Before acting, the person must file an application with the Commission with required data/documents, including minimum unimpaired net worth of at least PHP 10 million (exclusive of revaluation surplus), curriculum vitae of directors, and audited financial statements for the last three years (to the extent applicable). Disapproval is mandated if the applicant or any principal officer/director: (1) willfully makes material false/misleading statements or omits material facts; (2) is convicted of a crime involving moral turpitude involving securities transactions or arising out of fiduciary business; or (3) willfully violated or aided/abetted/counseled/induced/procured violations of the Act, RSA, or applicable rules.
Only a duly authorized local commercial bank of good repute, authorized by the BSP to perform trust functions, may act as custodian. It may also act as transfer agent or dividend disbursing agent, but must not perform any management or investment advisory function in the sale of shares of the same investment company.
Within 30 days from the effectivity of the order declaring effective the registration, and within the first 10 days of every month thereafter, it must submit an oath-executed report (by its Treasurer or other officer) showing: (A) total amount received from sale of shares; (B) total amount of redemptions; (C) number of shares outstanding at beginning of month; (D) number sold during the month; (E) number redeemed during the month; (F) number outstanding at end of month; and (G) percentage of outstanding shares owned by Filipinos.