Law Summary

Overview

This Memorandum Circular, issued by the Securities and Exchange Commission (SEC) on December 10, 2007, establishes the criteria and procedures for determining "qualified buyers" as defined under Section 10 of the Securities Regulation Code (SRC). It aims to regulate participation in securities transactions by individuals and institutional investors.

Section 1: Definition of Qualified Individual Buyers

• Legal Principle/Provision: A "qualified individual buyer" is defined as a natural person meeting specific financial and experience qualifications at the time of registration with a Self-Regulatory Organization (SRO) or other authorized entities.

• Key Definitions Introduced:

  • Qualified Individual Buyer

• Important Requirements:

  • Must have either:
    • A minimum annual gross income of PhP25,000,000 for the last two years; or
    • A total portfolio investment in securities of at least PhP10,000,000; or
    • A personal net worth of not less than PhP30,000,000.
  • Must have engaged in securities trading for at least one year or held a responsible position in a relevant entity for at least two years.

• Relevant Timeframes:

  • Qualifications must be met prior to registration.

Section 2: Definition of Qualified Institutional Buyers

• Legal Principle/Provision: A "qualified institutional buyer" is defined as a juridical person that meets specified financial thresholds at the time of registration.

• Key Definitions Introduced:

  • Qualified Institutional Buyer

• Important Requirements:

  • Must have either:
    • A minimum annual gross income of at least PhP100,000,000 for the last two years; or
    • A total portfolio investment in securities of at least PhP60,000,000; or
    • A net worth of not less than PhP100,000,000.

• Relevant Timeframes:

  • Qualifications must be met prior to registration.

Section 3: Application for Registration as Qualified Buyers

• Legal Principle/Provision: Registration as a "qualified buyer" requires submission of specific documentation.

• Important Requirements:

  • Applications must include:
    • A signed Information Sheet (specific forms for individual and institutional buyers).
    • Proof of qualifications.
    • Copies of income tax returns for the preceding two years, stamped by the Bureau of Internal Revenue.

Section 4: Validity and Renewal of Registration

• Legal Principle/Provision: Registration as a qualified buyer is valid for a fixed term.

• Important Requirements:

  • Registration is valid for two years.
  • Renewal applications must include a favorable recommendation from the authorized registrar and are subject to SEC approval.

• Relevant Timeframes:

  • Registration expires after two years unless renewed.

Section 5: Registry Book Access

• Legal Principle/Provision: Transparency and access to registration information are mandated.

• Important Requirements:

  • The registry book of authorized registrants must be open for review or inspection by the SEC.

Section 6: Transfer Restrictions

• Legal Principle/Provision: Restrictions on the transfer of securities.

• Important Requirements:

  • Securities acquired by qualified buyers cannot be assigned, transferred, or sold to non-qualified investors.

Section 7: Effectivity

• Legal Principle/Provision: The Memorandum Circular's provisions come into effect on a specified date.

• Relevant Timeframes:

  • Effective starting January 15, 2008.

Key Takeaways

• The SEC defines "qualified buyers" with distinct criteria for both individuals and institutions to ensure that only financially capable entities engage in securities trading.
• Specific documentation and proof of financial status are required for registration, which is valid for two years.
• The SEC maintains oversight by allowing inspection of registrants and imposing restrictions on the transfer of securities to protect market integrity.
• The provisions of this Circular are effective from January 15, 2008, ensuring compliance with the outlined regulations.