Law Summary

Overview

The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 3 on January 24, 2008, to establish rules governing the registration of qualified buyers by authorized registrars, which include various financial entities. This document outlines the functions, responsibilities, and procedures for registrars in relation to qualified buyers.

Section 1: Authorized Registrars

• Explanation: Entities authorized to act as registrars must possess the appropriate secondary license from the SEC.
• Key Definitions:
  • Authorized Registrars: Entities permitted to register qualified buyers.
• Requirements:
  • Must be one of the following:
    • Banks (broker-dealer, government securities dealer, underwriter)
    • Brokers
    • Dealers
    • Investment Houses
    • Investment Company Advisers
    • Issuer companies for their own securities
• Important Details:
  • Registration is contingent on the SEC's licensing approval.

Section 2: Initiation and Cessation of Functions as Registrar

• Explanation: Procedures for beginning and ending the registrar's functions.
• Requirements:
  • Written notification to the SEC is required to initiate or cease registrar functions.
  • Notice to cease functions must be provided at least 30 days in advance.
• Key Details:
  • Ongoing compliance with record-keeping obligations is required even after cessation.

Section 3: Registrars Internal Procedures

• Explanation: Registrars must establish internal processes for evaluating applicants' qualifications.
• Requirements:
  • Conduct due diligence in evaluation.
  • Ensure all supporting documents are submitted at application time.
• Important Details:
  • Records should comply with the Securities Regulation Code (SRC).

Section 4: Responsibilities of a Registrar

• Explanation: Outlines the specific duties of registrars concerning applicants and registrants.
• Key Responsibilities:
  • Collect written affirmations from applicants regarding the truthfulness of submitted information.
  • Maintain qualifications during registration.
  • Require registrants to submit an undertaking not to misrepresent themselves as qualified buyers if disqualified.
  • Prepare and secure signatures on letters of undertaking stating compliance with registration requirements.
  • Issue certificates of registration valid for two years.
• Important Details:
  • Attachments (Annexes "A" and "B") provide suggested forms for undertakings.

Section 5: Registry Book of Qualified Buyers

• Explanation: Requirement to maintain a registry book containing details of qualified buyers.
• Requirements:
  • Registry must include:
    • Names and registration dates of qualified buyers.
    • Personnel responsible for evaluations.
  • Note any disqualifications in the registry.
• Important Details:
  • Must be available for inspection by SEC representatives.

Section 6: Other Records

• Explanation: Obligations for maintaining records related to registrants.
• Requirements:
  • Retain application forms, information sheets, and proof of qualifications for at least five years.
  • Retain records of ongoing investigations beyond five years until closed.
• Key Details:
  • The SEC may require copies of records for review.

Section 7: Penalty

• Explanation: Consequences for non-compliance with the Circular or regulations.
• Penalties:
  • Violations are subject to sanctions under the SRC and its implementing rules.

Section 8: Effectivity

• Explanation: The Circular's effective date and transitional provisions.
• Effective Date: February 15, 2008.
• Transitional Provisions:
  • Prior qualified buyer statuses granted under Memorandum Circular No. 6 remain valid if qualifications are maintained and confirmed by the registrar.

Key Takeaways

• SEC Memorandum Circular No. 3 establishes the framework for registrars of qualified buyers, detailing authorized entities, their responsibilities, and record-keeping requirements.
• Entities must comply with notification procedures for beginning and ending registrar functions.
• Registrars are responsible for ensuring the integrity of the registration process and maintaining accurate records for SEC inspections.
• Non-compliance may result in penalties as specified under the SRC.
• The Circular becomes effective on February 15, 2008, with provisions for previously granted statuses.