CBP Circular Letter

April 25, 1991 CBP CIRCULAR LETTER TO : All Authorized Agent Banks Including Custodian Banks, Authorized Securities Dealers/Brokers, Transfer Agents and Stock Exchanges Pursuant to Monetary Board Resolution No. 438 dated April 19, 1991 approving the new simplified system for the registration of foreign investments in CB-approved Philippine securities, repatriation of sales proceeds and the remittance of dividends/profits and consistent with Circular No. 1284 dated April 19, 1991, we are issuing the procedures for the handling of securities transactions as set forth in the Memorandum of Agreement among the representatives of Authorized Securities Dealers/Brokers, Transfer Agents, Custodian Banks and the Bankers Association of the Philippines, and noted by the Central Bank of the Philippines and the Securities and Exchange Commission. cdlex A. Buy Trades (Registration) 1. Investor gives order to the Broker who executes the same. 2. Broker fixes the foreign exchange with an AAB and confirms foreign currency and amounts payable by Investor. 3. Investor instructs Custodian Bank to receive shares and registration details at the same time gives the same information to the Broker. 4. The Broker submits purchase invoice and letter of undertaking to deliver shares to Custodian Bank within two (2) days upon receipt of instructions from the Investor. 5. The AAB pays Broker who in turn immediately issues instructions to the Transfer Agent to transfer the shares from the seller to the non-resident investor. 6. The Custodian Bank issues STD Registration Document and gives two (2) copies to the Broker, one of which will be delivered to the Transfer Agent. In case an inward remittance is done by an AAB other than the Custodian Bank, AAB must deliver Credit Advice to the Broker within a day after the Broker gets paid. 7. The Custodian Bank delivers a copy of the STD Registration Document to the Central Bank with the supporting documents within two (2) days after issuance of the STD Registration Document. 8. Upon receipt of the shares, the Broker delivers the same to the Custodian Bank who in turn returns the letter of undertaking and vaults the shares. Applications for registration of foreign investment in CB-approved Philippine securities shall be filed by Authorized Securities Dealers/Brokers with the investors' designated Custodian Banks within seven (7) banking days from receipt of the inwardly remitted foreign exchange and its conversion to Philippine pesos. B. Sell Trades (Repatriation of Sales Proceeds) 1. Investor gives order to the Broker who executes the same. 2. Broker confirms trade to the Investor together with the advice of foreign currency amounts receivable. 3. Investor instructs Custodian Bank to deliver shares to the Broker. 4. Broker pays peso proceeds to Custodian Bank in exchange for the shares. The Custodian Bank credits the peso proceeds to a non-interest bearing suspense account. 5. Custodian Bank submits to Central Bank Application for Outward Remittance of sales proceeds together with supporting documents. 6. Central Bank approves application and releases approval to the Custodian Bank. 7. Custodian Bank remits the funds in foreign currency to the investor and reports the remittance to the Central Bank in the prescribed form. C. Registration of Stock Dividends/Stock Splits and Reverse Stock Splits 1. The declaring company applies to the SEC for approval. 2. SEC approves and forwards a copy of the approval to the Central Bank who shall hold it for reference. 3. The Transfer Agent applies to the Central Bank for approval of foreign dividend portion covering shares with STD Registration Documents and other supporting documents. Central Bank issues approval letter. 4. The Transfer Agent applies to Custodian Bank for issuance of new STD Registration Documents. 5. Custodian Bank issues new STD Registration Documents for stock dividends and stock splits and provides copies to the Central Bank within two (2) days after issuance of the STD Registration Documents for filing and future reference. In the case of reverse stock splits or stock splits involving cancellation of certificates, the Custodian Bank cancels the old STD Registration Documents, issues new ones and provides copies of them to the Central Bank within two (2) days after issuance. 6. Transfer Agent issues new stock certificates and forwards them to the appropriate custodian. D. Remittance of Cash Dividends 1. The Transfer Agent applies to the Central Bank for approval of foreign exchange portion of cash dividends declared on shares with STD Registration Documents together with supporting documents, Central Bank issues approval letter. 2. The Custodian Bank applies to the Central Bank for approval of the foreign exchange portion of cash dividends declared on shares with STD Registration Documents only when the shares involved are not included in the application previously filed with the Central Bank by the Transfer Agent and upon approval by Central Bank effects foreign currency payments and reports to the Central Bank within fifteen (15) days after remittance. E. In case of foreign investors without local Custodian Banks and have their local Broker act as custodian, the following procedures shall govern: Buy Trades 1. Investor gives order to the Broker who executes the same. 2. Broker fixes the foreign exchange with an AAB and confirms foreign currency and amounts payable by Investor. 3. Investor instructs Broker to keep the shares in its behalf and to register the shares in the Broker's Name or Nominee Name (local or foreign). 4. The AAB pays Broker and delivers the Credit Advice within a day after the Broker gets paid. 5. The Broker applies with the Central Bank for an STD Registration Document submitting at the same time copies of the purchase invoice and the AAB's Credit Advice. 6. The Central Bank issues an STD Registration Document and gives two (2) copies to the Broker, one of which will be delivered to the Transfer Agent. 7. Upon receipt of the STD Registration Document, the Broker immediately issues instructions to the Transfer Agent to transfer the shares from the seller to the non-resident Investor. 8. Upon receipt of the shares from the Transfer Agent, the Broker vaults the shares for the account of the Investor. Sell Trades 1. Investor gives order to the Broker who executes the same. 2. Broker confirms trade to the Investor together with the advice of foreign currency amounts receivable. 3. Investor instructs the Broker to use the shares in its possession for the Investor's account to cover the sale. 4. Broker pays peso proceeds to AAB in exchange for the forward cover on the foreign currency accounts receivable. The AAB credits the peso proceeds to a non-interest bearing cash suspense account. 5. Broker submits to Central Bank Application for Outward Remittance of sales proceeds together with supporting documents. 6. Central Bank approves application and releases approval to the AAB copy-furnished the Broker. 7. AAB remits the funds in foreign currency to the Investor and reports the remittance to the Central Bank in the prescribed form. Stock Dividends, Stock Splits and Reverse Stock Splits 1. The declaring company applies to the SEC for approval. 2. SEC approves and forwards a copy of the approval to the Central Bank who shall hold it for reference. 3. The Transfer Agent applies to the Central Bank for issuance of new STD Registration Documents for stock dividends and stock splits based on the lists of registered investments earlier submitted by brokers to the Transfer Agent. The Central Bank issues new STD Registration Documents and forwards them to the Transfer Agent. In the case of reverse stock splits and stock splits involving the cancellation of stock certificates, the broker surrenders the old STD Registration Document to the Transfer Agent who forwards the same to the Central Bank for cancellation and the issuance of a new STD Registration Document. 4. Transfer Agent issues new stock certificates then forwards them together with the STD Registration Document to the appropriate broker. Cash Dividends 1. The Transfer Agent applies to the Central Bank for approval of foreign dividend portion involving shares with STD Registration Documents based on the lists earlier submitted by brokers to the Transfer Agent. Central Bank issues approval letter. 2. The AAB or Custodian Bank effects foreign currency payments and reports to the Central Bank within fifteen (15) days after remittance. For purposes of this Circular Letter, the following terms shall have their meanings as set forth below: 1. Central Bank shall mean Central Bank of the Philippines. 2. SEC shall mean the Securities and Exchange Commission. 3. Investor shall mean a non-resident investor. 4. Broker shall mean any authorized securities dealers/brokers who is a bona fide member-firm of either the Manila or Makati Stock Exchange duly licensed by the Securities and Exchange Commission to act as securities broker/dealer and recognized by the Central Bank as such. 5. Custodian Bank shall mean an Authorized Agent Bank of the Central Bank appointed by the investor to hold shares for and in its behalf and to perform any corporate action required to protect its investments in the Philippines. 6. Transfer Agent shall mean a corporation, partnership or Authorized Agent Bank engaged in the business of acting as an extension of the Corporate Secretary of a listed corporation in maintaining the stock transfer books of the corporation. The issuer corporation may also act as transfer agent of its own shares. 7. STD (Securities Transaction Document) Registration Document shall mean the document issued by the Custodian Bank on behalf of the Central Bank where the unique number assigned to identify a specific investment in Central Bank-approved securities, the date of registration, identity of the shares, name and address of the non-resident investor, etc. are indicated. In the case of investors who do not have Custodian Bank, the Central Bank will issue the STD Registration Document. 8. Credit Advice shall mean the original or duly certified copy of a document issued by an Authorized Agent Bank as evidence of inward remittance of foreign exchange and its conversion to Philippine currency. 9. Purchase or Sales Invoice shall mean the Broker's original document evidencing the purchase or sale of a stock listed in the stock exchanges. 10. Authorized Agent Bank of the Central Bank (AAB) refers to a commercial bank. 11. Application for Outward Remittance shall mean an application submitted to the Central Bank for authority to repatriate proceeds of sale of registered investments in Central Bank-approved securities or to remit cash dividends accruing from registered investments. The application shall not be considered complete unless accompanied by the required supporting documents. 12. STD Letter Advice shall mean the advice to the Central Bank by the Custodian Bank or the broker to make of record that all or a specific portion of the total number of shares covered by a specific STD Registration Document will be utilized to support an application for outward remittance of sales proceeds. 13. Supporting documents required to be submitted with the application for issuance of STD Registration Document shall mean the following: a. In case of new purchases: i. purchase invoice ii. credit advice iii. transfer instructions of the broker (either Form D or DT) duly received. b. In case of stock dividend declaration: i. the SEC approval of the stock dividend declaration and listing in the stock exchange of the stock dividend. ii. where the stock dividend declared will require an increase in the authorized capital stock, the SEC Certificate of Filing of Amended Articles of Incorporation approving the increase in authorized capital stock shall be submitted in addition to the above. c. In case of stock split or reverse stock split, the SEC Certificate of Filing of Amended Articles of Incorporation approving the split. 14. Supporting Documents for Application for Outward Remittance shall mean the following: a. In case of repatriation of sales proceeds (application to be filed by the Custodian Bank or by a Broker in the case of an investor without Custodian Bank): i. STD Letter Advice ii. Sales Invoice issued by the Broker b. In case of remittance of cash dividends (application to be filed by the Transfer Agent): i. Names of investors and addresses, STD Registration Documents of the securities involved, gross amount of cash dividend, tax withheld and net amount requested for remittance. ii. Proof of payment of withholding tax. iii. Stock Exchange Dividend Notice (the circular issued by a stock exchange announcing a dividend declaration of a listed company). iv. Clearance from the Inter-Agency Committee on Domestic Borrowings in case of foreign firms whose total subscribed capital stock is more than 40% foreign owned. v. Certification from the Corporate Secretary that the remittance of cash dividends is not financed from domestic borrowings. vi. Latest financial statements. c. In case of remittance of cash dividends (application to be filed by Custodian Bank): i. names of investors and addresses, STD Registration Document of the securities involved, gross amount of cash dividends, tax withheld and net amount requested for remittance, and proof of payment of withholding tax. ii. Transfer Agent's certification that the shares involved are not included in its application for remittance of cash dividend for the same period previously filed with the Central Bank. For your information and guidance. (SGD.) GABRIEL C. SINGSON Senior Deputy Governor