CBP Notification to Authorized Security Dealers No. 6-58

July 16, 1958 CBP NOTIFICATION TO AUTHORIZED SECURITY DEALERS NO. 6-58 Switch transactions in Philippine domestic securities for account of nonresidents are allowed subject to the following conditions: 1. Nature of Philippine domestic securities belonging to nonresidents which are eligible for switch transactions The following Philippine domestic securities belonging to nonresidents are eligible for exchange with other Philippine domestic securities in switch transactions for account of the same nonresidents: a. Philippine domestic securities which have been held continuously by the same nonresident owner since or before December 9, 1949; b. Philippine domestic securities acquired in the Philippines by non-residents since December 9, 1949, under license issued by the Exchange Control Department or by an Authorized Security Dealer in behalf of the Exchange Control Department; c. Philippine domestic securities issued by a Philippine company with a transfer agent abroad which were acquired abroad by the present nonresident holder from another nonresident, and the transfer was duly registered with the transfer agent abroad and duly reported to the resident transfer agent; d. The stock involved must be one listed and normally traded in the Manila Stock Exchange. 2. To whom Philippine domestic securities of a nonresident may be sold in a switch transaction Philippine domestic securities belonging to a nonresident which meet the qualifications prescribed in Paragraph No. 1 above may be sold in a switch transaction for account of the nonresident owner only to a resident of the Philippines; provided, that , they may be sold to the account of another nonresident if payment is made in foreign currency acceptable to the Central Bank and the foreign exchange is surrendered to an Authorized Agent of the Central Bank within twenty-four (24) hours from the receipt thereof. 3. Philippine domestic securities which may be purchased for account of a nonresident in a switch transaction Only Philippine domestic securities with an annual average smaller earning and lower allocation for dividend remittance during the two-year period preceding the switch, computed in accordance with the policy governing investment remittances, than the stock for which it is to be exchanged, or shares of stock of a highly speculative character, such as those of oil companies, may be purchased for account of a nonresident in a switch transaction; provided, that , non-dividend paying stock may be exchanged for other non-dividend paying stock. In the determination of the allocation for dividend remittance of Philippine domestic securities for the purpose of switch transactions, it is not necessary that the company involved remitted a cash dividend during the two-year period mentioned, but it shall be sufficient that had the company applied for the remittance, it would have been allowed the said allocation. 4. Prices in the sale and purchase of Philippine domestic securities involved in a switch transaction for account of a nonresident In the sale and purchase of Philippine domestic securities in a switch transaction for account of a nonresident, the price of the stock shall not be more than the fair value in the case of the sale and not less than the fair value in the case of the purchase. 5. Switch transactions for account of nonresidents which may be licensed by Authorized Security Dealers in behalf of the Exchange Control Department Authorized Security Dealers may, in behalf of the Exchange Control Department issue licenses covering switch transactions in Philippine domestic securities for account of nonresidents under the following conditions: a. Both the sale and the purchase are to be effected thru the Authorized Security Dealer involved in the transaction; b. The Philippine domestic securities to be sold for account of the nonresident meet the Qualifications set forth in Paragraph No. 1 above, and paid during the preceding two-year period at least one cash or stock dividend; and the sale conforms to the conditions laid down in Paragraph No. 2 above; LLphi c. The Philippine domestic securities to be purchased for account of a nonresident shall be shares of stock of a Philippine company engaged in an extractive industry which has not declared a cash or stock dividend since December 9, 1949, or highly speculative stock, such as those of oil companies; d. The amount reinvested shall not be less than 90% of the proceeds of the sale or P500, whichever is greater; e. The reinvestment of the proceeds of the sale of the original stock in the other stock shall be made not later than 15 days from the date of the sale. The sale of the original stock in behalf of the nonresident owner should be covered by a license on E. C. Form Y, unless an application on E. C. Form X is approved with respect to the sale by a resident of the securities purchased for account of the nonresident and describes both the securities purchased and sold. Authorized Security Dealers issuing under this paragraph licenses covering switch transactions in Philippine domestic securities for account of nonresidents are held responsible for faithful compliance with the requirements of these regulations in every particular. 6. Licensing of other switch transactions in Philippine domestic securities for account of nonresidents All switch transactions in Philippine domestic securities for account of nonresidents outside of the cases which Authorized Security Dealers are authorized to license under Paragraph No. 5 above, shall be acted upon by the Exchange Control Department. In forwarding applications for switch transactions to the Exchange Control Department for action under this paragraph, Authorized Security Dealer shall certify that the stock to be sold belongs to nonresidents and that said stock meets the qualifications set forth in Paragraph No. 1 above. 7. Export of Philippine domestic securities purchased for account of nonresidents in approved switch transactions Philippine domestic securities purchased for account of nonresidents in switch transactions licensed by an Authorized Security Dealer, in behalf of the Exchange Control Department, on E. C. Form X, may be exported abroad under the same license, provided the exportation is made within thirty days from the date of the purchase. Philippine domestic securities acquired in a switch transaction licensed by the Exchange Control Department may be exported abroad under the terms to be stated in the license issued by the said Department. 8. Reports Authorized Security Dealers shall submit daily to the Exchange Control Department reports of switch transactions in Philippine domestic securities for account of nonresidents for which they issued licenses in behalf of the Exchange Control Department during the preceding business day. These reports shall be accompanied by two signed and duly numbered copies of each license issued. Authorized Security Dealers shall, furthermore, register weekly with the Exchange Control Department Philippine domestic securities purchased for account of nonresidents in switch transactions handled by them both under their own licenses and under license issued by the Exchange Control Department. This registration shall set forth the name and address of the nonresident purchaser, a description of the securities purchased, including the serial or identifying numbers of the stock certificate, the par value and number of the shares, the price paid per unit, the peso value of the securities at the date of purchase, the date on which the purchase was made, the number and date of the covering license, and whether or not the securities have been exported. 9. Revocation of other regulation s Notification to Authorized Security Dealers No. 4 dated July 28, 1955, and all other regulations governing switch transactions in Philippine domestic securities for account of nonresidents heretofore issued which are in conflict with the foregoing, are hereby revoked. For the Monetary Board: (SGD.) ANDRES V. CASTILLO Acting Governor