Rules on the Registration and Sale of Asset-Backed Securities

March 25, 1991 RULES ON THE REGISTRATION AND SALE OF ASSET-BACKED SECURITIES Pursuant to Presidential Decree No. 902-A, the Revised Securities Act and other existing applicable laws, the Securities and Exchange Commission hereby promulgates the following rules governing the registration and sale of Asset-Backed Securities in the interest of full disclosure and protection of investors. SECTION 1. Scope . These Rules shall apply to the issuance and sale of Asset-Backed Securities. prcd SECTION 2. Definition of Terms . For purposes of these Rules, the following definitions shall apply: a) "Assets" shall mean loans and receivables originated in the ordinary course of business of a corporation, including but not limited to mortgage loans, personal loans, lease receivables, trade receivables, and other similar financial assets. b) "Asset-Backed Securities" shall mean trust certificates issued by a trust created pursuant to the Rules representing undivided ownership interests in the Assets forming the Asset Pool. (c) "Asset Pool" shall mean a group of physically segregated or otherwise particularly identified Assets originally owned by the Originator, conveyed to, held, and owned by the Issuer. (d) "Custodian Bank" shall mean a duly authorized commercial bank which shall be the depository of Investible Funds and the Sinking Fund. (e) "Eligible Investments" shall mean obligations issued and/or fully guaranteed by the government of the Republic of the Philippines, registered securities and such other readily marketable investments which the Commission from time to time may approve. (f) "Investible Funds" shall mean proceeds of collections from the Asset Pool which are not yet due for distribution to holders of Asset-Backed Securities. (g) "Issuer" shall mean a Special Purpose Trust which shall issue the Asset-Backed Securities. (h) "Originating Procedures" shall mean the process of creating the Assets. In the case of credits or loans, the procedures used by the Originator, such as documentation, appraisal, credit investigation, etc. to determine the credit worthiness of the borrower and the value of the collateral offered, if any, to secure the loan. (i) "Originator" shall mean the entity which was the original obligee of the Assets, such as a financial institution that grants a loan or a corporation in the books of which the Assets were created. (j) "Securities" shall mean the term as defined in Section 2 of the Revised Securities Act. (k) "Seller" shall mean the entity which conveys to the Issuer, the Assets forming the Asset Pool. In most instances, the Seller may itself be the Originator. (l) "Servicer" shall mean the corporation appointed by the Issuer to perform the servicing of the Asset Pool. Servicing shall mean primarily, collecting and recording payments received on the Assets and remitting such collections to the Issuer. (m) "Sinking Fund" shall mean the proceeds of collection from the Asset Pool including all income therefrom, set aside in an account with a Custodian Bank to be used by Issuer to redeem the issued securities. (n) "Special Purpose Trust" shall mean a trust constituted for the sole purpose of purchasing Assets (the Trustee of such trust must be the Trust Department of a commercial bank), owning and holding the Asset Pool for a definite period of time until all Asset-Backed Securities issued are redeemed. SECTION 3. Requirement for the Registration of Asset-Backed Securities . No Asset-Backed Securities, except of a class exempt under any of the provisions of Section 5 of the Revised Securities Act or unless sold in any transaction exempt under any of the provisions of Section 6 thereof, shall be sold or offered for sale or distribution to the public in the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided. The aggregate amount of Asset-Backed Securities which may be issued by the Issuer at any time shall not exceed the outstanding principal amount of the Assets held in the Asset Pool. It is the intention of the Commission that the Asset-Backed Securities issued pursuant to these Rules be evaluated on the basis of the nature and quality of the Assets forming the Asset Pool, the ability and strength of the Originator and/or Seller, Issuer and Servicer and the soundness of the overall structure of every issue with the end in view of protecting the interest of the holder of Asset-Backed Securities and the investing public. An application for registration of Asset-Backed Securities must be jointly signed and filed by the Seller and the Issuer. The Seller and the Issuer shall be jointly responsible for the contents of the Registration Statement. SECTION 4. Minimum Size of Investment . Unless the Commission shall by order, otherwise prescribe, the minimum size of investment by any single investor in Asset-Backed Securities shall be the amount of P5,000. SECTION 5. Features of Asset-Backed Securities . (a) All registered Asset-Backed Securities must be pre-numbered and printed on security paper. (b) A specimen of the proposed Asset-Backed Certificate shall be submitted to the Commission for approval. (c) Asset-Backed Securities shall be signed, authenticated and sealed by the Trustee, and may be transferred by delivery of the Securities, endorsed by the owner or other person legally authorized to make the transfer. However, no transfer shall be valid, except as between the parties, until the transfer is recorded in the books of the Trustee, indicating the names of the parties to the transaction, the date of the transfer and the number of the certificate transferred. SECTION 6. Nature and Functions of an Issuer . (a) The Issuer must be a trust. (b) It should own and hold the Asset Pool. (c) It shall issue the Asset-Backed Securities. (d) It shall perform such other related and incidental activities contemplated in the Issue as disclosed in the Registration Statement. SECTION 7. Restrictions on Issuer . (a) It must be created for the sole purpose of owning and holding the Asset Pool. (b) It may own and hold only one Asset Pool at anyone time. (c) It may not engage in any activity other than owning and holding the Asset Pool or such other related and incidental activities as may be contemplated by the Issue and disclosed in the Registration Statement. (d) Term of existence shall expire upon retirement of all Asset-Backed Securities it has issued. (e) Issuer may not commingle the collections from the Asset Pool with moneys owned by or generated from a source other than the Asset Pool. Issuer shall establish a mechanism, such as a sinking fund or a separate bank account with a Custodian Bank in order to assure the payments of all amounts due the holders of the Asset-Backed Securities. (f) Investible Funds may be invested only in Eligible Investments as defined under these Rules. (g) It may not contract loans or extend guarantees or otherwise create similar liabilities. (h) The trustee of a trust may not be the trust department of the Servicer. SECTION 8. Conveyance of Assets to the Issuer . The conveyance to the Issuer of the Assets forming the Asset Pool shall be absolute and on a without recourse basis. SECTION 9. Appointment by the Commission . In the event that the Servicer, the Trustee or some other party essential for the fulfillment of the contractual undertakings in connection with an issue of Asset-Backed Securities shall, for any reason whatsoever (including but not limited to the insolvency, dissolution or liquidation of such entity), be unable to perform its contractual obligations in connection with the Issue, and the other parties thereto are unable to appoint a replacement in accordance with the provisions of the applicable contract, the Commission shall, in the exercise of its jurisdiction and in order to protect the interests of the investing public, appoint a replacement for such entity which is qualified in accordance with these Rules. SECTION 10. Procedures for Registration of Asset-Backed Securities . The Seller and Issuer applying for registration shall submit to the Commission the following: (a) Registration Statement (1) Form ABS (Annex 1) (2) Requirements from the Originator and/or Seller (i) Certified True Copy of Articles of Incorporation and By-Laws cdlex (ii) Board Resolution authorizing the Originator and/or the Seller to take the necessary steps required under these Rules for the registration of the Asset-Backed Securities (iii) Audited Financial Statements for the immediate past 3 fiscal years. (3) Requirements from the Issuer (i) Certified true copy of the Deed of Trust evidencing the conveyance of the Assets from the Originator to the Issuer. (ii) Drafts of all material contracts to be executed by the Issuer, the Originator and/or Seller, the Servicer and other parties in connection with the Issue. (iii) Copy of the Balance Sheet of Issuer. (4) Requirements from the Servicer (i) Certified True Copy of Articles of Incorporation and By-Laws (ii) Board Resolution authorizing the Servicer to enter into a servicing contract under these Rules. (iii) Audited Financial Statements for the immediate past 3 fiscal years or for a shorter period as may be allowed by the Commission. (iv) A certificate executed under oath by the Servicer's Authorized Officer attesting that the Servicer has the capacity to perform its undertakings in accordance with its contractual commitment. (v) Draft of the Servicing Contract prepared and to be executed in connection with the Issue. (vi) Projected annual Cashflow Statement covering the lifetime of the securities and indicating the maturity patterns office assets in the Asset Pool, supported by basic assumptions showing that even under adverse economic scenarios the cash flows generated by such assets are sufficient to support scheduled payments on the Asset-Backed Securities. (b) Prospectus (1) Front Page of Prospectus (i) Name of Seller and Issuer (ii) Name and amount of securities offered and a brief description of such securities (iii) The following statement in capital letters printed in bold-face roman type: THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. (iv) The date of the prospectus. (2) Summary of information contained in the prospectus. (3) A complete and detailed description of Assets forming the Asset Pool. (4) A complete and detailed description of Features of the Asset-Backed Securities to be Registered. (5) Information with Respect to the Originator and/or Seller, Issuer and Servicer (6) Plan of Distribution provided, however, that in case a Preliminary Prospectus is to be used before the effective date of the registration statement, the caption "Subject to Completion," the date of its issuance, and statement be printed in red ink, in type as large as that generally used in the body of the prospectus: Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the prospectus is completed. Prior to such completion, this prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in which such offer, solicitation or sale would be unlawful prior to registration under the Revised Securities Act. (c) Such other documents which may be deemed necessary by the Commission. SECTION 11. Action on Application for Registration . Upon filing of the Registration Statement and the documents aforedescribed, the applicant shall pay the Commission a fee equivalent to 1/10 of 1% of the maximum aggregate price at which the securities are proposed to be offered. The fact of such filing shall be immediately published by the Commission at the expense of the applicant in two (2) newspapers of general circulation in the Philippines once a week for two (2) consecutive weeks reciting that a Registration Statement for the sale of such securities has been filed with it and that the same, as well as the documents attached thereto, are open to inspection during business hours by interested parties and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable charge as the Commission may prescribe. Any interested party may file an opposition to the registration application within ten (10) days from the last publication. Within sixty (60) days after receipt of the complete application for registration, the Commission shall act upon the application and shall in the appropriate case issue an order making the registration effective and grant the applicant a Certificate of Registration and Authority to Issue Asset-Backed Securities with terms and conditions as it may impose in the public interest and for the protection of investors. Notwithstanding the foregoing, the Commission for the guidance of investors, may require the applicant to submit its securities to rating by securities rating agencies accredited by the Commission to provide all information necessary therefor. If any change occurs in the facts set forth in the Registration Statement, it shall be the obligation of the registrant to submit to the Commission for approval an amended Registration Statement. A copy of the Order of the Commission making the registration effective shall be published at the expense of the registrant once in a newspaper of general circulation in the Philippines within ten (10) days from its promulgation. The same rules shall apply to the amendment of the Registration Statement. Upon request, the Commission may accelerate granting authority in appropriate cases. SECTION 12. Periodic Reports . Issuers of registered Asset-Backed Securities shall submit to the Commission the following reports: (a) Quarterly Servicer Report not later than 30 days after the end of the preceding quarter containing the following: (1) Aggregate amount of collections for the quarter (2) Aggregate amount of funds segregated per accounts held, whenever applicable (3) Aggregate amount due Asset-Backed Securities holders but not yet paid, if any (4) Servicing fee for the period (5) Aggregate outstanding balance of delinquent accounts as of the end of business day of the preceding quarter (6) Total amount distributed to holders of Asset-Backed Securities (7) Total amount distributed to holders of Asset-Backed Securities allocable to investment amount (8) Total amount distributed to holders of Asset-Backed Securities allocable to the returns on investment amount (9) Such other information pertinent to the issue which may be deemed necessary by the Commission. (b) Annual Servicer Report not later than 105 days after the end of the preceding calendar year certifying that the Servicer's activities and performance under a servicing contract for the preceding calendar year were conducted under the signing Authorized Officer's supervision. (c) Annual Report of Independent Public Accountants not later than 105 days after the end of the preceding calendar year stating that the accountants have: (i) Examined the source of records and documents used in the preparation of the Quarterly Servicer Report and compared the records with the information reported in the certificates. Based upon the examination, the accountants are of the opinion that the servicing and reports have been conducted in compliance with the related servicing contract. (ii) Compared mathematical calculations of each amount set forth in the Quarterly Servicer Report with the source reports. Based upon the comparison, the accountants are of the opinion that such amounts are in agreement. (d) Audited Financial Statements for the preceding fiscal year of the Issuer and Servicer not later than 105 days after the end of the preceding fiscal year. (e) The registrant shall make a reasonably full, fair and accurate disclosure of every material fact relating to or affecting it which is of interest to investors. (f) Such other reports or notices which may be deemed necessary by the Commission. These periodic reports shall be signed under oath by the officer authorized pursuant to a Board Resolution previously filed with the Commission. SECTION 13. General Provision . The Commission shall by order, from time to time, prescribe such other requirement which it may deem to the best interest of the investing public. SECTION 14. Administrative Sanctions . If, after proper notice and hearing, the Commission finds that there is a violation of the Revised Securities Act, these Rules or its orders or that any registrant has, in a Registration Statement and its supporting papers and other reports required by law or rules to be filed with the Commission, made any untrue statement of a material fact, or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or refused to permit any lawful examination into its affairs, it shall, in its discretion, impose any or all of the following sanctions: (a) Suspension, or revocation of its certificate of registration and permit to offer securities; (b) A fine of no less than two hundred (P200.00) pesos nor more than-fifty thousand (P50,000.00) pesos plus not more than five hundred (P500.00) pesos for each day of continuing violation; (c) Disqualification from being an officer, member of the board of directors or principal stockholder of an issuer whose securities are or are about to be registered pursuant to these Rules; and (d) Other penalties within the power of the Commission under existing laws. The imposition of the foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individuals responsible for the violation. The Commission shall have the power to issue writs of execution to enforce the provisions of this Section and to enforce payment of the fees and other dues collectible under these Rules. SECTION 15. Effectivity . The rules shall take effect fifteen (15) days after the date of last publication in two (2) newspapers of general circulation in the Philippines. (SGD.) GONZALO T. SANTOS, JR. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner Associate Commissioner (SGD.) MERLE O. MANUEL (SGD.) ARMANDO Z. GONZALES Associate Commissioner Associate Commissioner (SGD.) ROSARIO N. LOPEZ Chairman Securities and Exchange Commission