Rules on Authorisation of an Investment Company as a Qualifying CIS and Recognition of a Foreign CIS under the ASEAN CIS Framework

August 16, 2021 SEC MEMORANDUM CIRCULAR NO. 9, S. 2021 TO : Investment Companies Fund Managers Foreign Collective Investment Schemes Foreign Collective Investment Schemes Operators Other Entities Dealing with an Investment Company or Foreign CIS SUBJECT : Rules on Authorisation of an Investment Company as a Qualifying CIS and Recognition of a Foreign CIS under the ASEAN CIS Framework WHEREAS , the ASEAN Capital Markets Forum (ACMF) was established in 2004 under the auspices of the ASEAN Finance Ministers, the primary responsibility of which is to develop a deep, liquid, and integrated regional capital market and is composed of a group of capital market regulators from ten ASEAN jurisdictions, namely Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Singapore, Thailand, Vietnam, and the Philippines; WHEREAS , one of the initiatives of the ACMF is the Framework for Cross-Border Offering of ASEAN Collective Investment Schemes (ASEAN CIS Framework) which allows fund managers operating in a member jurisdiction to offer CIS, such as unit trust funds or mutual funds, constituted and authorised in that jurisdiction, in other member jurisdictions under a streamlined authorisation process; WHEREAS , the ASEAN CIS Framework was operationalized in Malaysia, Singapore and Thailand in August 2014 following the signing of the Memorandum of Understanding (MoU) on Streamlined Authorisation Framework for Cross-border Public Offers of ASEAN Collective Investment Schemes in October 2013; WHEREAS , the supplemental memorandum of understanding (Supplemental MoU) to the existing MoU on Streamlined Authorisation Framework for Cross-border Public Offers of ASEAN Collective Investment Schemes was signed and entered into by and among Securities Commission Malaysia, Monetary Authority of Singapore, Securities and Exchange Commission of Thailand and Securities and Exchange Commission Philippines on 11 May 2021 to admit the Commission as the fourth signatory to the ASEAN CIS Framework; WHEREAS , Rule 16.2 on Regulations on Cross Border Transactions of the Implementing Rules and Regulations of the Investment Company Act (ICA) provides that the offering or selling of registered collective investment schemes in another economy/ies shall be subject to the regulations provided for in a mutual or multilateral cross-border trading of funds agreement which the Philippines is a signatory thereof; WHEREAS , the requirements under the Standards of Qualifying CIS shall be in addition to the applicable requirements under Sections 8 and 12 of the Securities Regulation Code and applicable provisions of the Investment Company Act and its Implementing Rules and Regulations; WHEREAS , to assist Investment Companies and their Fund Managers to offer cross-border under the Framework as well as the CIS Operators of foreign collective investment schemes, the Commission deems it necessary to issue the subject Rules; WHEREAS , the subject Rules should be read in conjunction with the Implementing Rules and Regulations of the Investment Company Act (ICA-IRR) and any amendments thereto, Standards of Qualifying CIS dated 11 May 2021 or any amendments thereto, published at http://www.theacmf.org, and other relevant documents which may be issued from time to time; IN VIEW OF THE FOREGOING , the following rules are promulgated: I. Coverage These rules shall apply to: a. Investment Companies and Fund Managers incorporated in the Philippines that intend to participate in the Framework and offer for sale the shares of Investment Companies cross-border; and b. Foreign Collective Investment Schemes Operators of Member Jurisdictions that will offer for sale foreign CIS in the Philippines under the ASEAN CIS Framework. II. Definition of Terms ACMF means the ASEAN Capital Markets Forum ACMF Member means the securities regulator of the respective ASEAN jurisdiction, and collectively, the "ACMF Members" ASEAN CIS Framework means the streamlined authorization framework for the cross-border offer of ASEAN collective investment schemes developed pursuant to the AMCF's Implementation Plan endorsed at the 13th ASEAN Finance Ministers' Meeting Certified Investment Solicitor shall refer to a natural person of legal age duly licensed by the Commission and appointed by the Fund Manager or Mutual Fund Distributor to solicit, sell or offer to sell the shares or units of an investment company to the public CIS Operator means a person who is responsible for the management of foreign collective investment scheme Commission means Securities and Exchange Commission Philippines Fund Manager means a registered entity with an Investment Company Adviser license that is engaged in the business of managing the daily operations of an Investment Company in the investment, administration, and accounting of fund assets Home Jurisdiction means the jurisdiction in which the Qualifying CIS is constituted or established, and approved by the competent securities regulator of that jurisdiction for offer to the public in that jurisdiction Host Jurisdiction means a jurisdiction (other than the Home Jurisdiction) in which the Qualifying CIS is offered or to be offered to the public in that jurisdiction Home Regulator means the securities regulator of the Home Jurisdiction Host Regulator means the securities regulator of the Host Jurisdiction Investment Company means a stock corporation primarily engaged or holds itself out as being engaged primarily, or proposes to engage, in the business of investing, reinvesting and trading in securities Member Jurisdiction means the jurisdiction of an ACMF Member which is a Signatory, and collectively, the "Member Jurisdictions" Qualifying CIS means a CIS constituted or established in its Home Jurisdiction which has been approved by its Home Regulator for offer to the public in the Home Jurisdiction and assessed by its Home Regulator as suitable to apply to a Host Regulator for its shares/units to be offered to the public cross-border in the Host Jurisdiction pursuant to the ASEAN CIS Framework Standards of Qualifying CIS means the set of rules and regulations as agreed and as may be amended from time to time amongst the ACMF members which applies to a Qualifying CIS under the ASEAN CIS Framework III. Requirements for Authorisation of Investment Companies as Qualifying CIS An Investment Company and its Fund Manager may offer the shares of the former in other Member Jurisdictions under the ASEAN CIS Framework only if: 1) Registration under ICA and SRC The Investment Company is incorporated under the laws of the Philippines and authorized under the Investment Company Act (ICA) and Securities Regulation Code (SRC) to issue shares to the public; Guidance on the Legal Character of Qualifying CIS from the Philippines: For the avoidance of doubt, only "shares" (and not "units") issued by qualified investment companies will be allowed to be offered under the Framework. Moreover, an investment company that offers both shares and units of participation in the Philippines is eligible to participate in the Framework, however, only shares can be offered cross-border. 2) Assessment as Qualifying CIS and Compliance with both local regulations and Standards of Qualifying CIS The Investment Company has been assessed by the Commission as suitable to be a Qualifying CIS, the parties involved such as the Fund Manager and the proposed cross-border offering is fully compliant with the SRC, ICA, and their respective Implementing Rules and Regulations (IRR) as well as the provisions of the Standards of Qualifying CIS and any amendments thereto. Guidance: References to "Qualifying CIS" in the Standards of Qualifying CIS should be read to include investment companies while a "CIS Operator" should be read to refer to Fund Managers of investment companies a. An Application to the Commission for Authorisation of an Investment Company as a Qualifying CIS must be made by the Investment Company or its Fund Manager, if authorized by the Board of Directors of the investment company by submitting a duly notarized and completed SEC Form-Qualifying CIS (Annex E) . b. The authorization of an Investment Company as a Qualifying CIS shall be subject to a fee in the amount of ten thousand pesos (P10,000.00) plus Legal Research Fee (LRF), provided all other filing fees covered by SEC ICA Form 7-A and SEC Form 12-1-ICA have been previously paid covering the securities to be concurrently offered in the Philippines and in Member Jurisdictions. An application is deemed incomplete if the fee is not paid. c. The Commission will review and assess the application for authorization of an investment company as a Qualifying CIS within twenty-one (21) business days from submission of complete documents. d. If the Commission is satisfied that the Fund Manager and Investment Company meet the applicable requirements stated in this Circular, Standards of Qualifying CIS, the ICA, SRC, and their respective IRRs, the Commission will issue a letter stating that: i. The investment company has been approved by the Commission for public offer in the Philippines; and ii. It has no objections to such investment company being deemed as a Qualifying CIS pursuant to the Standards of Qualifying CIS. IV. Additional Requirements for Investment Companies offering cross-border 1. An investment company that seeks to offer its shares under the Framework must demonstrate compliance with both domestic regulations and Standards of Qualifying CIS, but where the two sets of requirements differ on a particular provision, the stricter requirement/s would govern and such fact must be highlighted in the Prospectus of the Fund. 2. In case of cross-border offerings, the roles and responsibilities of the Board of Directors of Investment Company (Qualifying CIS), Fund Manager (CIS Operator), Custodian, Independent Oversight Entity and other entities or persons dealing with the Investment Company shall also be governed by the Standards of Qualifying CIS or any amendments thereto. 3. The shares of the Qualifying CIS must be concurrently offered in the Philippines and in Member Jurisdictions. 4. The existing provisions under Rule 12.1 of the ICA-IRR as well as applicable provisions of the SRC shall apply to the reportorial requirements of the investment company that will participate in the Framework. However, the monthly sales and redemption report should identify those sales and redemptions relating to cross-border offerings vis--vis local offerings for ease of monitoring. V. Recognition of Foreign Collective Investment Schemes to be offered in the Philippines A. Requirements for Recognition of a Foreign CIS The foreign Collective Investment Scheme (foreign CIS) may be offered in the Philippines pursuant to the ASEAN CIS Framework if the following requirements are complied with: 1) The foreign CIS is constituted in a Member Jurisdiction and is permitted/authorised to be offered to the general public of that Member Jurisdiction; 2) The foreign CIS is not subject to any suspension or revocation order by the Home Regulator; 3) The foreign CIS has been assessed by the Home Regulator as suitable to be a Qualifying CIS; 4) The foreign CIS has been recognized by the Commission and permitted to be offered in the Philippines subject to the requirements provided under these Rules and any of its amendments; 5) Units of the foreign CIS will be concurrently offered in the Philippines and in the jurisdiction in which the foreign CIS is constituted and primarily regulated; 6) The foreign CIS, the CIS Operator and the trustee/fund supervisor satisfy the requirements of the Standards of Qualifying CIS and any amendments thereto as well as the requirements under these Rules relative to the recognition of foreign CIS; and 7) The Offering Document of the foreign CIS complies with the disclosure requirements of the Commission; 8) A local representative and distributor/s in the Philippines must be appointed in relation to each foreign CIS that is to be offered, marketed and distributed in the Philippines. B. Requirement to Appoint a Local Representative in the Philippines The CIS Operator must appoint a local representative in the Philippines in relation to each foreign CIS that is to be offered, marketed and distributed in the Philippines. Any of the following can be appointed by the CIS Operator as its representative: Representative Description 1. Mutual Fund Distributor A juridical person duly licensed or authorised by the Commission to distribute shares or units of an Investment Company 2. Fund Manager A registered entity with an Investment Company Adviser license 3. Securities Broker/Dealer An entity duly registered with the Commission as securities broker/dealer Role and functions of a local representative To represent and act on behalf of the foreign CIS and its CIS Operator for all matters relating to that foreign CIS such as, but not limited to, the following: a. Submit or make available to the Commission and investors any report or information relating to the foreign CIS, the CIS Operator and any other information as may be required by the Commission from time to time b. Facilitate communication between the investors and CIS Operator/trustee/fund supervisor/custodian c. Inform and provide investors and the Commission with relevant reports, documents, and information involving the foreign CIS d. Keep a consolidated registry of investors in the Philippines which should be readily available to the Commission e. Make available for the Commission and public inspection at its registered office in the Philippines, the following: i. The current offering document and constitutive document of foreign CIS ii. The audited financial statements for the last two financial years and the latest interim financial statements (if applicable) iii. Each material contract and any other document involving the foreign CIS f. Notify the Commission within five (5) calendar days from the occurrence of the event of any of the following: i) any material change involving the foreign CIS or parties involved in the foreign CIS ii) any material action or order taken by the Home Regulator against the parties involved in the foreign CIS iii) any instance of Home Regulators order to suspend the redemption or dealing of units in the CIS iv) revocation of authority or license to offer the CIS in the Home Jurisdiction v) commencement and completion of the termination or winding up of the foreign CIS vi) any change in the registered address or any other contact details of the foreign CIS vii) any other material information involving the foreign CIS and parties involved in its operation g. Ensure that the NAV per unit/share of the foreign CIS is made publicly available on a daily basis h. Represent the operator of the foreign CIS in any dispute resolution scheme that the said operator may be subject to Replacement of representative 1) If the position of the local representative becomes vacant, the offering, marketing or distribution of the foreign fund must immediately cease and such fact must be immediately reported to the Commission within seven (7) business days from the occurrence of the event. 2) The CIS operator must appoint a new local representative within 30 calendar days from the date of the vacancy, or any such period as may be allowed by the Commission. 3) The CIS operator must immediately notify the Commission of such appointment. C. Requirement to Appoint a Local Distributor/s in the Philippines The CIS Operator must appoint one or more local distributors for the purpose of offering, marketing or distributing a foreign fund that is to be offered in the Philippines under the ASEAN CIS Framework. Any of the following can be appointed by the CIS Operator as the Local Distributor provided each local distributor has at least one (1) Certified Investment Solicitor (CiSol): Local Distributor Description 1. Mutual Fund Distributor A juridical person duly licensed or authorised by the Commission to distribute shares or units of an Investment Company 2. Fund Manager A registered entity with an Investment Company Adviser license and a separate license as a Mutual Fund Distributor 3. Securities Broker/Dealer An entity duly registered with the Commission as securities broker/dealer Guidance: A single entity can act both as local representative and distributor provided it possesses all the licenses required as mentioned above. Role and functions of a local distributor The responsibility of the local distributor is to offer, market or distribute the foreign CIS in the Philippines and will be required to keep a register of investors that will be readily available to the Commission. The local distributor should ensure compliance with the Suitability Rule under Rule 5.2.4 of the ICA-IRR. D. Application for Approval or Recognition for the sale or offering of units of a foreign CIS in the Philippines (1) An application to the Commission for the approval or recognition of a foreign CIS to be offered in the Philippines must be made by the CIS Operator or local representative of such foreign CIS by submitting a duly completed SEC-FCIS Form (Annex A) a. Submission of application must be addressed to: The Chairperson Securities and Exchange Commission Philippines (Attention: Director, Corporate Governance and Finance Department) North Wing Hall, Secretariat Building, PICC Complex, Pasay City 1307 b. Submission of applications can be made on a business day in the Philippines between 8:00 a.m. to 5:00 p.m. Philippine time. Any submission received by the Commission after 5:00 p.m. will be deemed to be received on the following business day. c. The application for recognition of foreign CIS and other relevant documents shall be submitted to the Commission in the form of hard (physical) copies as well as via electronic form (soft copies). The hard copy must be placed in an envelope with the following label on top: "ASEAN CIS" Corporate Governance and Finance Department. The electronic version shall be sent to the following email addresses: [emailprotected] and [emailprotected] or any other email as may be defined by the Commission. Guidance: The submission via electronic form is for information purposes only. The application shall be deemed to have been acquired by the Commission on the date the hard copies were received. (2) A Prospectus for an offer for sale of units of a foreign fund or collective investment scheme according to SEC Form-ASEAN CIS Prospectus (Annex B) shall include a Product Highlight Sheet; (3) Certification of True Documents and Data Accuracy (Annex D); (4) Standard letter issued by the Home Regulator to a Qualifying CIS Operator as per Appendix I of the ASEAN CIS Handbook; (5) ASEAN CIS Application Form as per Appendix II of the ASEAN CIS Handbook; (6) Undertaking to submit to the non-exclusive jurisdiction of the Host Jurisdiction's courts, as per Appendix III of the ASEAN CIS Handbook; and (7) A copy of the contract or similar evidence on the appointment of a local representative and distributor/s for the foreign CIS in the Philippines. Guidance: Where relevant, references to "unit(s)" in these Circular should be read to include shares or any other instrument representing a right or interest in a foreign fund or CIS and "unit holder(s)" should be read to refer to shareholders or any person entitled to be recognized as owner of such right or interest in that foreign CIS. All forms and documents shall be completed in the English language. In addition, where a person submits to the Commission a document which is not in English, the person shall also submit to the Commission, as the case may be, an accurate translation thereof in the English language. E. Payment of Filing Fee The foreign CIS shall be subject to the following fees: Description Fee For every application to the Commission for recognition of a foreign collective investment scheme (includes Prospectus registration) Php135,000.00 For registration of new 1 or updated prospectus Php35,000.00 F. Offering Document/Prospectus of foreign CIS 1) The offering document of a foreign CIS must comply with the relevant disclosure requirements provided under Annex B of these Rules as well as other applicable disclosures under Rule 4.2 of the ICA-IRR or any of its amendments. 2) The prospectus submitted to the Commission should not contain false or misleading information. 3) The CIS Operator must prepare and submit to the Commission upon filing the application either: a. the latest version of the offering document/prospectus as approved by the Home Regulator together with a wrapper which contains the additional information required to be disclosed to investors under these Rules and any other applicable Philippine law or regulation; or b. another offering document/prospectus (in addition to the original offering document/prospectus approved by Home Regulator) which complies with the disclosure requirements under these Rules and any other applicable Philippine laws or regulations. G. Rejection of Application for Recognition/Suspension or Revocation of Approval of a Foreign CIS for public offer in the Philippines The Philippines may refuse to recognize/approve a foreign Qualifying CIS for public offer in the Philippines, or may suspend, or revoke the Approval of a foreign Qualifying CIS for public offer in the Philippines, in any of the following circumstances: a. The CIS Operator or Qualifying CIS submits or has been found to have submitted false or misleading information to either the Home Regulator or the Commission; b. The CIS Operator or Qualifying CIS misrepresents to or has been found to have misrepresented to; defrauds or has been found to have defrauded investors; c. The CIS Operator, Qualifying CIS, the trustee/fund supervisor contravenes or has been found to have contravened any obligations or provisions in the constitutive documents that are applicable to them; d. The CIS Operator, Qualifying CIS or the trustee/fund supervisor fails or has been found to have failed to comply with any resolution passed by investors; or e. The CIS Operator, Qualifying CIS contravenes or has been found to have contravened any laws, regulations, Standards of Qualifying CIS, or administrative provisions imposed in the Home Jurisdiction or in the Philippines. Guidance: The abovementioned grounds shall apply for the rejection of application for Authorisation/Suspension or Revocation of Status of an Investment Company as a Qualifying CIS. H. Reportorial Requirements for foreign CIS The CIS Operator or its authorised representative must submit the following reports to the Commission: 1) Updated Prospectus to be submitted within fifteen (15) calendar days from the time it was updated and/or approved by the Home Regulator or after lodgment with the Home Regulator (whichever is applicable) 2) Annual Reports and Interim Reports must be submitted in the same manner and within the same period that it is required to be filed with the Home Regulator 3) A current report on SEC Form 17-C, as may be necessary, to make a full, fair and accurate disclosure to the public of every material fact or event that occurs which would reasonably be expected to affect the investors' decisions in relation to those securities within five (5) calendar days after the occurrence of the event reported, unless substantially similar information as that required by SEC Form 17-C has been previously reported to the Commission by the CIS Operator or its authorised representative 4) A monthly report within the same period that it is required to be submitted to the Home Regulator. If not required in the Home Jurisdiction, within thirty (30) days from effectivity of the Order recognizing the Qualifying CIS, and within the first ten (10) days of every month thereafter, the CIS Operator or authorised representative shall submit to the Commission a Monthly Issuance and Redemption Report of units, showing the additional information below if not yet contained in the monthly report submitted to the Home Regulator. a. The number of units outstanding at the beginning of the month b. The number and total amount/value of units sold during the month c. The number and total amount/value of units redeemed during the month d. The number of units outstanding at the end of the month e. The percentage of the outstanding shares owned by Filipinos as of the end of the month f. Number of accounts or investors g. Average net asset value as of the end of the month For items a to d, provide the information for Philippine investors only and include the percentage based on the total sales and redemptions for the month. Guidance: All reports to be submitted to the Commission must be in the English language. In case a foreign CIS, its CIS Operator or local representative submits to the Commission a document which is not in English, an accurate translation thereof in the English language must also be filed. I. Penalties for violations of foreign CIS The applicable provisions of the SRC, ICA, and their IRRs on civil and/or criminal liabilities shall apply in case of any violation relative to the offering of the foreign CIS in the Philippines. Guidance: The CIS Operator and its directors as well as Board of Directors of Qualifying CIS (as may be applicable) must confirm in its application that they are aware of the criminal and administrative liabilities under the Securities Regulation Code and other applicable laws of the Philippines relating to offer of CIS in the Philippines such as those involving false or misleading representation of material facts in any prospectus concerning the foreign CIS and any other material information. VI. Effectivity These rules shall take effect immediately after publication in two (2) newspapers of general circulation in the Philippines. Pasay City, Philippines, August 16, 2021. For the Commission: (SGD.) EMILIO B. AQUINO Chairperson ANNEX A SEC FCIS Form-Retail ASEAN CIS Application for Recognition of a Foreign Collective Investment Scheme (CIS) ANNEX B SEC Form-ASEAN CIS Prospectus For an Offer for Sale of Units of a Foreign Fund or Collective Investment Scheme ANNEX C Sample Product Highlight Sheet ANNEX D Certification of True Documents and Data Accuracy ANNEX E SEC Form-QCIS Application for Authorisation of an Investment Company as a Qualifying CIS Footnotes 1. If the Prospectus has an expiry date, the CIS Operator should register a new prospectus.