Request for Comments on the Proposed Rules and Regulations on Determining Whether a Trust Fund is a Qualified Buyer

April 20, 2018 SEC MSRD TO : Trust Entities, Investment Houses, Investing Public and All Other Interested Parties SUBJECT : Request for Comments on the Proposed Rules and Regulations on Determining Whether a Trust Fund is a Qualified Buyer NOTICE The Securities and Exchange Commission intends to issue Rules and Regulations on Determining whether a Trust Fund is a Qualified Buyer. Hence, the Commission is inviting the trust entities, investment houses, the investing public and other interested parties to submit their views, comments and inputs to the proposed rules. The draft SEC Memorandum Circular is hereto attached for your reference. Commenters may submit, not later than 7 May 2018, their views, comments and inputs by email to mrd@)sec.gov.ph and [emailprotected] . Issued on April 20, 2018. ATTACHMENT SEC MEMORANDUM CIRCULAR NO. _____ Series of 2018. TO : ALL CONCERNED SUBJECT : RULES AND REGULATIONS ON DETERMINING WHETHER A TRUST FUND IS A QUALIFIED BUYER SECTION 1. Coverage . These Rules shall apply to unit investment trust funds ("UITFs") and other funds managed by persons authorized by the Bangko Sentral ng Pilipinas ("BSP") to engage in trust functions and not enumerated in SRC Sec 10.1 (I). CAIHTE SECTION 2. Qualification of Trust Funds as Qualified Buyers . 2.1 UITFs that are established in accordance with rules and regulations of the BSP are deemed qualified buyers. 2.2 The other funds established under a trust arrangement may be considered as qualified buyers provided that the trustor, either natural or juridical person, possesses the requirements specified in 2015 SRC Rules 10.1.11.1.1 for natural persons and 10.1.11.2 for juridical persons; provided also, that the treatment of such fund as qualified buyer does not contravene the trust arrangement. For ease of reference, SRC Rule 10.1.11.1.1 provides that a natural person must have an (i) annual gross income of at least Ten Million Pesos (Php10,000,000.00) at least two years prior to evaluation as qualified buyer, or (ii) total portfolio investment in securities registered with the Commission of at least Ten Million Pesos (Php10,000,000.00), or (iii) personal net worth of not less than Thirty Million Pesos (Php30,000,000.00). SRC Rule 10.1.11.2 provides that a juridical person must have, at the time of being evaluated as qualified buyer, (i) gross assets of at least One Hundred Million Pesos (Php100,000,000.00), or (ii) total portfolio investment in securities registered with the Commission or financial instruments issued by the government of at least Sixty Million Pesos (Php60,000,000.00). 2.3 A fund established thru an Investment Management Account ("IMA") may be considered as a qualified buyer provided that it is established under a discretionary arrangement; provided also, that the beneficial owner/s of such fund possess the qualifications specified in 2015 SRC Rules 10.1.11.1.1 for natural persons, and 10.1.11.2 for juridical persons; provided further, that the treatment of such as qualified buyer does not contravene the IMA arrangement. SECTION 3. Compliance to SRC Rules 10.1.11.1.1 and 10.1.11.2 . The trustee shall be responsible for determining and monitoring the initial and continuing compliance of the funds with the qualifications in the aforementioned 2015 SRC Rules. SECTION 4. Recordkeeping . The trustee shall keep, maintain and update the list and records of the funds that it has determined as qualified buyers. The records and supporting documents that shall be maintained and required for evaluation shall be comparable to information and documents required under Rule 39.1.4.5 of the 2015 SRC Rules. The trustee shall make available for inspection to the Commission's representatives the documents to be used by the trustee such as application forms, trustors or beneficial owners' information sheets and proof of qualifications for a period of at least five (5) years. It shall retain the records that relate to an on-going investigation beyond this point until the Commission declares the case closed and terminated. SECTION 5. Reporting . A trustee shall submit to the Commission the list of funds to which it has conferred the status of "qualified institutional buyers" and "qualified individual buyers," within seven (7) days from the date of conferment or renewal of said status. For funds other than UITFs, the list shall contain the following information: For funds under Trust Arrangement 1. Name/Identity of funds; 2. Name of trustor/s; 3. Name and designation of the trust entity's personnel who conducted the evaluation; 4. Date of evaluation; and 5. Date of conferment of status as qualified buyer. For funds under IMA 1. Name/identity of funds; 2. Name of beneficial owner/s; 3. Name and designation of the trust entity's personnel who conducted the evaluation; 4. Date of evaluation; and 5. Date of conferment of status as qualified buyer. SECTION 6. Fund with More Than One Trustor (Trust Arrangement) or Beneficial Owner (IMA) . A fund comprising of two or more trustors in case of a trust arrangement or two or more beneficial owners in case of IMA shall be evaluated based on the arrangement among the trustors or beneficial owners (individually or joint) which they have represented to the trust entity. DETACa A joint account with an "OR" or "AND/OR" arrangement shall be evaluated based on the income or portfolio investment or net worth of each trustor or beneficial owner. A joint account with an "AND" arrangement shall be evaluated based on the combined income or portfolio investment or net worth of all the trustors or beneficial owners. SECTION 7. Sanctions and Penalties for Non-Compliance . Non-compliance with any of the requirements and procedures herein shall subject a covered entity or person to the administrative sanctions provided under Section 54 of the SRC. SECTION 8. Effectivity . These Rules shall take effect immediately following the completion of its publication in two (2) newspapers of general circulation in the Philippines. Pasay City, Metro Manila, ________ 2018. For the Commission: TERESITA J. HERBOSA Chairperson