Atty. Nicanor M. Zaratan, Jr.

April 16, 1996 Atty. Nicanor M. Zaratan, Jr. Rizal Towers, 4474 Singian St. 1210 Makati City, Metro Manila S i r : This refers to your undated letter requesting opinion on whether or not the " time-share contracts " for the occupancy of certain bungalows at Laguna de Boracay for a certain period of time at the rate indicated therein, of which your client, Timeshare Realty Corporation, was designated as the " marketer " by virtue of an agreement with the former, are required to be registered under the Revised Securities Act. cdlex The Revised Securities Act defines "securities" as follows: (a) " Securities " shall include bonds, debentures, notes, evidences of indebtedness, shares in company, pre-organization certificates or subscriptions, investments contracts, certificates of interest or participation in a profit sharing agreement, collateral trust certificates, equipment trust certificates (including conditional sale contracts or similar interests or instruments serving the same purpose), voting trust certificates, certificates of deposit for a security, or fractional undivided interest in oil, gas or other mineral rights, or, in general, interests or instruments commonly considered to be "securities", or certificates of interests or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or buy or sell any of the foregoing; or commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another, with or without recourse, such as promissory notes, repurchase agreements, certificates of assignments, certificates of participation, trust certificates or similar instruments; or proprietary or non-proprietary membership certificate, commodity futures contracts, transferable stock options, pre-need plans, pension plans, life plans, joint venture contracts, and similar contracts and investments where there is no tangible return on investments plus profits but an appreciation of capital as well as enjoyment of particular privileges and services ." (Emphasis supplied) The above definition of "securities" expressly embraces any form of "CONTRACT" for " enjoyment of particular privileges or services ". Thus, while the above-described scheme is not strictly considered an " investment contract " as there is no expectation of profitable return, it is essentially a contract involving money outlay on the assumption and anticipation of "future enjoyment of privilege" . Therefore, it falls within the scope of " securities " as defined above which requires registration under the Revised Securities Act. Accordingly, no such contracts shall be offered to the public, unless they are first registered with and/or licensed by the Securities and Exchange Commission pursuant to the provisions of the Revised Securities Act, unless exempted by the Commission pursuant to Section 6(b) of the same Law; and any " marketer " of said securities shall be subject to the following provision of the same Act. "SECTION 19. Registration of brokers, dealers and salesman . No broker, dealer or salesman shall engage in business in the Philippines as such broker, dealer or salesman or sell any securities, including securities exempted under this Act, except in exempt transaction, unless he has been registered as a broker, dealer, or salesman pursuant to the provisions of this Section . . . ." (Emphasis supplied) Please be advised, however, that the Commission has recently initiated legislative amendments to the Revised Securities Act which include, among others, the exclusion from the present definition of the term " securities " of any form of contract where there is no expectation of profitable return of investment (e.g. contracts for enjoyment of future privileges or services ). The proposed Legislative Bill is still pending with Congress. Until it is passed into law, the existing law on the matter shall be applied. cdlex Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner