Mr. Roberto M. Pagdanganan

August 19, 1993 Mr. Roberto M. Pagdanganan President League of Provinces 6/F Agustin Bldg.,Emerald Ave., Ortigas Complex, Pasig, Metro Manila S i r : This refers to your letter of August 4, 1993 relative to the following suggestions of the League of Provinces concerning flotation of local government unit bonds: 1. Issuance by the SEC of a memorandum circular, as soon as possible, reiterating existing pertinent SEC Rules and Regulations in compliance with Section 299 of the 1991 Local Government Code. 2. That the issuer, the local government unit, need not register with the SEC. However, they will have to submit pertinent documents to the SEC. Please be advised that under Section 5 of the Revised Securities Act, securities issued by the Government or any of its political subdivisions are exempted from registration requirements. Said Law provides: "SECTION 5. Exempt Securities . (a) Except as expressly provided the requirement of registration under subsection (a) of Section four of this Act shall not apply to any of the following classes of securities: (1) Any security issued or guaranteed by the Government of the Philippines, or by political subdivision or agency thereof or any of its public instrumentalities, or by any person controlled or supervised by, and acting as an instrumentality of said Government, or any certificate of deposit for any of the foregoing. xxx xxx xxx". (Emphasis supplied) Exempt securities are so classified under the Revised Securities Act because these are issued, sold or transferred by the Government or other institutions or organizations over which other government agencies exercise supervisory care. Thus, it would be repetitious for this Commission to require registration of said securities and to exercise additional supervision over said institutions. However, with the passage of the Local Government Code of 1991, there seems to appear a conflicting provision which states that securities issued by Local Government Units are subject to the rules and regulations of the Securities and Exchange Commission. Section 299 of the said Code provides: "Bonds and other Long Term Securities subject to the rules and regulations of the Central Bank and the Securities and Exchange Commission ,provinces, cities, and municipalities are hereby authorized to issue bonds, debentures, securities, collaterals, notes and other obligations to finance self-liquidating, income producing development or livelihood projects pursuant to the approved local development plan or the public investment program." (Emphasis supplied) Because of these conflicting statutory provisions, the Commission, in a letter dated August 11, 1993, posed a query to the Department of Justice inquiring whether or not Sec. 299 of the Local Government Code of 1991 is to be treated as an amendment to the Revised Securities Act, thereby making bonds and other securities issued by local government units subject to registration requirements under the Revised Securities Act and Rules and Regulations of the SEC. We will formally act on your suggestions as soon as we receive the reply from the Department of Justice. Very truly yours, (SGD) ROSARIO N. LOPEZ Chairman