Atty. Saturnino Bautista

August 31, 1982 Atty. Saturnino Bautista Batasang Pambansa Quezon City Sir : This is with reference to your request for our views and comments on Parliamentary Bill No. 1926, incorporating amendments to P.D. No. 175, as amended. Hereinunder are our comments on the pertinent sections of the proposed Parliamentary Bill No. 1926, as may be affecting the Commission. A. "Section 1. Section 4 of Presidential Decree Numbered One Hundred Seventy-Five, as amended, is amended to read as follows: 'SECTION 1. Powers of Cooperatives . Cooperatives shall have the following powers: (a) . . . (b) . . . (c) To establish rural banks under the Rural Bank Act and/or to purchase government-held preferred shares of rural banks which may be converted to voting common stocks, under the rules and regulations to be promulgated by the Monetary Board of the Central Bank and the Agrarian Reform Fund Commission; PROVIDED, HOWEVER, THAT REGISTRATION WITH THE BUREAU OF COOPERATIVES DEVELOPMENT OF COOPERATIVE RURAL BANKS AND OTHER COOPERATIVE BANKS ORGANIZED UNDER THIS DECREE SHALL BE SUFFICIENT FOR SAID BANKS TO ACQUIRE LEGAL PERSONALITY TO APPLY AND QUALIFY FOR LICENSING BY THE CENTRAL BANK OF THE PHILIPPINES, WITHOUT NEED FOR REGISTRATION AS CORPORATIONS WITH THE SECURITIES AND EXCHANGE COMMISSION, NOTWITHSTANDING THE PROVISIONS OF R. A. 337, AS AMENDED, AND/OR R. A. 720, AS AMENDED: PROVIDED FURTHER THAT SAID BANKS SHALL SUBMIT TO THE SUPERVISIONS OF THE BUREAU OF COOPERATIVE DEVELOPMENT SO FAR AS THE PROVISIONS OF THIS DECREE ARE CONCERNED AND TO THE CENTRAL BANK OF THE PHILIPPINES ON BANKING TRANSACTION' xxx xxx xxx." Comment: The Securities and Exchange Commission is in favor of the hereinabove proposed amendment to Section 4 of P. D. No. 175, as amended. On December 15, 1981, a letter was sent to the Securities and Exchange Commission addressed to Ms. Corazon I. Morando, Officer-in-Charge (now Director), Corporate and Legal Department, Securities & Exchange Commission and signed by Ms. Nelia T. Gonzalez, Officer-in-Charge, Bureau of Cooperatives Development (BOCD). It was noted that pursuant to P. D. No. 175, and letter of implementation Nos. 23 and 7, attached to said letter, that ". . . among others, the Bureau of Cooperative Development is charged with the following responsibilities: 1. Promulgate rules and regulations to govern the promotion, organization, registration, regulation and supervision of cooperatives; 2. Register/re-register cooperatives existing before the issuance of P. D. No. 175; 3. Regulate and supervise all types of cooperatives ; 4. Development of the cooperatives movement in the Philippines . . ." (Emphasis supplied) In paragraph 6 of said letter, the BOCD further noted that ". . . in instances where some primary cooperatives are beneficiaries of foreign and local financial assistance, their leaders have to organize and register with the Securities and Exchange Commission. This prevents the BOCD from imposing the requirements of the Ministry of Agriculture (formerly the Ministry of Local Government and Community Development), circular No. 74-47 which requires a clearance from the BOCD before receiving financial or technical assistance from whatever source. Furthermore, this Office cannot supervise their status, operations and utilization of funds through audit and inspection." In view of the foregoing, the BOCD requested arrangements with the Securities and Exchange Commission for the transfer of registration of organizations/associations composed of cooperatives from the SEC to the BOCD, which request has been granted. LibLex Registration with the BOCD of cooperative rural bank and other cooperative banks is a mere reaffirmation of the presently existing situation in cooperative organizations/associations. It would, thus, give more effect to the power of the BOCD of regulating and supervising all types of cooperatives. Registration, supervision as well as regulation of all types of cooperatives may be performed by one central body, such as the BOCD, in order to ensure coherent result. Likewise, the Commission by indorsing the proposed Section 1 of Parliamentary Bill No. 1926, further amending P.D. No. 175, would help hasten the development of cooperative movement in the Philippines. This would erase any duplicity of functions between the Commission and the Bureau of Cooperatives Development, thereby, saving the public of unnecessary inconvenience measured in terms of time and effort. All these would lead towards the achievement of unity and cooperation in the cooperative movement. Needless to say, the rights of the public are amply protected inasmuch as these cooperative rural banks and cooperative banks shall be subject to the supervision of the Central Bank of the Philippines. B. "Sec. 5. Privileges of Cooperatives. Cooperatives shall enjoy the following privileges: '(d) EXEMPTION OF ITS SECURITIES FROM THE PROVISIONS OF THE SECURITIES ACT PROVIDED SUCH SECURITIES ARE NOT SPECULATIVE. xxx xxx xxx." Comment: Section 5(a)(4) of the Revised Securities Act expressly provides that securities issued by rural credit associations or by cooperative marketing associations which are subject to regulation and supervision by the proper government agency are exempt securities. This being the case, securities issued by rural credit association or by cooperative marketing associations which are regulated and supervised by the Bureau of Cooperatives Development may thus be sold or offered for sale or distributed to the public within the Philippines and permitted to be sold as provided for under the Revised Securities Act without prior registration thereof under said Act. Furthermore, under the Revised Securities Act, the concept of speculative securities as contra-distinguished from non-speculative securities has been abolished. In view thereof, letter (d), Section 5 of Parliamentary Bill No. 1926 should be deleted for being unnecessary. LexLib We trust that the foregoing merit your request. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman