Amendment to APECO Interactive/Online Gaming Rules and Regulations of 2016

April 25, 2017

APECO MEMORANDUM CIRCULAR NO. 01-17

AMENDMENT TO APECO INTERACTIVE/ONLINE GAMING RULES AND REGULATIONS OF 2016

RULE I

Policy Guidelines

SECTION 1. Applicability. — Pursuant to the rule making powers of APECO under Section 12, subparagraphs (u) and (v) of RA 9490, as amended by RA 10083, the 2016 APECO Interactive/Online Gaming Rules and Regulations (hereafter, 2016 APECO Rules) is hereby amended to conform to and be consistent with the provisions of Executive Order No. 13, series of 2017, with the end in view of ensuring that the objectives of the said Executive Order are observed and supported through and by way of APECO's own rules and regulations.

SECTION 2. Scope of Authority of APECO to License and Regulate Online Gaming Operations and Other Related Online Gaming Services and Activities, as Clarified under Executive Order No. 13, Series of 2017. —

Pursuant to Republic Act 9490, as amended by Republic Act 10083, Charter of Aurora Pacific Economic Zone and Freeport Authority, the general guidelines shall be observed:

a.) APECO is authorized to operate on its own, either directly or through a subsidiary entity, or concession or license to others, tourism-related activities, including games, amusements and nature parks, recreational and sports facilities such as casinos, online game facilities, golf courses and others under priorities and standards set by the APECO;

b.) All online gambling facilities of online gaming operators, and other facilities of online service providers, shall be operated within the boundaries of the Aurora Ecozone, as particularly described in RA 9490, as amended by RA 10083, or within the areas mentioned in Section 12 (g) of RA 9490, as amended, which include PEZA Accredited Information Technology (IT) buildings, parks and centers, as well as other areas allowed by law, particularly those allowed or envisioned under Section 3, paragraph 2 of Executive Order No. 13, Series of 2017.

SECTION 3. Definition of Terms. — Section 8 of the 2016 APECO Rules is hereby amended by adding the following definitions:

"APECO Interactive/Online Gaming License" — Pursuant to Section 3 of Executive Order No. 13, series of 2017, which reads:

SECTION 3. Clarification on Online Gambling. — "No duly licensed online gambling operator, or provider of activities and services related to or in support of online gambling activities, shall directly or indirectly allow persons who are physically located outside the territorial jurisdiction of the licensing authority to place bets, or in any way participate, in the games conducted by such operator, whether through an online portal or similar means. Nothing herein, however, shall prohibit the duly licensed online gambling operator from allowing the participation or persons physically located outside Philippine territory.

The license to operate online gambling granted to qualified operators shall not be assigned, shared, leased, transferred, sold or encumbered to any other party. Any gambling operator desiring to operate outside the jurisdiction of the government authority which issued the existing license shall apply for a separate license with the appropriate authority. "

the following licenses may be issued by APECO in favor of its online gaming, license applicants:

(a) "APECO BASIC ONLINE GAMING LICENSE (APECO BOGL)" — may be issued by APECO in favor of applicants for online gaming license whose operations shall be conducted within the territorial jurisdiction of APECO, as described under Section 3 of RA 9490, as amended by RA 10083.

(b) "APECO SUPPLEMENTAL ONLINE GAMING LICENSE (APECO SOGL)" — may, upon proper application with and after due evaluation by APECO through its Master Gaming Licensor, in accordance with Section 3, Paragraph 2 of Executive Order No. 13, series of 2017, be issued by APECO to its existing APECO Basic Online Gaming Licensees who intend or desire to also operate outside of the territorial jurisdiction of APECO. CAIHTE

"APPROPRIATE AUTHORITY" — The term "appropriate authority" mentioned in Section 3, Paragraph 2 of Executive Order No. 13, Series of 2017, shall refer to the authorized government agency allowed by its charter to issue online gaming license.

"AVAILMENT OF INCENTIVES UNDER SECTION 5 OF RA 9490, AS AMENDED, AND OTHER BENEFITS PROVIDED BY LAW" — The incentives and other benefits available to APECO Registered Enterprises, which include online gaming licensees, shall be enjoyed by the holders of Basic or Supplemental Online Gaming Licenses to ensure their viability as vital contributors to the economic and social welfare of our people. The availments, as herein allowed, shall be pursuant to and in accordance with the appropriate guidelines of the appropriate government agency concerned.

SECTION 4. Licensing Procedure. — The licensing procedure for Basic Online Gaming License shall be as provided under the 2016 APECO Rules. With respect to application for Supplemental Online Gaming License, the procedure shall be as follows:

(1) The Basic Online Gaming Licensee shall submit the following:

(a) Notarized letter-request containing the justifications for the issuance by APECO of a Supplemental Online Gaming License;

(b) Duly accomplished Application Form for APECO Supplemental Online Gaming License;

(c) Copy of its valid and existing APECO Basic Online Gaming License;

(d) Proof of availability of relocation area, which can be any of the premises available under existing laws, rules and regulations; and

(e) Such relevant government permits and clearances.

SECTION 5. "Coordination of APECO with Oversight Body Created under Executive Order No. 13, Series of 2017". — To ensure compliance with Section 4 of Executive Order No. 13, series of 2017, APECO shall fully cooperate with and lend assistance to the Office of the President or its duly authorized representative, in such manner as may be prescribed or mutually agreed upon.

SECTION 6. "Reportorial Requirements under Executive Order No. 13, Series of 2017". — To ensure compliance with Section 5 of Executive Order No. 13, series of 2017, APECO shall provide the Office of the President or its duly authorized representative, a semi-annual consolidated report on the progress of the government's effort against illegal gambling activities within the territorial jurisdiction of APECO and areas where APECO online gaming licensees are allowed by law to operate, pursuant to Section 3, Paragraph 2 of Executive Order No. 13, series of 2017 and Sections 4 (c) and 12 (g) of RA 9490, as amended.

SECTION 7. Applicability of Supplemental Online Gaming License Application Fees and Hosting Fees. — In addition to the fees imposable under the 2016 APECO Rules relative to the issuance of the APECO Basic Online Gaming License, an application fee and a hosting fee for the APECO Supplemental Online Gaming Licenses shall be imposed and collected by APECO in such amount or manner of collection as may be determined by APECO, in consultation with the Office of the President or its duly authorized representative.

SECTION 8. Effectivity. — These amendments shall take effect immediately upon its publication.

Approved as per APECO Board Resolution No. 05 series of 2017.

(SGD.) ISRAEL F. MADUCDOC

President and CEO

ATTACHMENT

APECO INTERACTIVE/ONLINE GAMING RULES AND REGULATIONS OF 2016

RULE I

Policy Guidelines

SECTION 1. Applicability. — Pursuant to the rule making powers of APECO under Section 12, subparagraphs (u) and (v) of RA 9490, as amended by RA 10083, these interactive/online gaming rules and regulations herein promulgated (hereafter referred to as the 2016 APECO Rules) shall apply to all matters pertaining or related to licenses and permits for interactive/online gaming operations issued by the Aurora Pacific Economic Zone and Freeport Authority (APECO) under its Charter, Republic Act 9490, as amended by Republic Act 10083, hereafter referred to as "RA 9490, as amended".

SECTION 2. General Mandate of the State. — Under Section 2 of RA 9490, as amended, it is the policy of the State "to actively encourage, promote, induce and accelerate the sound and balanced industrial, economic and social development of the country in order to provide jobs to the people, especially those in rural areas, increase their productivity and their individual and family income, and thereby improve the level and quality of their living conditions through the establishment, among others, of special economic zones in suitable and strategic locations in the country and through measures that shall effectively attract legitimate and productive foreign investments."

SECTION 3. Specific Function of APECO. — As a special economic zone, and as a measure by which APECO can "effectively attract legitimate and productive foreign investments," APECO is authorized, under Section 12 (f) of R.A. 9490, as amended, "to operate on its own, either directly or through a subsidiary entity, or concession or license to others, tourism-related activities, including games, amusements and nature parks, recreational and sports facilities such as casinos, online game facilities, golf courses and others under priorities and standards set by the APECO." HTcADC

SECTION 4. Support and Assistance from the National Government. — To enable APECO to successfully accomplish its mandates, purposes and functions under its Charter the following specific powers, authorities, functions, assistance and support are granted or extended to APECO:

a. The national government shall provide the Aurora Ecozone with the transportation, telecommunications and other facilities needed to attract legitimate and productive investments, generate linkage industries and employment opportunities for the people of the Province of Aurora and its neighbouring towns and cities (Sec. 4 (b) of R.A. 9490, as amended); and

b. The national government shall actively cooperate and coordinate with the Aurora Ecozone and the LGUs concerned to ensure the speedy development of the Aurora Ecozone as the vital gateway to the Pacific Seaboard. (Section 4 (j) of R.A. 9490, as amended)

SECTION 5. Rule-Making and Standard-Setting Functions of APECO. — In furtherance of the above mandates, powers and functions bestowed upon the national government as well as the APECO, LGUs and other concerned national agencies, the following rules and regulations are promulgated, pursuant to APECO's Rule-Making and Standard-Setting authority under Section 12 (u) and (v) of R.A. 9490, as amended.

SECTION 6. Interpretation. — Pursuant to Section 23 of R.A. 9490, as amended, in case of doubt or conflict in the interpretation of any provision hereof, the powers, authorities and functions that are vested in APECO by Law or through its rule-making or standard setting authority are intended to decentralize governmental functions and authority and promote an efficient and effective working relationship between and among the Aurora Ecozone, the national government and the local government units concerned.

SECTION 7. Validity and Implementability of Interactive/Online Gaming License. — All interactive/online gaming licenses and permits issued by APECO under these Rules shall be valid and implementable within:

(a) the Aurora Pacific Economic Zone and Freeport (APEZF), also referred to as the "Aurora Ecozone" in Section 4 (a) of RA 9490, as amended;

(b) the premises of PEZA Accredited Information Technology (IT) Facilities in Metro Manila and other key places in the Philippines, pursuant to Section 12 (g) of RA 9490, as amended;

(c) the premises of APECO Accredited Information Technology (IT) Facilities situated in Metro Manila and other key places in the Philippines, pursuant to and in accordance with mutually beneficial economic relations entered into between the APECO and the private entities owning or managing appropriate assets, infrastructures, units, buildings, and facilities located within any suitable or appropriate area within the country, under Section 4 (c) of RA 9490, as amended; and

(d) the premises authorized or to be authorized under Section 12 (B) of RA 9490, as amended, to have the rights to enjoy, receive and benefit from the same privileges, licenses or concessions granted or to be granted to other ecozones and free trade zones.

7.1 PEZA ACCREDITED (IT) FACILITY. Pursuant to Section 12 (g) of RA 9490, as amended, APECO is authorized to enter into a Mutual Cooperation Agreement with PEZA for the utilization of PEZA resources, assets and facilities.

For purposes of Section 7 (b) of these rules and regulations, PEZA facilities shall include PEZA owned resources, assets and facilities as well as privately owned buildings, structures or facilities contained in the updated list of PEZA Accredited Information Technology (IT) Centers or Parks. In respect of the latter, the APECO shall directly deal with or otherwise enter into mutually beneficial economic relations with the owner/manager of the said buildings, structures or facilities.

7.2 APECO ACCREDITED (IT) FACILITY. APECO, upon prior written endorsement by its master gaming licensor, shall declare a building, structure or facility to be an "APECO ACCREDITED (IT) FACILITY" where its licensees may be authorized to locate and operate thereat, taking into consideration the following guidelines:

(i) The building, structure or facility has sufficient power backup generators and redundant telecommunications facility that can support and sustain the operations of APECO registered enterprises;

(ii) The building, structure or facility has fiber optic telecommunication lines or any other modern equipment that can guaranty supply of high speed internet;

(iii) The owners/managers of the subject buildings, structures or facilities have entered into a mutually beneficial economic relation or agreement with APECO, consistent with the provisions of Section 8 hereof. Additionally, the agreement must grant to the authorized officials or representatives of the Regulator/s, unrestricted access to the premises of the APECO online gaming licensees or the APECO Accredited Technical Service Providers for purposes of regular or on-the-spot monitoring of their respective operations or activities.

7.2.1 Documentary Requirements. — Accreditation of APECO facility shall be accompanied with:

1. Copy of Board Resolution issued by the Board of Directors of the owner/manager of the building, structure or facility, authorizing its signatory to negotiate, enter into, and sign the Memorandum of Agreement (MOA) with APECO;

2. Copy of the MOA between APECO and the owner/manager of the building, unit, compound, facility or structure or Information Technology (IT) installation;

3. Certificate of Inspection conducted by APECO or its technically capable representative stating that the building or structure is equipped with sufficient power backup generators and fiber optic telecommunication lines or any other modern equipment that guarantee supply of high speed internet; aScITE

4. Copy of valid Mayor's Permit and other local clearances issued in reference to the building, infrastructure or facility concerned.

RULE II

Definition of Terms

SECTION 8. The following terms shall be defined or understood as follows:

"APECO" refers to the Aurora Pacific Economic Zone and Freeport Authority which is the governing body of the Aurora Pacific Economic Zone and Freeport (APEZF) or otherwise known as Aurora Ecozone;

"APECO Accredited Information Technology (IT) Support Facility" refers to a building, unit, structure or installation located in Metro Manila or in other key places which are subject matter of mutually beneficial economic relations entered into by APECO and other agencies or entities and has been accredited by APECO under these rules, as having sufficient infrastructure requirements to support online gaming operations under Section 4 (c) of RA 9490, as amended;

"APECO Accredited Technical Service Provider (AATSP)" refers to an entity certified by APECO as an entity that officially provides technical services to APECO online gaming licensee such as but are not limited to, customer support, technical support, software development, information technology, content provision, video streaming services, internet connectivity, telecommunication services, data centers, payment solutions, marketing and administration, and other analogous services;

"APECO ACCREDITED DATA CENTER" To ensure proper and strict monitoring and auditing of the Gross Gaming Revenues (GGR) and relevant financial operations of all APECO Online Gaming licensees and APECO Accredited Technical Service Providers, APECO, through its Master Gaming Licensor, shall engage the services of a reputable and independent Data Center Operator for purposes of determining accurate online gaming fees and corresponding government revenue share, including monitoring of the financial activities of the online gaming licensee for purposes of complying with anti-money laundering laws, rules and regulations;

"APECO Composite Monitoring Team on Online Gaming (ACMTOG)" shall refer to a team composed of competent officials or officers from APECO and its Master Gaming Licensor, tasked to monitor compliance of APECO online gaming licensees with the terms and conditions of their license and the rules and regulations of APECO;

"APECO Online Game Facility (AOGF)" refers to any building, unit, installation, compound or structure located inside the Aurora Ecozone, or outside the Aurora Ecozone provided that it is located in any PEZA, PAGCOR, or APECO Accredited Information Technology (IT) Facility;

"APECO Interactive/Online Gaming License (AOGL)" is an official document issued by the Regulator, authorizing the licensee to operate interactive/online game/s within an approved online game facility, for a given period, and under the terms and conditions as may beprescribed by the Regulator; DETACa

"APEZF" or "Aurora Ecozone" both refer to the area declared by RA 9490, as amended by RA 10083, as a separate customs and taxation territory, comprising of two (2) large parcels of land situated in the barangays of Dibet, Esteves, San Ildefonso, Cozo and Culat in the Municipality of Casiguran, Province of Aurora, as described in Section 2 of RA 10083 including any subsequent expansion, addition or modification thereof;

"Authority to Operate" refers to the authority given by APECO to its online gaming licensee to commence online gaming operations. The authority to operate shall not be given by APECO unless and until a prior written certification is issued by the Master Gaming Licensor to the effect that the concerned online gaming licensee has complied with all the necessary pre-operational requirements under these rules and all fees and charges have been paid by the online gaming licensee.

"Close associate" of an applicant for a license means:

a) a director or an executive officer of the applicant;

b) a shareholder or the applicant; or

c) any person who is associated with the ownership or management of the licensee's operations once the license to the applicant is granted.

"Close associate" of a licensee means:

a) a director or an executive officer of the licensee; or

b) a shareholder of the licensee; or

c) a person who is associated with the ownership or management of the licensee's operations, as duly determined by the President of APECO.

"Code of Practice" refers to the operational standards prescribed by the Regulator upon consultation with the online gaming operators and the betting public, which will serve as minimum service standards that an online gaming operator should have to ensure integrity, transparency, and reliability;

"Control system" means a system of internal controls and administrative and accounting procedures for the conduct of interactive/online games by a licensee;

"Interactive/Online Gaming Equipment" means a machine or other device (whether electronic, electrical or mechanical), computer software or any other thing used or suitable for use in the conduct of an interactive/online game;

"Interactive/Online Gaming Hosting Fee" means the fee imposed under Section 38;

"Law enforcement agency" shall, for purposes of this Rules and Regulations, include:

a) the Philippine National Police;

b) the Security Force of APECO; Bureau of Immigration (BI), Bureau of Internal Revenue (BIR), the Philippine Drug Enforcement Agency (PDEA);

c) the Office of the Public Prosecutor; and

d) other law enforcement agencies outside the Philippines like the International Criminal Police Organization (INTERPOL), the ASEAN Chiefs of Police (ASEANAPOL), etc.

"Master Gaming Licensor" means the entity authorized by APECO to process all applications for interactive/online gaming licenses, recommend approval or disapproval thereof to APECO, and assist APECO in monitoring and supervising the activities and operations of all APECO interactive/online gaming licensees;

The phrase "xxx mutually beneficial economic relationship xxx" in Section 4 (c) of RA 9490, as amended, with respect to interactive/online gaming, refers to agreements and/or arrangements between APECO and other entities which are intended to capacitate or otherwise strengthen APECO's interactive/online gaming licensees to attain their respective business plans and objectives, provide jobs for the people and improve the level and quality of their living conditions. It also enables APECO to bolster or otherwise promote the sound and balanced economic and social development of the country and enhance APECO's effectiveness to attract legitimate and productive foreign investments.

"PEZA" means the Philippine Economic Zone Authority created pursuant to Republic Act 7916;

"PEZA resources, assets and facilities" shall refer to PEZA owned structures, buildings or facilities which may be utilized by APECO for the use of its online gaming licensees pursuant to Section 12 (g) of RA 9490, as amended;

"PEZA Accredited Information Technology (IT) Facility" means a building, unit, compound, facility, structure or installation included in the list of PEZA Accredited IT Facilities located in Metro Manila and other key places in the Philippines which are deemed declared as "PEZA resources, assets and facilities," as mentioned in Section 12 (g) of RA 9490, as amended. These resources, assets and facilities may likewise be utilized by APECO as subject of "mutually beneficial economic relation" with the owners/managers thereof, pursuant to Section 4 (c) of RA 9490, as amended;

"President" shall refer to the President of the Aurora Pacific Economic Zone and Freeport Authority (APECO);

"Proxy betting" is a manner of placing bets whereby the real player/bettor outside the Philippines, plays and bets through the internet by instructing or controlling the proxy player inside a live studio casino through the use of a telecommunication, electronic, or video streaming device;

"Regulator/s" refers to the Aurora Pacific Economic Zone and Freeport Authority (APECO) including its Master Gaming Licensor;

"Telecommunication device" means:

a) a computer adopted to communicate by way of the internet or another communications network; or

b) a television receiver adopted to allow the viewer to transmit information by way of a cable television network or other communications device; or

c) a telephone or mobile or cellular phone; or any other electronic device or thing used for communication. aDSIHc

RULE III

Elements and Types of Interactive/Online Gaming

SECTION 9. Interactive/Online Game. — A game is deemed interactive/online if:

a) a prize consisting of money or something else of value is offered or can be won under the rules of the game; and

b) a player:

i. enters the game or takes any step in the game by means of a telecommunication or electronic device, whether playing directly or through a proxy; and

ii. gives, or undertakes to give, a monetary payment or other valuable consideration to enter the game; and

c) the winner of a prize in the game is decided:

i. wholly or partly by chance; or

ii. by a competition or other activity in which the outcome is wholly or partly dependent on the player's skill.

SECTION 10. Subject to Section 11 hereof, betting on a race event, sporting event, cockfighting event, live studio casino card games, Random Numbers Game (RNG), lottery, Binary, bingo, or any other event by means of a telecommunication or any other electronic device, whether directly or indirectly through a proxy player, is taken to be an interactive/online game.

SECTION 11. A game is an interactive/online game or not depending upon the declared characterization or categorization of APECO.

RULE IV

Licensing

SECTION 12. APECO Interactive/Online Gaming License (AOGL). — That which is issued by the Regulator authorizing the licensee, whether organized in the Philippines or in a foreign country, to set up interactive/online gaming facilities within the Aurora Ecozone, or APECO/PEZA accredited Information Technology buildings, parks, centers, resources or facilities.

The APECO Online Gaming Licensee may commence online gaming operations upon compliance with the provision of Section 8 hereof, on "Authority to Operate", in which case the APECO shall issue, in favor of the licensee, an "Authority to Operate" upon its showing or proof of compliance with the following pre-operational requirements:

(a) The online game facilities must be within the Aurora Ecozone or within the APECO or PEZA registered/accredited Information Technology Buildings, Parks, Centers, resources, assets and facilities;

(b) Sufficient power back up and high speed telecommunication facilities; and

(c) Sworn declaration of inventory of current personnel and information technology equipment to be executed by an officer or duly authorized representative of the online gaming licensee.

The validity of the Authority to Operate shall be co-terminus with the validity of the interactive/online gaming license, unless sooner terminated due to violations of these Rules.

SECTION 13. Who May Apply for an Interactive/Online Gaming License. — An application for Interactive/Online Gaming License may be filed by:

(a) An APECO Registered Enterprise authorized to do business related to tourism, entertainment, Business Process Outsourcing (BPO) or Information Technology (IT);

(b) A corporation constituted in a foreign country which has a local representative in the Philippines. The local representative must also be an APECO Registered Enterprise authorized to do business related to tourism, entertainment, Business Process Outsourcing (BPO) or Information Technology (IT).

SECTION 14. Requirements. — An applicant for Interactive/Online Gaming License must:

(a) submit all the documentary requirements to the Regulator;

(b) pass the Probity Test to be conducted by the Regulator; and

(c) pay the required fees.

SECTION 15. Where to File the Application. — An application for Interactive/Online Gaming License with the required supporting documents may be filed with APECO, through its Master Gaming Licensor. ETHIDa

SECTION 16. Fees. — Upon filing of the application with APECO or its Master Gaming Licensor, the applicant must pay the applicable fees to APECO or its Master Gaming Licensor, as appropriate.

The Master Gaming Licensor shall evaluate the application and all supporting documents and conduct probity tests under these Rules and submit its reports and evaluation to APECO for appropriate action.

SECTION 17. Probity Test. — In order for the Regulator to conduct a probity test, through the Master Gaming Licensor, the online gaming applicant must submit the following minimum requirements:

(a) a duly accomplished Company Probity Form to be signed by the company's authorized representative;

(b) a duly accomplished Personal Probity Form to be signed by each incorporator;

(c) clearance from the appropriate law enforcement and regulatory agency; and

(d) other documents to prove applicant's integrity and financial capability.

SECTION 18. Licensing Procedure. —

The licensing procedure for an APECO license to conduct interactive/online operations shall be as follows:

18.1 The applicant must submit to the Master Gaming Licensor, one (1) original and three (3) photo copies of the application to conduct interactive/online gaming with all the documentary requirements;

18.2 Upon receipt of the application for Interactive/Online Gaming license, the Master Gaming Licensor shall evaluate the application and the supporting documents to determine the type of interactive/online game and its corresponding fees;

18.3 The Master Gaming Licensor shall evaluate and assess the application and the attached documents with regard to probity and financial capability of the applicant. If found to be complete and in order, the Master Gaming Licensor may prepare and sign the Interactive/Online Gaming License and indorse the same with the original copy of the documents to APECO for its approval;

18.4 Within ten (10) working days from receipt by APECO, its President shall review the documents submitted and sign the Interactive/Online Gaming License in case the application is complete and in order.

18.5 In case of disapproval of the application for Interactive/Online Gaming License, the APECO President shall inform in writing the Master Gaming Licensor of the reasons for such denial.

SECTION 19. Additional Requirements. — The Master Gaming Licensor may, by written notice given to an applicant for a license, require the submission of additional information or documents that are necessary and reasonable for the proper evaluation of the application. The notice must specify a period of not less than fourteen (14) days within which the applicant is to give the additional information or documents.

SECTION 20. Application to be Granted or Refused. —

20.1 The Master Gaming Licensor must:

a) consider, process and evaluate an application for a license; and

b) make its recommendation to APECO President within a reasonable time after receiving the application or any further information or documents requested by the APECO President and/or the Master Gaming Licensor.

20.2 In deciding whether an applicant is a suitable person to hold a license, the Master Gaming Licensor must consider the following:

a) the character, business reputation and financial background of each close associate of the applicant;

b) the applicant's current financial position and whether the applicant has the financial, technical and other resources to conduct interactive/online games under a license;

c) whether the financial resources of the applicant are available from a source that is not tainted with illegality;

d) whether the applicant has in place a satisfactory corporate ownership or trust structure;

e) the experience and business ability of the persons who will be involved in the management or operation of the applicant's operations;

f) all others prescribed under the regulations.

20.3 If the Master Gaming Licensor determines that the applicant is qualified to be granted a gaming license, it must prepare the gaming license and transmit such license, with the original documents, to APECO President, who has ten (10) days to act on the transmitted license.

 If the Master Gaming Licensor, with the written consent of the APECO President, decides to deny the application for a license, the Master Gaming Licensor must give the applicant written notice of the decision within one (1) month from such denial.

SECTION 21. Interactive/Online Gaming License. — An Interactive/Online Gaming License contains the following information:

(a) Company name of the APECO Registered Enterprise;

(b) Serial Number of the license;

(c) Office addresses within and outside the Aurora Ecozone;

(d) Type of Interactive/Online Game/s;

(e) Terms and conditions of the license; and

(f) Validity period of the license which shall not be more than seven (7) years.

SECTION 22. Renewal of License. — An application for the renewal of an interactive/online gaming license must be filed not later than the 30th day immediately preceding the expiration date of the license. The licensing procedure under Section 18 of these rules shall apply in the processing of the application for renewal of license, except the following subsections. cSEDTC

22.1 The application for renewal of license must be accompanied by:

(a) Interactive/Online Gaming License Application Form;

(b) Proof of updated payment of Interactive/Online Gaming Hosting fees;

(c) Proof of compliance with the terms and conditions of the license; and

(d) Annual documents required to be submitted as indicated in the terms and conditions of the license.

22.2 The applicant must submit a report showing a change in the membership of the Board of Directors or in the ownership of stocks of the licensee. The new members of the Board of Directors must submit a duly-filled out Personal Probity forms.

SECTION 23. Terms and Conditions of the License. — The license shall be subject to following terms and conditions:

(a) license shall be non-transferrable;

(b) validity period must not be more than seven (7) years;

(c) licensee must not operate interactive/online games not specified in the license;

(d) licensee is not allowed to operate in online game facilities not indicated in the license;

(e) licensee must allow duly authorized inspectors of the Regulator to conduct random inspection of the online gaming activities and equipment of the licensee, at any time of the day or night.

RULE V

Other Conditions of a License

SECTION 24. License Not to be Transferred. — A license cannot be transferred except by way of enforcement of a mortgage, charge or encumbrance in accordance with Section 25.

SECTION 25. Mortgage, Charge or Encumbrance over License. — A licensee must not mortgage, charge or otherwise encumber its license except upon approval of the Master Gaming Licensor, with the written consent of APECO President.

25.1 If a person/corporation has a written approval from the APECO President to sell and transfer a license under or because of a mortgage, charge or encumbrance, the license may only be sold a transferred to a person approved by the APCO President after consultation with the Master Gaming Licensor.

25.2 The APECO President must not approve the transfer of a license, unless the he or she is satisfied after consultation with the Master Gaming Licensor that the proposed transferee is a qualified person to hold the license.

25.3 In deciding whether to approve the transfer, the APECO President may take into account the matters set out in Section 17 hereof and exercise any of the powers in Section 20 hereof, in relation to the proposed transfer.

25.4 If a person/corporation takes over a license because of a mortgage, charge or encumbrance, he or she can appoint a receiver or manager of the business conducted under the license, provided that the Master Gaming Licensor with the written approval of the APECO President, approves the proposed receiver or manager.

RULE VI

Accreditation of Entities

SECTION 26. The following entities may be accredited by APECO:

26.1 TECHNICAL SERVICE PROVIDER (TSP) — refers to an entity that provides technical services such as but are not limited to technical support, gaming software/platform, information technology, data/content provision, video streaming services, internet connectivity, telecommunication services, data centers, payment solutions, marketing and administration, business process outsourcing and other analogous service that does not involve the actual taking of bets from wagers.

26.2 TECHNICAL SERVICE PROVIDER'S CERTIFICATE (TSPC). Who are required — Private entities/enterprises that have valid Service Level Agreements with APECO online gaming licensees are required to secure TSPC from the APECO President.

26.3 DOCUMENTARY REQUIREMENTS — An application for TSPC shall be accompanied with the following:

(i) Letter request from the authorized signatory of the TSP;

(ii) Certified True Copy of the Service Level Agreement between the APECO Registered Enterprise and the Technical Service Provider (TSP);

(iii) Certified True Copy of the list of equipment to be used by TSP;

(iv) TSP Certification as to the number of its employees (both local and foreign).

26.4 VALIDITY OF THE TSPC — The Technical Service Provider's Certificate (TSPC) shall be valid for one (1) year unless sooner revoke for violation of the terms and conditions of the license.

RULE VII

Compliance Requirements

SECTION 27. No Interactive/Online Gambling by Persons under Age 18. —

A licensee must not allow an individual who is under 18 years of age to play an interactive/online game. SDAaTC

27.1 It is understood that no bets or wagers from within the territorial jurisdiction of the Republic of the Philippines shall be accepted by the licensee in connection with its online gaming operation.

 Neither shall the results of sporting events held within the Philippines be the subject of sports betting operation of the said licensees, except results of cockfighting and horse racing events held in the Philippines, considering that they are essentially a game of chance (involving, as they do, the substantial participation of animals) and considering further that they are recognized as "national pastimes" held regularly in the localities as per rules and regulations issued by Local Government Units (LGU's) and the appropriate government agencies or authorities.

27.2 A licensee is prohibited to issue interactive/online gaming sublicense, technical service provider certificate, BPO accreditation of any form, in favor of another entity without the approval of the Regulator.

27.3 A licensee that contravenes Section 27 shall be liable to pay a fine not exceeding Philippine Pesos: Five Million (PhP5,000,000).

SECTION 28. Approval of Control Systems. — A licensee must not conduct interactive/online games under its license unless the Regulator has given written approval for the licensee's Control System.

28.1 In deciding whether to approve a licensee's control system, the Regulator takes into consideration the following:

a) the licensee's general procedures in the conduct of interactive/online games;

b) the licensee's procedures and standards for the maintenance, security, storage and transportation of equipment to be used in the conduct of interactive/online games;

c) the licensee's procedures in recording and paying prizes won in interactive/online games;

d) the licensee's procedures in using and maintaining surveillance and security facilities;

e) the licensee's systems in the transferring and accounting of money;

f) the licensee's procedures for:

i. dealing with players' complaints about games;

ii. conforming with the policies of financial institutions (i.e., MasterCard and Visa);

iii. excluding players from playing interactive/online games;

iv. identifying and managing problems in the gambling behavior of players; and

v. registering player.

g) the licensee's general, administrative systems and procedures;

h) such other matters which the Regulator deems relevant.

28.2 A licensee that contravenes Section 28 shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (PhP25,000,000).

SECTION 29. Change of Control System. — A licensee may apply for changes in its approved control system with the Regulator.

29.1 The application must:

a) be made in writing at least sixty (60) days before the actual commencement of interactive/online games; and

b) contain particulars of the proposed changes to the licensee's approved control system.

29.2 The Regulator may, by written notice given to a licensee, direct the license to change the licensee's approved control system within the time frame, stated in the notice.

29.3 If the licensee does not comply with the directive, the approval for the licensee's control system shall be cancelled.

SECTION 30. Approval of Equipment. — A licensee must obtain the Regulator's written approval for each item of interactive/online gaming equipment used by the licensee to conduct interactive/online games under its license.

30.1 A licensee must install its server equipment to be used in its online gaming operations within the APECO Online gaming facility accredited by the Regulator for its monitoring purposes;

30.2 A licensee must not install, modify, decommission, remove or destroy any such equipment without the written approval of the Regulator.

30.3 A licensee that contravenes Section 30 shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (PhP25,000,000).

SECTION 31. Financial Institution Accounts. — A licensee must keep an account or accounts with a financial institution in the Philippines that is licensed under the General Banking Act for use in:

a) all banking or similar transactions for the operations conducted under its license; or

b) such other purposes' as may be approved in writing by the Regulator.

31.1 A licensee must use a financial institution account only for the purpose referred to in Section 31 (a) or for which the account is approved under subsection Section 31 (b). acEHCD

31.2 A licensee that contravenes Section 31 shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (P25,000,000).

SECTION 32. Notification of Changes. — A licensee must give the Regulator written notice of:

a) a change or addition to the licensee's close associates;

b) a reduction in the licensee's financial resources; or

c) any change or addition to the persons who manage or operate the licensee's operations.

32.1 The written notice must be sent within seven (7) days after the change, addition or reduction occurs.

32.3 A license that contravenes Section 32 shall be liable to pay a fine not exceeding Philippine Pesos: Five Million (PhP5,000,000).

SECTION 33. Records. — A licensee must keep all its gambling records in a place approved by the Regulator in APEZF or in APECO accredited facility.

33.1 Section 33 does not apply to an exempt gambling record as prescribed by the regulator.

33.2 A licensee must keep a gambling record for five (5) years after the end of the transaction to which the record relates.

33.3 A licensee that contravenes Section 33 or any of its subsection shall be liable to pay a fine not exceeding Philippine Pesos: Five Million (PhP5,000,000).

SECTION 34. Submission of Reports. — A licensee must give reports to the Regulator about the licensee's operations under its license.

34.1 The Regulator is to specify, by notice in writing to tire licensee, the information to be included in the reports.

34.2 The reports must be in approved forms and submitted within the time prescribed in the notice.

34.3 A licensee must not include any information that is false or misleading in its reports.

34.4 The Regulator may make information obtained under this section available to a law enforcement agency within or outside of the Philippines if in its judgment there is illegal activity being conducted within or outside the Philippines.

34.5 A licensee that contravenes Section 34 shall be liable to pay a fine not exceeding Philippine Pesos: Ten Million (PhP10,000,000).

SECTION 35. Audit. — As soon as practicable after the end of each financial year, a licensee must allow its books of accounts and financial statements of its operations conducted under its license for the financial year to be audited by an auditor qualified for appointment and approved by the Regulator.

35.1 The auditor must:

a) Complete the audit within three (3) months after the end of the financial year; and

b) Immediately after completion of the audit, give a copy of the audit report to the Regulator.

35.2 Sub-section 35.1 (a) shall not be enforced if the Regulator is satisfied that compliance by the auditor will not be practicable.

35.3 On receiving an auditor's report, the Regulator may, by written notice given to the licensee, require the licensee to give the Regulator further information about a matter relating to the licensee's operations mentioned in the audit report.

35.4 A licensee must comply with a requirement under Sub-section 35.3 within the time stated in the notice.

35.5 An audit is to be undertaken at the licensee's expense.

35.6 A licensee that contravenes Section 35, shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (PhP25,000,000).

SECTION 36. Special Audit. — The Regulator may, by written notice to the licensee, require the licensee to open its books of accounts and financial statements for the operations conducted under its license to be audited for the period specified in the notice if the Regulator is satisfied that the licensee:

a) may have insufficient financial, technical or other resources to conduct interactive/online games in accordance with its license and the provisions hereof; or

b) may have undertaken fraudulent acts in conducting interactive/online games under its license; or

c) may have provided false or misleading reports.

36.1 The audit must be undertaken at the licensee's own expense within the period specified in the notice by an auditor qualified for appointment and approved by the Regulator.

36.2 The auditor must give a copy of the report to the Regulator immediately after completing it.

36.3 A licensee that contravenes Section 36 shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (PhP25,000,000).

SECTION 37. Investigation of Licensee. — The Regulator may, at any time, conduct the investigations and make the queries that authority considers to be necessary to determine whether a licensee:

a) is a suitable person to continue to hold a license; or

b) is complying with the provisions of this Act, the regulations or the code.

37.1 A licensee must pay to the Regulator the reasonable costs incurred by the latter in conducting any investigation and making any inquiry.

RULE VIII

Interactive/Online Gaming Hosting Fee

SECTION 38. Hosting Fees. — A hosting fee ("interactive/online gaming hosting fee") is imposed on the gross winnings of the licensee's operations under its license.

38.1 Subject to Subsection 38.2, interactive/online gaming hosting fee is to be calculated and paid on a basis prescribed by the regulations.

38.2 The rate of interactive/online gaming hosting fee must not exceed eighteen (18%) percent of the licensee's gross profit.

38.3 For the purpose of this section, the gross profit of a licensee's operations under its license for a particular period is to be worked out using the following formula.

Gross winnings = amount played - players' winnings/prizes - Merchant Discounts

Where:

 "Amount played" is the total amount received during that period by licensee from operations; and

 "Players' winnings/prizes" is the total amount paid out as prizes to players within that period of the licensee's operations.

 "Merchant Discounts" are the fees charged by banks and other financial institutions for the processing of non-cash payments such as credit cards, smart cards and other forms of non-cash payments.

SECTION 39. Payment and Returns for Calculation of Online Gaming Hosting Fee. —

Interactive/Online Gaming Hosting Fee is payable by the licensee within fifteen (15) days after receipt of billing invoice.

39.1 A licensee must provide to the Regulator the information needed for calculating Interactive/Online Gaming Hosting Fee within five (5) days following the month in respect of which the gross profit was made. The information must be provided in an approved form.

39.2 A licensee that contravenes Section 39 shall be liable to pay a fine not exceeding Philippine Pesos: Twenty Five Million (PhP25,000,000).

SECTION 40. Penalty for Late Payment and Underpayment. — A licensee must pay to the Regulator a penalty on any amount of Interactive/Online Gaming Hosting Fee outstanding ("the unpaid amount") as of the end of the period allowed for the payment.

40.1 The penalty is: SDHTEC

a) Seven and a half percent (7.5%) of the unpaid amount; and

b) An additional five percent (5%) of the unpaid amount for each month or part of a month during which the unpaid amount is not paid.

40.2 If any part of an underpayment of Interactive/Online Gaming Hosting Fee is due to fraud, a surcharge equivalent to three hundred (300%) percent of the underpayment.

SECTION 41. Recovery of Amounts. — An amount of Interactive/Online Gaming Hosting Fee and penalties payable under this Part are shall be considered debts due to the Regulator by the licensee and may be recovered by the Regulator by action in a court of competent jurisdiction.

RULE IX

Suspension, Revocation and Surrender

SECTION 42. Suspension and Revocation of License. — The Master Gaming Licensor may, with the written consent of the APECO President, suspend or revoke a license if:

a. the licensee is no longer a suitable person to hold a license;

b. the license was issued on the basis of materially false or misleading information; or

c. following an investigation by an inspector under Section 37 or an audit under Section 35 or 36, the licensee has insufficient financial resources to conduct interactive/online games in accordance with its license and is in the public interest to suspend or revoke the license or the licensee is in violation of any provision contained herein; or

d) the licensee is subject to voluntary or involuntary winding up proceedings or under receivership.

42.1 If the Master Gaming Licensor, with the written consent of the President, intends to suspend or revoke a license, the Master Gaming Licensor must notify the licensee in writing of the proposed suspension or revocation and give the licensee at least fifteen (15) to appeal in writing to the Master Gaming Licensor.

42.2 The Master Gaming Licensor must take into account all supporting documents submitted by the licensee in deciding whether to suspend or revoke the license.

42.3 The Master Gaming Licensor must give the licensee written notice of any suspension or revocation of its license.

SECTION 43. Immediate Suspension. — The Master Gaming Licensor may, with the written consent of the President, suspend a license immediately for a period not exceeding ninety (90) days if the Master Gaming Licensor believes that:

a) a ground exists under Section 42 to suspend or revoke the license; and

b) the circumstances are so extraordinary that it is imperative to suspend the license immediately to ensure that public interest is not affected in an adverse and material way.

43.1 The suspension:

a) must be effected by a written notice given to the licensee;

b) takes effect immediately upon receipt of notice; and

c) continues to take effect until the Master Gaming Licensor cancels the suspension or upon expiration, whichever comes first.

SECTION 44. Effect of Suspension and Revocation. — A person whose license is suspended or revoked under section 42 or 43 must cease to conduct all interactive/online games while the suspension or revocation is in force, notwithstanding any appeal or request for reconsideration.

44.1 The Master Gaming Licensor, with the written consent of the APECO President may rescind the suspension of a license on his or her own motion.

44.2 The licensee can resume conducting interactive/online games when the suspension is rescinded or upon expiration.

RULE X

Violations and Penalties

SECTION 45. Offense for Unlicensed Interactive/Online Gaming. —

A person must not conduct an interactive/online game wholly or partly in the APEZF or in any PEZA or APECO Accredited Facility located in Metro Manila and other key places, unless the person is a licensee and the game has been approved by the Regulator.

A person who contravenes the preceding paragraph is liable to pay a fine as follows:

a) if the person is an individual — by a fine not exceeding Philippine Pesos: Ten Million (PhP10,000,000) or imprisonment for a term not exceeding ten (10) years or both; or

b) in any other case — by a fine not exceeding Philippine Pesos: Fifty Million (PhP50,000,000).

SECTION 46. False Information. —

An applicant must not:

a) make an application that is false or misleading in any material particular; or

b) give in response to a notice, any information or document that is false or misleading in any material particular.

 An applicant that contravenes subsection (3) shall be liable to pay a fine not exceeding Philippine Pesos: Thirty Million (PhP30,000,000).

RULE XI

Regulators

SECTION 47. Functions and Powers of Regulators. — The Aurora Pacific Economic Zone and Freeport Authority and its duly appointed Master Gaming Licensor shall be, henceforth, known as the Regulators, with the following functions and duties:

a) implement or administer the provisions of these rules and regulations;

b) process the applications for APECO interactive/online gaming licenses;

c) do all things necessary or convenient to be done for or in connection with the performance of its functions;

d) perform its functions in accordance with the general policy directions approved by the APECO Board of Directors.

SECTION 48. Complaints. — The Regulator shall investigate any formal complaint relative to the licensee's operations. However, the Regulator does not have to investigate a complaint if in its opinion it is petty, frivolous or vexatious.

SECTION 49. Appointment of Inspectors. — The Regulators may appoint all or any person, including a person who is not a public servant, who has appropriate qualifications and expertise in legal, technical and financial aspect of online gaming operations.

49.1 An inspector has the following powers:

a) to inspect, examine or test any interactive/online games or interactive/online gaming equipment used by a licensee in conducting operations under its license;

b) to require a person to produce documents or answer questions about such games or equipment;

c) to enter any premises used by the licensee for conducting operations under its license and seize:

i. any such games or equipment; or

ii. any other books, document or thing (including electronically stored information);

that the inspector can use as evidence in the violation of any of the provisions of these Rules and Regulations.

49.2 An inspector must obtain the consent of the owner or occupier of the premises to exercise his powers under paragraph 2 (c) of Sub-section 49.1 or in the absence of consent must obtain a search warrant from the proper Court.

SECTION 50. Reports. —The Master Gaming Licensor must, within two (2) months after the end of each year, provide the APECO President with a report relating to the Master Gaming Licensor's activities for that year. HESIcT

50.1 The Master Gaming Licensor must provide the President with any additional information that he requires.

SECTION 51. Contracting out Services and Work. — The Master Gaming Licensor may enter into an agreement with a person or any entity with appropriate qualifications and expertise to provide services to or to perform work for the Master Gaming Licensor.

RULE XII

Special Provisions

SECTION 52. Establishment of Various Committees. — The President and CEO of APECO, upon prior advice to the APECO Board of Directors, may establish the following composite committees:

52.1 APECO COMPOSITE MONITORING TEAMS (ACMT). This composite team shall be composed of authorized competent officials/officers from APECO and its Master Gaming Licensor and shall be responsible for the monitoring of all APECO online gaming licensees to ensure compliance with the terms and conditions of the license and the applicable pertinent laws, rules and regulations.

52.2 INTERAGENCY COMMITTEE FOR THE PROTECTION OF ONLINE GAMING (IACPOG). This Ad Hoc Inter-agency Committee, to be formed by the APECO President and CEO, which may include representatives from Philippine National Police (PNP), National Bureau of Investigation (NBI), Philippine Drugs Enforcement Agency (PDEA), Bureau of Immigration (BI), and Bureau of Internal Revenue (BIR) for the purpose of policy and program coordination in enforcing applicable laws to online gaming to ensure proper protection and security of APECO Online Gaming Operators;

52.3 LOCAL SECURITY TEAMS FOR ONLINE GAMING (LSTOG). This composite team of not more than six (6) members to be formed by the APECO President and CEO, from PNP, NBI, PDEA, BI, BIR, PEZA, PAGCOR, and President of the League of Cities, to ensure the security and safety of all officers and personnel located or working in the premises of the PEZA or APECO Accredited IT Facility.

RULE XIII

Miscellaneous

SECTION 53. Appeal Rights. — An applicant for a license, or a licensee, as the case requires may appeal to the Board of Directors of APECO against the following decisions of the Master Gaming Licensor and/or APECO President and CEO;

a) to refuse to grant a license;

b) to impose conditions on any license;

c) to suspend or revoke a license;

d) to refuse to rescind the suspension of a license;

e) to refuse to renew a license; or

f) to refuse the approval of a transfer of a license from one accredited area to another.

53.1 An appeal must be made not more than fifteen (15) days after the date on which the appellant is notified of an adverse decision.

53.2 The APECO President and CEO may:

a) refer the matter back to the Master Gaming Licensor with directions to reconsider the whole or any specified part of the appeal; or

b) confirm, reverse or modify the appealed decision, and issue such orders and give such directions as may be necessary to give effect to the decision of the Master Gaming Licensor.

SECTION 54. Confidentiality. — A person who is, or was, an inspector or employee or officer of the Authority responsible for administering these Rules and Regulations must not disclose information obtained by the person in performing functions under these Rules and Regulations.

Confidentiality under the preceding paragraph does not apply to the disclosure of information if the disclosure is:

a) required or allowed under these Rules and Regulations;

b) authorized by any other law, rules or regulations or pursuant to an order of the Court.

54.1 A person who contravenes Section 54 shall be liable to pay a fine not exceeding Philippine Pesos: Five Hundred Thousand (PhP500,000), without prejudice to such other sanctions, directives imposed by APECO, the Master Gaming Licensor or the appropriate government agency.

SECTION 55. Forfeiture. — A court that finds a person guilty of an offense under these Rules and Regulations may order that any interactive/online gaming equipment or other item used, or intended to be used, by the person in the commission of the offense shall be forfeited in favor of APECO.

SECTION 56. Orders. — APECO may issue such orders and directives not inconsistent with these Rules and Regulations to effectively and efficiently carry out the provisions of these Rules and Regulations.

SECTION 57. Application of Certain Other Acts. — The Foreign Investment Act of 1991 (R.A. 7042) shall have suppletory application.

SECTION 58. Retroactive Effect. — These 2016 APECO Rules and Regulations shall have retroactive effect.

Approved by APECO through Board Resolution No. 05 series of 2016.

(SGD.) ISRAEL F. MADUCDOCPresident and CEO