By Denise A. Valdez, Reporter
THE Securities and Exchange Commission (SEC) is seeking to change some procedures in regulating fund managers and investment companies to tighten shareholder protection.
The corporate regulator issued a notice on its website listing its proposed changes to the implementing rules and regulations (IRR) of Republic Act No. 2629 or the Investment Company Act.
Among the proposals is adding a measure in the event that the registration and license of a fund manager is suspended or revoked.
In case the fund manager and the investment company are disbanded at the same time, the fund manager must appoint within six months a liquidator that will liquidate assets on behalf of the investment company.
The unclaimed assets of the investment company will be placed in an escrow for 10 years or until all investors have claimed their investments, whichever comes sooner, after which the funds will be turned over to the government.
Another proposal is setting a P1-billion cap on the additional capital requirements for an investment company adviser.
The previous IRR requires that firms have a minimum paid-up capital of P50 million and a minimum unimpaired net worth of P50 million. But the fund manager must infuse an additional unimpaired capital of 0.02% of the excess of P100 billion of its total assets under management.
The qualifications for an independent custodian is likewise being amended, to increase the limit on the ownership of shares issued in the investment company and fund manager.
The proposal is to require that an independent custodian does not hold 10% or more of the total number of issued shares in the investment company and fund manager, nor have a common shareholder holding 10% or more of the issued share capital. This is higher than the previous limit of a 5% ownership.
The draft also seeks to change the qualifications for fund managers that manage an investment company marketing itself as a money market fund.
In the previous rules, such fund managers are required to invest in any of the following: high-quality debts securities, deposits, or high-quality money market instruments. In the proposed changes, financial derivatives for hedging arrangements will be included in the list.
The hedging arrangement should not be aimed at generating a return, should result in an overall verifiable reduction of the risk of the qualifying collective investment schemes, should offset the risks linked to the underlying being hedged, should relate to the same asset class being hedged, and should be able to meet its hedging objecting in all market conditions.
Other requirements for fund managers on money market funds will remain as is: a cash reserve or assets with high liquidity and low market risk, and non-involvement in direct lending of monies.
Public comments are now being sought by the SEC before approving the proposed amendments. Written comments may be submitted via e-mail to its Corporate Governance and Finance Department at firstname.lastname@example.org until Aug. 7.