SEC strengthens measures against dirty money

By Revin Mikhael D. Ochave, Reporter

THE Securities and Exchange Commission (SEC) has approved guidelines that will further promote transparency in the ownership of corporations, which could help prevent money laundering and terrorist financing in the Philippines.

In a memorandum circular, the corporate regulator provided measures such as prohibiting the issuance of bearer shares, and requiring the disclosure of the identity of beneficial owners or persons who own or control corporations.

SEC Chairperson Emilio B. Aquino said illicit activities such as money laundering and terrorist financing usually come from arrangements that let shareholders or members hide their identities, thus increasing the risk of being misused.

“The newly issued guidelines will provide the commission with adequate, accurate, and timely information to combat such unlawful activities, while cementing our commitment to international standards and best practices against money laundering and terrorist financing,” Mr. Aquino said.

Under the memorandum, the SEC mandates that no corporation or entity can issue, sell or offer for sale or distribution bearer shares and bearer share warrants, where the name of owners are not indicated in the physical stock certificate and not recorded in the stock and transfer book of the issuing corporation.

“Bearer shares are equity securities owned by a certain person or entity that holds the physical certificate, which enables the transfer of ownership of shares of stock by mere delivery of such certificate,” the SEC said.

“Bearer share warrant is a document certifying that the bearer is entitled to a certain amount of the fully paid shares of stock of a corporation,” it added.

Further, the new guidelines require corporations, aside from publicly listed companies, to disclose and record the alienation, sale or transfer of shares of stock in their stock and transfer book within 30 days, including the date and the persons involved in the transaction.

According to the SEC, the new guidelines also prohibit the payment of dividends to any person or entity unless the name is indicated in the records of the corporation as the owner of the said shares of stock.

However, it does not include dividend payments made by publicly listed companies to the Philipine Central Depository nominee or any similar entity certified to be the depository and custodian of shares used for trading in the stock exchange.

“The guidelines likewise require newly registered corporations to disclose the identity of the persons on whose behalf they were registered and the nominators/principals of nominee incorporators/first directors/trustees and shareholders within 30 days from receipt of their certificates of registration,” the SEC said.

Meanwhile, the SEC said nominee directors, trustees, and shareholders of existing corporations are required to disclose their nominators and principals within 30 days after the guidelines take effect, or 30 days from the time they assumed the roles in their respective companies.

The commission also mandates all corporations to keep sufficient and accurate data on their beneficial owners at their principal offices.

“Noncompliance shall be sanctioned with a fine of P5,000 to P2 million, plus up to P1,000 for each day of continuing violation but not exceeding P2 million; suspension or revocation of the certificate of incorporation; and other penalties the commission may impose,” the SEC said.

The SEC said the new guidelines meet the recommendations issued in a report by the Financial Action Task Force (FATF) in October 2019.

Some of the FATF’s recommendations include the creation of measures that will avoid the misuse of bearer share warrants, nominee directors, and nominee shareholders for money laundering and terrorist financing, and to ensure that mechanisms work to ensure that data on a company’s beneficial ownership can be found out in a timely manner.