On April 13, 2023, the Securities and Exchange Commission ("SEC") issued Memorandum Circular No. 4, Series of 2023 ("MC 4-23") to adopt the ASEAN Sustainable and Responsible Fund Standards ("ASEAN SRFS") and establish rules on the qualifications of local investment companies under the ASEAN SRFS and the recognition of foreign investment collective schemes qualified under the ASEAN SRFS that seek to offer in the Philippines under the ASEAN Collective Investment Scheme ("CIS") framework ("ASEAN CIS Framework"). MC 4-23 took effect on April 27, 2023, after its publication in two newspapers of general circulation in the Philippines.
MC 4-23 applies to (i) investment companies, including sub-funds of an umbrella fund, and fund managers that seek to qualify under the ASEAN SRFS and want to either offer locally or on a cross-border basis under the ASEAN CIS Framework, and (ii) CIS Operators and Foreign SRFs that seek to offer in the Philippines under the ASEAN CIS Framework.
General
1. What is the ASEAN CIS Framework?
The ASEAN CIS Framework is an initiative of the ASEAN Capital Market Forum ("ACMF") which allows fund managers operating in ASEAN member jurisdictions to offer CIS, such as unit trust funds or mutual funds, constituted and authorized in that jurisdiction, in other member jurisdictions under a streamlined authorisation process. This process is covered under the Memorandum of Understanding on the Streamlined Authorisation Framework for Cross-border Public Offers of ASEAN Collective Investment Schemes, as supplemented ("MOU").
2. What is the ACMF?
The ACMF is composed of a group of capital market regulators from Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Singapore, Thailand, Vietnam, and the Philippines.
3. Which ASEAN member jurisdictions have adopted the ASEAN CIS Framework?
As of the date of this bulletin, there are four signatories to the MOU: Securities Commission Malaysia, Monetary Authority of Singapore, the Securities and Exchange Commission of Thailand, and the Securities and Exchange Commission of the Philippines (the jurisdictions of the ACMF members that are signatories to the MOU are collectively referred to as "Member Jurisdictions").
4. What is the ASEAN SRFS?
The ASEAN SRFS was developed by the ACMF, in line with the growing importance of sustainable finance in ASEAN and the actionable recommendations in the Roadmap for ASEAN Sustainable Capital Markets, to provide the minimum disclosure and reporting requirements for CIS that seek to qualify under the ASEAN SRFS and to address the need for a comparable, uniform and transparent disclosure of information to mitigate the risk of, among others, greenwashing (the process of conveying a false impression or misleading information about how a company's products are environmentally sound1).
Philippine Investment Companies
5. What kinds of Philippine entities may qualify under the ASEAN SRFS?
Investment companies (in general terms, this means any issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities), including any sub-fund of an umbrella fund, may qualify under the ASEAN SRFS by showing satisfactory compliance with the following:
(a) registration under the Investment Company Act (Republic Act No. 2629 or "ICA") and the Securities Regulation Code ("Republic Act No.8799 or "SRC") and their respective implementing rules and regulations ("IRR");
(b) compliance with SEC Memorandum Circular No.11, Series of 2022 on Sustainable and Responsible Investment Funds ("SRIF") and any amendments there to (the "Local SRIF Rules"); and
(c) compliance with the ASEAN SRFS and any amendments there to.
6. What is the process for qualification?
The qualification process is initiated by the entity (referred to in item 5) submitting a notarized and complete SEC ASEAN SRF Form (attached as Annex B of MC 4-23) signed by at least the majority of the Board of Directors of the investment company and the fund manager.
The application is subject to a filing fee of PhP10,000.00 plus 1% Legal Research Fee ("LRF").
If the SEC is satisfied that the applicant complies with the afore mentioned requirements, the SEC will issue a letter qualifying the investment company or sub-fundas an SRF.
7. How may Philippine investment companies qualified under the ASEAN SRFS make offers under the ASEAN CIS Framework?
Philippine entities that intend to offer shares on a cross-border basis under the ASEAN CIS Framework must:
(a) comply with the requirements for qualification in Q4 above; and
(b) comply with SEC Memorandum Circular No. 9, Series of 2021 or the Rules on Authorization of an Investment Company as a Qualifying CIS and Recognition of a Foreign CIS under the ASEAN CIS Framework ("MC9-21").
If the SEC is satisfied that the applicant complies with the afore mentioned requirements, the SEC will issue a Standard Letter recognizing the applicant as qualified to make offers under the ASEAN CIS Framework.
Foreign Collective Investment Schemes
8. Which foreign collective investment schemes may be offered in the Philippines under the ASEAN CIS Framework?
Foreign SRF as defined in MC 4-23. This refers to a Foreign CIS that has also been qualified as an ASEAN SRF in a Member Jurisdiction other than the Philippines.
A Foreign CIS refers to a Qualifying CIS under the ASEAN CIS Framework constituted in a Member Jurisdiction other that the Philippines and is permitted/authorized to
be offered to the general public of that Member Jurisdiction.
A Qualifying CIS means a CIS constituted or established in its Home Jurisdiction which has been approved by its Home Regulator for offer to the public in the Home Jurisdiction and assessed by its Home Regulator as suitable to apply to a Host Regulator for its shares/units to be offered to the public cross-border in the Host Jurisdiction pursuant to the ASEAN CIS Framework.
In addition, the Foreign SRF must show satisfactorily show compliance with the following:
(a) the Foreign SRF and CIS Operator (the person or entity which is licensed/registered with, or approved by, the securities regulator in the ASEAN jurisdiction to operate or manage CIS that may be offered in that jurisdiction) should both comply with SEC MC 9-21, and any amendments thereto, with respect to the approval and recognition of Foreign CIS to be offered in the Philippines;
(b) proof of qualification as an ASEAN SRF, which is in the form of the Standard Letter issued by its home regulator that it has qualified as an ASEAN SRF;
(c) submission of a duly accomplished SEC ASEAN SRF Form (attached as Annex B of MC 4-23);
(d) payment of an application fee of PhP80,000.00 plus 1%LRF;and
(e) compliance with requirements under the Local SRIF Rules in relation to the (i) name of the Foreign SRF and (ii) incorporation of additional disclosures in the prospectus.
