Governing The Establishment, Operation And Regulation Of Investment Houses

Case Overview and Summary

PRESIDENTIAL DECREE No. 129

Governing the Establishment, Operation and Regulation of Investment Houses

- Definitions (Section 3):
• Underwriting is guaranteeing the distribution and sale of securities issued by another corporation.
• Securities are written evidences of ownership, interest, participation or indebtedness.

- Coverage and Exclusions (Section 2):
• Any enterprise engaged in underwriting securities is considered an Investment House and subject to this law. (Section 2)
• Does not preclude other enterprises from merely buying and selling short-term securities.

- Organization and Registration (Section 4):
• Investment Houses must be organized as stock corporations. (Section 4)
• SEC registration requires meeting requirements like capital, organization, integrity of organizers, no conflict with public interest, etc. in consultation with Monetary Board.
• Existing Investment Houses must file information sheet within 6 months.

- Citizenship Requirements (Section 5):
• Majority of voting stock must be owned by Filipino citizens.
• Majority of Board members must be Filipino citizens.

- Prohibitions (Section 6):
• Directors/officers cannot concurrently be directors/officers of banks, except as authorized by Monetary Board. (Section 6)
• Investment Houses cannot engage in banking operations.

- Powers (Section 7):
• Underwrite securities, participate in syndicates, act as financial consultant/adviser/broker/portfolio manager, promote ventures, conduct research, acquire property, design employee benefit plans, and other related activities. (Section 7)

- Minimum Capital (Section 8):
• Minimum paid-in capital is 20 million pesos.

- Credit Policies (Section 9):
• Investment Houses must coordinate credit policies with Monetary Board.

- Reporting (Section 10):
• Submit semi-annual reports to SEC and Central Bank.
• SEC may require including underwriting commitments as contingent accounts.

- Regulations (Section 11):
• SEC and Central Bank to promulgate implementing rules within 6 months.

- Central Bank Regulatory Powers (Section 12):
• Subject to Central Bank regulations for non-bank financial intermediaries.
• Monetary Board may allow quasi-banking functions with conditions like capital, liquidity, interest rate ceilings.
• Central Bank can issue cease-and-desist orders and impose fines for non-compliance.

- Other Provisions:
• No separate broker/dealer license needed under Securities Act. (Section 13)
• Corporation Law applies unless inconsistent. (Section 14)
• Existing Investment Houses have 1 year to comply, except information sheet. (Section 15)
• Penalties for violations include fines up to 20,000 pesos and/or 5 years imprisonment. (Section 16)