Amendments to the Regulations on Investment Management Activities

BANOKO Sexrnau Ne PILIPINAS OFFICE OF THE GOVERNOR clRcurAR No.llgq Series of 2021- Subject: Amendments to the Regulations on Investment Management Activities The Monetary Board, in its Resolution No. 77 dated 21 January 202t, approved the amendments to the regulations under the Manual of Regulations for Banks (MORB) and the Manual of Regulations for Non-Bank Financial lnstitutions (MORNBFI) to reduce the minimum size of an account, and expand the securities eligible as investment outlet for commingled funds under investment management. Section 1. Section 415 of the MORB and Section 41.5-Q of the MORNBFI are hereby amended to read, as follows: "4t514t5-Q TNVESTMENT MANAGEMENT ACItVtTtES The.conduct of investment management activities shall be subject to the following regulations. Minimum docu mento ry requi rements. xxx Minimum size of each investment monogement occount (tMA). BSFIs may determir6 the minimum amount that should be maintained by a client in an IMA: Provided, That the same shall at least be P100,000: Provided further,That the initial contribution and the carrying balance shall not fall below the said amount, except in cases where the reduction is due to investment losses and/or fund management fees, BSFIs should consider the adequacy of their risk management processes and operational capabilities in setting the minimum amount for their lMAs. Commingling of funds. For purposes of this regulation, commingling of funds shall refer to the act of combining funds from multiple lMAs for the sole purpose of investing in qualified asset/s enumerated under item "b" below. Funds from lMAs may be commingled: Provided, That allof the following conditions are met: a. The investment of each of the lMAs in the commingled fund shall at least be P1.00,000; b. The commingled funds shall only be invested in (i) securities directly issued by the Philippine National Government, (ii) exchange-traded equities and fixed income securitiesl and commercial papers , Provided, That these securities/papers are registered with the Securities and Exchange Commission, (iii) securities issued by banks incorporated in the Philippines, except those issued through the trust units, 1 including those issued offshore 7,1,i . r,,l,i

or (iv) securities issued by other sovereigns that are exempt from registration under Section 9(b) of the Securities Regulation Code; The commingling of funds and the manner of termination of the same shall be specifically agreed in writing by the clients. The investment manager should ensure that the agreement to commingle funds with other lMAs is legally binding and enforceable. Furthermore, the risks associated with commingling of funds, such as market liquidity risk, shall be fully disclosed to the clients; d. The investment manager shall determine that it possesses the operational capability to manage the accounts participating in commingled funds. In doing so, the investment manager shall undertake an assessment taking the following into consideration: (i) sufficiency of personnel handling commingled lMAs; (ii) capability of existing systems to accurately and readily identify the allocation of each investor in a commingled fund and generate the following information on a per IMA basis, at a minimum: accruals, coupons received, dividends received, mark-to-market gains or losses and required reports; and (iii) ability to conduct periodic reconciliation of relevant records; and e. The maximum number of lMAs that can be commingled into one fund shall be determined by the investment manager based on its own operational capability to commingle lMAs. An investment manager shall have adequate policies, procedures, and control mechanisms to ensure that the conditions for commingling set forth in this Circular are consistently complied v0ith. Lending and investment disposition. xxx xxx' Tax-exempt individuol investment monagement occounts.The following shall be the features/requirements of lMAs of individuals which may be exempted from the twenty percent (20%) final tax under Section 24(BX1) of R.A. No. 8424 (The Tax Reform Act of 1997): A. XXX b. The minimum amount of investment for an IMA shall be the amount prescribed by the BSFls, but not lower than P100,000; xxx"

a Section 2. ltem 7 on "Advice of Counsel" of Appendix Q-18 of the MORNBFI is hereby deleted. Renumbered ltem 10 of Appendix Q-18 of the MORNBFI and ltem 10 of Appendix 21 of the MORB on "Withdrawal of Income/Principal" are hereby amended to read, as follows: "Appendix 2U Q-18 SAMPLE INVESTMENT MANAGEMENT AGREEMENT (Appendix to Sec. 415/415-Q on Minimum documentary requirements) xxx WITHDRAWALS FROM THE PORTFOLIO (10) Withdrawal of Income/Principal - Subject to availability of funds and the non-diminution of the Portfolio below (the amount prescribed by the trust entity, but not lower than P100,000), the Principal may withdraw the income/principal of the Portfolio or portion thereof upon written instruction or order given to the Investment Manager. xxx xxx" Section 3. This Circular shall take effect fifteen (1.5) calendar days following its publication in the Official Gazette or in any newspaper of general circulation in the Philippines. FOR THE MONETARY BOARD: c. \' BENJAMIN E. DIOKNO Governor fg Frhr\^aYv 2s21 --_---V