Opinion No. 15-04 Re: Broker/Dealer in Proprietary Shares; Mutual Fund Distributor

SEC BuildingEDSA,Greenhills,Mandaluyong City Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

20 July 2015

Broker/Dealer in Proprietary Shares Mutual Fund Distributor SEC-OGC Opinion No.15-04

Pasig City 1605 22FThe Taipan Place Building F.OrtigasJr.RoadOrtigas Center ATTY.JAYSON O'S.RAMOS Corporate Lawyer NOVEL CAPITAL,INC

Sir:

for Novel Capital, Inc. (Novel Capital to incorporate an affiliate as Securities minimum paid-up capital required will only be Phpl0,000,000.00, and to subsequently Broker/Dealer in Proprietary Shares (Non-SRO Member so that under the law,the register as a Mutual Fund Distributor (MFD. This pertains to your letter dated 31 January 2013 inquiring whether it is possible

solely and exclusively as a MFD. You stated that Novel Capital wishes to incorporate an affiliate which will operate

to this, applicants for Broker/Dealer in Proprietary Shares (Non-SRO Member are Shares, provided that it will comply with the requirements for registration. In connection registering as Securities Broker/Dealer (SRO Members. These requirements are posted in and can be viewed from the Commission's website. Hence, upon compliance with the aforementioned requirements for registration, the affiliate could be registered as a Phpl0,000,000.00 minimum paid-up capital is required from those corporations BrokerDealer in Proprietary Shares. required to put up the minimum paid-up capital amounting to Php5,000,000.00. The Novel Capital can incorporate an affiliate as a Broker/Dealer in Proprietary

may not subsequently register as MFD because only registered Investment Company However,after registration as Broker/Dealer in Proprietary Shares, the affiliate

http://www.sec.gov.ph/gsr/primary/other_applications.html#table55. SEC Form 28-BD/28-BDA posted http://www.sec.goy.ph/download/annexes_form.html and

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shares are authorized to deal only in proprietary shares and such authority does not include buying, selling or distributing shares of stocks of investment companies and MFDs. These entities are permitted to register as such for the primary reason that their authority to distribute securities, which includes mutual fund shares, is an inherent mutual funds. Advisers, Brokers/Dealers in Securities, and Investment Houses are allowed to register as function of their respective secondary licenses. In contrast, brokers/dealers in proprietary

up a minimum paid-up capital of Php5,000,000.00, among others; however, it may not Proprietary Shares by complying with the requirements for registration, such as putting subsequently register as MFD in view of the restriction on its authority to deal only in proprietary shares. Thus, Novel Capital can incorporate an affiliate as Securities Broker/Dealer in

shall not be used in the nature of a standing rule binding upon the courts, or upon the it will be disclosed that the facts relied upon are different, this opinion shall be rendered facts disclosed in the query and relevant solely to the particular issues raised therein and Commission in other cases of similar or dissimilar circumstances. If upon investigation null and void. It shall be understood that the foregoing opinion is rendered based solely on the

Please be guided accordingly.

CAMLO SMORREA GenerallCpunsel VVC

2SEC Meorandum Circular 2003-I5, No. 7