SEC working on investment plan to help firms this crisis
The Securities and Exchange Commission is working on a new regulatory framework for the development of a capital market where closed-end investment companies primarily invest in corporate debt papers of large and medium enterprises, as part of efforts to cushion the economic fallout of the Covid-19 pandemic.
The SEC on July 8 issued for public comment the draft rules providing the minimum requirements and guidelines in the creation and operation of such investment companies called Corporate Debt Funds (CDF).
“With the proposed regulatory framework, we hope to help avert credit and liquidity crises that may arise from the economic downturn caused by the Covid-19 pandemic, and support the recovery of businesses and the overall economy,” SEC Chair Emilio B. Aquino said.
“The new investment vehicle called CDF will be particularly helpful in providing for the liquidity needs of large- and medium-sized corporations for repayments, emergency spending, and investments necessary to sustain their operations and preserve jobs in these challenging times.”
A CDF is a closed-end investment company that offers for sale a fixed number of non-redeemable units of participation or shares and has a limited offer period. Its objective is to invest in the portfolios of corporate debt papers of large corporations and medium-sized enterprises operating or deriving income in the Philippines, or any company guaranteed by a large or medium-sized domestic corporations or by the Philippine government and/or its agencies.
The CDF may offer different share or unit classes with similar investment objectives but are managed as separate asset pools. Each class shall correspond to a distinct part of the assets and liabilities of the CDF.
Subscription in a CDF is done only on initial public offering and redemption is at maturity although it can make periodic distribution of income to investors on a pro-rata basis. It may also pay out the proceeds of the underlying investments of each share/ unit class upon their liquidation until the termination and maturity of its securities.
To incorporate, the CDF shall have a minimum subscribed and paid up capital of P50 million. But as an exception, the subscribed and paid up capital shall not be lower than P1M, if the CDF forms part of a group of investment companies to be created or already in existence to be managed or under management by the same fund manager with a track record of at least five years.
All interested parties may submit their comments on the draft rules not later than July 17 to the SEC Corporate Governance and Finance Department located at the ground floor, Secretariat Building, PICC Complex, Pasay City. Comments may likewise be emailed at [email protected] and [email protected] – Press release