Press Release
May 19, 2009

ENACT COLLECTIVE INVESTMENT SCHEMES BILL, URGES ANGARA
Seeks to amend half-century old Investment Company Act

Senator Edgardo J. Angara today urges his colleagues to enact the Collective Investment Schemes bill which seeks to amend the Investment Company Act of 1960 in order to establish a comprehensive regulatory framework for collective investment schemes (CIS) as a means to develop the Philippine capital market.

"Since the time the Investment Company Act was enacted, the Philippine mutual fund industry has remained lackluster and lagged behind its faster growing Asian neighbors. Financial experts associated this observation to the fact that investment companies and unit investment trust funds, the most common forms of CIS, are still governed by varying laws and regulations. This is in contrast with the worldwide trend in the regulation of CIS, which is to have single law to regulate all types of CIS," said Angara who chairs the Senate Committee on Finance.

Countries such as the United Kingdom, Japan, Australia, Korea and Singapore have adopted this approach.

He added, "As such, there are differences in regulatory requirements (regulatory arbitrage) and taxation among the different forms of CIS, even though the investment products they offer to the public are essentially the same. It is believed that this regulatory arbitrage gives rise to an uneven playing field which will prove unfavorable to the growth of the industry. More importantly, such regulatory arbitrage will result in uneven levels of protection to the investing public."

A Collective Investment Scheme is any arrangement whereby funds are solicited from the investing public for the purpose of investing, re-investing and/or trading in securities or other assets.

Angara recently filed SB 1181 which seeks to promote investor protection; assist in the development of the capital markets; encourage participation by the best qualified asset management companies; and investment advisers and broaden participation by Filipinos in securities ownership.

He cited that in line with current global trends and practices, the bill will not be limited to regulating open and close ended investment companies. The bill will cover all such other collective investment schemes/vehicles which include investment companies, unit investment trust funds, and such other similar indirect or collective investment schemes/vehicles which solicit funds form the investing public for the purpose of investing, re-investing and/or trading in securities or other assets.

In order to further assist the development of pooled investments in the Philippines, the bill also proposes to eliminate existing differences in regulatory treatment.

Angara, former Banks, Financial Institutions and Currencies Committee chair, shared that the bill also seeks to establish a CIS Investors Protection Fund for the purpose of compensating CIS investors for the extraordinary losses or damage they may suffer due to fraud or mismanagement or business failure other than market decline in the investment portfolio.

"As reeling global markets suffer from the havoc of the global financial crisis, what we need is a catalyst for capital build-up in order to shore up the Philippine capital market. This would then put our country a step ahead as we anticipate the global economic rebound, once financial markets and global economies have recovered," added Angara.

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