Republic Act No. 2629

REPUBLIC ACT No. 2629

Investment Company Act

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Short title. -This Act may be cited as the "Investment Company Act."

Section 2. Declaration of policy. -It is hereby declared that the policy and purposes of this Act in accordance with which the provisions of this Act shall be interpreted, are to mitigate and, so far as is feasible, to eliminate the following conditions which adversely affect the national public interest and the interest of investors:

Section 3. Definitions. -When used in this Act, unless the context otherwise requires—

No provision in this Act shall apply to, or be deemed to include, the Philippines or any political subdivision thereof, or any agency, authority, or instrumentality of any one or more of the foregoing, or any corporation which is wholly owned directly or indirectly by any one or more of the foregoing, or any officer, agent, or employee of any of the foregoing acting as such in the course of his official duty, unless such provision makes specific reference thereto.

Section 4. Definition of investment company. -

Section 5. Classification of investment companies. -

Section 6. Transactions by investment companies. -

The provisions of this subsection shall not apply to transactions which are merely incidental to the dissolution of an investment company.

Section 7. Registration of investment companies. -

Section 8. Ineligibility of certain affiliated persons and underwriters. -

Section 9. Affiliations of directors, officers and employees. -

Section 10. Offers to exchange securities. -

Section 11. Functions and activities of investment companies. -

Section 12. Changes in investment policy. -

Section 13. Size of investment companies. -No registered investment company organized after the effective date of this Act, and principal underwriter for such a company, shall make a public offering of securities of which such company is the issuer, unless—

Section 14. Contracts of advisers and underwriters. -

Section 15. Board of directors; election; term vacancies; and salaries. -No person shall serve as a director of a registered investment company unless he is a Filipino citizen and elected to that office by the holders of the outstanding voting securities of such company, at an annual or a special meeting duly called for the purpose; except that vacancies occurring between such meeting may be filed in any otherwise legal manner if immediately after filing any such vacancy at least two-thirds of the directors then holding office shall have been elected to such office by the holders’ of the outstanding voting securities of the company at such an annual or special meeting. In the event that at any time less than a majority of the directors of such company holding office at that time were so elected by the holders of the outstanding voting securities, the board of directors or proper officer of such company shall forthwith cause to be held as promptly as possible and in any event within sixty days a meeting of such holders for the purpose of electing directors to fill any existing vacancies in the board of directors unless the Commission shall by order extend such period. The foregoing provisions shall not apply to members of an advisory board.

No member of the Board of Directors or any executive official shall receive any salary or emolument from the investment company at a rate higher than that fixed by the Commission after taking into consideration; the experience and qualifications of the official concerned; the amount and nature of securities issued by the company; the size and standing of the company in the business community; the volume of business done by the company; the number of years the company has been in business; and other pertinent conditions and circumstances: Provided, However, That in no case shall the operational expenses of such company exceed ten per cent of the total investment fund received from the investors; And Provided, finally, That non-compliance with the provisions of this Act shall cause the cancellation of its registration and the liquidation of its assets for redistribution to investors.

Section 16.Transactions of certain affiliated persons and underwriters. -

In the event that any such contract or agreement does not at the effective date of this Act comply with the requirements of this subsection and is not amended to comply therewith prior to the expiration of said one year, this subsection shall not be deemed to have been violated if prior to said expiration date each such investment adviser as principal underwriter shall have filed with the Commission a waiver in writing of any protective provisions of the contract or agreement to the extent that it does not comply with this subsection.

Section 17. Capital structure of investment companies. -

Section 18. Dividends. -It shall be unlawful for any registered investment company to pay any dividend, or to make any distribution in the nature of a dividend payment, wholly or partly from any source other than—

It shall likewise be unlawful to advertise such dividends in terms of centavos or pesos per share without also stating the percentage they bear to the par value per share.

Section 19. Proxies; voting trusts. -

Section 20. Loans by investment companies.— It shall be unlawful for any registered investment company to lend money or property to any person, directly or indirectly, if -

Section 21. Investment Company prohibited to guarantee obligations. -It shall be unlawful for any investment company to guarantee any obligation of whatever kind or nature.

Section 22. Distribution, redemption, and repurchase of securities. -

Section 23. Distribution and repurchase of securities; closed-end companies. -

Section 24. Registration of securities under the Securities Act. -

Section 25. Reorganization plans, reports by Commission. -

Section 26. Periodic payment plan. -

Section 27. Reports and financial statements of investment companies and affiliated persons. -

Section 28. Accounts and records. -

Section 29. Accountants and auditors. -

Section 30. Report of settlement of civil actions. -

Section 31. Destruction and falsification of reports and records. -

Section 32. Unlawful representations and names. -

Section 33. Injunctions against gross misconduct and abuse of trust. -The Commission is authorized to require a registered investment company to remove or suspend a person serving or acting in one or more of the following capacities who has been found guilty, after proper investigation and hearing by said Commission, of gross misconduct or gross abuse of trust in respect of any such investment company for which such person so serves or acts:

The suspension shall be for such period of time as the Commission in its discretion, shall deem appropriate.

Section 34. Theft and estafa. -Whoever steals, unlawfully abstracts, unlawfully and wilfully converts to his own use or to the use of another, or embezzles any of the moneys, funds securities, credits, property, or assets of any registered investment company shall be deemed guilty of a crime, and upon conviction thereof shall be subject to the penalties provided in section forty of the Securities Act.

Section 35. Rules, regulations, and orders; general powers of Commission. -

Section 36. Rules and regulations; procedure for issuance. -The rules and regulations of the Commission under this Act, and amendments thereof, shall be effective upon publication in the manner which the Commission shall prescribe, or upon such later date as may be provided in such rules and regulations.

Section 37. Orders; procedure for issuance. -

Section 38. Hearings by Commission. -Hearing may be public and may be held before the Commission or any officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.

Section 39. Enforcement of this Act. -

Section 40. Agents and Investment Solicitors. -No investment company doing business within the Philippines or agent thereof shall pay any commission or other compensation to any person for services in obtaining investments in an investment company unless such person, after passing mental and moral test, holds a certificate of authority issued by the Securities and Exchange Commissioner to act as an agent or investment solicitor of such company as hereafter provided. No person shall act as an agent, sub-agent, or investment solicitor in the solicitation or procurement of investment or application for investment in an investment company or receive for services for obtaining such investments any commission or other compensation from any investment company doing business in the Philippines or from the agent or underwriter thereof, without first getting a certificate of authority so to act from the Securities and Exchange Commissioner, which must be renewed annually in the first day of January and not later than the fifteenth day of March. Such certificate shall be issued by the Securities and Exchange Commissioner only upon the written applicant of the person desiring such authority, such application being approved and countersigned by the investment company or its agent or underwriter, and shall be upon a form approved by the Securities and Exchange Commissioner. The Securities and Exchange Commissioner shall have the right to refuse to issue or renew and to revoke any such certificate in his discretion. No such certificate shall be valid, however, in any event after the fifteenth day of March of the year following the issuance of said certificate. A renewal certificate may be issued upon application of the company, its agent or underwriter represented by such agent or investment solicitor.

Any person who for compensation solicits or obtains investments on behalf of any investment company or its agent or underwriter or transmits for a person other than himself an investment or application for investment in an investment company or offers or assumes to act as an agent or investment solicitor of an investment company, shall be an investment agent or investment solicitor within the intent of this section and shall thereby become liable to all the duties, requirements, liabilities, and penalties to which such a person is subject.

Any person or company violating the provisions of this section shall upon conviction, be subject to a fine of five hundred pesos. Upon the conviction of any person acting as agent, sub-agent, investment solicitor, or broker for the commission of any offense connected with the business of an investment company, the Securities and Exchange Commissioner shall immediately revoke the certificate of authority issued to him and no such certificates shall thereafter be issued to such convicted person.

The Securities and Exchange Commissioner shall issue such rules and regulations as he may deem necessary for the enforcement and implementation of the provisions of this section.

Section 41. Court review of orders. -Any person or party aggrieved by an order issued by the Commission under this Act may obtain a review of such order in accordance with the provisions of section thirty-five of the Securities Act, as amended.

Section 42. Disclosure of information filed with Commission; copies. -

Section 43. Reports by Commission. -The Commission shall submit from time to time, a report to the Congress covering the work of the Commission under this Act, with such information, data, and recommendations for further legislation in connection therewith as it may find advisable.

Section 44. Fees; additional personnel; Commissioner’s Compensation. -

Any person entering the government service who may be appointed to any of said positions shall start at the initial rate of the salary corresponding to his position, as provided under the pertinent laws, rules and regulations.

The Commission shall take charge of the enforcement and implementation of the provisions of this Act. The Securities and Exchange Commissioner shall receive the compensation and enjoy all the privileges of Judges of the Court of First Instance.

Section 45. Appropriation: assessment. -To carry out the purposes of this Act, the Commission is hereby authorized to spend its income under this Act. Should the Commission’s total income under this Act in any year be less than its total expenditures as certified by the Securities and Exchange Commissioner, the different shall be pro-rated among all investment companies in business, and the Commission is authorized to assess and collect from each of them its corresponding share which shall not exceed one-half of one per centum of its net asset value.

Section 46. Validity of contracts. -

Section 47. Procuring violation of Act; obstructing compliance. -

Section 48. Penalties. -Unless otherwise specifically provided elsewhere in this Act, any person who violates any provision of this Act or of any rule, regulation, or order thereunder, or any person who in any registration statement, application, report, account, record, or other document filed or transmitted pursuant to this Act or the keeping of which is required pursuant to section twenty-eight (a) of this Act makes any untrue statement of fact or omits to state any fact necessary in order to prevent the statements made therein from being materially misleading in the light of the circumstances under which they were made, shall upon conviction be fined not more than fifty thousand pesos or imprisoned for not more than five years or both.

Section 49. Effect on existing law and repealing clause. -The rights and remedies provided by this Act shall be in addition to any and all other rights and remedies that may now exist, but no person permitted to maintain a suit for damages under the provisions of this Act shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of.

Paragraph (r) of section one hundred ninety-four of Commonwealth Act Numbered Four hundred sixty-six, as amended by section three of Republic Act Numbered Forty-two, is further amended to read as follows:

All laws, Acts, parts of Acts, Rules of Court, executive orders, and administrative regulations which are inconsistent with this Act are hereby repealed.

Section 50. Separability of provisions. -If any provision of this Act shall be held invalid, the remainder of the Act shall not be affected thereby.

Section 51. Effective date. -This Act shall take effect upon its approval.

Approved: June 18, 1960.

"Stockbroker" includes all persons whose business it is, for themselves as such brokers or for other brokers, to negotiate purchases or sales of stock, bonds, exchange, bullion, coined money, bank notes, promissory notes, or other securities; but does not include underwriters for one or more investment companies as defined in the Investment Company Act; "dealer in securities" includes all persons who for their own account are engaged in the sale of stock, bonds, exchange, bullion, coined money, bank notes, promissory notes or other securities."