Publications


Regulatory
Pointer

Volume 1,
Series 2
Exemption from the 5% Liquidity Requirement of Mutual Fund Index Trackers

SEC Memorandum Circular No. 8-2016

The Securities Exchange Commission (SEC) released its Memorandum Circular (MC) No. 8 entitled as “Exemption from the 5% Liquidity Requirement of Mutual Fund Index Trackers” which has been effective since June 28, 2016.

MC No. 8 discussed the latest approved amendments of the Investment Company Act (ICA) Rule 35-1 (d)(4), as amended by SEC MC No. 12-2013. This was the topic for the general meeting last June 23, 2016. It states that since all mutual funds should be required by the SEC to at least invest 5% in liquid/semi-liquid assets such as Treasury notes or bills, Certificate of Indebtedness which is issued by the Bangko Sentral ng Pilipinas, and Savings or time deposits with government owned banks or commercial banks, if these mutual funds wanted to be exempted from such requirement, they need to submit a notarized contingency plan. The contingency plan should be duly signed by the Fund’s President or Director and Manager, and most importantly, must include this statement:

“In making any redemption to meet a client obligation, the fund manager will exercise the requisite prudence and diligence necessary under the circumstances and taking into account all relevant factors that will ensure market stability.”

Sources:

Copyright © 2017 Alas Oplas & Co., CPAs. All rights reserved.