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PRESIDENTIAL DECREE NO. 129
PRESIDENTIAL DECREE NO. 129 -
GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF INVESTMENT
HOUSES
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WHEREAS, there were pending before
Congress, prior to the promulgation of Proclamation No. 1081, dated
September 21, 1972, urgent measures proposing the regulation of the
so-called investment banks; chanroblesvirtualawlibrary
WHEREAS, an extensive survey and study of the Philippine financial
system had been undertaken in order to determine its adequacy in
Philippine economic development, and an integrated set of
recommendations were submitted;chanroblesvirtualawlibrary
WHEREAS, the recommendations, as endorsed with modifications by the
monetary authorities and made the basis of this Decree, advocated the
enactment of the statutory framework within which the underwriting of
securities may be governed and, to the extent that these entities
perform quasi-banking functions, to harmonize their operations with
national monetary goals.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and
General Order No. 1, dated September 22, 1972, as amended, and in order
to effect the desired changes and reforms in the social, economic, and
political structure of our society, do hereby order and decree and make
part of the law of the land the following: chanroblesvirtualawlibrary
Section 1. Title. — This Decree shall be known as
"The Investment Houses Law".
Section 2. Scope. — Any enterprise which engages in
the underwriting of securities of other corporations shall be
considered an "Investment House" and shall be subject to the provisions
of this Decree and of other pertinent laws.
Nothing in this Decree shall be understood to preclude other
enterprises from engaging in the mere buying and selling of short-term
securities of other persons or enterprises.
Section 3. Definitions. — For the purpose of this
Decree, unless the context otherwise indicates, the following
definition of terms are hereby adopted: chanroblesvirtualawlibrary
(a) "Underwriting" is the act or process of
guaranteeing the distribution and sale of securities of any kind issued
by another corporation.
(b) "Securities" are written evidences of ownership,
interest, or participation, in an enterprise, or written evidences of
indebtedness of a person or enterprise. It includes, but is not limited
to the instruments enumerated in Section 2 of the Securities Act
(Commonwealth Act No. 83, as amended).
Section 4. Organization and registration. —
Investment Houses shall be organized in the form of stock corporations.
The Securities and Exchange Commission shall not register the articles
of incorporation of any Investment House, or any amendment thereto,
unless it is satisfied from the evidence submitted to it: chanroblesvirtualawlibrary
(a) That all the requirements of this Decree and of
existing laws or regulations to engage in the business have been
complied with;chanroblesvirtualawlibrary
(b) That the proposed enterprise will not be in
conflict with public interest and economic growth;chanroblesvirtualawlibrary
(c) That the amount of capital, the proposed
organization, direction and administration, as well as the integrity,
experience and expertise of the organizers and the proposed managerial
staff, provide reasonable assurance that the enterprise will be
conducted with financial prudence.
In determining compliance with the provisions of subsections (b) and
(c) above, the Securities and Exchange Commission shall consult the
Monetary Board of the Central Bank of the Philippines. chanroblesvirtualawlibrary
All applications for registration of the articles of incorporation of
Investment Houses shall be accompanied by:cralaw:red
(1) At least three copies of the proposed articles of
incorporation;chanroblesvirtualawlibrary
(2) A statement under oath of the educational
background and experience of the organizers, directors, and the
proposed managerial staff, as well as in information on any position
concurrently held by them in other financial or banking institutions,
if any;chanroblesvirtualawlibrary
(3) A projected statement of assets and liabilities
of the proposed Investment House;chanroblesvirtualawlibrary
(4) A tentative program of operation for one year,
including its investment direction and volume; and chanroblesvirtualawlibrary
(5) Such other information as the Securities and
Exchange Commission may require in support of the application and to
enable the Commission to determine the justifiability of establishing
the proposed enterprise.
Any enterprise already in operation and exercising the powers of an
Investment House prior to the effectivity of this Decree shall, within
six months therefrom, file an information sheet with the Securities and
Exchange Commission in such form and containing such data as the
Securities and Exchange Commission may, at its discretion, require, to
enable the Commission to determine, in consultation with the Monetary
Board, whether the enterprise meets the requirements of this Decree.
Section 5. Citizenship requirements. — The majority
of the voting stock of any Investment House shall be owned by citizens
of the Philippines. In determining the percentage of foreign-owned
voting stocks in Investment Houses, the basis for the computation shall
be the citizenship of each stockholder, and, with respect to corporate
owners of voting stock, the citizenship of the individual owners of
voting stock in the corporation holding shares in that Investment
House. chanroblesvirtualawlibrary
The majority of the members of the Board shall be citizens of the
Philippines.
Section 6. Prohibitions. — Except as may be
authorized by the Monetary Board, no director or officer of an
Investment House shall concurrently be a director or officer of a bank,
as defined in Section 2 of the Republic Act No. 337, as amended:
Provided, however, That in no event can a person be authorized to be
concurrently an officer of an Investment House and of a bank.
No Investment House shall engage in banking operations as defined in
Section 2 of Republic Act No. 337, as amended. chanroblesvirtualawlibrary
Section 7. Powers. — In addition to the powers
granted to corporations in general, an Investment House is authorized
to do the following:cralaw:red
(1) Arrange to distribute on a guaranteed basis
securities of other corporations and of the Government or its
instrumentalities;chanroblesvirtualawlibrary
(2) Participate in a syndicate undertaking to
purchase and sell, distribute or arrange to distribute on a guaranteed
basis securities of other corporations and of the Government or its
instrumentalities; chanroblesvirtualawlibrary
(3) Arrange to distribute or participate in a
syndicate undertaking to purchase and sell on a best-efforts basis
securities of other corporations and of the Government or its
instrumentalities; chanroblesvirtualawlibrary
(4) Participate as soliciting dealer or selling group
member in tender offers, block sales, or exchange offering or
securities; deal in options, rights or warrants relating to securities
and such other powers which a dealer may exercise under the Securities
Act (Act No. 83, as amended);chanroblesvirtualawlibrary
(5) Promote, sponsor, or otherwise assist and
implement ventures, projects and programs that contribute to the
economy's development;chanroblesvirtualawlibrary
(6) Act as financial consultant, investment adviser,
or broker;chanroblesvirtualawlibrary
(7) Act as portfolio manager, and/or financial agent,
but not as trustee of a trust fund or trust property as provided for in
Chapter VII of Republic Act No. 337, as amended; chanroblesvirtualawlibrary
(8) Encourage companies to go public, and initiate
and/or promote, whenever warranted, the formation, merger,
consolidation, reorganization, or recapitalization of productive
enterprises, by providing assistance or participation in the form of
debt or equity financing or through the extension of financial or
technical advice or service;chanroblesvirtualawlibrary
(9) Undertake or contract for researches, studies and
surveys on such matters as business and economic conditions of various
countries, the structure of financial markets, the institutional
arrangements for mobilizing investments;chanroblesvirtualawlibrary
(10) Acquire, own, hold, lease or obtain an interest
in real and/or personal property as may be necessary or appropriate to
carry on its objectives and purposes;chanroblesvirtualawlibrary
(11) Design pension, profit-sharing and other
employee benefits plans; and
(12) Such other activities or business ventures as
are directly or indirectly related to the dealing in securities and
other commercial papers, unless otherwise governed or prohibited by
special laws, in which case the special law shall apply.
Nothing in this section shall preclude other enterprises not covered by
this Decree from engaging in the activities listed under subsections
(3) to (11) of this section, except as may otherwise be governed by
special laws. chanroblesvirtualawlibrary
Section 8. Capital. — The minimum initial
paid-in-capital of any Investment House shall be twenty million
(P20,000,000) pesos.
Section 9. Credit policies. — Investment Houses shall
coordinate their credit policies with the general credit policies of
the Monetary Board of the Central Bank.
Section 10. Reports. — Investment Houses shall submit
to the Securities and Exchange Commission and to the Central Bank a
semi-annual report of operations and financial condition, signed under
oath by its chief accountant and verified by its president. chanroblesvirtualawlibrary
The Securities and Exchange Commission may, at its discretion, require
Investment Houses to include their underwriting commitments as
contingent accounts in their financial statements.
Section 11. Regulations. — Within six months after
the approval of this Decree, the Securities and Exchange Commission, in
coordination with the Central Bank, shall promulgate the necessary
rules and regulations implementing the provisions of this Decree.
Section 12. Central Bank regulatory powers. —
Investment Houses shall be subject to such regulations of the Central
Bank or non-bank financial intermediaries as may be promulgated
pursuant to Section 2-B of Republic Act No. 337, as amended. The
regulations which may include, but need not be limited to (a) minimum
size of fund acceptance or receipt, (b) methods of marketing and
distribution, (c) terms of placement and maturities, and (d) uses of
funds may be modified by the Monetary Board insofar as they apply to
Investment Houses.
The Monetary Board may, at its discretion, determine whether Investment
Houses may be permitted to perform quasi- banking functions as defined
in Section 2-D, subsection (b) of Republic Act No. 337, as amended. The
Monetary Board is hereby authorized, at its discretion, to require any
enterprise which is engaged or proposes to engage in quasi-banking
functions to incorporate as an Investment House. If the Monetary Board
decides to permit Investment Houses to engage in quasi-banking
functions, the Board may require as a condition precedent the obtaining
of a certificate of authority for the purpose from the Monetary Board.
Whenever the Monetary Board authorizes an Investment House to engage in
quasi-banking functions, in accordance with the provisions of this
section, the Board may subject Investment Houses to further
regulations, pursuant to Republic Act 337, as amended, which may
include but need not necessarily be limited to (a) liquidity reserve
requirements; (b) capital-to-risk assets ratios; (c) interest rate
ceilings; and (d) such other constraints as the Board may deem
necessary. chanroblesvirtualawlibrary
In the exercise of its authority in this section, the Monetary Board
may, whenever, it determines that the circumstances so warrant subject
an Investment House to special examination.
Whenever on the basis of the reports submitted by, or upon examination
of the books and records of, an Investment House, the Central Bank
finds that the Investment House is not complying with the provisions of
this section, with the pertinent provisions of this Decree, of other
laws, or of orders, instructions, rules or regulations issued by the
Monetary Board pertaining non-bank financial intermediaries and
quasi-banking activities, said Board shall forthwith issue a
cease-and-desist order upon the Investment House concerned. Failure on
the part of an Investment House to comply with the cease-and-desist
order shall subject said Investment House to a fine not exceeding two
hundred (P200) pesos for every day the order is violated, to be imposed
by the Monetary Board, without prejudice to the penalties provided in
Section 16 of this Decree. chanroblesvirtualawlibrary
Section 13. Applicability of Securities Act. — An
Investment House may engage in the business of a dealer or a broker
under the Securities Act without obtaining a separate license for the
purpose as required in Section 14 of the Securities Act (C.A. No. 83,
as amended).
Section 14. Applicability of Corporation Law. — The
provisions of the Corporation Law (Act No. 1459, as amended) insofar as
they are not in conflict or inconsistent with the provisions of this
Decree shall apply to Investment Houses.
Section 15. Transitory provisions. — Existing
enterprises which are operating as Investment Houses shall, within one
year following the approval of this Decree, comply with the
requirements hereof, except with respect to the filing of an
information sheet which shall be complied with within six months as
provided in the last paragraph of Section 4 of this Decree. chanroblesvirtualawlibrary
Section 16. Penalties for violation. — Upon proof
that an Investment House is violating or not complying with the
provisions of this Decree, of other pertinent laws, of the terms or
conditions of its certificate of registration or charter, or of orders,
decisions, rulings or regulations issued by the Securities and Exchange
Commission or by the Central Bank of the Philippines, the Securities
and Exchange Commission shall impose upon the Investment House and
collect a fine not exceeding two hundred (P200) pesos per day for every
day during which such violation or non-compliance continues, and/or
suspend its certificate of registration. The officer or director of the
Investment House who ordered or authorized the violation or
non-compliance shall be solidarily liable. The fine so imposed shall be
paid to the Government of the Philippines through the Securities and
Exchange Commission. chanroblesvirtualawlibrary
Without prejudice to the provisions of the preceding paragraph any
person, or any director or officer of an Investment House who violates
or does not comply with the provisions of this Decree, of other
pertinent laws, of the terms or conditions of its certificate of
registration or charter, or of orders, decisions, rulings or
regulations issued by the Securities and Exchange Commission or by the
Central Bank of the Philippines, shall be punished by a fine of not
more than twenty thousand (P20,000) pesos, or an imprisonment of not
more than five years or both, at the discretion of the Court.
Section 17. Separability clause. — The provisions of
this Decree are hereby declared separable, and if any clause, sentence,
provision or section hereof, or its application to any person or
circumstance should be declared invalid, such invalidity shall not
affect the other provisions of this Decree which can be given force and
effect without the provisions which have been declared invalid.
Section 18. Repeal. — All Acts and existing laws
inconsistent with this Decree are hereby repealed.
Section 19. Effectivity. — This Decree shall take
effect immediately.
Done in the City of Manila,
this 15th day of February, in the year of Our Lord, nineteen hundred
and seventy-three.
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