SEC issues draft rules on PERA investment products

IN accordance with Section 15 of Republic Act 9505, also known as the "PERA Act of 2008," and its implementing rules and regulations, the Securities and Exchange Commission (SEC) issued draft rules on qualified or eligible PERA investment products. PERA, which stands for Personal Equity and Retirement Account, refers to voluntary retirement accounts established by and for the exclusive use and benefit of the contributor for the purpose of being invested solely in PERA investment products in the Philippines.

The contributor retains ownership — whether legal or beneficial — of funds placed therein, including all earnings of such funds. The establishment of a provident personal savings plan through PERA intends to promote capital market development and savings mobilization by establishing a legal and regulatory framework of retirement plans for persons, comprised of voluntary personal savings and investments. Further, this is a recognition of the potential contribution of PERA to long-term fiscal sustainability through the provision of long-term financing and reduction of social pension benefits.

Under the SEC draft rules, securities will be considered PERA qualified and/or eligible investment products if they are registered pursuant to the requirements of the Securities Regulation Code and the Investment Company Act, and are any of the following: a newly formed mutual fund, including any sub-fund of an umbrella fund and exchange traded funds, in which case the fund manager should have a track record of at least five years and the name shall contain the words "Personal Equity and Retirement Account" or "PERA"; Real Estate Investment Trust shares; corporate bonds with an investible rating issued by an accredited credit rating agency; and equity securities that form part of the Philippine Stock Exchange Index (PSEi).

Government securities, securities issued by the Bangko Sentral ng Pilipinas (BSP) and corporate bonds issued by banks in compliance with the requirements of the BSP are likewise considered eligible PERA investment products. Securities other than those mentioned may also be qualified provided that the product is demonstrated to be non-speculative, readily marketable and with a track record of regular income payment to investors. Section 3 of the draft rules provides the criteria for securities to be considered non-speculative, readily marketable and with a track record of regular income payment.

An eligible PERA investment product may, however, lose its eligibility when declared so by the SEC, specifically after it has been found to have lost one or all of the required characteristics to be eligible such as being non-speculative, readily marketable and a provider of regular income payment. Furthermore, a registered security may lose eligibility when its registration statement is suspended or revoked, is removed from the PSEi in the case of PSEi member security, or is declared to be in default by a competent authority or its credit rating downgraded to non-investible grade in the case of a corporate bond.

An investment in a security that is later declared to be ineligible will continue to be authorized to be part of the PERA portfolio provided that any subsequent investments by a contributor in said security after being declared as ineligible will not qualify to be made part of the PERA portfolio.

I urge the public to send their comments to the SEC-Markets and Securities Regulation Department through Atty. Desiree Amor J. Franco at msrd_covid19@sec.gov.ph or dajfranco@sec.gov.ph.

Source: TheManila Times