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SEC IDs securities to park equity, retirement funds

THE Securities and Exchange Commission (SEC) has released a memorandum circular that lists securities such as equities, bonds and funds in which Personal Equity and Retirement Account (PERA) funds may be invested.

The list, outlined in SEC Memorandum Circular 7 (Series of 2022), also provided the rules on qualified and eligible “PERA Investment Products,” pursuant to Republic Act 9505, (PERA Act of 2008) and its implementing rules and regulations.

PERA refers to a voluntary retirement account 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 country.

The memorandum states that PERA may be invested in newly-formed mutual funds, including any sub-fund of an umbrella fund and exchange-traded funds whose fund managers have a track record for the past five years prior to the application of being responsible for the operation and management of a registered mutual fund being offered to the general public.

The name of the newly-formed mutual fund must have 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 Dividend Yield Index are also deemed eligible PERA investment products.

The guidelines further identified government securities, securities issued by the Bangko Sentral ng Pilipinas (BSP) and corporate bonds issued by banks in compliance with central bank requirements.

Equity securities included in the PSE index may be classified as eligible PERA investment products, provided that the PSE certify to the SEC that the equity securities met the requisites of being non-speculative, readily marketable and with a track record of regular income payment to investors. The regulator said its website will contain the PSE-certified list of PERA eligible securities comprising the PSEi.

The SEC may qualify other securities to be eligible as PERA investment products if the product is non-speculative, readily marketable and has a track record of regular income payment to investors.

Meanwhile, a security loses its eligibility as a PERA investment product if the SEC declares it to be ineligible. A registered equity security may also lose its eligibility if its registration statement gets suspended or revoked, or in the case of a PSEi member security, if it is removed from the PSEi.

Corporate bonds, on the other hand, may also be deemed ineligible if they are declared to be in default by a competent authority or person in accordance with applicable laws, rules and contracts and if their credit rating is downgraded to a non-investible grade. The same provisions apply for corporate bonds issued by banks.

A security that has been deemed eligible by the SEC may also lose its eligibility after it has been found to have lost one or all of the required characteristics of being non-speculative, readily marketable and provider of regular income payment.

An investment in a security that is later declared to be ineligible as PERA investment product may continue to be authorized to be part of the PERA portfolio, provided that any subsequent investments by a contributor in said security shall not qualify to be included in the PERA portfolio.

The rules require issuers of securities qualified to be eligible PERA investment products to comply with the reportorial requirements set by the SEC.

Failure to abide by the memorandum circular and other laws, rules and relevant regulations will result in administrative penalties and other civil and criminal liability provided for under applicable laws.