By Chino S. Leyco
An organization of fund management institutions gave its support to a proposed measure aiming to eliminate existing differences in regulatory and tax treatment for all forms of collective investment schemes (CIS) to ensure uniform levels of protection for investors.
In a statement, Deanno Basas, Fund Managers Association of the Philippines (FMAP) president said yesterday that the proposed measure will not only safeguard public interest but the interests of industry stakeholders as well.
“The proposed CIS Law will enable all participants to play a key role in the development of the capital market, and FMAP, as an organized body, will take part in that process,” Basas said.
Bohol Rep. Arthur Yap, who heads the House committee on economic affairs, said the proposed legislation will “prevent regulatory arbitrage, which is unfavorable to the growth of the industry and results in uneven levels of protection to the investing public.”
Yap said having a CIS Law becomes imperative with the economic integration of the 10 member-states of the Association of Southeast Asian Nations (ASEAN).
He also added the measure would usher in more sophisticated asset management products as well as intra-ASEAN transactions.
“As we find our place in ASEAN, we will have to work on this. And with more foreign direct investments in the coming years — a critical issue is financial integration and what it means for the country,” Yap said.
“No sector should take advantage of each other, so we need to create a regulatory framework that would breed inclusive development,” the lawmaker added.
Basas earlier said the industry is ready for more asset management products, such as hedge funds and alternative investments, noting the sector, despite the relatively limited products, continued to grow in the recent years.
“There is still too much potential for expansion. I believe that we can offer more products to our clients and hedge funds and alternative space are possible growth horizons,” Basas said.
He, however, noted the concern of regulators that the domestic market might not be as matured as Philippine counterparts, particularly the more sophisticated economies.
“However, this is two-pronged, and the market’s development may be hindered if we don’t educate them. If we can educate our customers about these more sophisticated financial products, then we can help in the maturity of the domestic market and give them a wider range of choices,” Basas said.
Earlier, Albay Rep. Joey Salceda said a CIS Law will provide more investment opportunities for the middle- to low-income individuals in the industry by giving them access to the capital markets.
Salceda said he expects CIS investments to double within the next six years to at least R3 trillion.
A collective investment scheme as defined under the bill is any arrangement whereby funds are solicited from the investing public for the purpose of investing, reinvesting and/or trading in securities or other assets.
The measure also seeks to promote investor protection by applying high governance standards in the establishment, management and operation of collective investment schemes and the registration and sale of CIS securities.
Currently, a number of countries, including the United Kingdom, Japan, Australia, Korea and Singapore, have adopted a single law to regulate all types of collective investment schemes.
In the Philippines, various laws govern investment companies (mutual funds), unit investment trust funds (UITFs) and separate account funds.
Yap said CIS securities has reached roughly P1.6 trillion – broken down to P750 billion in UITF; at least P280 billion in mutual funds; and P414 billion in collected premiums for variable life.
“These investments have yearly increments in the total amount of P200 billion,” he added.