SEC eases SBG investment limits for equity and multi-asset funds

THE Securities and Exchange Commission (SEC) has eased the single business group (SBG) investment limit for equity funds, balanced funds, and multi-asset funds exposed to equity securities, following requests from fund managers. 

The corporate regulator issued Memorandum Circular (MC) No. 2 on March 28, which provides exemptions to the SBG limit imposed by MC No. 15, issued in 2020, the SEC said in an e-mail statement on Wednesday.

Under the current limit, an investment company is barred from investing, in aggregate, more than 20% of its net assets in transferable securities, money market instruments, deposits, and over-the-counter financial derivatives issued by any SBG, provided the investments do not exceed 5% of the net assets of the investment company.

MC No. 2 provides that funds with no actual investment in financial derivatives, including equity funds, balanced funds, and multi-asset funds that have actual exposure to equity securities, are not covered by the SBG limit.

“Instead, these exempted classes of investment companies will be subject to the single entity or issuer investment limitation under Rule 6.8(b) of the implementing rules and regulations of Republic Act No. 2629, or the Investment Company Act (ICA), until further notice by the commission,” the SEC said.

However, the SEC said that all investment companies, including the covered funds, will continue to be subject to other investment limits and restrictions under existing rules and regulations, including investment companies with or without actual investments in financial derivatives.

It added that investment companies seeking to engage in the cross-border offering of their funds to other ASEAN member jurisdictions as qualifying collective investment schemes must comply with the 20% SBG limit in the ASEAN standards of qualifying collective investment schemes.

The corporate regulator also said it will not impose fines or penalties for any breach of the SBG limit committed by the covered funds from May 15, 2020, until March 27 of this year.

“Any breach of the single entity/issuer limit in Rule 6.8(b) by the covered funds will result in the imposition of corresponding fines and penalties under the ICA implementing rules and regulations and other applicable laws, rules, and regulations,” the SEC said. — Revin Mikhael D. Ochave