FIST law takes effect after SEC, others release IRR

GOVERNMENT agencies on Monday released the implementing rules and regulations of the Financial Institutions Strategic Transfer (FIST) Act, a law that allows for the establishment of corporations to invest in or acquire non-performing assets of covered financial institutions.

The Securities and Exchange Commission, together with the Department of Finance, Bangko Sentral ng Pilipinas, Bureau of Internal Revenue and Land Registration Authority issued the IRR of the law, paving the way for its operationalization starting this week.

“The FIST Act is integral to the government’s economic recovery program aimed at positioning us back to growth from the setbacks brought about by the Covid-19 pandemic,” SEC Chairman Emilio B. Aquino said.

“The commission has always supported the passage of the FIST Act. With the implementing rules and regulations in place, we are optimistic that the law will serve its purpose of ensuring the resilience and recovery of the financial sector, which in turn will provide the much-needed support for businesses and consumers alike.”

The rules provide that a FIST corporation shall be organized as a stock corporation, other than a one-person corporation, with a minimum authorized capital stock of P500 million, of which P125 million shall be subscribed and at least P31.25 million paid up in cash.

It shall be classified as a corporation vested with public interest, and as such, it shall have independent directors on its board of directors, appoint a compliance officer, submit compensation and performance reports, and comply with other requirements prescribed by law.

Applications for the establishment and registration of a FIST corporation (FISTC) shall be filed with the SEC within 36 months from the FIST Act’s effectivity. Those established on the 25th to 36th month cannot avail of the tax incentives unless an amendatory law extending the privileges is passed.

Under the law, the financial institutions that may transfer their soured loans to the FIST corporation include the central bank, banks, pawnshops, non-stock savings and loan associations and non-bank creditcard issuers and other credit-granting institutions supervised by the central bank; financing companies, lending companies, and accredited microfinance nongovernment organizations; investment houses; insurance companies; and select government-owned and -controlled corporations and government financial institutions. The assets should have become non-performing on or before December 31, 2022. They may be nonperforming loans, including receivables and restructured loans whose principal and/or interest have remained unpaid for at least 90 days after they have become past due or after any events of default under the loan agreement.

The institutions may also transfer to the companies, which can be treated as special purpose vehicles, their real and other properties acquired in settlement of loans and receivables, including shares of stocks and personal properties acquired by way of dation in payment, or judicial or extrajudicial foreclosure or execution of judgment or enforcement of security interest.

These soured assets that may be sold as FIST corporations can issue investment unit instruments to a qualified buyer in the minimum amount of P10 million, pursuant to its plan submitted to the SEC and issued with a Certificate of Permit to Sell or Offer for Sale Securities.

The IRR prohibits one FISTC from acquiring the instruments from another FISTC. The selling financial institutions and its parent, subsidiaries, affiliates or stockholders, directors, officers, or any related interest are also not allowed to acquire or hold, directly or indirectly, the instruments of the FISTC that acquired its soured assets.