SEC allows eligible PERA investment product list
AFTER I wrote about the proposed rules on qualified or eligible Personal Equity and Retirement Account (PERA) investment products on June 1, the Securities and Exchange Commission (SEC) released Memorandum Circular 7, Series of 2022 (MC 7) pursuant to Republic (RA) Act 9505, or the “PERA Act of 2008,” and its implementing rules and regulations.
MC identifies securities registered in line with the requirements of RA 8799, or the “Securities Regulation Code” and RA 2629, or the “Investment Company Act” that are deemed to be eligible PERA investment products. It provides the list of equities, bonds, funds and other securities where PERA funds may be invested.
These include 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 that has been offered to the general public. The name of the newly formed mutual fund must contain the words “Personal Equity and Retirement Account,” or “PERA.”
Real estate investment trust shares, corporate bonds with an investable rating issued by an accredited credit rating agency and equity securities that form part of the Philippine Stock Exchange (PSE) dividend yield index are also deemed eligible PERA investment products.
Exempt securities such as government securities, securities issued by the Bangko Sentral ng Pilipinas (BSP) and corporate bonds issued by banks in compliance with BSP requirements are likewise considered as eligible PERA investment products.
Section 3 of MC 7 also mentions equity securities included in the PSE index (PSEi) that may be classified as eligible PERA investment products, provided that the PSE certifies to the SEC that the equity securities meet the requisites of being non-speculative, readily marketable and have a track record of regular income payment to investors. The SEC will disseminate the PSE-certified list of PERA eligible securities comprising the PSEi through its website.
The SEC may likewise qualify other securities to be eligible as PERA investment products as long as the product is nonspeculative, readily marketable and has a track record of regular income payment to investors.
MC 7 also explains how a security loses its eligibility as a PERA investment product. First, a security loses its eligibility when 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 if it is removed from the PSEi in the case of a PSEi member security.
Corporate bonds may 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-investable grade. The same provisions apply to corporate bonds issued by banks.
A security that has been deemed eligible by the SEC may likewise lose its eligibility if it is 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 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.
In addition to the above discussion, please take note that issuers of securities qualified to be eligible for PERA investment products are also subject to compliance with the reportorial requirements and other information required by the SEC.
We at the commission hope that the investing public shall be properly guided by the above PERA guidelines for the development of the capital market, savings mobilization and recognition of PERA’s long-term fiscal sustainability through the provision of longterm financing and reduction of social pension benefits. I advise you to check the SEC website to check the full details of MC 7.