The CMDC is lobbying for the passage of several bills aimed at removing unnecessary constraints on the competitiveness and development of the capital market and strengthening the country’s legal and regulatory framework.
In particular, the CMDC is seeking changes in the Securities Regulation Code (src), the Revised Investment Company Act and the Personal Equity Retirement Account (PERA).
Enacted into law in July 2001, the src is a landmark legislation designed, among others, to provide investor confidence, instill professionalism among industry participants, and thereby promote the development of the capital market.
Within the same year, however, some provisions of the src came under attack for ambiguity. A bill has thus been filed with both the Senate and the Lower House to amend certain provisions of the Code to respond to current Philippine market situation.
The proposed amendments to the src involve the abolition of the broker-dealer segregation provision in view of recent technological advances that will allow better monitoring and surveillance of possible fraudulent activities.
The segregation of the broker-dealer function has been copied from the US law. In a situation where brokering is slow due to a bearish market, brokers do a lot of dealing for themselves. Under the present law, this would not be allowed unless such broker is a market-maker.
Other proposals include the amendment of the broker-director prohibition to require better disclosure of transactions of affiliated and interested parties, and help eliminate opportunities for insider trading and the mandatory tender offer to better protect minority investors from hostile takeovers.
The CMDC is also seeking the removal of the documentary stamp tax on the secondary trading of debt and equity instruments. This will significantly facilitate and reduce the cost of trading of equity and fixed-income instruments in the secondary markets.
The removal of the DST will also encourage more secondary trading of both bonds and equities, making it easier and cheaper for companies to raise funds for investment through IPOs and bond issuance.
The CMDC is also calling for the establishment of a proper regulatory framework that will open up the mutual funds industry to a wide variety of foreign investment companies and ensure investor protection.
Competition from foreign investment companies will not only provide investors with greater investment opportunities but indirectly force existing investment firms to improve their performance and services to prevent loss of market share.
PERA, on the other hand, would create personal tax benefit retirement accounts and encourage investment in tax deferred retirement plans, thus promoting long-term savings and easing burdens on the Social Security System.