Under the investment guidelines drawn up by the SEC, a pre-need company may only invest 10 percent of its trust fund in government securities and as much as 15 percent in long-term commercial papers registered with the SEC with a credit rating of "1" for short-term and "Aaa" for long-term based on the rating scale of the Philippine Ratings Corp.
Investments in real estate shall not also exceed 25 percent of the total trust fund equity of a pre-need company. The real estate properties should be located in strategic areas of cities and first class municipalities and must be appraised every three years by a licensed real estate appraiser, accredited by the Philippine Association of Real Estate Appraisers, to reflect the increase or decrease in the value of the property.
In case the appraisal would result in an increase in value, only 60 percent of the appraisal increase is allowed to be recorded in the books of the trust fund but in case of decline in value, the entire decline shall be recorded.
SEC said the appraisal increment should not be used to cover required monthly contribution to the trust fund.
Pre-need companies’ investments in equities should not likewise exceed 25 percent of the total trust fund equity while investments in any particular issue shall not exceed 10 percent of the allocated amount.
Investments shall be limited to stocks listed in the big board of the Philippine Stock Exchange, those that are actively traded, financially stable, and have declared dividends for the past three years.
The SEC is set to meet with the Federation of Philippine Pre-need Plan Companies Inc. tomorrow to discuss reforms necessary to further develop the pre-need industry.
The SEC earlier asked the Bangko Sentral ng Pilipinas to audit the trust funds of pre-need companies to determine whether the investments made are in accordance with the required portfolio mix.
It asked the BSP to immediately inform the Commission of the trustee bank found violating the required investment portfolio mix for its appropriate action.