SEC releases draft implementing rules of FIST law

The Securities and Exchange Commission (SEC) on Friday released the draft Implementing Rules and Regulations (IRR) of the Financial Institutions Strategic Transfer (FIST) law for comments and inputs of the public and stakeholders.

Republic Act No. 11523 or FIST was signed into law by President Rodrigo Duterte early this week. 

The law seeks to create specialized asset-managing corporations that would acquire "bad loans and stagnant properties" from embattled financial institutions.

Under the measure, a FIST corporation may invest in, or acquire non-performing assets (NPAs) from financial institutions and engage third parties to manage, operate, collect, and dispose of acquired NPAs.

In a statement, the SEC said the draft IRR will operationalize the newly-signed law. The commission is the primary implementing agency of the FIST Act.

The IRR was drafted by the corporate regulator with inputs from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR) and National Economic and Development Authority (NEDA).

The law provides 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.

The draft IRR further states that a FIST corporation shall be classified as corporations vested with public interest.

As such, it shall have independent directors in its board, appoint a compliance officer, submit compensation and performance reports, and comply with other requirements prescribed by law.

Application

Applications for the establishment and registration of an FIST corporation shall be filed with the SEC within 36 months from the effectivity of the law, according to the commission.

Those established on the 25th to 36th month cannot avail of the tax incentives unless an amendatory law extending the privileges is passed, it said.

Entities created under Republic Act No. 9182, as amended, or The Special Purpose Vehicle (SPV) Act of 2002, may avail of the privileges and incentives by submitting a notarized Secretary’s Certificate, recent articles of incorporation and bylaws, and latest audited financial statements and General Information Sheet showing their compliance with the minimum capital requirements, according to the SEC.

Under the law, only the BSP, banks, pawnshops, non-stock savings and loan associations (NSSLAs), and non-bank credit card 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 (GOCCs) and government financial institutions (GFIs) may transfer NPAs to FIST corporations.

Meanwhile, the government-owned companies and financial institutions allowed to transfer NPAs to FIST corporations are the Philippine Deposit Insurance Corporation, Land Bank of the Philippines, Development Bank of the Philippines (DBP), National Home Mortgage Finance Corporation, Philippine Guarantee Corporation, Home Development Mutual Fund, Social Security System, Government Service Insurance System, Small Business Corporation and National Housing Authority.

The assets shall have become non-performing on or before December 31, 2022, the SEC said.

They may be non-performing loans, which include receivables and restructure 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 has occurred, it added.

Investments

Meanwhile, a FIST corporation may issue Investment Unit Instruments (IUIs) to any qualified buyer in the minimum amount of P10 million, pursuant to a plan submitted to the SEC and issued with a Certificate of Permit to Sell or Offer for Sale Securities.

The approved plan shall include the investment policies of the FIST corporation, features of the IUIs including specific amounts issued and or to be issued, rights of the holders of the IUIs, and methods for the liquidation and distribution of assets to the holders of IUIs, among others, the SEC said.

The draft IRR prohibits an FIST corporation from acquiring the IUIs of another FIST corporation.

“The selling financial institution, as well as its parent, subsidiaries, affiliates or stockholders, directors, officers or any related interest, shall likewise not acquire or hold, directly or indirectly, the IUIs of the FISTC that acquired its NPAs,’ the SEC said.

“Any FISTC or SPV that offers to sell or distribute its IUIs to the non-permitted investors within the Philippines without prior approval of the Commission thereof shall be subject to the penalties provided under Republic Act No. 8799, or the Securities Regulation Code, and its IRR,” it added.

Incentives

Under the IRR, the transfer and other related transactions involving eligible non-performing loans and real and other properties acquired “shall be exempt from the payment of certain taxes such as the documentary stamp tax, capital gains tax, creditable withholding income taxes and value-added tax, subject to applicable revenue regulations.”

“To encourage the infusion of capital and financial assistance by the FIST corporation for the purpose of rehabilitating the borrower’s business, the draft IRR also exempts FIST corporations from the income tax on net interest income arising from new loans in excess of existing loans, among others," the SEC said.—LDF, GMA News