Securities and Exchange Commission chairperson Emilio Aquino says the new investment vehicle that the Commission is developing aims to provide the liquidity needs of large and medium-sized corporations to sustain their operations and preserve jobs amid the economic downturn brought by COVID-19. | SEC photo
CEBU CITY, Philippines — As part of its efforts to cushion the economic fallout brought by the coronavirus disease 2019 (COVID-19) pandemic, the Securities and Exchange Commission (SEC) is working on a new investment vehicle for the development of a capital market where “closed-end investment companies primarily invest in corporate debt papers of large and medium enterprises.”
SEC Chairperson Emilio Aquino, in a statement, said the development of the new framework aims to help in preventing credit and liquidity crisis and support the recovery of businesses from the economic downturn caused by COVID-19 and the subsequent lockdowns.
On July 8, 2020, SEC issued the draft rules for the requirements and guidelines in the creation and operation of a closed-end investment company, Corporate Debt Funds (CDFs).
“The new investment vehicle called Corporate Debt Fund will be particularly helpful in providing for the liquidity needs of large and medium-sized corporations for repayments, emergency spending, and investments necessary to sustain their operations and preserve jobs in these challenging times,” Aquino said.
According to SEC, a CDF is a closed-end investment company that would offer a fixed number of non-redeemable units of participation or shares for sale, in a limited offer period.
“Its objective is to invest in the portfolios of corporate debt papers of large corporations and medium-sized enterprises operating or deriving income in the Philippines, or any company guaranteed by a large or medium-sized domestic corporations or by the Philippine government and/or its agencies,” the SEC explained in its statement.
The draft set of rules on the CDFs, which is now available on the SEC website, was prepared in consultation with the mutual fund industry through Philippine Investment Fund Association (PIFA).
“The CDF may offer different share or unit classes with similar investment objectives but are managed as separate asset pools. Each class shall correspond to a distinct part of the assets and liabilities of the CDF,” the SEC said. / dcb