10/02/21

ASIA: Philippine SEC Tightens Rules on Beneficial Ownership of Shares.

As published on regulationasia.com, Wednesday 10 February, 2021.

New guidelines will require the disclosure of the identity of the beneficial owners of shares and prohibit the issuance of bearer shares.

The Philippine SEC (Securities and Exchange Commission) has approved new guidelines aimed at promoting greater transaparency in the ownership of corporations.

In a memorandum circular, the SEC says it will require the disclosure of the identity of the beneficial owners of shares and prohibit the issuance of bearer shares.

SEC Chairperson Emilio Aquino said arrangements that allow shareholders to conceal their identities expose corporations to the risk of being misused for illicit activities such as money laundering and terrorist financing.

“The newly issued guidelines will provide the commission with adequate, accurate, and timely information to combat such unlawful activities while cementing our commitment to international standards and best practices against money laundering and terrorist financing,” he said.

Under the SEC’s new guidelines, corporations, aside from publicly listed companies, are required to disclose and record the alienation, sale or transfer of shares of stock within 30 days, including the date and the persons involved in the transaction.

The guidelines also prohibit the payment of dividends to any person or entity unless the name is indicated in the corporation’s records as the owner of the said shares. This does not apply to dividends paid by publicly listed companies to the Philippine Central Depository nominee or any similar entity authorised to act as depository and custodian of shares.

Nominee directors, trustees, and shareholders of existing corporations are required to disclose their nominators and principals within 30 days after the guidelines take effect, or within 30 days from the time they assumed the roles in their respective companies.

In addition, all corporations are required to keep sufficient and accurate data on their beneficial owners at their principal offices.

Those who will violate the new rules can face penalties between PHP 5,000 and PHP 2 million, as well as up to PHP 1,000 per day for continuing violations. They may also face suspension or revocation of their certificate of incorporation, among other penalties.

The rules adopt recommendations issued by the FATF (Financial Action Task Force) in its October 2019 mutual evaluation report, specifically a recommendation to introduce measures to ensure that bearer share warrants, nominee directors and nominee shareholders are not misused for money laundering and terrorist financing.

The Philippines has been working on strengthening its AML laws to avoid being included in the FATF’s grey list, including through the recent passage of amendments which bring into scope gaming operators, their service providers, real estate developers and brokers as covered entities.