Hi! I am Nina Lasala, former Treasurer of the Philppines. This blog is meant to be an open forum for investors, fellow finance professionals, and other interested parties to discuss the state of Philippine Debt Management.

Thursday, March 10, 2005

BSP CIRCULAR NO. 457 Series of 2004


Below is BSP Cir. 457. We need to reconcile the statements given by Dep. Gov. Espenilla durring last night's forum on Diyos at Bayan on Channel 11 regarding the fact that investors HAVE A CHOICE as to whether they would want to use a 3rd Party Custodian or not.

Take for example Section 1. c, isn't the ability to trade one's security an intrinsic right that comes along with buying that security in the first place? What value does a fixed income security have for an investor if he cannot trade it when the prices move either for him or against him.

In other words, the investor is still forced to take on a third party custodian if he needs the protection of being able to trade out of his position. Why can't the investor have the best of both worlds? He has direct registration with RoSS (as allowed by Circ. 428) and can still trade.

The lawyers can now decide whether access to trading and liquidity is a proprietary right that belongs to the investor which should not be disenfranchised.

CIRCULAR NO. 457 Series of 2004
Pursuant to Monetary Board Resolution No. 1415 dated 30 September 2004, the following clarificatory regulations governing securities custodianship operations of banks and non-bank financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP), are hereby issued as follows:

Section 1. Pursuant to the provisions of Subsecs. X238.2 of the Manual of Regulations for Banks, as amended by Circular No. 392 dated 23 July 2003, and Subsecs. 4101Q.4 and 4104N.3 of the Manual of Regulations for Non-Bank Financial Institutions, as amended by Circular No. 450 dated 6 September 2004, securities sold on a without recourse basis shall be delivered to the purchaser, or to his designated custodian duly accredited by the BSP: Provided, That a bank/other entity authorized by the BSP to perform custodianship function may not be allowed to be custodian of securities issued or sold on a without recourse basis by said bank/entity, its subsidiaries or affiliates, or of securities in bearer form. Existing securities being held under custodianship by banks/other entities under BSP supervision, which are not in accordance with said regulation, must therefore, be delivered to a BSP accredited third party custodian. However, banks and other financial institutions under BSP supervision may maintain custody of existing securities of their clients who are unable or unwilling to take delivery pursuant to the provisions of Circular No. 392 but who declined to deliver their existing securities to a BSP accredited third party custodian subject to the following conditions:

a) the custody arrangements with clients have been in existence prior to the effectivity date of this Circular;

b) the dealing bank/NBFI under BSP supervision had been informed in writing by the client that he is not willing to have his existing securities delivered to a third party custodian;

c) any BSP regulated institution shall not enter into securities transactions with a client who has outstanding securities not delivered to a BSP accredited third party custodian; and

d) it shall be the responsibility of any BSP regulated institution to satisfy itself that the person purchasing securities from it has no outstanding securities holdings which were not delivered to a BSP accredited third party custodian.

Section 2. The provisions of Section 12 of Circular No. 428 dated 27 April 2004 are hereby amended, as follows:
For purposes of compliance with the requirements of R.A. No. 9160, otherwise known as the “Anti-Money Laundering Act of 2001,” as amended, particularly the provisions regarding customer identification, record keeping and reporting of suspicious transactions, a BSP-accredited custodian may rely on referral by the seller/issuer of securities: Provided, THAT IT MAINTAINS A RECORD OF SUCH REFERRAL TOGETHER WITH THE MINIMUM IDENTIFICATION, INFORMATION/DOCUMENTS REQUIRED UNDER THE LAW AND ITS IMPLEMENTING RULES AND REGULATIONS.-

Section 3. A BSP accredited custodian must maintain accounts only in the true and full name of the owners of the security. However, said securities owners may be identified by number or code in reports and correspondences to keep his identity confidential.

Section 4. Securities subject of pledge and/or deed of assignment as of the date of this Circular, may be held by a lending bank up to the original maturity of the loan or full payment thereof, whichever comes earlier.

Section 5. Sanctions
Without prejudice to the penal and administrative sanctions provided for under Sections 36 and 37, respectively of R.A. No. 7653 (The New Central Bank Act), violation of any provision of this Circular shall be subject to the following sanctions/penalties.

First Offense –

a. Fine of P10,000.00 a day for the institution for each violation reckoned from the date the violation was committed up to the date it was corrected; and

b. Reprimand for the directors/officers responsible for the violation.

Second Offense –
a. Fine of P20,000.00 a day for the institution for each violation reckoned from the date the violation was committed up to the date it was corrected; and

b. Suspension for ninety (90) days without pay of directors/officers responsible for the violation.
Subsequent Offenses –

a. Fine of P30,000.00 a day for the institution for each violation from the date the violation was committed up to the date it was corrected;

b. Suspension or revocation of the authority to act as securities custodian and/or registry; and

c. Suspension for one hundred twenty (120) days without pay of the directors/officers responsible for the violation.

Section 6. Effectivity
This Circular shall take effect fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation.

FOR THE MONETARY BOARD:
RAFAEL B. BUENAVENTURA Governor
14 October 2004

30 Comments:

Anonymous Anonymous said...

Nina,

You should really move on. This website of yours is filled with misinformation based on half-truths and has had the effect, whether knowingly or unknowingly, of deceiving the public and muddling the real issues at hand.

I know you may feel slighted since you feel that you were taken out of your position rather abruptly, and you are entitled to your opinion.

The public must be made aware of the true intent of the circulars has always been to develop a vibrant capital market for the country. Over time, these reforms, though they might cause some minor disruptions in the short-term, will inevitably lead to long-term benefits for the government and the country as a whole.

These attacks on the good characters of the individuals mentioned in this site and in today's issue of the BusinessWorld are malicious and irresponsible.

We urge you, as a responsible Christian, to stop these lies that you publish through this website.

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and the joker laughs...

The issue with the circulars is not that the public refuses to buy them but that the Central Bank and the proponents of the Exchange cannot sell them.

The anonymous poster above me profers the contention that the ends do justify the means - a machiavellian concept emanating from the philosophy of "the Prince", a person who rules through mandate by God and by right. Unfortunately, such a creature does not exist. The financial reforms program is not a mandate but a responsibility and the persons affected have the right to not only discuss the effects of the reforms but to demand from those proposing the reforms clarification and redress of grievance.

The issue is neither Nina's tenure as Treasurer which was productive nor is it the brevity of her service for she is not clinging to her post. The issue is that all investors should read both sides of the argument and decide for themselves whether to avail or not to avail of custody services.

The public is most deceived by reformers that preach transparency yet implement in secrecy.

The public is most misinformed by reformers that assume the public so stupid as not to require explanation.

The public is most poorly served by attempts to foist upon them plans whether salvific or otherwise without their consent.

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