SEC relaxes rules on small investors

The Securities and Exchange Commission (SEC) is making it easier for small investors to open accounts to boost participation in the capital markets.

The SEC has issued new rules for so-called low-risk accounts, or those opened and maintained by Filipino investors with a deposit of P50,000 or lower.For these types of investors, a SEC-registered financial intermediary may limit requirements to open an account.These can include a customer’s name, birthdate, email address, residential/ business address, mobile and/or landline number, source of income, a copy of a verifiable identification card or document with photo, and a signature card.

Customers may open an account after providing the minimum information required and upon vetting by at least two responsible staff and/or officers of the concerned financial intermediary, acting as checker and maker.

The intermediaries will continue to impose the necessary know-your-customer or customer due diligence measures.This is meant to establish the true identity and existence of their customers before, during or after the opening of the account but not later than 15 days from the date the account is opened.

“As we encourage investments in the capital market, however, promoting good corporate governance and the protection of minority investors becomes crucial as ever,” SEC Chair Emilio Aquino said in a statement.

In a separate circular, the SEC also sought to promote good corporate governance and the protection of investors.

SEC Memorandum Circular No. 20, Series of 2020 provides that independent directors should constitute at least one-third of the members of the board of directors of exchanges and other organized markets.

It stated that an independent director of an exchange and other organized market “should have the relevant experience in or working knowledge of the capital or financial markets for at least three years prior to his/her election.”

Also, there should be at least four persons representing the interests of issuers, investors and other market participants, with each sector having at least one representative, in the board of directors of exchanges and other organized markets.A person who is elected as director to represent any of these sectors in the board of an exchange or other organized market shall have had the relevant experience in or working knowledge of the related sector and the capital or financial markets for at least three years prior to the person’s election.

A person may be elected as a director representing any of these sectors for a maximum period of 10 years with a mandatory cooling off period of at least one year after the first five years.