The Market Monitor Minding the Nation's Business
By Riza Lozada
The Securities and Exchange Commission (SEC) has approved the extension of the effectivity of financial statements from 135 to 180 days to align with regional standards as part of the Association of Southeast Asian Nations (Asean) market integration.
Part II, Section 4 of SRC Rule 68 of the Securities Regulation Code (SRC) provided that “at the time a registration statement on SEC form 12-1 is to become effective, the financial information therein shall be as of a date within 135 days from effective date or such longer period which the Commission may allow upon favorable consideration of a written request of the registrant.”
The factors that may be considered in granting the request include the time constraints and the significant circumstances surrounding the given proposed issue.”
In its meeting held last December 22, the SEC en banc resolved to issue the Financial Reporting Bulletin (FRB) 18 for the extension of the effectivity of financial statements (FS) from 135 days to 180 days.
This reform in financial reporting standard aims to address the recurring requests from companies for exemptive relief to extend the effectivity of their FS. This is also in line with the Asean standard for the age requirement for FS which is 180 days, the SEC said in press release.
“Accounting and auditing professionals, prospective issuers of securities and other concerned organizations are advised to take note of this new requirement.
With the approval of the FRB No. 18, the Commission will no longer entertain further request for extension of the 180-day period. FRB No. 18 is effective immediately,” the SEC statement said.
Last August 7, the SEC announced that it has approved the 2015 Implementing Rules and Regulations of the Securities Regulation Code or 2015 SRC Rules.
The 2015 SRC Rules enhances existing requirements including the ability of companies to raise funds in the domestic market, addresses regulatory gaps, strengthens market and regulatory structures, and adopts global best practices to ensure that the players are able to meet the challenges posed by increasing market sophistication and regional integration.
The initial draft of the pro-posed amendments was re-leased for public comment in 2011. Subsequently, the SEC conducted a series of consultations with market participants and various stakeholders. The final draft of the rules was adopted after SEC carefully reviewed and considered the relevant comments that it received.
Among the salient features of the rules are:
• Shelf registration is expanded. Under a shelf registration pro-gram, securities to be issued in tranches may be registered for an offering to be made on a continuous or delayed basis for a period not exceeding three years;
• Commercial paper is now sim-ply defined as evidence of indebtedness of any person with a maturity of three hundred and sixty-five (365) days or less. The new rules ceased using the terms of long term commercial paper and short term commercial paper.
Selling commercial papers is also made easier with the requirement of an issuer rating instead of a separate rating for each issuance; and
• A new category of exempt security is introduced. This involves securities issued or guaranteed by multilateral financial entities (MFEs) established through a treaty or binding agreement to which the Philippines is a party.
“I am pleased that the SEC has completed this very challenging project,” SEC chairperson Teresita Herbosa said.
“We received significant in-puts on this rule-making, and in response we incorporated many changes from the proposals that are designed to address vary-ing concerns. I believe the final version faithfully implements the statutory requirements as mandated by SRC,” she added.
Public offerings which have a limited character are also ex-empt from registration. Such offerings will be exempt as long as the covered securities are available only to the parties or persons named in the application for exemption for a specified period. An example of this are the employee stock option plans (ESOPs) issued by a corporation to its eligible employees.
Underwriters are also no longer required to underwrite securities solely on a firm commitment basis. They can agree on a different plan of distribution with the issuing company subject to the approval by the SEC.