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PHILIPPINE SECURITIES & EXCHANGE COMMISSION
SUPERVISORY STRUCTURE SUPERVISORY STRUCTURE SUPERVISORY STRUCTURE SUPERVISORY STRUCTURE FOR PRIVATE PENSIONFOR PRIVATE PENSIONFOR PRIVATE PENSIONFOR PRIVATE PENSION
IN THE PHILIPPINES IN THE PHILIPPINES IN THE PHILIPPINES IN THE PHILIPPINES By Dir. Emilio B. Aquino
OECD/INPRS Conference on Private Pensions in Asia
May 28-30, Hyderabad, India
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Outline of the PaperOutline of the PaperOutline of the PaperOutline of the Paper
• Introduction
• Functions and Responsibilities
• Independence
• Organizational Structure and Performance
• Conclusion
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
FourFourFourFour----Tiered SystemTiered SystemTiered SystemTiered System
Social assistance scheme (DOH, DSWD, PHIC)
Mandatory defined benefit scheme (GSIS, SSS)
Mandatory Retirement PayGSIS and Pag-ibig Fund
Voluntary tier (Pre-Need Pension Plans)
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Private Pension SchemesPrivate Pension SchemesPrivate Pension SchemesPrivate Pension Schemes
• Mandatory Retirement Law (RA 7641)• Personal Pensions Plans:
– Pre-Need Pension Plans (RA 8799/ PN Rules)
– Endowment Insurance (PD 612)
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Pension CompaniesPension CompaniesPension CompaniesPension CompaniesNumber, Size and ImpactNumber, Size and ImpactNumber, Size and ImpactNumber, Size and Impact
0
5
10
15
20
25
30
35
40
45
1996 1997 1998 1999 2000 2001
No. of Pre-NeedPension PlanCompanies
412001
412000
421999
361998
321997
391996
No. of Pre-Need Pension Plan Companies
Year
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
PrePrePrePre----Need SalesNeed SalesNeed SalesNeed SalesIndustry PerformanceIndustry PerformanceIndustry PerformanceIndustry Performance
1994 - 2001
0
10
20
30
40
50
1994 1995 1996 1997 1998 1999 2000 2001
year US$1=PhP52
in b
illion P
hP
esos
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Pension Plan SalesPension Plan SalesPension Plan SalesPension Plan SalesIndustry PerformanceIndustry PerformanceIndustry PerformanceIndustry Performance
1994 - 2001
0
5
10
15
20
25
1994 1995 1996 1997 1998 1999 2000 2001
year
amo
un
t in
bill
ion
p
eso
s
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Trust Fund EquitiesTrust Fund EquitiesTrust Fund EquitiesTrust Fund EquitiesNumber, Size and ImpactNumber, Size and ImpactNumber, Size and ImpactNumber, Size and Impact
0000
2,0002,0002,0002,000
4,0004,0004,0004,000
6,0006,0006,0006,000
8,0008,0008,0008,000
10,00010,00010,00010,000
12,00012,00012,00012,000
14,00014,00014,00014,000
1996199619961996 1998199819981998 2000200020002000
TrustFundEquities(inmillionpesos)
13,297.02001
10,600.02000
8,715.31999
6,753.01998
4,763.71997
3,613.51996
Amount (in million Pesos)
Year
Total Trust Fund Equities from 1996 to 2001
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
FUNCTIONS AND FUNCTIONS AND FUNCTIONS AND FUNCTIONS AND RESPONSIBILITIESRESPONSIBILITIESRESPONSIBILITIESRESPONSIBILITIES
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Supervisory BodiesSupervisory BodiesSupervisory BodiesSupervisory Bodies
• Securities and Exchange Commission– Pre-Need Pension Plans
• Insurance Commission– Endowment/Annuity Plans
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Functions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and Responsibilities
SEC Contributions and Regularity of Payments
SECCompliance to Governance Rules
Pre-Need Plans enjoy no tax benefits. Under proposed PERA, the Bureau of Internal Revenue (BIR) will handle tax qualifications
Qualifications for Tax Benefits
SECLicensing/Registration
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Functions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and Responsibilities
Trust Funds are lodged with Trust Entities
Custodian Procedures
Trust Entities follow a set of investment regulations (Monitored jointly by SEC and the Philippine Central Bank (BSP)
Investments, Asset Allocation, Performance, Min. Capital and Reserves
SEC approves the plan contract. Any issues arising therefrom are settled initially before a SEC mediation proceeding
Benefits Eligibility conditions
It is a voluntary pension scheme mostly subscribed by Overseas workers and the self-employed.
Membership
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Functions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and ResponsibilitiesFunctions and Responsibilities
SEC Merger and Liquidation Process
SEC Rules provide for disclosure requirements
Disclosure Procedures
Basic Commission of 10% is allowed. Compliance is monitored by SEC
Administrative Cost, Fees and Marketing
SECFinancial, Actuarial and Accounting Methods
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Coordination MechanismsCoordination MechanismsCoordination MechanismsCoordination Mechanisms
• MOAs between SEC and the Bangko Sentral NgPilipinas (BSP) on joint investigation and enforcement efforts.
• SEC, BSP and IC as the members of the Anti-Money Laundering Council.
• Current move to transfer supervision over the pre-need sector from SEC to the Insurance Commission.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Pros and Cons for a Specialized Pros and Cons for a Specialized Pros and Cons for a Specialized Pros and Cons for a Specialized AgencyAgencyAgencyAgency
• Advantages:– Regulatory Focus
• Developing Competencies• Coping up with fast changes within sphere of control
• Disadvantages:– Duplication of functions/Regulatory Arbitrage– Limited Jurisdiction.
• The Chairperson of the Philippine SEC has broached the idea of a single regulator to oversee the banking, insurance, pension and securities markets. The other agency heads are not receptive to the immediate consideration of the concept.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Political, Institutional Political, Institutional Political, Institutional Political, Institutional and Operational Independenceand Operational Independenceand Operational Independenceand Operational Independence
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
SEC TOP MANAGEMENTSEC TOP MANAGEMENTSEC TOP MANAGEMENTSEC TOP MANAGEMENT• The SEC is a collegial body, composed of a Chairperson and four (4)
Commissioners, appointed by the President for a term of seven (7) years each. (Sec. 4, Securities Regulation Code).
• Commissioners are natural-born citizens, 40 years of age for Chairperson and 35 years of age for Commissioners, of good moral character, of unquestionable integrity, of known probity and patriotism, and with recognized competence in social and economic disciplines.
• Majority of Commissioners, including the Chairperson, are members of the Philippine Bar.
• Chairperson, as CEO, executes and administers the policies, decisions, orders and resolutions approved by SEC and has general executivedirection and supervision of the work and operation of SEC.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Administrative Supervision Administrative Supervision Administrative Supervision Administrative Supervision and Financeand Financeand Financeand Finance
• The Department of Finance has administrative supervision over the SEC but not operational control.
• The Department of Budget and Management reviews the proposed budget and seeks the funding therefor from the Philippine Congress. SEC enjoys partial fiscal autonomy since it retains PhP100 million from its collections for operational needs. (Sec. 75, SRC)
• The pre-need industry is not involved with the determination of the cost of the supervision. However, the Federation of Pre-Need Companies has been into active advocacy including the call for Congress to grant the Insurance Commission the authority to retain a portion of its income similar to what the SEC enjoys.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Compensation of SEC StaffCompensation of SEC StaffCompensation of SEC StaffCompensation of SEC Staff• All SEC positions are governed by a compensation and position
classification systems and qualification standards approved by the Commission with a compensation plan comparable with that of the Bangko Sentral ng Pilipinas, subject to periodic review by the Commission no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and efficiency.
• SEC is exempt from laws, rules, and regulations on compensation, position classification and qualification standards.
• For now, the SEC salary scale more or less approximates that ofthe private sector.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Appointment and RemovalAppointment and RemovalAppointment and RemovalAppointment and Removal
• Directors like Commissioners are Presidential appointees. However, Directors and Assistant Directors must be holders of a Career Executive Service Eligibility and a Masters Degree .
• These career officials can only be removed for cause.• A minimum period of one year from departure from
SEC must be observed, before resigned employees may be hired by supervised entities. Although, this happens only occasionally.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Audit and ReviewAudit and ReviewAudit and ReviewAudit and Review• The Commission of Audit audits the activities of SEC.• While SEC exercises all supervisory powers, any person
aggrieved by an order of the Commission may appeal the order to the Court of Appeals by petition for review in accordance with the pertinent provisions of the Rules of Court. (Sec. 70, SRC)
• SEC comes out regularly with annual reports which are duly published. Weekly press conferences are conducted. Awebsite is maintained to post any significant information for the benefit of agency constituents.
• SEC appears to be armed with adequate powers to fulfill its mandate.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Organizational Structure Organizational Structure Organizational Structure Organizational Structure and Performanceand Performanceand Performanceand Performance
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Vision and Mission StatementsVision and Mission StatementsVision and Mission StatementsVision and Mission StatementsVISION
It is the vision of the Securities and Exchange Commission, as an independent, credible regulator adhering to international standards, to be a prime mover of Philippine economic development by ensuring a fair, efficient, and transparent capital market.
MISSIONThe Securities and Exchange Commission shall actively promote
the development of a globally competitive Philippine capital market, effectively regulate and monitor its operations, and widely disseminate reliable information for the protection of the investing public.
To carry out the mission, the SEC shall harness its empowered human resources, functioning under a culture of efficiency and integrity, and delivering services through systems enhanced by appropriate technology.
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Organizational ChartOrganizational ChartOrganizational ChartOrganizational Chart
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
NTD Organization ChartNTD Organization ChartNTD Organization ChartNTD Organization Chart
SEC Support/Clerical
Executive AssistantClerk/Messenger
SEC Actuary
Securities Specialist II
DIRECTOR
Asst. DirectorActuarialReview
Asst. DirectorMonitoring
& Audit
Asst. DirectorRegistration & Licensing
SEC Chief Counsel SEC Chief Counsel
Securities Counsel III Securities Counsel III
Securities Specialist II
Securities Specialist II Securities Specialist I
Securities Specialist II
Securities Specialist II
Securities Specialist II
Securities Specialist I
Securities Specialist I
Securities Specialist I
SEC Support/Clerical
SEC Support/Clerical
SEC Support/Clerical
SEC Support/Clerical
Securities Specialist II Securities Specialist II
PHILIPPINE SECURITIES & EXCHANGE COMMISSION
Some InsightsSome InsightsSome InsightsSome Insights
• Individual circumstances of each jurisdiction must be taken into account in the consideration of a model.
• Regardless of structural models, enabling statutes must provide greater flexibility to regulators to cope up with fast changes in the market.
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