SEC Issues Beneficial Ownership Transparency Guidelines

The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 1, s. 2021 (MC 1) dated 27 January 2021 promoting transparency of beneficial ownership.

Section 2(c) of MC 1 defines beneficial owner as the natural person/s who ultimately owns or controls or exercises ultimate effective control over the corporation as defined and required to be disclosed in the General Information Sheet (GIS) pursuant to SEC MC No. 15, s. 2019 or any amendment thereto.

Section 6 of MC 1 applies to entities applying for registrationand requires disclosure of the following details of the person on whose behalf the corporation is registered and the nominators/principals of nominee incorporators/first directors/trustees and shareholders:

1. Full names
2. Country of residence
3. Nationality, and
4. Tax identification numbers (TIN), or passport numbers in the absence of such TIN.

If they do not act for and on behalf of another person, then they shall submit to the SEC a declaration of such fact.

Section 7 of MC 1 applies to existing corporations and likewise requires the disclosure of the following details of the person on whose behalf the corporation is registered and the nominators/principals of nominee incorporators/directors/trustees and shareholders:

1. Full names
2. Country of residence
3. Nationality
4. TIN (or passport numbers in the absence of TIN)
5. If the nominator or principal is a corporation, the registered name of the corporation, its country of registration, names of its incorporators and directors, its beneficial owner, its TIN, if any, shall in the same manner be disclosed. If the nominator or principal is a trust, the names, nationality and country of residence, and TIN or passport number of the trustor/s, trustee/s and beneficiary/ies of the trust shall in like manner be disclosed.

Exemption from Disclosure Requirement

All covered institutions as enumerated in Section 3(a) of the AMLA, as amended, and SEC MC No. 16, s. 2018 are exempted from this requirement but the exemption applies only to nominee/trustee arrangements related to products/services of persons already covered by the Customer Identification Requirements and Record Keeping by Supervising Authorities under the AMLA.

Deadline to Comply; Penalty for Non-Compliance

For newly registered corporations, compliance is within thirty (30) days from the issuance of their SEC Certificate of Registration.

For existing corporations, compliance is not later than 31 March 2021 as provided in SEC Notice dated 23 February 2021.

For persons who will become nominee shareholders, directors/trustees on or after the effectivity of MC 1, compliance shall be within 30 days from the time they became or assumed the role of or started acting as nominee directors/trustees or shareholders.

Under Section 13 of MC 1, the following acts --

1. Willful violation of MC 1 or related orders of the SEC; or
2. Any person has, in applications, records, declarations, disclosures, or documents required under MC 1 to be filed with the SEC, made any untrue statement of any material fact required to be stated or necessary to make these statements therein not misleading; or
3. Any person has refused to permit any lawful examination into its affairs.

-- are punishable by any or all of the following after due notice and hearing:

1. Fine of no less than P5,000.00 nor more than P2,000,000.00 plus not more than P1,000.00 for each day of continuing violation but in no case to exceed P2,000,000.00;
2. Suspension or revocation of the certificate of incorporation; and
3. Other penalties within the power of the SEC to impose.

The imposition of the administrative sanction is without prejudice to criminal prosecution.

Online Compliance

Compliance for new and existing nominee directors/trustees/shareholders shall be done online via the link provided in SEC Notice dated 23 February 2021.

The same SEC Notice prescribed the Beneficial Ownership Transparency Declaration (BOTD) forms and the consent forms that should be accomplished and uploaded to the link provided together with the declarant’s valid ID.

Click here to read the full text of SEC MC 1, s. 2021 and here for the Notice posted on 23 February 2021 with links to the BOTD forms.