SEC crafts rules on FIST law

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    The Securities and Exchange Commission (SEC) is looking at requiring business entities availing of tax incentives under the Financial Institutions Strategic Transfer (FIST) Act (RA 11523) to be registered within 36 months after the law is passed.

    Special purpose vehicles (SPV) created under the older law that also granted tax incentives for them, RA9182 or The Special Purpose Vehicle (SPV) Act of 2002, may avail of the same privileges and incentives under FIST.

    Signed by President Duterte on February 16 , FIST aims to cushion the “serious economic setbacks and tremendous financial pressure on markets and industries” caused by the COVID-19 pandemic.

    The same scheme was implemented by the government in the early 2000 after the 1997 Asian financial crisis.

    The SEC, the primary implementing agency of the FIST Act, is drafting the law’s implementing rules and regulations (IRR) with inputs from the Bangko Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR) and National Economic and Development Authority (NEDA).

    The IRR when finalized will operationalize the newly- signed law that allows for the creation of corporations that invest in or acquire non-performing assets (NPAs) of financial institutions such as banks, lending and financing companies, investment houses, and insurance companies.

    The law provides that a FIST corporation (FISTC) shall be organized as a stock corporation other than a one-person corporation, with a minimum authorized capital stock of P500 million, of which P125 million shall be subscribed and at least P31.25 million paid up.

    The draft IRR provides that a FIST entity shall be classified as corporations vested with public interest.

    It shall have independent directors in its board of directors and shall appoint a compliance officer, submit compensation and performance reports, and comply with other requirements prescribed by law.

    Under the law, only the BSP, banks, pawnshops, non-stock savings and loan associations (NSSLAs), and non-bank credit card issuers and other credit-granting institutions supervised by the central bank; financing companies, lending companies, and accredited microfinance nongovernment organizations; investment houses; insurance companies; and select government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs) may transfer NPAs to FIST entities.

    The GOCCs and GFIs allowed to transfer NPAs to FISTCs are Philippine Deposit Insurance Corp., Land Bank of the Philippines, Development Bank of the Philippines (DBP), National Home Mortgage Finance Corp., Philippine Guarantee Corp., Home Development Mutual Fund, Social Security System, Government Service Insurance System, Small Business Corp. and National Housing Authority.

    The assets shall have become non-performing on or before Dec. 31, 2022. They may be non-performing loans, which include receivables and restructure loans whose principal and/or interest have remained unpaid for at least 90 days after they have become past due or after any events of default under the loan agreement has occurred.

    Financial institutions may likewise transfer to FISTCs real and other properties acquired (ROPA) in settlement or loans and receivables, including shares of stocks and personal properties acquired by way of dation in payment (dacion en pago) or judicial or extra-judicial foreclosure or execution of judgment or enforcement of security interest.