SEC clarifies exempt securities deals under new draft rules

The Securities and Exchange Commission (SEC) has released draft rules clarifying the treatment of exempt transactions under the Securities Regulation Code (SRC), aiming to streamline capital market procedures and ease regulatory compliance for businesses and investors.

In a notice dated Aug. 15, the SEC’s Markets and Securities Regulation Department (MSRD) issued for public comment a draft memorandum circular that amends Sections 10.1, 10.2, and 10.3 of the SRC’s implementing rules.

The proposed rules seek to address inconsistencies in the interpretation and application of exemptions from securities registration, which have been the subject of varying directives across past SEC circulars.

Under the SRC, Section 10.1 enumerates specific securities and transactions that are automatically exempt from the standard registration requirement for offers and sales in the Philippines.

Section 10.2 empowers the SEC to grant additional exemptions for transactions not specifically listed, while Section 10.3 sets out the procedures and fees for those seeking exemption confirmations.

“[T]here is a need for prospective guidance to the public on the applicability of the requirement to obtain confirmations of exemption under Section 10 of the SRC,” the draft circular states.

The SEC said the move is in line with the agency’s broader policy to “improve ease of doing business, facilitate access to the capital market, and provide predictability in government transactions, all while ensuring protection to the investing public.”

Under the proposed guidelines, a person claiming an exemption under Section 10.1 will now be required to file SEC Form 10.1 by selecting the “Notice of Exemption” option, submitted no later than 10 calendar days before the offer or sale of securities.

No filing fee will be required for this submission.

However, companies that wish to obtain an official confirmation of exemption under Section 10.1 must also submit SEC Form 10.1, this time by selecting “Application for Confirmation of Exempt Transaction.”

This application will be subject to a filing fee equal to one-tenth of one percent of the maximum aggregate price or issued value of the securities, as stipulated in Section 10.3 of the SRC.

For transactions under Section 10.2—those not automatically exempt—a formal Application for Confirmation of Exempt Transaction must be filed and is likewise subject to the same 0.1% fee.

Industry stakeholders and capital market participants have until Aug. 25 to submit comments and position papers via email to msrd_srd@sec.gov.ph.

The draft circular is available for download through the official SEC website.

The clarification of these rules is part of the SEC’s ongoing efforts to enhance market transparency, ensure investor protection, and foster broader participation in the country’s financial markets.

By streamlining the exemption process and eliminating unnecessary filings, the Commission hopes to reduce transaction costs and increase compliance among issuers.