The House of Representatives committee on ways and means on Wednesday is pushing for the enactment of a bill that will make it easier and cheaper for working Filipinos to invest in legitimate securities.
Albay Representative Joey Salceda, the panel’s chairperson and the House resident economist, made the call as he was elected by the House Committee on Economic Affairs to chair the technical working group on Collective Investment Schemes, House Bill 642 which he authors.
A collective investment scheme is an “arrangement where funds are pooled for the purpose of investing in securities and other investments.”
Salceda pointed out that under current laws, which do not expressly provide for collective investment schemes, investors need to shell out significant amounts of cash in order to make investments in “clunky” assets such as real estate or businesses.
Salceda added that entering into an investment itself is “tricky” for ordinary Filipinos.
“Only around 27 percent of households have any savings at all, and many of them are excluded from investing. If you are an OFW and you never had a TIN, you won’t be able to get one while abroad because you can only get a TIN onsite. That is potentially USD 58 billion that is not being fully tapped in the formal markets – and that is why OFWs are susceptible to scams. We are trying to solve that with the Ease of Paying Taxes Act,” Salceda said.
“But the other problem is that our assets tend to be “clunky,” In finance, we call this asset divisibility. The idea is that assets can be divided into infinitesimally small units so that the smallest retail investor can participate in investing an asset. Because we do not have a legislated CIS framework, most of our assets cannot be divided among smaller investors.”
“In short, if you are a retail investor, it’s expensive to get started. Furthermore, retail investors tend to invest individually, and therefore speculatively. Individually, it is also expensive to get a personal fund manager who can make more intelligent decisions for the average investor.”
Salceda pointed this entry barrier as the rationale for a framework for investing collectively. “This is why we need a stronger, broader market for collective investment schemes. Collective investment schemes reduce the fixed costs of fund management and administration.”
“There is already a working model in the REIT law, which is basically a collective investment scheme, except the supply of investment products comes first. This proposal simply defines a CIS as an arrangement where funds are pooled for the purpose of investing in securities and other investments.”
“But we need to set ground rules. First, the duties and responsibilities of the fund manager needs to be outlined, and this bill tries to do that. The agreement to manage funds has to follow certain parameters. The decision-making for the fund, as well as custodianship arrangements need to be set.”
