MORNBFI Vol. 1 - Planters Development Bank

§ 4611Q.209.12.31as applied for by the QB: Provided, That aQB with Type 2 Authority shall complywith the sales and marketing guidelinesprescribed in Appendix Q-16. The Type 2Authority also carries authority to transactas broker and end-user of the said specificderivatives instruments.(2) Type 3 - Limited User AuthorityA QB or a trust department of a QB,may apply for a Type 3 Authority. A QB ora trust department of a QB with Type 3Authority may transact, as an end-user, inspecific types of derivatives product, withspecific underlying reference, as appliedfor by the QB, outside of those instrumentsthat meet the conditions under Subsec.4611Q.1. A Type 3 Authority will enablesaid QB or trust department to transact asend-user of derivatives instruments as maybe applied for by the QB or trustdepartment.(3) Type 4 - Special Broker AuthorityA QB that is also an investment housemay likewise apply for a Type 4 Authority.A QB with Type 4 Authority may facilitatea derivatives transaction between a BSPauthorizeddealer and end-user clients:Provided, That the QB, acting as broker,ensures that its client fully understands itslimited responsibility as a broker andobserves the provisions of Appendix Q-16.A QB with additional Type 2 or 4Authorities shall be responsible forcomplying with pertinent securities laws,rules and regulations.For purposes of this Subsection, thetypes of derivatives are classified asfollows: forwards, swaps and options.Underlying reference pertains to thefollowing: interest, foreign currencies/foreign exchange, equity, credit andcommodity.b. Qualification requirements. A QBapplying for additional authority to engagein additional derivatives activities shall:(1) Demonstrate adequate competencein its general operations as evidenced by:(a) CAMELS composite rating of at least“3” with a similar rating for Management,as applicable;(b) No unresolved major safety andsoundness issues that threaten liquidity orsolvency; and(c) Substantial compliance withregulations on anti-money laundering,corporate governance and risk management.(2) Hold capital commensurate to therisks assumed or to be assumed from thederivatives activities. A QB applying for orholding a Type 2 Limited Dealer Authorityor Type 3 Limited User Authorityautomatically agrees to be covered by allregulations prescribing capital for marketrisk, notwithstanding any provision to thecontrary. In addition, the BSP expects a QBapplying for or holding additional derivativesauthority to have adequate capital toaccommodate existing and future risks fromadditional and generally authorizedderivatives activities as well as risks arisingfrom the QB’s other business activities. Forthis purpose, the BSP may require capitalhigher than the minimum required underprudential regulations.(3) Have and maintain a riskmanagement system that conforms to theprinciples and complies with the minimumstandards prescribed in Appendix Q-15.(4) Demonstrate the relevance ofproposed derivatives activities to the QB’smain purpose as an institution. The BSPreserves the right to deny applicationswhose proposed derivatives activities donot reasonably fit the nature of theirbusiness operations.c. Applicability to trust department ofQBs. Trust departments of QBs may applyfor Type 3 Authority, provided they complywith the requirements prescribed andobserve the provisions of Appendix Q-15and Q-16.d. Application procedures. Theapplicant shall submit to the Capital MarketsSpecialist Group, SES of the BSP a writtenManual of Regulations for Non-Bank Financial Institutions Q RegulationsPart VI - Page 5