MORNBFI Vol. 1 - Planters Development Bank

APP. Q-38a08.12.31DISPOSITION OF COMPLIANCE ISSUES ON APPENDIX Q-38[Appendix to Secs. 4441Q and 4144N and Subsecs. 4101Q.4, 4235Q.5(2008 - 4211Q.4) and 4103N.3]A. The Monetary Board, in its ResolutionNo. 581 dated 05 May 2006 approved a thirty(30) calendar day period from 05 June 2006within which banks/non-banks will effectrevisions to non-conforming SPAs issued byinvestor-clients to strictly conform to the limitedauthority provisions of Section 7 of AppendixQ-38, subject to the following conditions:1. The clean-up of SPAs will coverthose issued by clients prior to Circular No.524 dated 31 March 2006;2. Custodians will allow transfers ofsecurities from proprietary accounts ofdealers to their omnibus principal custodyaccounts within the period;3. There will be no penalties imposedfor dealer-banks and accredited securitiescustodians that allowed non-compliant SPAsprior to Circular No. 524 dated 31 March2006 or those issued under Circular Letterdated 4 August 2005 if corrected within thethirty (30)-day period; and4. Non-compliance with other provisionsof Appendix Q-38 are not covered/qualified tobe corrected within the thirty (30)-day periodand are therefore subject to the usual penalty/sanctions under existing regulations.B. The Monetary Board, in its ResolutionNo. 876 dated 06 July 2006 approved thefollowing disposition of compliance issues forthe period of 05 July 2006 - 04 August 2006:1. The sending by a dealing bank toall its clients of:(a) a notice indicating a limitation onthe authority of the dealing bank pursuantto Section 7 of Appendix Q-38; and(b) compliant SPA for execution willbe deemed substantial compliance only asof 05 July 2006. Proof thereof should bepreserved for examination purposes.2. Custodians will be deemed insubstantial compliance as of 05 July 2006 if theyhave obtained confirmation from the dealingbanks that notifications on the limitation of thedealing bank’s authority, together with acompliant SPA for the clients’ signature, havebeen sent to all their clients. Absent confirmationfrom the dealing bank of the sending of noticesand the revised SPA, the custodian shouldimmediately freeze (i.e., no new movementsin the security, except sale or disposition thereof)the account to be considered in substantialcompliance.3. Absent a compliant SPA, thedealing bank and custodian should“freeze” the account of the client.Accordingly, if a client wants to transactwith securities, the dealing bank mustrequire the submission of an executedcompliant SPA before any new transactioncan be entered into. Otherwise, the dealingbank will be subject to the appropriatepenalties prescribed under Subsec.X441.29. However, for the period of 05July 2006 - 04 August 2006, transactionsby the dealing bank with its clients, absenta compliant SPA but to which an adviceon the limitation of the authority of thedealing bank and a compliant SPA forsignature have been sent, will be subjectto a fine of P10,000.00 per transaction/day:Provided, That the total penalty arising fromthat class of violation for the said periodshall not exceed P100,000.00, computedin accordance with Section 37 of RepublicAct No. 7653 (The New Central Bank Act).Furthermore, the Custodian will not besubject to any penalties for acceptingsecurities subject of the transaction.4. Starting on 05 August 2006, thepenalties under Subsec. X441.29 shall beapplied for any violation of the provisions ofAppendix Q-38. Custodians shall be requiredto freeze the securities account for those withouta compliant SPA from the investor.(M-2006-009 dated 18 July 2006 and M-2006-002 dated 05 June 2006)Manual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-38a - Page 1