Congressional probe of SEC urged over pre-need industry

The Securities and Exchange Commission (SEC) has been charged in Congress with "creating havoc" in the pre-need industry to the "detriment and prejudice of planholders".

In a strongly worded resolution that he filed in the House of Representatives, Congressman Harlin Cast. Abayon has called for an inquiry in aid of legislation over the alleged arbitrary implementation by the SEC of the new pre-need rules issued in 2002 and Circulars 6, 7 and 8 on the Actuarial Reserve Liability (ARL) which were detrimental and prejudicial to pre-need planholders. The resolution also seeks to investigate the position of SEC comptroller. It was discovered during previous congressional hearings that the SEC — appointed comptroller assigned to CAP receives compensation beyond that allowed by law.

Through his resolution Abayon pointed out that since 1977 some six million plans had been sold, with the industry accumulating approximately P160 billion in assets.

He further added that prior to the arbitrary implementation of the new rules, the pre-need industry had encountered no problems in making good their commitments to planholders.

The Philippine Federation of Pre-Need Plan Companies (PFPPC) had earlier cautioned the SEC about implementing the new rules. It further questioned the relevance of the new ARL rules to the pre-need industry, and even predicted that older companies with excellent track records would be severely penalized down the road by the new rules.

Consequently, two of the leading companies in the pre-need industry, College Assurance Plan (CAP) and Platinum Plans were both denied renewal of their dealer’s license by the SEC for failing to meet the newly implemented ARL criteria, causing cash flow problems and threatening long-established reputations.

In his resolution Abayon also pointed out that pre-need plans, which are a Filipino invention, can claim to be one of the most successful retail products in the Philippines. Furthermore, he stated that the pre-need industry is providing a vital service to the Filipino people that the government cannot render.

He added: "While it is admitted that the SEC has the power to regulate the pre-need industry, nonetheless as a government regulator it must promulgate rules and regulations that would assist the industry to sustain its momentum of growth rather than choke it."