SEC releases draft IRR on FIST law

MANILA, Philippines — The Securities and Exchange Commission has released the draft implementing rules and regulations of the newly enacted Financial Institutions Strategic Transfer (FIST) Act for public comments.

President Duterte approved the FIST measure on Feb. 16, which aims to help markets and industries cope with the financial pressure of the COVID-19 pandemic.

Under the law, corporations will now be allowed to engage third parties to manage, operate, collect, and dispose of non-performing assets acquired from a financial institution.

A FIST corporation shall be organized as a stock corporation with a minimum authorized capital stock of P500 million, of which P125 million shall be subscribed and at least P31.25 million paid up.

Under the law, only the BSP, banks, pawnshops, non-stock savings and loan associations (NSSLAs), and non-bank credit card issuers and other credit-granting institutions supervised by the central bank; financing companies, lending companies, and accredited microfinance non-government organizations; investment houses; insurance companies; and select government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs) may transfer their non performing assets to FIST companies.

According to the FIST Act, the assets shall have become non-performing on or before Dec. 31, 2022.

A FIST corporation may then issue investment unit instruments (IUIs) to any qualified buyer in the minimum amount of P10 million.

The approved plan shall include the investment policies of the FIST, features of the IUIs including specific amounts issued and or to be issued, rights of the holders of the IUIs, and methods for the liquidation and distribution of assets to the holders of IUIs, among others.

Under the draft IRR, the transfer and other related transactions involving eligible NPLs and ROPAs shall be exempt from the payment of certain taxes such as the documentary stamp tax, capital gains tax, creditable withholding income taxes and value-added tax, subject to applicable revenue regulations.

To encourage the infusion of capital and financial assistance by the FIST for the purpose of rehabilitating the borrower’s business, the draft IRR also exempts FISTs from the income tax on net interest income arising from new loans in excess of existing loans, among others, the SEC said.