Statement of Objectives
Mutual funds play a vital role in capital formation, savings promotion and wealth distribution. The nature of the business, however, involves the sale of securities to the general public and the management of large concentrations of funds by others. While such activities are governed and regulated by laws, rules and regulations, they nonetheless present opportunities for conflicts of interest to arise and abuses of trust to be committed by persons involved in the industry. Such inappropriate actions, while perhaps not prohibited by law, could nevertheless harm the investing public and damage the reputation of the industry.
As the trade association of investment companies, the Investment Company Association of the Philippines, Inc. (the “Association”) hereby adopts this Code of Ethics (the “Code”) as an expression of its commitment and resolve to:
1. Protect the interests of the investing public by discouraging the commission of abuse, exploitation, manipulation, and misrepresentation by persons involved in the industry.
2. Provide an environment of healthy competition in the industry by cultivating a culture of transparency and fair play among its members.
3. Promote mutual funds as a safe and viable investment alternative by ensuring that persons involved in the industry adhere to the highest levels of professionalism and ethical standards.
4. Assist the Securities and Exchange Commission in regulating the industry by policing its own ranks and ensuring that persons who do not perform their fiduciary duties and responsibilities are dealt with accordingly.
Definition of Terms
For the purpose of this Code, the following terms shall be defined as follows:
1. “Access Person” means any director, officer, portfolio manager, or investment personnel of an investment company or an investment adviser, who in the ordinary course of business, has access to information regarding the purchase or sale of securities of the investment company.
2. “Commission” means the Securities and Exchange Commission.
3. “Distributor” for an open-end investment company means a person or company who pursuant to contract is authorized to sell or distribute such investment company's shares to a dealer or to the public or both.
4. “Interested Person” means any director, officer, affiliate or employee of the investment adviser, management company, distributor, custodian, legal counsel or auditor.
5. “Investment Adviser” of an investment company means any person or company who: (a) regularly furnishes advice or recommends investment decisions with regard to the securities portfolio of such investment company; or (b) undertakes the management of the portfolio securities of such investment company including the arrangement of purchases, sales, or exchange of securities.
6. “Investment Company” means any company registered as such with the Securities and Exchange Commission under the Investment Company Act, as may be amended from time to time.
7. “Management Company” of an investment company means any company who provides investment advisory services and/or administrative services for such investment company.
8. “Mutual Fund” means an open-end investment company.
9. “Sales Communications” means any form of communication used to induce the purchase of mutual fund shares, such as, but not limited to, advertisements, press releases, letters, reports, brochures, newsletters, and web pages.
10. “Salesperson” means any natural person who solicits investments for or sells shares of a mutual fund.
Statement of General Principles
The following general principles shall guide investment companies, interested persons, investment advisers, management companies, distributors, and salespersons in the conduct of their business and their relationship with investors:
1. It shall be the duty at all times of all persons involved in the industry to place the interests of the investing public first.
2. Companies and persons involved in the industry shall observe the highest standards of commercial honor, integrity, business prudence, and equitable principles of trade in the conduct of their businesses and activities.
3. Interested persons and access persons shall not take inappropriate advantage of their positions and shall at all times place the interests of the shareholders of the funds first.
Sales and Redemptions
1. In recommending to an investor the purchase of mutual fund shares, a salesperson shall have reasonable grounds for believing that the recommendation is suitable for such investor. Reasonable efforts shall be made by the salesperson to ‘know the client' and to obtain information concerning the investor's financial status, risk tolerance, investment knowledge and experience, investment objectives, and such other relevant information that the investor may willingly disclose. Such information shall be used solely for the purpose of determining the suitability of the investment being recommended but shall otherwise be treated with confidentiality by the salesperson.
2. Prior to the offer for sale of mutual fund shares, a salesperson shall deliver to a prospective investor a current prospectus of the mutual fund being offered, regardless of whether the investor asks for it or not.
3. A salesperson shall explain material facts contained in the prospectus to provide an investor information needed to make an informed decision about the purchase of the mutual fund shares being offered. Such material facts shall include information such as, but not limited to, investment objectives and policies, risks, sales loads, redemption fees, management fees, investment and redemption procedures, keeping track of investments, and tax considerations.
4. A salesperson shall not only explain the benefits of investing in mutual funds but also the risks inherent in them.
5. A salesperson shall not guarantee the future price or promise any specific rate of return on any mutual fund investment being offered.
6. A salesperson shall promptly remit investments and requests for redemption to the head office of the distributor, management company or investment adviser.
1. Management companies, distributors and salespersons shall not make any exaggerated, unwarranted or misleading statements or claims in [all] any sales communications.
2. The presentation of fund performance in sales communications shall be in compliance with such forms and standards, which the Association may from time to time prescribe.
Hiring and Training of Salespersons
1. A distributor shall not permit any person to sell or distribute mutual fund shares distributed by it unless such person has been properly trained and that he possesses the knowledge and skill to effectively explain the benefits and risks of investing in mutual funds.
2. A distributor shall not allow or authorize any person to sell or distribute mutual fund shares distributed by it unless such person has secured a certificate of authority to act as such with the Commission.
1. Personal securities transactions by access persons shall be conducted in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility.
2. Access persons shall be prohibited from executing a personal securities transaction on a day during which any investment company in his/her complex has a pending “buy” or “sell” order in that same security until that order is fully executed or withdrawn.
Management of the Fund
1. Management companies shall provide shareholders of the fund benefits and services that they are justly entitled to.
2. Investment advisers shall manage the funds entrusted to them with due care and prudence and shall perform their fiduciary duties and responsibilities with utmost professionalism.
3. Investment company directors, specially the independent directors, shall oversee the operation of the fund by the management company and the investment adviser to ensure that it is being managed and operated in the best interest of the fund shareholders.
Compliance with Laws, Rules and Regulations
1. Investment companies and management companies shall not only comply with the specific provisions of laws, rules and regulations governing investment companies but also the spirit of such laws, rules and regulations.
2. Investment companies and management companies shall comply with such accounting procedures and standards and valuation methods that the Association may from time to time prescribe.
Any allegation, suspicion, question or contest of the violation of any provision of this Code shall be forwarded to the Membership and Ethics Committee of the Association. The Association may make such investigations, as it deems necessary, to determine whether any company or person has violated any provision of this Code. Such company or person shall be given the opportunity to present its case in a proceeding to be conducted by the Board of Trustees.
If after proper investigation and proceeding, a company or person is found to be in violation of this Code, such company or person shall suffer the penalty of fine, suspension, expulsion, and/or other disciplinary measure as may be recommended by the Membership and Ethics Committee and as may be approved by the Board of Trustees. The findings of the Association on any violation of this Code shall be reported to the Securities and Exchange Commission. The penalties imposed under this Code shall be without prejudice to penalties and sanctions that the Securities and Exchange Commission may impose for violation of existing laws, rules, and regulations.