MANILA, Philippines — The Securities and Exchange Commission has exempted equity funds, balanced funds and multi-asset funds from the 20-percent single business group (SBG) investment limit.
The SEC on March 28 issued SEC Memorandum Circular No. 2, Series of 2025, which provides for the Rules on Single Business Group Investment Limitation.
The easing of the rules followed requests from various fund managers, on behalf of their managed funds, to be exempted from the SBG limit.
Under the prevailing SBG cap, an investment company is prohibited from investing more than 20 percent of aggregate net assets in transferable securities, money market instruments deposits and over-the-counter financial derivatives issued by any single business group.
Also, investments in over-the-counter financial derivatives with non-investment grade or unrated counterparty should not exceed 5 percent of net assets.
Definition
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The new circular exempts certain types of funds to the limit on SBG, defined as a company, its subsidiaries, fellow subsidiaries, parent company and ultimate parent company.
MC 2 provides that funds without actual investment in financial derivatives – equity funds, balanced funds and multi-asset funds that have actual exposure to equity securities – will not be subject to the SBG limit.
Instead, these firms will be subject to the single entity or issuer investment limitation under the implementing rules and regulations of the Investment Company Act.
Banking regulators likewise impose a limit on the credit exposure of banks to a single group, in order to better manage risk and encourage diversification.
-DORIS DUMLAO-ABADILLA
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