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SEC Issues Guidelines on Application for Allocation of Codes for Financial Instruments

On 25 April 2023, the Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 7, series of 2023, to provide for the guidelines on application for the allocation of International Securities Identification Number (“ISIN”), Classification of Financial Instruments (“CFI”), and Financial Instrument Short Name (“FISN”) codes for financial instruments (“Guidelines”). 

Scope and Application for Securities Identifiers

The Guidelines apply to the following registered securities, including tokenized or digital forms thereof:

  1. Shares of stock, bonds, debentures, notes, evidence of indebtedness, asset-backed securities;
  2. Investment contracts, certificates of interest or participation in a profit-sharing agreement, certificates of deposit for a future subscription;
  3. Fractional undivided interests in oil, gas, or other mineral rights;
  4. Derivatives like options and warrants;
  5. Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments; and
  6. Other instruments, as may in the future, be determined by the SEC.

Securities required to register with the SEC are qualified for allocation of these securities identifiers once their respective Registration Statements are rendered effective by the SEC. Securities exempt from registration are immediately qualified for securities identifiers allocation.

Application for securities identifiers shall be done online via email to the SEC. The filing fee is PHP1,500.00 per set of securities identifiers (i.e., ISIN, CFI and FISN). The issuance of an ISIN, CFI, or FISN shall depend on the subject securities. 

Consequences of Corporate Actions

The Guidelines also provided for the consequences of certain corporate actions.

Issuers shall obtain new ISINs for the securities to be created as a result of the following corporate actions:

  1. Domicile of company which changes to another country if the securities evidenced by a physical certificate was exchanged for a new one;
  2. Stocks of distinct entities that underwent consolidation to form a new legal entity;
  3. Bonds of distinct entities that underwent consolidation to form a new legal entity, if old certificates are exchanged for new ones;
  4. Increase in issued share capital if the stocks have different rights attached;
  5. Share consolidation or sub-division;
  6. Capital reduction or change in board lot size; and
  7. Issue of a class of securities new to listing.

Meanwhile, ISINs of securities shall become inactive as a result of following corporate actions:

  1. Merger by absorption that results to emergence of only one surviving company;
  2. Consolidation of distinct companies to form a new legal entity;
  3. Assimilation that makes 2 previously non-fungible securities fungible or any other event which makes the use of an existing separate ISIN superfluous, unless a reuse is planned;
  4. Repayment of capital debt financial instruments or redeemable shares (fully redeemed), unless the bonds are in default;
  5. Exchange of a convertible type of security into another type of security;
  6. Forced liquidation of a company and discontinuation of the legal proceedings because of lack of assets; and
  7. Voluntary dissolution of a company.