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Sunday, December 3, 2023

SEC streamlines disclosure requirements

The Securities and Exchange Commission (SEC) eased the disclosure requirements for companies seeking to raise funds through the capital market.

It issued Memorandum Circular (MC) Nos. 13 and 14, Series of 2023 to streamline the disclosure requirements as part of the commission’s efforts to boost participation in the capital market.

MC No. 13 and 14 will amend Annex C of Rule 12 of the 2015 implementing rules and regulations of the Securities Regulation Code (SRC).

Annex C of SRC Rule 12 directs companies planning to conduct share sale to include in their registration statement to be filed with the SEC the “financial condition, changes in financial condition, and results of operation for each of the last three fiscal years.”

MC 13 clarifies that registrants will now be required to disclose financial information for only two comparative periods in the last three fiscal years.

Meanwhile, MC 14 also relaxed the requirement for a registrant to provide mitigating factors in the risk factors section of its prospectus by making the disclosure optional.

Annex C directs a registrant to provide a description of its business, including a discussion of major risks involved in the company and its subsidiaries.

Risks include factors that make the offering speculative or risky such as the absence of operating history, lack of profit from recent operations, poor financial position or lack of market for the registrant’s securities.

“The streamlined procedures are part of the commission’s efforts to encourage more companies to tap the capital markets for their business expansion needs,” SEC chairperson Emilio Aquino said.

“The SEC will continue to find more ways to make the registration of securities and securing a license to sell such securities easier, which will also translate to more investment opportunities for the public,” he said.

The corporate regulator recently shortened the settlement cycle from three days to two days after the trade date by amending the 2015 IRR of Republic Act No. 8799, or the Securities Regulation Code, through Memorandum Circular No. 11, Series of 2023.

It also empowered funding portals to act as registrars of qualified institutional and individual buyers, which eliminates the need for these portals to use third-party institutions to assist potential investors with their applications as qualified buyers.

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