The Securitization Act of 2004

Section 5

The SPE in the form of an SPC shall be a stock corporation established in accordance with the Corporation Code of the Philippines and the rules promulgated by the Commission solely for the purpose of securitization and registered as such with the Commission. An SPE constituted as an SPT shall be a trust administered by an entity duly licensed to perform trust functions under the General Banking Law and need not be registered as such with the Commission. In any event, the SPE, whether in the form of an SPT or SPC, shall be solely organized and operated for purposes of securitization in accordance with this Act. The Commission and the BSP shall, from time to time, determine the required capitalization for the SPCs and SPTs, respectively.

Section 6

After the establishment of an SPE pursuant to Section 5 hereof, the proposed Plan shall be submitted to the Commission for approval, which shall include the following: (a) The nature and mechanics of the sale of assets from the Seller to the SPE, including the terms, conditions and circumstances specified in the Plan wherein the assets may be reverted to the Seller: (b) The credit enhancements or liquidity supports for the ABS which may be provided in the following manner: (i) standby letter of credit issued by a commercial bank or universal bank other than the trustee bank or the Originator or Seller or its subsidiary/affiliate, its parent company or the parent company's subsidiary/affiliate; (ii) surety bond issued by any insurance company other than the Originator or Seller or its subsidiary or affiliate, its parent company or the parent company's subsidiary or affiliate, or the parent or subsidiary of the trustee bank; (iii) guarantee issued by any entity other than the Originator or Seller or its subsidiary/affiliate, its parent company or the parent company's subsidiary/affiliate, or the trustee bank or its parent or subsidiary; (iv) over-collateralization provided by the Seller wherein the assets conveyed to the SPC or SPT exceed the amount of ABS to be issued; (v) subordinated securities issued by an SPE to any entity including those issued to the Seller that are lower ranking, or junior to other obligation, and are paid after claims to holders of senior are satisfied; and (vi) other credit enhancements as may be approved by the Commission. (c) The identities and qualifications of the Originator, Seller, Servicer, underwriter an dealer of the ABS, and description of any compensation the issuer, seller or any underwriter has received or will receive in the future in connection with the ABS; (d) The identity, qualifications and compensation of the trustee that will administer the assets conveyed to the SPE for the benefit of the ABS holders of the ABS holders which trustee shall not be related directly or indirectly to the Originator or Sellers; (e) The aggregate principal amount of the value of ABS to be issued, the principal amount of each class within the ABS, and the denominations which shall not be lower than Five thousand pesos (P5,000.00) in which the ABS will be issued; (f) The structure of the ABS to be registered, including the structure and payment priorities of each class of certificates within the ABS, anticipated payments and yields for each class, and the circumstances under which the ABS may be redeemed or retired; (g) A full description of the assets contained, or to be contained, in the asset pool supporting the ABS; (h) The rating agency/agencies for the ABS, the criteria used or to be used to rate the ABS, and any limitation, qualifications or material risks not addressed by the rating agency/agencies; (i) A full description of how the issuer will collect and maintain remittances from the assets pending distribution to holders of the ABS, including the issuer's investment policies and the identity of the issuer's investment advisor, if any; (j) The plan for the management and administration of the assets, asset pool and the ABS, including the disposition of the foreclosed properties, if any; and (k) The manner of disposal of any residual value or asset with the SPE after all obligations to holders of ABS shall have been settled.

Section 7

All ABS shall be registered with the Commission in accordance with Sections 8 and 12 of the Securities Regulation Code and its implementing rules and regulations: Provided, however, That issuers of ABS falling under Sections 9 and 10 thereof shall be required to file with the Commission, a notice, with a disclosure statement.

Section 8

The commission shall issue to an SPC or SPT the corresponding order and permit to sell ABS only after compliance with all the registration requirements and the approval of the Plan by the Commission.

Section 9

In case the originator of the assets is a bank or any other financial intermediary which under special laws is subject to the supervision of the BSP, or an entity directly related to said bank or other financial intermediary, or in the event the SPE is constituted in the form of an SPT, an endorsement by the BSP of the Plan shall be required before it s approval by the Commission.

Section 10

Each SPE shall have the power to: (a) Accept the sale or transfer of assets; (b) Issue and offer the ABS for sale to investors; (c) Undertake on its own or through contracts with any person, such activities as contained in the approved Plan; (d) Create any indebtedness or encumbrances to defray administrative or other necessary expenses as specified in the Plan; and (e) Pay out or invest its funds in accordance with the Plan or as approved by the Commission.

Section 11

the SPE shall not undertake any activity other than that contained in the approved Plan except upon a written approval of the Commission and the written consent of the holders of the ABS representing at least two-thirds (2/3) of the outstanding amount of the ABS: Provided, That in case the originator of the assets is a bank or nay other financial intermediary which under special laws is subject to the supervision of the BSP, or an entity directly or indirectly related to said bank or other financial intermediary, or in the event the SPE is constituted in the form of an SPT, prior endorsement by the BSP is necessary.

Section 12

The transfer of the assets from the Originator or Seller to the SPE shall be deemed to be a "true sale" when it results in the following: (a) The transferred Assets are legally isolated and put beyond the reach of the Originator or Seller and its Creditors; (b) The transferee SPE has the right to pledge, mortgage or exchange those transferred Assets; (c) The transferor relinquishes effective control over the transferred assets; (d) The transfer shall be effected by either a sale, assignment or exchange, in any event on a without recourse basis to the Originator or Seller; (e) The transferee shall have the right to profits and disposition with respect to the assets; (f) The transferor shall have the right to recover the assets and the transferee shall not have the right to reimbursement of the price or other consideration paid for the assets; and (g) The transferee shall undertake the risks associated with the assets. This shall not, however, prevent the transferor from giving normal representations or warranties of the assets sold.

Section 13

If the Commission finds that the Originator or Seller has undertaken the securitization so as to seek the benefits of this Act without a true intention to carry it out, the Commission shall withdraw or cancel the registration of the ABS and the registration of the SPE as issuer, and cause the dissolution of the SPC or termination of the SPT. The Originator or Seller and as the case may be, the trustees, shall pay as fine an amount equal to the taxes from which the SPE has been exempted plus a surcharge of twenty-five percent (25%) of the face value of the ABS issued, without prejudice to the penalties under this law and the National Internal Revenue Code of 1997.

Section 14

It shall be unlawful for any person, whether or not it contemplation of death, to cause directly, the issuance, for the benefit of another or others, of ABS and avail of the tax incentives granted by this Act for the purpose of evading the payment of donor's or estate taxes.

Section 15

The SPE shall be dissolved in the following cases: (a) It fail to accept the transfer of assets or issue ABS to investors within six (6) months from the date of approval of the Plan unless extended by the Commission; (b) Holders of at least two third (2/3) of the total amount of its ABS still outstanding have resolved to dissolve the SPE and the approval of the Commission has been obtained; in case the Originator of the assets is a bank or any other financial intermediary which under special laws, is subject to supervision of the BSP, or an entity directly or indirectly related to said bank or other financial intermediary, or in the event the SPE is constituted in the form of an SPT, an endorsement by the BSP shall be required prior to approval of the Commission; (c) Conditions for dissolution that are specified in the Plan occur; or (d) The Commission orders dissolution in accordance with Section 13 and 19.

Section 16

The SPE and the registration of the ABS shall be terminated, cancelled withdrawn in any of the cases provided for under the last preceding section.

Section 17

If the Commission finds that an SPE has no authorized representative to act on its behalf or such persons cannot act for any reason resulting in the interruption of its activities pursuant to the approved Plan, the Commission shall have the power to appoint any person or persons to act as interim representative for the SPE. The interim representative shall have the full and exclusive authority to implement the approved Plan. In the event of an appointment of replacement of an interim representative, the Commission shall post the notice at the Commission's office and other its publication in at least two (2) newspapers of national circulation.

Section 18

Where an interim representative has been appointed in accordance with Section 17. (a) The directors, officers, or any employees of the SPE shall take all appropriate steps to safeguard the property and the benefits of the holders of the ABS of the SPE and shall deliver the property accounts, documents, and seals of the SPE to the interim representative; and (b) Any person who possesses property or documents of the SPE shall notify the representative of such possession.

Section 19

The Commission shall order the dissolution of an SPE upon finding that the SPE cannot continue to undertake its business, and shall proceed to liquidate the SPE in accordance with the Corporation Code.

Section 20

The Commission shall have the power to inspect or order the Production of the records of the SPE.