EDITORIAL

Scrutinizing Pre-need Plans’
Rules and Regulations

As the number of aggrieved pre-need plan holders continues to swell with the gradual collapse of the pre-need industry, Senator Chiz Escudero has asked the Senate to look into, with dispatch, the manner by which the prevailing rules on the registration and sale of pre-need plans under the securities regulation code are implemented.

Escudero made such move by filing Senate Resolution No. 848 urging the Senate Committee on Banks, Financial Institutions and Currencies to check if the prescribed rules and regulations that regulate pre-need plans are properly implemented.

He said that as a declared policy, the State shall promote the development of the capital market, protect investors, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.

S.R. No. 848 specifically wants to determine if the establishment of trust funds by banks and investment houses duly licensed by the monetary board of the Bangko Central Ng Filipinas, as part of the prescribed rules and regulations, are being implemented.

Escudero, who incidentally is also the Chairman of the committee tasked by the resolution, said that the creation of such trust funds is statutorily regulated by the New Banking Law of 2000, Republic Act No. 8754. It mandates the Monetary Board of the Bangko Central Ng Filipinas to issue the necessary authorization for the operations of a trust business.

However, despite these regulatory provisions provided for by laws, three pre-need plan companies and nine rural banks closed in December 2008 due to insolvency.

“With these insurance companies failing to honor their commitments to their plan holders allegedly through bankruptcy or misreporting of their finances, we need immediately to identify the problems and come out with legislative solutions”.

Escudero said this will preserve and strengthen the integrity of banks and financial institutions as well as ensure and safeguard the protection and confidence of the investing public.

“These plan holders also supposedly hold the future and dreams of their children but these have been dissolved together with the collapse of these insurance companies”.

“Where is the investor’s interest right now? This must be addressed by addressing the problems responsible for the closure of certain rural banks and pre-need companies in the country” Escudero suggested.

Pre-need Industry Hearing

The Senate started Monday morning its hearing on the state of the pre-need industry with focus on ensuring strict monitoring by the government of pre-need companies and protecting consumers’ investments as the global financial crisis heats up.

Sen. Mar Roxas said the Senate Trade and Commerce which he chairs and the Senate banks committee chaired by Sen. Chiz Escudero have invited leaders of the pre-need industry, Finance Secretary Margarito Teves, SEC Chair Fe Barin and leaders of organizations of pre-need plan holders to the Senate hearing to determine legislation needed to address recent reports of the industry’s huge financial problems.

“It is important to protect the interest of the plan holders who invested their money for the future of their family. We knew long time ago that the industry has problems, and we will ask SEC and finance officials why they did nothing to solve these,” stressed.

The Senate investigation will also take off from the passage of the Pre-Need Code which Roxas authored with Sen. Edgardo Angara, former chair of the Senate banks committee, which the Upper Chamber passed on third reading last June.

“Since the Pre-Need Code already sought the additional regulations to protect the public from scammers in the pre-need industry, it is important to assess the industry’s situation in the light of the global financial crisis and how to protect the investment of plan holders,” Roxas said.

An industry position paper claiming that the value of the pre-need industry’s trust fund has dropped by P40 billion, triggered fears of its imminent collapse.

“Additional legislation may be needed to protect consumers’ interest. Due to the wide-ranging and catastrophic impact of the global financial crisis in markets abroad, it is our primary responsibility as the country’s leaders to ensure our investing public will not be in the losing end again”, he said.” /MP