Through my trips abroad, I have met different Filipinos that have fully migrated and have changed their citizenship. They have not gone home in a while, don’t have any work or source of income in the Philippines but have seen the growth opportunities in the stock market and want to invest in the PSE.
In line with my trip to Melbourne this June (join us for Stock Smarts Melbourne this June 9 – 11) and the past trainings that we have conducted in London, Auckland and Los Angeles this post is to give a brief background on how foreigners can invest in the PSE.
Foreign Ownership Rule
Can foreigners invest in the Philippines? The answer is definite yes, and this includes resident foreign citizens and non-resident foreign citizens. While the Securities and Exchange Commission (SEC) may have imposed limitations, this however, should not be a major concern. The SEC provides that foreign ownership of Philippine company shares should not go beyond 40%. There is also a rule sent by the SEC and the Philippine Association of Securities Brokers and Dealers, Inc. (PABSDI) over new disclosure procedures regarding the foreign ownership rule.
The heart of why I do this seminars is I want to build a generation of Filipinos with the right foundation in stock investing. I want to bring smart investing to every Filipino around the world! If you would like to know more on how you could time the market checkout the trainings below.
Now under the country’s foreign investment law, 1991 Foreign Investment Act (FIA), full foreign equity may be allowed in all areas of investment except those reserved for Filipinos under the 1987 Constitution and existing laws. The Negative list provides in detail the businesses and sectors governing the limitation on which foreigners may engage business in. It is classified into two lists: Negative List A and Negative List B.
Negative List A provides the 28 business areas which foreign ownership is strictly not allowed hence it is reserved entirely to Filipino citizens. This includes mass media, retail trade enterprises with a paid-up capital of not less than $2,500,000, and cooperatives and small-scale mining.
Negative List B provides the businesses or areas which foreign ownership is allowed but only up to 40% of a company’s paid-up capital. This includes manufacture, repair, storage and distribution of products or ingredients requiring Philippine National Police (PNP) clearance.
Upon knowing the limitations and assuming you’re all set, you may now proceed to the application process. Generally, you need to find an online broker to trade stocks.
In a general aspect, the requirements and procedures for opening an account across all brokerages are almost the same. With regards to the procedure for application, your broker will ask for the necessary documents and IDs to prove your identity. Online brokers will require all of its applicants to fill up their application and also other forms such as the Customer Account Information Form (CAIF), Foreign Account Tax Compliance Act (FATCA), and The Online Securities Trading Agreement (OSTA). Some brokers will require you to still print their application forms while there are some that have gone totally paperless already.
For resident foreign citizens, the above-mentioned forms should be accompanied by a photocopy of one valid government issued ID. And for non-resident foreign citizens, a photocopy of a valid passport is needed.
After submitting those documents, they will set a video conference with you just to confirm the authenticity of the information in the documents you have submitted. Once your account is activated, you can now buy stocks.
So here’s the not so complicated but definitely the tricky part of stock investing: it’s choosing what stocks to buy. This step involves a hefty amount of discernment. The important thing to really keep in mind is that you should diversify and not to put all your eggs in one basket. Although the general trend of the stock market in the long-run is always going upward, we cannot avoid the short-term risks and volatilities. Remember that investing in equity means you should have an appetite for risk.