Accounting Alert

This Accounting Alert is issued to circulate Securities and Exchange Commission (SEC) Memorandum Circular (MC) No. 6-2024 dated March 27, 2024, which covers the updated fines and penalties on the late and non-submission of audited financial statements (AFS), General Information Sheet (GIS), and non-compliance with SEC MC 28-2020.

Rationale

The SEC has not introduced any modification in the schedule of fines and penalties since the issuance of the guidelines on the imposition of fines and penalties for non-compliance with reportorial requirements in July 2002. Upon a thorough review of all regulated entities, the SEC saw the need to reevaluate its existing scale of fines and penalties to meaningfully deter violations and non-compliance with current regulations.

Definition of Terms

A. For One Person, Stock, and Non-Stock Domestic Corporations

a. Filed/Submission on Time means the punctual submission of the reportorial requirements, as prescribed by the Commission.

b. Late Filing/Submission means the submission of the reportorial requirements which may either be:

i. Filing after the due date but still within a year of the prescribed deadline for filing;

ii. Filing beyond one (1) year from the prescribed period, in which case the penalty shall be the base fine for “Non-Filing” and the computation of the monthly penalty shall not exceed twelve (12) months; or

iii. In case of SEC MC 28, submitting beyond thirty (30) calendar days from the issuance of the certificate of registration, license, or authority.

c. Non-Filing means non-submission of the reportorial requirements.

B. For Stock and Non-Stock Foreign Corporations

a. Filed/Submission on Time means the punctual submission of the reportorial requirements, as prescribed by the Commission.

b. Late Filing/Submission means the submission of the reportorial requirements which may either be:

i. The filing after thirty (30) calendar days from the anniversary date of the issuance of the SEC license for GIS or from the prescribed deadline for AFS;

ii. The filing after sixty (60) calendar days from the anniversary date of the issuance of the SEC license for GIS or from the prescribed deadline for AFS, in which case the penalty shall be the base fine of “Non-Filing” and the computation of the monthly penalty shall not exceed twelve (12) months; or

iii. In case of SEC MC 28, submitting beyond thirty (30) calendar days from the issuance of the certificate of registration, license, or authority.

c. Non-Filing means non-submission of the reportorial requirements.

Scales of Fines and Penalties

The basis of computation of fines shall be the latest due submission of the GIS and/or AFS. Should there be non-submission of the GIS and/or AFS for the prior years, such GIS and/or AFS shall be considered as not filed and shall be assessed in accordance with the Circular.

Companies shall be formally notified of their corresponding fines and penalties. For purposes of determining the frequency of violation, the number of settled notices with corresponding Confirmation of Payment will be considered, such that the counting of “First Offense” shall only set-in after the settlement of the initial notice.

After a corporation is notified of its delinquent status, the commission of a sixth (6th) offense constitutes a ground for revocation of its Certificate of Registration/License to Transact Business in the Philippines or Secondary License and shall warrant the imposition of monetary fines equivalent to the fifth (5th) offense plus one hundred percent (100%) surcharge of the total assessed fine.

The full scale of fines and penalties is presented in Part II of the Circular.

Effectivity

The Circular shall cover requests for monitoring received by the SEC on 1 April 2024.

Please see the attached circular for further information.