Amendments to the Bangko Sentral ng Pilipinas’ (BSP) consumer protection rules take effect today, focusing on an individual’s right to “cooling off” or canceling investment contracts without penalty.
The central bank on Friday issued an advisory regarding the “cooling-off” right, which it described as “one of the key requirements of the new BSP Financial Consumer Protection Regulation that seeks to empower clients by giving them the opportunity to reconsider their long-term investment decisions.”
BSP Circular 898, issued January 14, detailed amendments to the manual of regulations for both banks and non-bank financial institutions. It noted that the changes were made pursuant to a December 18, 2015 Monetary Board resolution, and that their effectivity had been deferred to January 16, 2016.
The central bank said BSP-supervised financial institutions (BSFIs) should give clients at least two banking days from the signing of the investment contract to cancel.
The “cooling-off” right is applicable only to individuals and not corporations, partnerships and associations, and covers investments in long-term financial instruments—government securities, corporate bonds and long-term negotiable certificates of deposit, for example—with a remaining term of at least on year.
Clients should notify the BSFI in writing within the cooling-off period, and will only shoulder a “reasonable amount of processing or administrative fees plus any mark to market costs from the signing of the contract up to its cancellation.”
“BSFIs should disclose these costs, including the benchmark from which market value of the financial instrument will be determined, prior to the signing of the agreement or in the agreement,” the central bank said.