Revised Maharlika Fund IRR lets Marcos accept, reject board nominees

Malacañang has released the revised implementing rules and regulations (IRR) of the Maharlika Investment Fund (MIF) Act on Saturday.

Among the most salient changes in the revised IRR of the MIF law is giving the President authority to accept or reject the nominees submitted by the Maharlika Investment Corp.’s (MIC) Advisory Body for the positions of president and chief executive officer (PCEO), regular, and independent directors of the MIC Board.

Section 30 of the revised IRR of the MIF law states that “the President may either accept or reject the recommendation of the Advisory Board: and, provided, finally, that, the President may require the Advisory Body to submit additional names of nominees.”

The same section also states that the Advisory Body shall submit to the Office of the President the list of nominees to vacant regular and independent directors and the PCEP positions.

The previous version of the IRR supposedly limits the choices of the President on who he can appoint in the MIC Board to those shortlisted by the Advisory Body.

In particular, Section 23 of the previous IRR, states that regular directors of the MIC “shall be appointed by the President upon recommendation of the Advisory Body.”

The Advisory Body for the MIC is composed of the secretaries of Budget, National Economic and Development Authority (NEDA), and the Treasurer of the Philippines.

Early last month, President Ferdinand Marcos Jr. suspended the enforcement of the IRR of the MIF law, “pending further study.”

Marcos later clarified that it was not on hold and that the government was still working to have it operational by the end of 2023.

"Upon our approval, we'll swiftly establish the corporate structure, getting the MIF up and running," Marcos said earlier this week. 

Budget Secretary Amenah Pangandaman, who sits in the MIC Board’s Advisory Body, earlier said that the board of directors of the government-owned company that will manage the sovereign wealth fund will be named in November as the government is committed to finish its review of the IRR “soon.”

Maharlika Investment Corp.

The release of the revised IRR of the Maharlika law could now spell the beginning of its operationalization.

Finance Secretary Benjamin Diokno, the chief architect of the MIF, has repeatedly said the sovereign wealth fund will be fully operational by the end of 2023, meaning that the Maharlika Investment Corp. (MIC) Board has already conducted its first meeting to plan its investment activities.

The Finance chief also said that the MIC is expected to begin its investment activities in the first quarter of 2024 after it secured initial capital from Landbank, DBP, and the Bangko Sentral ng Pilipinas.

Marcos signed the Maharlika Investment Fund Act of 2023 in July, with the aim of tapping state assets for investment ventures to generate additional public funds.

The law creates the MIC, a government-owned company that will manage the MIF—a pool of funds sourced from state-run financial institutions that will be invested in high-impact projects, real estate, and financial instruments.

The MIC’s Board of Directors would be composed of the Finance Secretary, who will serve as the ex-officio chairperson; the presidents of Landbank and DBP; two regular directors; and three independent directors from the private sector.

The Treasury had earlier said the Advisory Body had submitted its shortlist of candidates for the MIC’s Board of Directors to the OP.

It is still not clear whether the applications for nominees to the MIC’s Board of Directors will be reopened considering the revision of the IRR.

Apart from letting the President accept or reject the list of nominees submitted by the Advisory Board, the revised implementing rules of the MIF law also removed the provision on “Additional Qualifications of Regular and Independent Directors.”

Section 29 of the previous IRR outlines the minimum educational, professional, track record, and ethical qualifications of those who can be appointed to the MIC Board.

Exercise independence

In a news release, the Presidential Communications Office (PCO) said that with the revision of the MIF law’s IRR, the MIC “will exercise independence to give the body more latitude in managing the fund, thus promoting good corporate governance.”

The Office of the Executive Secretary, for their part, said that the revisions introduced by the President to the IRR of the law “serve to clarify, while simultaneously buttressing, the exercise of the discretionary powers of the Board of Directors to maintain its independence; ensure that the MIC has a free hand to explore gainful investment opportunities, while adhering faithfully to the letter of the law; and, ensure that investments are of high impact and are in line with the socioeconomic development program of the government.”

The MIC is authorized to invest in a wide range of products, activities, and projects, such as cash and other tradable commodities; fixed income instruments issued by sovereigns; domestic and foreign corporate bonds; listed or unlisted equities; and Islamic investments, such as Sukuk bonds, among others.

The IRR also provides lists of penalties to be imposed in order “to ensure the integrity of the Fund,” such as the imposition of heavy fines ranging from P1 million to P15 million and imprisonment of six to 20 years for various offenses, such as willfully holding office while in possession of any disqualification; knowingly certifying the corporation’s financial statements despite their gross incompleteness or inaccuracy; willingly allowing oneself to be used for fraud; and failure to sanction, report, or file appropriate action for graft and corrupt practices. –VAL, GMA Integrated News