The Securities and Exchange Commission (SEC) has announced a significant easing of the single business group (SBG) investment limit for equity, balanced, and multi-asset funds with actual exposure to equity securities. The SEC’s new Memorandum Circular (MC) No. 2, Series of 2025, provides important exemptions to the SBG investment restriction, responding to requests from fund managers for greater flexibility.
Under previous guidelines, set by SEC MC No. 15, Series of 2020, investment companies were restricted from allocating more than 20 percent of their net assets to securities, derivatives, or financial instruments issued by any single business group, a definition that includes subsidiaries and parent companies. The limitation was particularly strict in over-the-counter financial derivatives with non-investment grade or unrated counterparties.
The newly issued memorandum allows funds with no investments in financial derivatives—such as equity, balanced, and multi-asset funds—to be exempt from the SBG limit. These funds will now operate under the single entity or issuer investment limitation, providing greater flexibility for fund managers while still maintaining oversight through the Investment Company Act (ICA).
This change is seen as a necessary step to adapt to the evolving market conditions and enhance the competitiveness of investment funds in the region. Fund managers had long called for the exemption, arguing that the previous restrictions hinder the ability to diversify portfolios and maximize returns for investors.
Furthermore, the SEC clarified that no penalties will be imposed for violations of the SBG limit committed between 15 May 2020, and 27 March 2025, for the funds affected by the new rules.
While this update is seen as a positive move for the industry, funds seeking to offer cross-border investments to other ASEAN member states must still adhere to the 20 percent SBG limit as part of the ASEAN Qualifying Collective Investment Schemes standards. The SEC also emphasized that all other investment limits and regulations remain in effect for all funds.
