Financial Advisory Agreement (Philippines)

A Financial Advisory Agreement in the Philippines governs the arrangement between the parties and the conditions on which it operates.

Under Section 28 of the Securities Regulation Code (RA 8799), investment advisers — persons who, for compensation, engage in the business of advising others on the value of securities or the advisability of investing in, purchasing, or selling securities — must register with the SEC as investment advisers unless an exemption applies. SEC Memorandum Circular No. 7 (2015) sets out the registration requirements for investment adviser representatives and their principals. A financial advisor who provides investment advice without SEC registration is liable for penalties under Section 73 of RA 8799.

For corporate finance advisory services — such as mergers and acquisitions (M&A) advisory, capital markets advisory, and IPO advisory — the financial advisor is typically a licensed investment house registered with the SEC under the Investment Houses Law (Presidential Decree No. 129, as amended). Investment houses advising on equity or debt securities offerings are also subject to the PSE Listing Rules (for listed company transactions) and BSP regulations (for debt instruments).

The Civil Code of the Philippines (Republic Act No. 386) governs the contractual relationship between the client and advisor through the provisions on agency (Articles 1868–1932) and contracts for services (Articles 1642–1688). A financial advisor who enters into contracts on behalf of a client in an agency capacity must have express authority under Article 1878 of the Civil Code, which requires special powers of attorney for transactions such as investing in securities, entering into financial contracts, or compromising claims.

For financial advisors who provide financial planning services (budgeting, retirement planning, estate planning, insurance planning) to individual clients without providing securities advice, no SEC registration is required, but the advisor remains bound by the general Civil Code duties of an agent: to act in the best interest of the principal (Article 1887), to render an account of all transactions (Article 1891), and not to acquire any interest adverse to the client without disclosure (Article 1889).

The legal framework governing the Financial Advisory Agreement (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Financial Advisory Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The National Internal Revenue Code (RA 8424) sets the foundational requirements.

A Financial Advisory Agreement in the Philippines is needed whenever an individual or business formally engages a financial advisor and wants a written contract defining the advisory scope, fees, and regulatory compliance obligations.

A Financial Advisory Agreement is needed when a high-net-worth individual engages a licensed investment adviser registered with the SEC to manage or advise on a securities portfolio. The written agreement is required under SEC Memorandum Circular No. 7 (2015) and must disclose the advisor's compensation structure and any conflicts of interest.

A Financial Advisory Agreement is needed when a corporation engages an investment house to advise on a merger, acquisition, or business combination. The agreement defines the advisor's mandate (buy-side or sell-side), the scope of due diligence and valuation work, the success fee structure, and confidentiality obligations regarding non-public transaction information.

A Financial Advisory Agreement is needed when a company hires a financial advisor to assist in raising capital through a private placement of equity or debt securities. The SEC's rules on public offering and private placement under Section 10.1 of the Securities Regulation Code (RA 8799) require proper documentation of the advisory and placement roles.

A Financial Advisory Agreement is needed when an OFW (Overseas Filipino Worker) or Filipino expatriate engages a financial planner to manage remittances, plan investments in the Philippines, and set up retirement funds. The agreement documents the scope of services, the advisor's compensation, and whether the advisor has authority to execute transactions on behalf of the client.

A Financial Advisory Agreement is needed for consumer protection compliance when a financial advisor or wealth manager recommends financial products (mutual funds, variable unit-linked insurance plans, pre-need plans) to retail clients. The SEC's know-your-customer (KYC) and suitability assessment requirements under SEC Memorandum Circular No. 1 (2020) require written documentation of the advisory relationship and the client's risk profile.

A valid Financial Advisory Agreement in the Philippines must contain the following essential elements to comply with the Securities Regulation Code, Civil Code, and SEC regulatory requirements.

Parties and Regulatory Status: Full legal names of the client and the financial advisor, the advisor's SEC Registration Number as an investment adviser (if applicable), the advisor's professional qualifications (CFA charterholder, CPA-licensed financial planner, etc.), and TINs. For investment advisers registered with the SEC, the agreement must identify the registered investment adviser entity and the individual representative serving the client under SEC Memorandum Circular No. 7 (2015).

Scope of Services: A precise description of the advisory services — whether investment portfolio advisory, corporate finance advisory, financial planning (budgeting, retirement, estate), debt restructuring advisory, or capital raising advisory. The scope must be specific enough to define what the advisor will and will not do, and to distinguish advisory services from execution services (where a broker-dealer license may be required).

Advisor's Authority: Whether the advisor has discretionary authority to execute transactions on the client's behalf (discretionary advisory mandate) or only provides recommendations for the client to act on (non-discretionary advisory mandate). Discretionary authority requires a special power of attorney under Article 1878 of the Civil Code and specific SEC authorization under RA 8799.

Compensation Structure: The advisory fee arrangement — flat retainer fee, hourly rate, success fee (percentage of deal value for M&A or capital raising transactions), asset-based fee (percentage of assets under advisory per annum), or commission on financial products recommended. SEC rules require disclosure of any commission or incentive the advisor receives from third parties (product issuers, brokers) that may create conflicts of interest.

Conflict of Interest Disclosure: An express disclosure of any actual or potential conflict of interest — such as the advisor's ownership of or financial interest in any securities or products recommended to the client, any compensation from third-party product providers, or any related-party relationships — as required by SEC Memorandum Circular No. 7 (2015) and the fiduciary duty rules applicable to registered investment advisers.

Confidentiality and Data Privacy: An obligation on the advisor to maintain the confidentiality of all client information and to comply with the Data Privacy Act of 2012 (Republic Act No. 10173) in collecting, processing, and storing the client's personal and financial data. Under the National Privacy Commission's implementing rules, both the advisor (as personal information controller) and any sub-processors must implement appropriate privacy and security measures.

Term and Termination: The initial term of the advisory engagement, renewal conditions, and termination rights — including the client's right to terminate without cause upon advance written notice and the treatment of fees earned but not yet paid upon termination. The forms-legal.com Financial Advisory Agreement (Philippines) template covers the mandatory elements under National Internal Revenue Code (RA 8424).