SEC OGC Opinion No. 04-2024: Re: Applicability of SRC Registration Requirements to Timeshares

On 26 March 2024, the Securities and Exchange Commission (“SEC”) Office of the General Counsel (“OGC”) issued SEC OGC Opinion No. 04-2024 to discuss the applicability of the registration requirements under the Securities Regulation Code (“SRC”) to timeshares (the “Opinion”).  

The Opinion was issued upon the request of Marriott Ownership Resorts, Inc. (“MORI”) which asked the SEC whether their Marriott Vacation Club Destinations Exchange Program (“MVCD-EP”) is required to be registered. The MVCD-EP is an additional feature of the timeshares of Marriott Vacation Club (“MVC Timeshares”) which will allow existing owners to exchange their timeshare interests for “Exchange Points” which the owners can use to reserve accommodations in other affiliated places or resorts.

The SEC noted that the MVC Timeshares are distinct from the MVCD-EP that accompanies them. Here, MORI specifically asked about the applicability of the registration requirements to the MVCD-EP. Nevertheless, the SEC opined that timeshares have previously been held to be securities. Timeshares are contracts for future employment of a privilege or service such as vacation rights or interests consisting of future right to use resort facilities. In this regard, they are akin to investment contracts which require registration. In another SEC opinion cited by the SEC, timeshares were held to be securities because the definition of securities under the SRC included contracts where, although there is no tangible return on investments, there is enjoyment of particular privileges and services.

As for the MVCD-EP, the SEC said that registration is not necessary for its distribution to existing MVC Timeshare owners in the Philippines. First, the MVCD-EP is not considered a security because there is no monetary investment or consideration involved for its implementation and thus, it can no longer be considered an investment contract. Second, the MVCD-EP was not sold or offered for sale or distribution to the public as the MVCD-EP is only a free upgrade of the benefits currently being received by existing MVC Timeshare owners.