Corpo February 26

7/21/2019 Corpo February 26

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February 26, 2015

Have you gone through the definition of a security?

As I told you there is really no definition of a security.

hat they have in the la! is an enu"eration of !hat is a

security is.

#o!, e$%licit in the inter%retation of a security is the pre-

need plansare no! included as %art of securities, even

if %art of its essential features is an insurance. &o in a

sense, there is a divided 'urisdiction over a %re(need

%lans. )art of it is covered by the insurance

co""issioner insofar as the insurance %ortion of it is

concerned. Another %art of it is under the &*+ because

it is classified as a security.

he definition is in -./

3.9. "Pre-need plans" are contracts which provide

for the performance of future services of or the

payment of future monetary considerations at the

time actual need, for which plan holders pay in cash

or installment at stated prices, with or without

interest or insurance coverage and includes life,

pension, education, interment, and other plans

which the Commission may from time to time

approve.

&o, the insurance %art here "ust %ass the insurance

co""issioner but the final a%%roval of its release to the

%ublic is by the &*+ because its classification is that it is

a security. here is this troubleso"e class of securities

!hich is called a derivative.

It is in -.1 d

d erivatives li3e o%tion and !arrants4

elieve it or not, the "ost nu"ber of securities no!

internationally, are derivatives. In fact, there is an

esti"ate as of 2 years ago, the "ost nu"ber o

securities is valued at 60 trillion & dollars. 7nly one

3ind of derivative, the so(called credit default swap.

AR!C#$ %R&' %R. ()$

Credit *efault $waps %or *ummies

$eptem+er ,

PoliticsRoosh

If it doesnt pass, then heaven help us all.

Allo! "e to teach you !hat a credit default

s!a% is and !hy it8s so i"%ortant to !hat is

ha%%ening to the econo"y today.

9irgle :entborro!s ;50 fro" "e. I !ant to

get insurance on his debt in case he goes

bro3e. I go to


2/12

ban3ru%t.

#o! I8" in trouble. he debt I had on "y

boo3s that !as insured is no! uninsured. he

agencies loo3 at "y boo3s and see I have

this e$%osed debt and they do!ngrade "y

ass. I have no choice but to enter ban3ru%tcy

as !ell. ut I ha%%ened to be 3nee dee% in

the +& ga"e too. I !rote a ton of the"forAr'e!tino, insuring the debt o!ed to hi"

by other %arties. hen I go do!n it %uts

%ressure on hi". Ci3e do"inoes !e fall.

In the carnage it turned out that the ratings !e

used to 'udge each other8s debt !orthiness

!as bogus fro" the start. *ssentially !e all

ga"bled li3e !e !ould at a blac3'ac3 table,

but !e did it !hile drun3. And blind.

he insurance co"%any AID !rote ;E billion!orth of s!a%s.

Ivy Ceague BA8s turned the +& into an

even "ore insidious device. In !ays that I !ill

not begin to understand, s!a%s !ere used not

'ust to insure against debt but to s%eculate if

co"%anies !ould fail or not. It turned out that

!hile 9: only o!ed "e ;50, there !ere

s!a%s !ritten !orth ;500 bet!een %arties

that 9: didn8t even 3no! about@ he s!a%s

beca"e a "eans to "a3e "oney instead of asi"%le insurance %olicy. his !as enabled by

a govern"ent run by %oliticians !hose

treasure chests !ere stoc3ed full of

3ind donations fro" the big ban3ers. hey did

not hesitate to loo3 the other !ay.

A lot of s!a%s !ere !ritten by ban3s and

businesses that are no! very sic3 fro"

"a3ing bad bets and %ossibly outright fraud in

the housing boo". ho !ould have thought

that giving no "oney do!n G no(doc loans!as a bad idea?

Here8s the bad ne!s/

there are ;5 trillion of credit default s!a%s

out there. A default on a "ere 10 !ould

cause an econo"ic disaster. nfortunately,

it8s guaranteed to ha%%en.

Actually that !as the good ne!s. Here8s

the real bad ne!s/

he an3 for International &ettle"ents

recently re%orted that total derivatives trades

e$ceeded one Juadrillion dollars K that8s

1,000 trillion dollars. Ho! is that figure even

%ossible? he gross do"estic %roduct of all

the countries in the !orld is only about 60trillion dollars. he ans!er is that ga"blers

can bet as "uch as they !ant.

he Juote u% to% !as said byHenry )aulson.

) Borgan loss/ !hat is a credit default

s!a%?

+&s "ay have caused the ;2bn loss at )

Borgan K no !onder arren uffet called

the" a L!ea%on of "ass destructionL

In 200- arren uffet called credit defaults

s!a%s a L!ea%on of "ass destructionL

)hotogra%h/ ho"as CohnesGAF)GDettyI"ages

Rupert /eate

0Rupert/eate

Bonday 1 Bay 2012 12.2E &Cast

"odified on ednesday 21 Bay

20102.-1 &

+redit default s!a%s +&s are a for" of

insurance on bonds issued by co"%anies andcountries that investors can buy and sell. If it

loo3s li3e an issuer "ay have trouble %aying

K such as Dreece, for e$a"%le K the +&

%rice rises because the bond is "ore ris3y

and it !ill cost "ore to insure.

+&s !ere drea"ed u% in the late 10s and

beca"e very %o%ular, very Juic3ly. In 2000,

2
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3/12

the "ar3et !as !orth ;00bn M560bn. y

200, it !as "ore than ;-0 trillion.

hey can be used by bond investors K as a

hedge against %otential defaults K or traded

se%arately !hen they are called na3ed +&s.

he case against +& contracts is usuallye$%lained using house insurance as an

e$a"%le/ it is not %ossible to ta3e out an

insurance %olicy on so"eone elseLs house K

because you !ould then have a financial

interest in burning it do!n. Investors !ith no

interest in the underlying bond can buy and

sell +&s K and %rofit fro" its de"ise.

Dreece has bla"ed s%eculators trading in

+& contracts on Dree3 bonds for %ushing

u% govern"ent fundraising costs.


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aggregated "ortgage? C*$ credit default swap.here

!ill be an insurance co"%any !ho !ill underta3e to buy

the ris3 that this "ortgage "ay colla%se. hy !ill they

do that? hey !ill receive a %re"iu". C*$ is a form of

insurance. Bo(default gani ning credit, 3a"i ang "u%uli.

ayran 3a na"o. I3a! "an nag %ahu!a" ani sa bang3o

na nag(aggregate ana, bayran 3a na"o. i na3a

3ailangan "o foreclose aning "ortgage. :a"i ang

"usalo ana. iin "ana sila gi3an sa ilang 3!arta? Di3ansad na sa "ga dag3ong %ools of "oney li3e hedge

funds or "utual funds or retire"ent funds nga nangita ug

earnings "ore than interest in the ban3. 100 of the

%re"iu"s %aid goes to the +&. &ige 3ag da!at %ero

3ung "ahagbong na gani ning "ortgages, diha na ang

%roble"a ni"o. )ero daghan "an 3ag +& sa uban, dili

"ana "ahagbong "ana dayon. hat are tha chances

that all these aggregated "ortgages !ill fail? hat is in

fact actuarially %roven. Actuarial datu"/ gico"%ute na na

sa "ga "athe"atician and they base their %re"iu"s on

the li3elihood that the "ortgage aggregate !ill fail.

:ana@

)ossible ba na "ahagbong na 100? Ahhh dili 'ud na

"ahitabo. nya 3ay nahagbong "an 'ud tanan. Bao nay

da3ong di"alas@ ecause the i"%robable actually

ha%%ened. hatLs !hy huge ban3s, A"erican Insurance

Drou% AID, %ag3ada3o ana, that is the biggest

insurance co"%any in the !orld((hagbong. Cee"an

brothers. Hagbong. nsa %a "an? a tabanga.

Hagbong sa. hy? because all of this !ent do!n

together. (with feelings aa!o si father. super affe"ted)

:insa "ay insurer aning tanan? he entire central ban3

syste" of the !orld. *ach country has its o!n central

ban3. hey acted together to save the !orld. (wow.

super hero) hat is another story ho! they acted

together. After 5 years, they !ere going to start easing

"oney su%%ly. Ang gibuhat sa "ga central ban3s, they

'ust intervene into the financial "ar3ets of the !orld and

started inducing cash. nsaon "ana nila? #aay +&

nga nag fail? )aliton na3o tanan. (again, with

feelings)#ganong "a3abuhat "an sila ana? :ay sila

"ay naga %rinta sa 3!arta. &o intervene. :aron, ni(ingon sila na 5 years na"an. #i(i"%rove na"an ang

so"e of the econo"ies that !ere affected. &o they !ill

ease in %utting their "oney. )agsugod sa easing 3ay

3agidlay na"an sad. Dreece, &%ain, sugod na"an sad

ug 3adiglay. &o sugod na sad sila. 7, gaha%on sa

testi"ony ni OQellenO. Bs. Qellen is the federal reserve

chair%erson !ho too3 over fro" en ernan3e, the one

!ho !restled !ith the financial "eltdo!n of the !orld in

2000 u% to 201. :ani si Qelen, first fe"ale federa

reserve chair"an in & history (repre###eeent$)

anet Qellen

Chair, %ederal Reserve, 2ashington,

)nited $tates

on Forbes Cists

R6 )o!erful )eo%le

RE2 in 201-

R2 )o!er o"en

(%ust thought we should now this. &aha)

hy is it so i"%ortant? :aning federal reserve?

ecause internationally, "ost debts in the !orld is

deno"inated in & dollars. Busugot 3ag dili, its

deno"inated in & dollars, the "ost acce%table

currency in the !orld. &a %ag3a 3aron !a %ay "a3a%ul

ni(ana. :anang singgit sa Insi3 na ilang currency ang

%ina3a acce%table, diha %a 3o "utuo ana 3ung naa nay

"uda!at ug yuan sa claro ". recto. :ana@ a %a gan

"uda!at ana. OBuda!at ba 3a ug Quan? nsay Quan?

Quan it, I donLtO (haha wale!.)

&o, this +& is not traded in the stoc3 "ar3et. It is

traded in the over the counter "ar3et. Bu(ingon ang

AID, are you a"enable to aggregated "ortgages o

!ells fargo going at 2 tenths of 1, annually?

Bo ingon dayon ang +al)ers +alifornia )ublic

*"%loyeesL


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3abayad ana 3ung "ahitabo 3anang contingency

insured against, unsa "an i"ung buhaton?


6/12

di 3a gusto ana, i3a! na ang "utrabaho. :atunga ra sa

%a%eles i"ung %ir"ahan, %a%eles ra@

he ne$t thing ha%%ened !as that Ho!ey !as sued.

hy are you selling securities !ithout registering it !ith

the &*+? Is this a security? his is not a security, they

have a choice. hey can !or3 it the"selves or leave it tous. &o they contested it. It !ent to the &+.

he &+ said, that is a security. here are ele"ents.

nsa "ana? asaha ninyo.

y including an invest"ent contract !ithin the

sco%e of T 21 of the &ecurities Act,

+ongress !as using a ter" the "eaning of

!hich had been crystaliPed by this %rior

'udicial inter%retation. It is therefore

reasonable to attach that "eaning to the ter"

as used by +ongress, es%ecially since such a

definition is consistent !ith the statutory ai"s.

In other !ords, an investment contract, for

purposes of the $ecurities Act, means a

contract, transaction or scheme where+y a

person invests his money in a common

enterprise and is led to e4pect profits

solely from the efforts of the promoter or a

third party, it +eing immaterial whether theshares in the enterprise are evidenced +y

formal certificates or +y nominal interests

in the physical assets employed in the

enterprise. &uch a definition necessarily

underlies this +ourtLs decision in *+ v.

'oiner +orp., and has been enunciated and

a%%lied "any ti"es by lo!er federal courts.

UFootnote 5V It %er"its the fulfill"ent of the

statutory %ur%ose of co"%elling full and fair

disclosure relative to the issuance of Othe

"any ty%es of instru"ents that, in our

co""ercial !orld, fall !ithin the ordinaryconce%t of a security.O H.


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such offerings, even though the failure result

fro" a bona fide"ista3e as to the la!, cannot

be sanctioned under the Act.

his conclusion is unaffected by the fact that

so"e %urchasers choose not to acce%t the full

offer of an invest"ent contract by declining to

enter into a service contract !ith

&o, every ti"e you issue a security, you have to register.

#o! if you donLt !ant to register, you a%%ly for an

e$e"%tion. here are 2 3inds of securities that need not

be registered/ e4empt securities and securities

+elonging to an e4empt transaction.

$ection 9. Exempt Securities. 9.6. he

re:uirement of registration under

$u+section .6 shall not as a general rule

apply to any of the following classes of

securities;


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hen you have e$e"%t transactions. It is the transaction

itself !hich is e$e"%t.

$ection 6. Exempt Transactions. 6.6.

he re:uirement of registration under

$u+section .6 shall not apply to the sale

of any security in any of the following

transactions;

udicial sale, or sale +y an

e4ecutor, administrator, guardian or

receiver or trustee in insolvency or

+an1ruptcy.


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+y mortgage upon real estate or tangi+le

personal property, when the entire

mortgage together with all the +onds or

notes secured there+y are sold to a single

purchaser at a single sale.


10/12

#o!, very i"%ortant@ A ban3 !hen it issues securities,

they are e$e"%t transactions. hy? ecause all the

securities issued by a ban3 is %re(e$a"ined by the &).

he only e$ce%tion to that e$ce%tion is ban3s o!n share

of stoc3. hat is not an e$e"%t transaction, because a

ban3 shares of stoc3, according to our rules no!, %art of

it "ust be sold to the %ublic. &o therefore, the sale of

securities of a +an1 is considered an e4empt

transaction e4cept the +an1s own shares.

&ec. 11. +o""odity Future contracts.

his is a ty%e of security to %revent or "ini"iPe ris3. ItLs

described in sec. 11

$ection 66. Commodity Futures Contracts. -

/o person shall offer, sell or enter into

commodity futures contracts e4cept in

accordance with the rules, regulations and

orders the Commission may prescri+e in the

pu+lic interest. he Commission shall

promulgate rules and regulations involving

commodity futures contracts to protect

investors to ensure the development of a fair

and transparent commodities mar1et.

&ec. 12 %rocedure for registration

$ection 6. Procedure of Registration

Securities. - 6.6. All securities re:uired to +e

registered under $u+section . ! shall +e

registered through the filing +y the issuer in

the main office of the Commission, of a

sworn registration statement with the

respect to such securities, in such form and

containing such information and document

as the Commission prescri+e. he

registration statement shall include any

prospectus re:uired or permitted to +e

delivered under $u+sections ., .3, and .5.

6.. !n promulgating rules governing the

content of any registration statement


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that aforesaid registration statement,

as well as the papers attached

thereto are open to inspection at the

Commission during +usiness hours,

and copies thereof, photostatic or

otherwise, shall +e furnished to

interested parties at such reasona+le

charge as the Commission may

prescri+e.6.7. 2ithin forty-five ected,

unless the applicant is allowed to amend the

registration statement as provided in $ection

65 hereof. he Commission shall enter an

order declaring the registration statement to

+e effective if it finds that the registration

statement together with all the other papers

and documents attached thereto, is on itsface complete and that the re:uirements

have +een complied with. he Commission

may impose such terms and conditions as

may +e necessary or appropriate for the

protection of the investors.

6.8. )pon affectivity of the registration

statement, the issuer shall state under oath

in every prospectus that all registration

re:uirements have +een met and that all

information are true and correct as

represented +y the issuer or the one ma1ing

the statement. Any untrue statement of fact

or omission to state a material fact re:uired

to +e stated herein or necessary to ma1e the

statement therein not misleading shall

constitute fraud.

he %rocedure, you "ust understand, !hat do you file?

Qou file a registration statement.

$$$

he registration state"ent shall include any

%ros%ectus reJuired or %er"itted to be delivered

under &ubsections .2, .-, and ..

$$$

If you go through the &*+ code for the registration o

securities, it is "ore co"%licated than incor%orating a

cor%oration. &uhuhu)Asta ang biogra%hy sa tanan

board of directors of all the cor%orations involved in the

issuance "ust be docu"ented and described. If you fai

to accurately disclose or you !ithhold any "ateria

infor"ation about a %articular board of director, that isconsidered as culpa+le non disclosure. hat !ill be

considered as cul%able non disclosure.

&o for %o%ular consu"%tion, you need a +rochure

ecause the registration state"ent "ight be so thic3 tha

not even the &*+ !ill read it %ro%erly. 7nly one guy !il

read it. &o you translate it to %o%ular literature. hat is a

brochure. It "ust be included in the registration

state"ent. he brochure "ust not contain any "ateria

fact that is not reflected in the registration state"ent. It"ust be faithful to the registration state"ent. If it is not

then that is another violation that "ay be a ground for

nullifying the registration state"ent.

he registration state"ent is #7 a%%roved by the &*+

because if the &*+ a%%roves it, it "ight be considered

as an endorse"ent but the &*+ is not a sales"an. It is

a regulator. hat the &*+ does is it issues a notice of

effectivity. It is no! effective, you can no! sell it.

ut, at any ti"e, it is a%%raise and it verifies that there is

a "aterial non disclosure then it can recall the sale. It

can issue a restraining order and then it !ill conduct its

investigation. he investigation that it !ill conduct is

confidential in nature. 7nly the final results !ill be o%en

to the %ublic. &o %lease re"e"ber that.

7nce a %articular security is %ut under a cloud of doubt

it can be very difficult for that security to recover and

there are so "any livelihood involved there/ investor

issuer, e"%loyees. &o the &*+ is advised to be very

careful in investigating a registration state"ent.

11


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hen should the

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