Revised Securities Act

7/25/2019 Revised Securities Act

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REPUBLIC ACT NO. 8799

THE SECURITIES REGULATION CODE

Be it enacted by the Senate and the House ofRepresentative of the Philippines in theCongress assembled:

CHAPTER I

TITLE AND DEFINITIONS

Section 1. Title.- This shall be known as "TheSecurities Regulation Code"

Section 2. Declaration of State Policy. TheState shall establish a socially conscious, freemarket that regulates itself, encourage thewidest participation of ownership in enterprises,enhance the democratization of wealth,promote the deelopment of the capital market,protect inestors, ensure full and fair disclosureabout securities, minimize if not totallyeliminate insider trading and other fraudulent or

manipulatie deices and practices whichcreate distortions in the free market!

To achiee these ends, this SecuritiesRegulation Code is hereby enacted!

Section 3. Denition of Terms. - !#!"Securities" are shares, participation or interestsin a corporation or in a commercial enterprise orpro$t-making enture and eidenced by acerti$cate, contract, instruments, whetherwritten or electronic in character! %t includes&

a! Shares of stocks, bonds, debentures,notes eidences of indebtedness, asset-backed securities'

b! %nestment contracts, certi$cates ofinterest or participation in a pro$tsharing agreement, certi$es of depositfor a future subscription'

c! (ractional undiided interests in oil, gasor other mineral rights'

d! )eriaties like option and warrants'e! Certi$cates of assignments, certi$cates

of participation, trust certi$cates, otingtrust certi$cates or similar instruments'

f! *roprietary or nonproprietarymembership certi$cates in corporations'and

g! +ther instruments as may in the futurebe determined by the Commission!

!! "%ssuer" is the originator, maker, obligor, orcreator of the security!

!! "roker" is a person engaged in thebusiness of buying and selling securities for theaccount of others!

!.! ")ealer" means many person who buyssells securities for his/her own account in theordinary course of business!

!0! "1ssociated person of a broker or dealer" isan employee therefor whom, directly e2ercises

control of superisory authority, but does notinclude a salesman, or an agent or a personwhose functions are solely clerical orministerial!

!3! "Clearing 1gency" is any person who actsas intermediary in making delieries uponpayment e4ect settlement in securitiestransactions!

!5! "62change" is an organized market place orfacility that brings together buyers and sellersand e2ecutes trade of securities and/orcommodities!

!7! "%nsider" means 8a9 the issuer' 8b9 a directoror o:cer 8or any person performing similarfunctions9 of, or a person controlling the issuer'gies or gae him access to materialinformation about the issuer or the security thatis not generally aailable to the public' 8d9 1goernment employee, director, or o:cer of an

e2change, clearing agency and/or self-regulatory organization who has access tomaterial information about an issuer or asecurity that is not generally aailable to thepublic' or 8e9 a person who learns suchinformation by a communication from anyforgoing insiders!

!;! "*re-need plans" are contracts whichproide for the performance of future sericesof or the payment of future monetaryconsiderations at the time actual need, forwhich plan holders pay in cash or installment atstated prices, with or without interest orinsurance coerage and includes life, pension,education, interment, and other plans which theCommission may from time to time approe!

!#

!##! "*rospectus" is the document made by oran behalf of an issuer, underwriter or dealer to

sell or o4er securities for sale to the publicthrough registration statement $led with theCommission!

!#! "Registration statement" is the applicationfor the registration of securities re=uired to be$led with the Commission!

!#! "Salesman" is a natural person, employedas such as an agent, by a dealer, issuer orbroker to buy and sell securities!

!#.! ">ncerti$cated security" is a security

eidenced by electronic or similar records!

!#0! ">nderwriter" is a person who guaranteeson a $rm commitment and/or declared beste4ort basis the distribution and sale ofsecurities of any kind by another company!


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CHAPTER II

SECURITIES AND ECHANGE CO!!ISSION

Section ". Administrative Agency. .!#!This Code shall be administered by the Securityand 62change Commission 8hereinafter referredto as the "Commission"9 as a Collegial body,composed of a chairperson and 8.9

Commissioners, appointed by the *resident fora term of 859 seen years each and who shallseres as such until their successor shall haebeen appointed and =uali$ed! 1 Commissionerappointed to $ll a acancy occurring prior to thee2piration of the term for which his/herpredecessor was appointed, shall sere only forthe une2pired portion of their terms under*residential )ecree ?o! ;nless theconte2t indicates otherwise, the term"Commissioner" includes the Chairperson!

.!! The Commissioners must be natural-born

citizens of the *hilippines, at least forty 8.


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l! %ssue subpoena duces tecum andsummon witnesses to appear in anyproceedings of the Commission and inappropriate cases, order thee2amination, search and seizure of alldocuments, papers, $les and records,ta2 returns and books of accounts of anyentity or person under inestigation asmay be necessary for the proper

disposition of the cases before it, sub@ectto the proisions of e2isting laws'

m! Suspend, or reoke, after proper noticeand hearing the franchise or certi$cateof registration of corporations,partnership or associations, upon any ofthe grounds proided by law' and

n! 62ercise such other powers as may beproided by law as well as those whichmay be implied from, or which arenecessary or incidental to the carryingout of, the e2press powers granted theCommission to achiee the ob@ecties

and purposes of these laws!

0!! The CommissionAs @urisdiction oer all casesenumerated under section 0 of *residential)ecree ?o! ;


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*osition Classi$cation 1ct of #;7; 8Republic 1ct!3507, as amended9!

CHAPTER III

REGISTRATION OF SECURITIES

Section 7! Requirement of Registration ofSecurities! 7!#! Securities shall not be sold oro4ered for sale or distribution within the

*hilippines, without a registration statementduly $led with and approed by theCommission! *rior to such sale, information onthe securities, in such form and with suchsubstance as the Commission may prescribe,shall be made aailable to each prospectiepurchaser!

7!! The Commission may conditionally approethe registration statement under such terms asit may deem necessary!

7!! The Commission may specify the terms and

conditions under which any writtencommunication, including any summaryprospectus, shall be deemed not to constitutean o4er for sale under this Section!

7!.! 1 record of the registration of securitiesshall be kept in Register Securities in whichshall be recorded orders entered by theCommission with respect such securities! Suchregister and all documents or information withthe respect to the securities registered thereinshall be open to public inspection at reasonablehours on business days!

7!0! The Commission may audit the $nancialstatements, assets and other information of $rmapplying for registration of its securitieswheneer it deems the same necessary toinsure full disclosure or to protect the interest ofthe inestors and the public in general!

Section ;! Eempt Securities! ;!#! There=uirement of registration under Subsection7!# shall not as a general rule apply to any ofthe following classes of securities&

a! 1ny security issued or guaranteed by theDoernment of the *hilippines, or by anypolitical subdiision or agency thereof, orby any person controlled or superisedby, and acting as an instrumentality ofsaid Doernment!

b! 1ny security issued or guaranteed by thegoernment of any country with whichthe *hilippines maintains diplomaticrelations, or by any state, proince orpolitical subdiision thereof on the basisof reciprocity& *roided, That theCommission may re=uire compliance

with the form and content for disclosuresthe Commission may prescribe!

c! Certi$cates issued by a receier or by atrustee in bankruptcy duly approed bythe proper ad@udicatory body!

d! 1ny security or its deriaties the sale ortransfer of which, by law, is under thesuperision and regulation of the +:ceof the %nsurance Commission, ousingand Fand >se Rule Regulatory oard, orthe ureau of %nternal Reenue!

e! 1ny security issued by a bank e2cept itsown shares of stock!

;!! The Commission may, by rule or regulationafter public hearing, add to the foregoing anyclass of securities if it $nds that theenforcement of this Code with respect to suchsecurities is not necessary in the public interestand for the protection of inestors!

Section 1&. #$emt Transactions. #

a! 1t any @udicial sale, or sale by ane2ecutor, administrator, guardian or

receier or trustee in insolency orbankruptcy!

b! y or for the account of a pledge holder,or mortgagee or any of a pledge lienholder selling of o4ering for sale ordeliery in the ordinary course ofbusiness and not for the purpose ofaoiding the proision of this Code, toli=uidate a bona!de debt, a securitypledged in good faith as security for suchdebt!

c! 1n isolated transaction in which anysecurity is sold, o4ered for sale,subscription or deliery by the ownertherefore, or by his representatie forthe ownerAs account, such sale or o4erfor sale or o4er for sale, subscription ordeliery not being made in the course ofrepeated and successie transaction of alike character by such owner, or on hisaccount by such representatie and suchowner or representatie not being theunderwriter of such security!

d! The distribution by a corporation actielyengaged in the business authorized by

its articles of incorporation, of securitiesto its stockholders or other securityholders as a stock diidend or otherdistribution out of surplus!

e! The sale of capital stock of a corporationto its own stockholders e2clusiely,where no commission or otherremuneration is paid or gien directly orindirectly in connection with the sale ofsuch capital stock!

f! The issuance of bonds or notes securedby mortgage upon real estate or tangiblepersonal property, when the entire

mortgage together with all the bonds ornotes secured thereby are sold to asingle purchaser at a single sale!

g! The issue and deliery of any security ine2change for any other security of thesame issuer pursuant to a right of


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conersion entitling the holder of thesecurity surrendered in e2change tomake such conersion& Provided, Thatthe security so surrendered has beenregistered under this Code or was, whensold, e2empt from the proision of thisCode, and that the security issued anddeliered in e2change, if sold at theconersion price, would at the time of

such conersion fall within the class ofsecurities entitled to registration underthis Code! >pon such conersion the paralue of the security surrendered in suche2change shall be deemed the price atwhich the securities issued and delieredin such e2change are sold!

h! rokerAs transaction, e2ecuted uponcustomerAs orders, on any registered62change or other trading market!

i! Subscriptions for shares of the capitalsstocks of a corporation prior to theincorporation thereof or in pursuance of

an increase in its authorized capitalstocks under the Corporation Code,when no e2pense is incurred, or nocommission, compensation orremuneration is paid or gien inconnection with the sale or disposition ofsuch securities, and only when thepurpose for soliciting, giing or taking ofsuch subscription is to comply with there=uirements of such law as to thepercentage of the capital stock of acorporation which should be subscribedbefore it can be registered and dulyincorporated, or its authorized, capitalincrease!

@! The e2change of securities by the issuerwith the e2isting security holderse2clusiely, where no commission orother remuneration is paid or giendirectly or indirectly for soliciting suche2change!

k! The sale of securities by an issuer tofewer than twenty 8


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#!.! The registration statement shall be signedby the issuerAs e2ecutie o:cer, its principaloperating o:cer, its principal $nancial o:cer,its comptroller, its principal accounting o:cer,its corporate secretary, or persons performingsimilar functions accompanied by a duly eri$edresolution of the board of directors of the issuercorporation! The written consent of the e2pertnamed as haing certi$ed any part of the

registration statement or any document used inconnection therewith shall also be $led! Hherethe registration statement shares to be sold byselling shareholders, a written certi$cation bysuch selling shareholders as to the accuracy ofany part of the registration statementcontributed to by such selling shareholders shallbe $led!

#!0! 8a9 >pon $ling of the registrationstatement, the issuer shall pay to theCommission a fee of not more than one-tenth8#/#pon a4ectiity of the registrationstatement, the issuer shall state under oath ineery prospectus that all registrationre=uirements hae been met and that all

information are true and correct as representedby the issuer or the one making the statement!1ny untrue statement of fact or omission tostate a material fact re=uired to be statedherein or necessary to make the statementtherein not misleading shall constitute fraud!

Section 13. Re%ection and Revocation ofRegistration of Securities. # #!#! The

Commission may re@ect a registration statementand refuse registration of the security there-under, or reoke the a4ectiity of a registrationstatement and the registration of the securitythere-under after the due notice and hearing byissuing an order to such e4ect, setting forth its$nding in respect thereto, if it $nds that&

8a9 The issuer&8i9 as been @udicially declared

insolent'8ii9 as iolated any of the proision

of this Code, the rules promulgate

pursuant thereto, or any order ofthe Commission of which theissuer has notice in connectionwith the o4ering for which aregistration statement has been$led

8iii9 as been or is engaged or isabout to engage in fraudulenttransactions'

8i9 as made any false or misleadingrepresentation of material facts inany prospectus concerning theissuer or its securities'

89 as failed to comply with anyre=uirements that theCommission may impose as acondition for registration of thesecurity for which the registrationstatement has been $led' or

8b9 The registration statement is on its faceincomplete or inaccurate in any materialrespect or includes any untruestatements of a material fact re=uired tobe stated therein or necessary to make

the statement therein not misleading' or

8c9 The issuer, any o:cer, director orcontrolling person performing similarfunctions, or any under writer has beenconicted, by a competent @udicial oradministratie body, upon plea of guilty,or otherwise, of an o4ense inolingmoral turpitude and /or fraud or isen@oined or restrained by theCommission or other competent oradministratie body for iolations ofsecurities, commodities, and other

related laws!

(or the purposes of this subsection, the term"competent @udicial or administratie body"shall include a foreign court of competent@urisdiction as proided for under Rules of Court!


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#!! The Commission may compel theproduction of all the books and papers of suchissuer, and may administer oaths to, ande2amine the o:cers of such the issuer or anyother person connected therewith as to itsbusiness and a4airs!

#!! %f any issuer shall refuse to permit an

e2amination to be made by the Commission, itsrefusal shall be ground for the refusal orreocation of the registration of its securities!

#!.! %f the Commission deems its necessary, itmay issue an order suspending the o4er andsale of the securities pending any inestigation!The order shall state the grounds for takingsuch action, but such order of suspensionalthough binding upon the persons noti$edthereof, shall be deemed con$dential, and shallnot be published! >pon the issuance of thesuspension order, no further o4er or sale of

such security shall be made until the same islifted or set aside by the Commission!+therwise, such sale shall be oid!

#!0! ?otice of issuance of such order shall begien to the issuer and eery dealer and brokerwho shall hae noti$ed the Commission of anintention to sell such security!

#!3! 1 registration statement may bewithdrawn by the issuer only with the consentof the Commission!

Section 1". Amendment to theRegistration Statement. #.!#! %f aregistration statement is on its face incompleteor inaccurate in any material respect, theCommission shall issue an order directing theamendment of the registration statement! >poncompliance with such order, the amendedregistration statement shall become e4ectie inaccordance with the procedure mentioned inSubsection #!3 hereof!

#.!! 1n amendment $led prior to the e4ectie

date of the registration statement shallrecommence the forty-$e 8.09 day periodwithin which the Commission shall act on aregistration statement! 1n amendment $ledafter the e4ectie date of the registrationstatement shall become e4ectie only uponsuch date as determined by the Commission!

#.!! %f any change occurs in the facts set forthin a registration statement, the issuer shall $lean amendment thereto setting forth thechange!

#.!.! %f, at any time, the Commission $nds thatthe registration statement contains any falsestatement or omits to state any fact re=uired tobe stated therein or necessary to make thestatements therein not misleading, theCommission may conduct an e2amination, and,

after due notice and hearing, issue an ordersuspending the a4ectiity registrationstatement! %f the statement is duly amended,the suspension order may be lifted!

#.!0! %n making such e2amination theCommission or any o:cer or o:cers designatedby it may administer oaths and a:rmations andshall hae access to, and may demand the

production of, any books, records or documentsreleant to the e2amination! (ailure of theissuer, underwriter, or any other person tocooperate, or his obstruction or refusal toundergo an e2amination, shall be a ground forthe issuance of a suspension order!

Section 1#. Susension of Registration. -#0!#! %f at any time, the information containedin the registration statement $led is or hasbecome misleading, incorrect, inade=uate orincomplete in any material respect, or the saleor o4ering for sale of the security registered

thereunder may work or tend to work a fraud,the Commission may re=uire from the issuersuch further information as may in its@udgement be necessary to enable theCommission to ascertain whether theregistration of such security should be reokedon any ground speci$ed in this Code! TheCommission may also suspend the right to selland o4er for the sale such security pendingfurther inestigation, by entering an orderspecifying the grounds for such action, and bynotifying the issuer, underwriter, dealer orbroker known as participating in such o4ering!

#0!! The refusal to furnish information re=uiredby the Commission may be a ground for theissuance of an order of suspension pursuant toSubsection #0!#! >pon the issuance of any suchorder and noti$cation to the issuer, underwriter,dealer or broken know as participating in sucho4ering, no further o4er or sale of any suchsecurity shall be made until the same is lifted orset aside by the Commission! +therwise suchsale shall be oid!

#0!! >pon issuance of an order of suspension,the Commission shall conduct a hearing! %f theCommission determines that the sale of anysecurity should be reoked is shall issue anorder prohibiting sale of such security!

#0!.! >ntil the issuance of a $nal order, thesuspension of the right to sell, though bindingupon the persons noti$ed there of, shall bedeemed con$dential, and shall not bepublished, unless it shall appear that the orderof suspension has been iolated after notice! %f,howeer, the Commission $nds that the sale of

the security will neither be fraudulent nor resultin fraud, it shall forthwith issue an orderreoking the order of suspension, and suchsecurity shall be restored to its status as aregistered security as of the date of such orderof suspension!


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CHAPTER I'

REGULATION OF PRE(NEED PLANS

Section 1%. Pre&'eed Plans. ?o personshall sell or o4er for sale to the public any pre-need plan e2cept in accordance with rules andregulations which the Commission shallprescribe! Such rules shall regulate the sale of

pre-need plans by, among other things,re=uiring the registration of pre-need plans,licensing persons inoled in the sale of pre-need plans, re=uiring disclosures to prospectieplan holders, prescribing adertising guidelines,proiding for uniform accounting system,reports and recording keeping with respect tosuch plans, imposing capital, bonding and other$nancial responsibility, and establishing trustfunds for the payment of bene$ts under suchplans!

CHAPTER '

REPORTORIAL RE)UIRE!ENTS

Section #5! Periodic and $ther Reports of %ssuer.#5!#! 6ery issuer satisfying the re=uirements inSubsection #5! hereof shall $le with theCommission&

a! Hithin one hundred thirty-$e 8#09days, after the end of the issuerAs $scalyear, or such other time as theCommission may prescribe, an annualreport which shall include, among others,a balance sheet, pro$t and lossstatement and statement of cash Iows,for such last $scal year, certi$ed publicaccountant, an a managementdiscussion and analysis of results ofoperation' and

b! Such other periodical reports for interim$scal periods and current reports onsigni$cant deelopments of the issuer asthe Commission may prescribe asnecessary to keep current information onthe operation of the business and$nancial condition of the issuer!

#5!! The reportorial re=uirements of Subsection#5!# shall apply to the following&8a9 1n issuer which has sold a class of its

securities pursuant to a registration undersection # hereof& Provided ho&ever' Thatthe obligation of such issuer to $le reportsshall be suspended for any $scal year afterthe year such registration became e4ectieif such issuer, as of the $rst day of any such$scal year, has less than one hundred 8#


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b! %f the purpose of the purchases orprospectie purchases is to ac=uirecontrol of the business of the issuer ofthe securities, any plans or proposalswhich such persons may hae that wille4ect a ma@or change in its business orcorporate structure'

c! The number of shares of such securitywhich are bene$cially owned, and the

number of shares concerning whichthere is a right to ac=uire, directly orindirectly, by' 8i9 such person, and 8ii9each associate of such person, giing thebackground, identity, residence, andcitizenship of each such associate' and

d! %nformation as to any contracts,arrangements, or understanding withany person with respect to any securitiesof the issuer including but not limited totransfer, @oint entures, loan or optionarrangements, puts or call guarantees ordiision of losses or pro$ts, or pro2ies

naming the persons with whom suchcontracts, arrangements, orunderstanding hae been entered into,and giing the details thereof!

#7!! %f any change occurs in the facts set forthin the statements, an amendment shall betransmitted to the issuer, the 62change and theCommission!

#7!! The Commission, may permit any personto $le in lieu of the statement re=uired bysubsection #5!# hereof, a notice stating thename of such person, the shares of any e=uitysecurities sub@ect to Subsection #5!# which areowned by him, the date of their ac=uisition andsuch other information as the commission mayspecify, if it appears to the commission thatsuch securities were ac=uired by such person inthe ordinary course of his business and werenot ac=uired for the purpose of and do not haethe e4ect of changing or inIuencing the controlof the issuer nor in connection with anytransaction haing such purpose or e4ect!

CHAPTER 'IPROTECTION OF SHAREHOLDERS

INTERESTS

Section #;! (ender $)ers! a9 1ny person or group of persons acting in

concert who intends to ac=uire at least#0G of any class of any e=uity securityof a listed corporation of any class of anye=uity security of a corporation withassets of at least $fty million pesos80


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deceptie or manipulatie acts or practices, inconnection with any tender o4er or re=uest orinitation for tenders, or any solicitation for anysecurity holders in opposition to or in faor ofany such faor of any such o4er, re=uest, orinitation! The Commission shall, for thepurposes of this subsection, de$ne andprescribe means reasonably designed topreent, such acts and practices as are

fraudulent, deceptie and manipulatie!

Section 2&. Pro$y solicitations! -

#!#! The propose aggregate purchase price inthe case of a transaction under Section < or5!' or

#!! The proposed payment in cash, and ionalue of any securities or property to be

transferred in the ac=uisition, merger orconsolidating, or the cash and alue of anysecurities proposed to be receied upon thesale disposition of such assets in the case of asolicitation under Section

inerse proportion to the alue of the aggregateprice of the o4ering!

Section 22. Internal Record 0eeing andAccounting Control. (6ery issuer which hasa class of securities that satis$es there=uirements of Subsection #5! shall&

!#! )eice and maintain a system of internal

accounting controls su:cient to proidereasonable assurance that& 8a9 Transactions andaccess to assets are pursuant to managementauthorization' 8b9 (inancial statements areproided in conformity with generally acceptedaccounting principles that are adopted by the1ccounting standards council and the rulespromulgated by the Commission with the regardto the preparation of the $nancial statements'and 8c9 Recorded assets are compared withe2isting assets at reasonable interals anddi4erences are reconciled!

Section 23. Transactions of Directorso1cers and Princial Stoc2holders. !#!6ery person who is directly or indirectly thebene$cial owner of more than ten per centum8#


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Subsection shall not be construed to coer anytransaction were such bene$cial owner was notsuch both time of the owner or the sale, or thesale of purchase, of the security inoled, orany transaction or transactions which theCommission by rules and regulations maye2empt as not comprehended within thepurpose of this subsection!

!! %t shall be unlawful for any such bene$cialowner, director or o:cer, directly or indirectly,to sell any e=uity security of such issuer if theperson selling the principal& 8a9 )oes not ownthe security sold& or 8b9 %f owning the security,does not delier not delier it against such salewithin < days thereafter, or does not within$e days after such sale deposit in the mails orthe unusual channels of transportation' but noperson shall be deemed to hae iolated thissubsection if he proes not withstanding thee2ercise of good faith he was unable to makesuch deliery in such time, or that to do so

would cause undue inconenience or e2pense!

!.! The proisions of subsection ! shall notapply to any purchase and sale, or sale andpurchase, and the proisions of Subsection !shall not apply to any sale, of an e=uity securitynot then or thereafter held by him and aninestment account, by a dealer in the ordinarycourse of his business and incident to theestablishment or maintenance by him of aprimary or secondary market, otherwise than onan 62change, for such security! The Commissionmay, by such rules and regulations as it deemsnecessary or appropriate in the public interest,de$ne and prescribe terms and conditions withrespect to securities held in an inestmentaccount and transactions made in the ordinarycourse of business and incident to theestablishment or maintenance of a primary orsecondary market!

CHAPTER 'II

PROHIBITIONS AND FRAUD*

!ANIPULATION AND INSIDER TRADING

Section 2". 3aniulation of SecurityPrices4 Devices and Practices. .!# %t shallbe unlawful for any person acting for himself orthrough a dealer or broker, directly or indirectly&

8a9 To create a false or misleading appearanceof actie trading in any listed securitytraded in an 62change of any other tradingmarket 8hereafter referred to purposes ofthis Chapter as "62change"9&

8#9 y e4ecting any transaction in suchsecurity which inoles no change in thebene$cial ownership thereof'

89 y entering an order or orders for thepurchase or sale of such security withthe knowledge that a simultaneous orderor orders of substantially the same size,time and price, for the sale or purchaseof any such security, has or will be

entered by or for the same or di4erentparties' or

89 y performing similar act where there isno change in bene$cial ownership!

8b9 To a4ect, alone or with others, a securitiesor transactions in securities that& 8%9 Raisestheir price to induce the purchase of asecurity, whether of the same or a di4erentclass of the same issuer or of controlling,

controlled, or commonly controlledcompany by others' or 8iii9 Creates actietrading to induce such a purchase or salethrough manipulatie deices such asmarking the close, painting the tape,s=ueezing the Ioat, hype and dump, boilerroom operations and such other similardeices!

8c9 To circulate or disseminate information thatthe price of any security listed in an62change will or is likely to rise or fallbecause of manipulatie market operationsof any one or more persons conducted for

the purpose of raising or depressing theprice of the security for the purpose ofinducing the purpose of sale of suchsecurity!

8d9 To make false or misleading statement withrespect to any material fact, which he knewor had reasonable ground to beliee was sofalse or misleading, for the purpose ofinducing the purchase or sale of anysecurity listed or traded in an 62change!

8e9 To e4ect, either alone or others, any seriesof transactions for the purchase and/or saleof any security traded in an 62change forthe purpose of pegging, $2ing or stabilizingthe price of such security' unless otherwiseallowed by this Code or by rules of theCommission!

.!! ?o person shall use or employ, inconnection with the purchase or sale of anysecurity any manipulatie or deceptie deiceor contriance! ?either shall any short sale bee4ected nor any stop-loss order be e2ecuted inconnection with the purchase or sale of anysecurity e2cept in accordance with such rules

and regulations as the Commission mayprescribe as necessary or appropriate in thepublic interest for the protection of inestors!

.!! The foregoing proisions notwithstanding,the Commission, haing due regard to thepublic interest and the protection of inestors,may, by rules and regulations, allow certain actsor transactions that may otherwise beprohibited under this Section!

Section 2#. Regulation of tion Trading.?o member of an 62change shall, directly or

indirectly endorse or guarantee theperformance of any put, call, straddle, option orpriilege in relation to any security registeredon a securities e2change! The terms "put","call", "straddle", "option", or "priilege" shall


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not include any registered warrant, right orconertible security!

Section 2%. Fraudulent Transactions. %tshall be unlawful for any person, directly orindirectly, in connection with the purchase orsale of any securities to&

3!#! 6mploy any deice, scheme, or arti$ce to

defraud'

3!! +btain money or property by means ofany untrue statement of a material fact of anyomission to state a material fact necessary inorder to make the statements made, in the lightof the circumstances under which they weremade, not misleading' or

3!! 6ngage in any act, transaction, practice orcourse of business which operates or wouldoperate as a fraud or deceit upon any person!

Section 27. Insider5s Duty to Disclose6hen Trading. 5!#! %t shall be unlawful foran insider to sell or buy a security of the issuer,while in possession of material information withrespect to the issuer or the security that is notgenerally aailable to the public, unless& 8a9 Theinsider proes that the information was notgained from such relationship' or 8b9 %f the otherparty selling to or buying from the insider 8or hisagent9 is identi$ed, the insider proes& 8%9 thathe disclosed the information to the other party,or 8ii9 that he had reason to beliee that theother party otherwise is also in possession ofthe information! 1 purchase or sale of a securityof the issuer made by an insider de$ned inSubsection !7, or such insiderAs spouse orrelaties by a:nity or consanguinity within thesecond degree, legitimate or common-law, shallbe presumed to hae been e4ected while inpossession of material nonpublic information iftransacted after such information came intoe2istence but prior to dissemination of suchinformation to the public and the lapse of areasonable time for market to absorb suchinformation& Provided' ho&ever, That this

presumption shall be rebutted upon a showingby the purchaser or seller that he was aware ofthe material nonpublic information at the timeof the purchase or sale!

5!! (or purposes of this Section, information is"material nonpublic" if& 8a9 %t has not beengenerally disclosed to the public and wouldlikely a4ect the market price of the securityafter being disseminated to the public and thelapse of a reasonable time for the market toabsorb the information' or 8b9 would beconsidered by a reasonable person important

under the circumstances in determining hiscourse of action whether to buy, sell or hold asecurity!

5!! %t shall be unlawful for any insider tocommunicate material nonpublic information

about the issuer or the security to any personwho, by irtue of the communication, becomesan insider as de$ned in Subsection !7, wherethe insider communicating the informationknows or has reason to beliee that such personwill likely buy or sell a security of the issuerwhole in possession of such information!

5!.! 8a9 %t shall be unlawful where a tender

o4er has commenced or is about to commencefor&

8i9 1ny person 8other than the tendero4eror9 who is in possession ofmaterial nonpublic informationrelating to such tender o4er, to buyor sell the securities of the issuerthat are sought or to be sought bysuch tender o4er if such personknows or has reason to beliee thatthe information is nonpublic and hasbeen ac=uired directly or indirectlyfrom the tender o4eror, those acting

on its behalf, the issuer of thesecurities sought or to be sought bysuch tender o4er, or any insider ofsuch issuer' and

8ii9 1ny tender o4eror, those acting onits behalf, the issuer of the securitiessought or to be sought by suchtender o4er, and any insider of suchissuer to communicate materialnonpublic information relating to thetender o4er to any other personwhere such communication is likelyto result in a iolation of Subsection5!. 8a98%9!

8b9 (or purposes of this subsection the term"securities of the issuer sought or to be soughtby such tender o4er" shall include anysecurities conertible or e2changeable into suchsecurities or any options or rights in any of theforegoing securities!

CHAPTER 'III

REGULATION OF SECURITIES !AR+ET

PROFESSIONALS

Section 28. Registration of 7ro2ers8Dealers8 Salesmen and AssociatedPersons. 7!#! ?o person shall engage in thebusiness of buying or selling securities in the*hilippine as a broker or dealer, or act as asalesman, or an associated person of any brokeror dealer unless registered as such with theCommission!

7!! ?o registered broker or dealer shallemploy any salesman or any associated person,and no issuer shall employ any salesman, whois not registered as such with the Commission!

7!! The Commission, by rule or order, mayconditionally or unconditionally e2empt fromsubsection 7!# and 7! any broker, dealer,salesman, associated person of any broker ordealer, or any class of the foregoing, as it


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deems consistent with the public interest andthe protection of inestors!

7!.! The Commission shall promulgate rulesand regulation prescribing the =uali$cations forregistration of each category of applicant, whichshall, among other things, re=uire as a conditionfor registration that&

8a9 %f a natural person, the applicant

satisfactorily pass a written e2aminationas to his pro$ciency and knowledge inthe area of actiity for which registrationis sought'

8b9 %n the case of a broker or dealer, theapplicant satisfy a minimum net capitalas prescribed by the Commission, andproide a bond or other security as theCommission may prescribe to securecompliance with the proisions of thisCode' and

8c9 %f located outside of the *hilippines, theapplicant $les a written consent to

serice of process upon the Commissionpursuant to Section 30 hereof!

7!0! 1 broker or dealer may apply forregistration by $ling with the Commission awritten application in such forms and containingsuch information and documents concerningsuch broker or dealer as the Commission by ruleshall prescribe!

7!3! Registration of a salesman or of anassociated person of a registered broker ordealer may be made upon written application$led with the Commission by such salesman orassociated person! The application shall beseparately signed and certi$ed by theregistered broker or dealer to which suchsalesman or associated person is to becomea:liated, or by the issuer in the case of asalesman employed appointed or authorizedsolely by such issuer! The application shall be insuch form and contain such information anddocuments concerning the salesman orassociated person as the Commission by ruleshall prescribe! (or purposes of this Section, a

salesman shall not include any employee of anissuer whose compensation is not determineddirectly or indirectly on sales of securities if theissuer!

7!5! 1pplications $led pursuant to Subsections7!0 and 7!3 shall be accompanied by aregistration fee in such reasonable amountprescribed by the Commission!

7!7! Hithin thirty 8

8b9 as willfully made or caused to be madea materially false or misleading

statement in any application forregistration or report $led with theCommission or a self-regulatoryorganization, or has willfully omitted tostate any material fact that is re=uired tobe stated therein'


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8c9 as failed to satisfy the =uali$cations orre=uirements for registration prescribedunder Section 7 and the rules andregulations of the Commissionpromulgated thereunder'

8d9 as been conicted, by a competent@udicial or administratie body of ano4ense inoling moral turpitude, fraud,embezzlement, counterfeiting, theft,

estafa, misappropriation, forgery,bribery, false oath, or per@ury, or of aiolation of securities, commodities,banking, real state or insurance laws'

8e9 %s en@oined or restrained by a competent@udicial or administratie body fromengaging in securities, commodities,banking, real state or insurance actiitiesor from willfully iolating laws goerningsuch actiities'

8f9 %s sub@ect to an order of a competent@udicial or administratie body refusing,reoking or suspending any registration,

licensed or other permit under this Code,the rules and regulations promulgatedthereunder, any other law administeredby the Commission'

8g9 %s sub@ect to an order of a self-regulatoryorganization suspending or e2pelling himfrom membership or participatingtherein or from association with amember or participant thereof'

8h9 as been found by a competent @udicialor administratie body to hae willfullyiolated any proisions of securities,commodities, banking, real state orinsurance laws, or has willfully aided,abetted, counseled, commanded,induced or procured such iolation' or

8i9 as been @udicially declared insolent!

(or purposes of this subsection, the term"competent @udicial or administratie body"shall include a foreign court of competent@urisdiction and a foreign $nancial regulator!

;!!8a9 %n case of charges against a salesman or

associated person, notice thereof shallalso be gien the broker, dealer or issueremploying such salesman or associatedperson!

8b9 *ending the hearing, the Commissionshall hae the power to order thesuspensions of such brokerAs, dealers,associated personAs or salesmanAsregistration& Provided, That such ordershall state the cause for suchsuspension! >ntil the entry of a $nalorder, the suspension of suchregistration, though binding upon the

persons noti$ed thereof, shall bedeemed con$dential, and shall not bepublished, unless it shall appear that theorder of suspension has been iolatedafter notice!

;!! The orders of the Commission refusing,reoking, suspending or placing limitations on aregistration as herein aboe proided, togetherwith its $ndings, shall be entered in the Registerof Securities Barket *rofessionals! Thesuspension or reocation of the registration of adealer or broker shall also automaticallysuspend the registration of all salesmen andassociated persons a:liated with such broker or

dealer! The order of the Commission refusing,reoking, suspending or placing limitations on aregistration as herein aboe proided, togetherwith its $ndings, shall be entered in the Registerof Securities Barket *rofessionals! Thesuspension or reocation of the registration of adealer or broker shall also automaticallysuspend the registration of a dealer or brokershall also automatically suspend the registrationof all salesmen and associated persons a:liatedwith such broker or dealer!;!.! %t shall be su:cient cause for refusal,reocation or suspension of a brokerAs or

dealerAs registrations, if any associated personthereof or any @uridical entity controlled by suchassociated person has committed any act oromission or is sub@ect to any disabilityenumerated in paragraphs 8a9 through 8i9 ofSubsection ;! % hereof!

Section 3&. Transactions andResonsi!ility of 7ro2ers and Dealers. $

transaction in securities or induce or attempt toinduce the purchase or sale of any securitye2cept in compliance with such rules andregulations as the Commission shall prescribe toensure fair and honest dealings in securities andproide $nancial safeguards and otherstandards for the operations of brokers anddealers, including the establishments ofminimum net capital re=uirements, theacceptance of custody and use of securities ofcustomers, and the carrying and use of depositsand credit balances of customers!

Section 31. Develoment of Securities3ar2et Professionals. $ The Commission in@oint undertaking with self regulatoryorganizations, organizations and associations of$nance professionals as well as priateeducational and research institute shall


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undertake or facilitate/organize continuingtraining, conferences/seminars, updatingprograms, research and deelopments as wellas technology transfer at the latest andadance trends in issuance and trading ofsecurities, deriaties, commodity trades andother $nancial instruments, as well as securitiesmarkets of other countries!

CHAPTER IECHANGES AND OTHER SECURITIES

TRADING !AR+ETS

Section 32. Prohi!ition on 9se of9nregistered #$change4 Regulation ofver&the&Counter 3ar2ets.!#! ?o broker,dealer, salesman, associated person of a brokeror dealer, or 62change, directly or indirectlyshall make use of any facility of an 62change inthe *hilippines to e4ect any transaction in asecurity, or to report such transaction, unlesssuch 62change is registered as such under

Section of this Code!

8a9 !!8a9 ?o broker, dealer, salesman or

associated person of a broker or dealer,singly or in concert with any otherperson, shall make, create or operate, orenable another to make, create oroperate, any trading market, otherwisethan on a registered 62change, for thebuying and selling of any security,e2cept in accordance with rules andregulations the Commission mayprescribe!

8b9 The Commission may promulgate rulesand regulations goerning transactionsby brokers, dealers, salesmen orassociated persons of a broker or dealer,oer any facilities of such trading marketand may re=uire such market to beadministered by a self-regulatoryorganization determined by theCommission as capable of insuring theprotection of inestors comparable to

that proided in the case of a registered62change! Such self-regulatoryorganization must proide a centralizedmarketplace for trading and must satisfyre=uirements comparable to thoseprescribed for registration of 62changesin Section of this Code!

Section 33. Registration of #$changes. !#! 1ny 62change may be registered as suchwith the Commission under the terms andconditions hereinafter proided in this Sectionand Section .< hereof, by $ling an application

for registration in such form and containingsuch information and supporting documents asthe Commission by rule shall prescribe,including the following&

8a9 1n undertaking to comply and enforceby its members with the proisions of

this Code, its implementing rules andregulations and the rules of the62change'

8b9 The organizational charts of the62change, rules of procedure, and a listof its o:cers and members'

8c9 Copies of the rules of the 62change' and8d9 1n undertaking that in the eent a

member $rm becomes insolent or

when the 62change shall hae foundthat the $nancial condition of itsmember $rm has so deteriorated that itcannot readily meet the demands of itscustomers for the deliery of securitiesand/or payment of sales proceeds, the62change shall, upon order of theCommission, take oer the operation ofthe insolent member $rm andimmediately proceed to settle themember $rmAs liabilities to itscustomers!

!! Registrations of an 62change shall begranted upon compliance with the followingproisions&

8a9 That the applicant is organized as astock corporation& Provided, That anyregistered 62change e2isting prior to thee4ectiity of this Code shall within one8#9 year reorganize as a stockcorporation pursuant to ademutualization plan approed by theCommission'

8b9 That the applicant is engaged solely inthe business of operating an e2change&Provided' ho&ever, That theCommission may adopt rules,regulations or issue an order, uponapplication, e2empting an 62changeorganized as a stock corporation andowned and controlled by another@uridical person from the restriction!

8c9 Hhere the 62change is organized as astock corporation, that no person maybene$cially own or control, directly orindirectly, more than $e percent 80G9of the oting rights of the 62change and

no industry or business group maybene$cially own or control, directly orindirectly, more than twenty percent8


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Commission, the rules, regulations andorders thereunder, or the rules of the62change'A

8e9 1 fair procedure for the disciplining ofmembers and persons associated withmembers, the denial of membership toany person seeking to be a member, thebarring of any person from associationwith a member, and the prohibition or

limitation of any person from associationwith member, and the prohibition orlimitation of any person from access toserices o4ered by the 62change'

8f9 That the brokers in the board of the62change shall comprise of not morethan forty-nine percent 8.;G9 of suchboard and shall proportionatelyrepresent the 62change membership interms of olume/alue or trade and paidup capital, and that any natural personassociated with a @uridical entity that isa member for this purpose' Provide'

That any registered 62change e2istingprior to the a4ectiity of this Code shallimmediately comply with thisre=uirement'

8g9 (or the board of the 62change to includein its composition 8#9 the president ofthe 62change, and 8ii9 no less than $ftyone percent 80#G9 of the remainingmembers of the board to be comprisedof three 89 independent directors andpersons who represent the interests ofissuers, inestors, and other marketparticipants, who are not associatedwith any broker or dealer or member ofthe 62change for a period of two 89years prior to his/her appointment! ?oo:cer or employee of a member, itssubsidiaries or a:liates or relatedinterests shall become an independentdirector: Provided, ho&ever' That theCommission may by rule, regulation, ororder upon application, permit thee2change organized as a stockcorporation to use a di4erentgoernance structure& Provided' further,

That the Commission is satis$ed thatthe 62change is acting in the publicinterest and is able to e4ectielyoperate as a self-regulatory organizationunder this Code& Provided' !nally' Thatany registered e2change e2isting priorto the a4ectiity of this Code shallimmediately comply with thisre=uirement!

8h9 The president and other management ofthe 62change to consist only of personswho are not members and are notassociated in any capacity, directly or

indirectly with any broker or dealer ormember or listed company of the62change& Provided, That the 62changemay only appoint, and a person mayonly sere, as an o:cer of the e2changeif such person has not been a member

or a:liated with any broker, dealer, ormember of the 62change for a period ofat least two 89 years prior to suchappointment'

8i9 The transparency of transactions on the62change'

8@9 The e=uitable allocation of reasonabledues, fees, and other charges amongmembers and issuers and other persons

using any facility or system which the62change operates or controls'

8k9 *reention of fraudulent andmanipulatie acts and practices,promotion of @ust and e=uitableprinciples of trade, and, in general,protection of inestors and the publicinterest' and

8l9 The transparent, prompt and accurateclearance and settlement of transactions e4ected on the 62change!

!! %f the Commission $nds that the applicant

62change is capable of complying and enforcingcompliance by its members, and personsassociated with such members, with theproisions of this Code, and the rules of the62change, and that the rules of 62change arefair, @ust and ade=uate, the Commission shallcause such 62change to be registered! %f, afternotice due and hearing, the Commission $ndsotherwise, the application shall be denied!

!.! Hithin ninety 8;pon the registration of an 62change, it is

shall pay a fee in such amount and within suchperiod as the Commission may $2!

!3! >pon appropriate application inaccordance with the rules and regulations of theCommission and upon such terms as theCommission may deemed necessary for theprotection of inestors, an e2change maywithdraw its registration or suspend itsoperations or resume the same!

Section 3". Segregation and :imitation offunctions of 3em!ers8 7ro2er and Dealers.

" .!#! %t shall be unlawful for any member-broker of an 62change to e4ect any transactionon such 62change for its own account, theaccount of an associated person, or an accountwith the respect to which it or an associatedperson thereof e2ercises the inestment


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discretion& Provided' ho&ever'That this Sectionshall not make unlawful-

8a9 1ny transaction by a member-brokeracting in the capacity of a market maker'

8b9 1ny transaction reasonably necessary tocarry on an odd-lot transactions'

8c9 1ny transaction to o4set a transactionmade in error' and

8d9 1ny other transaction of a similar nature

as may be de$ned by the Commission!

.!! %n all instances where the member-brokere4ects a transaction on an 62change for its ownaccount or the account of an associated personor an account with the respect to which ite2ercises inestment discretion, it shall discloseto such customer at or before the completion ofthe transaction it is acting for its own account&Provided' further' That this fact shall bereIected in the order ticket and thecon$rmation slip!

.!! 1ny member-broker who iolates theproisions of this Section shall be sub@ect to theadministratie sanctions proided in Section 0.of this Code!

Section 3#.Additional Fees of #$changes.%n addition to the registration fee prescribed inSection of this Code, eery 62change shallpay to the Commission, on a semestral basis onor before the tenth day of the end of the end ofeery semester of the calendar year, a fee insuch an amount as the Commission shallprescribe, but not more than one-hundredth ofoneper centum8#G9 of the aggregate amountof the sales of securities transacted on such62change during the preceding calendar yearfor the priilege of doing business, during thepreceding calendar year or any part thereof!

Section 3%. Powers with Resect to#$changes and ther Trading 3ar2et. 3!#! The Commission is authorized, if in itsopinion such action is necessary or appropriatefor the protection of inestors and the publicinterest so re=uires, summarily to suspend

trading in any listed security on any 62changeor other trading market for a period note2ceeding thirty 8


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Section 7! %ndependent ,irectors. 1nycorporation with a class of e=uity securitieslisted for trading on an 62change or with assetsin e2cess of (ifty million pesos 8*0

REGISTRATION* RESPONSIBILITIES AND

O'ERSIGHT OF SELF(REGULATOR,

ORGANI-ATIONS

Section ;! -ssociations of Securities Bro+ers'and ,ealers' and $ther Securities Related$rganiations! ;!#! The Commission shallhae the power to register as a self-regulatoryorganization, or otherwise grant licenses, and toregulate, superise, e2amine, suspend orotherwise discontinue, as a condition for theoperation of organizations whose operations arerelated to or connected with the securitiesmarket such as but not limited to associationsof brokers and dealers, transfer agents,custodians, $scal and paying agents, computerserices, news disseminating serices, pro2ysolicitors, statistical agencies, securities ratingagencies, and securities information processorwhich are engaged in business of& 8a9 Collecting,processing, or preparing for distribution orpublication, or assisting, participating in, or

coordinating the distribution or publication of,information with respect to transactions in or=uotations for any security' or 8b9 )istributingor publishing, whether by means of a tickertape, a communications network, a terminaldisplay deice, or otherwise, on a current andcontinuing basis, information with respect tosuch transactions or =uotations! TheCommission may prescribe rules andregulations which are necessary or appropriatein the public interest or for the protection ofinestors to goern self-regulatory organizationsand other organizations licensed or regulated

pursuant to the authority granted in Subsection;!# including the re=uirement of cooperationwithin and among, and electronic integration ofthe records of, all participants in the securitiesmarket to ensure transparency and facilitatee2change of information!

;!! 1n association of brokers and dealers maybe registered as a securities associationpursuant to Subsection ;! by $ling with theCommission an application for registration insuch form as the Commission, by rule, mayprescribe containing the rules of the associationand such other information and documents asthe Commission, by rule, may prescribe as

necessary or appropriate in the public interestor for the protection of inestors!

;!! 1n association of brokers and dealers shallnot be registered as a securities associationunless the Commission determines that&

8a9 The association is so organized and has thecapacity to be able to carry out the purposes ofthis Code and to comply with, and to enforcecompliance by its members and personsassociated with its members, with theproisions of this Code, the rules and

regulations thereunder, and the rules of theassociation!

8b9 The rules of the association, notwithstandinganything in the Corporation Code to thecontrary, proide that&8#9 1ny registered broker or dealer may

become a member of the association'89 There e2ist a fair representation of its

members to sere on the oard of )irectorsof the association and in the administrationof its a4airs, and that may any naturalperson associated with a @uridical entitythat is a member shall himself be deemedto be a member for this purpose'

89 The oard of )irectors of the associationincludes in its composition& 8a9 Thepresident of the association and 8b9 *ersonwho represent the interests of the issuerand public inestors and are not associatedwith any broker or dealer or member of theassociation' that the president and othermanagement of the association not be amember or associated with any broker,dealer or member of the association'

8.9 (or the e=uitable allocation of reasonabledues, fees, and other charges amongmember and issuers and other personsusing any facility or system which theassociation operates or controls'

809 (or the preention of fraudulent andmanipulatie acts and practices, thepromotion of @ust and e=uitable principles oftrade, and, in general, the protection ofinestors and the public interest'

839 That its members and persons associatedwith its members shall be appropriatelydisciplined for iolation of any proision of

this Code, the rules and regulationsthereunder, or the rules of the association'

859 That a fair procedure for the disciplining ofmembers and persons associated withmembers, the denial of membership to anyperson seeking membership therein, the


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barring of any person from becomingassociated with a member thereof, and theprohibition or limitation by the associationof any person with respect to access toserices o4ered by the association or amember thereof!

;!.! 8a9 1 registered securities association shalldeny membership to any person who is not a

registered broker or dealer!

8b9 1 registered securities association may denymembership to, or condition the membership of,a registered broker or dealer if such broker ordealer&

8i9 )oes not meet the standards of $nancialresponsibility, operational capability,training, e2perience or competence that areprescribe by the rules of the association' or8ii9 as engaged, and there is a reasonablelikelihood it will again engage, in acts orpractices inconsistent with @ust and

e=uitable principles of fair trade!

8c9 1 registered securities association may denymembership to a registered broker or dealer notengage in a type of business in which the rulesof the association re=uire members to beengaged& Provided' ho&ever'That no registeredsecurities association may deny membership toa registered broker or dealer by reason of theamount of business done by the broker ordealer!1 registered securities association may e2amineand erify the =uali$cations of an applicant tobecome a member in accordance withprocedure established by the rules of theassociation!

8d9 1 registered securities association may bar asalesman or person associated with a broker ordealer from being employed by a member orset conditions for the employment of asalesman or associated if such person&

8i9 )oes not meet the standards of training,e2perience, or competence that are prescribeby the rules of the association' or

8ii9 as engage, and there is a reasonablelikelihood he will again engage, in acts orpractices inconsistent with @ust and e=uitableprinciples of fair trade!

1 registered securities association may e2amineand erify the =uali$cations of an applicant tobecome a salesman or associated personemployed by a member in accordance with theprocedures establish by the rules of theassociation! 1 registered association also mayre=uire a salesman or associated personemployed by a member to be registered with

the association in accordance with theprocedures prescribed in the rules of theassociation!

;!0! %n any proceeding by a registeredsecurities association to determine whether a

person shall be denied membership, or barredfrom association with a member, the associationshall proide notice to the person under reiewof the speci$c grounds being considered fordenial, a4ord him an opportunity to defendagainst the allegations, and keep a record of theproceedings! 1 determination by the associationto deny membership shall be supported by astatement setting forth the speci$c grounds on

which the denial is based!

Section "&. Powers with Resect to Self&Regulatory rgani"ations. " .pon the$ling of an application for registration as an62change under Section , a registeredsecurities association under Section ;, aregistered clearing agency under Section ., orother self-regulatory organization under thisSection, the Commission shall hae ninety 8;

submit to the Commission for priorapproal any proposed rule oramendment thereto, together with aconcise statement of the reason ande4ect of the proposed amendment

8b9 Hithin si2ty 83self-regulatory organization that suchorganization e4ect on its own behalf speci$edchanges in its rules and practices and, after dueto notice and hearing it determines that suchchanges hae not been e4ected, and that suchchanges are not necessary, by the rule or


20/31

regulation or by order, may alter, abrogate orsupplement the rules of such self-regulatoryorganization in so far as necessary orappropriate to e4ect such changes in respect ofsuch matters as&

8a9 Safeguards in respect of the $nancialresponsibility of members and ade=uateproision against the easion of $nancialresponsibility through the use of

corporate forms or special partnerships'8b9 The superision of trading practices'8c9 The listing or striking from listing of any

security'8d9 ours of trading'8e9 The manner, methods, and place of

soliciting business'8f9 (ictitious accounts'8g9 The time and method of making

settlements, payments, and delieries,and of closing accounts'

8h9 The transparency of securitiestransactions and prices'

8i9 The $2ing of reasonable rates of fees,interest, listing and other charges, butnot rates of commission'

8@9 Binimum units of trading'8k9 +dd-lot purchases and sales'8l9 Binimum deposits on margin accounts'

and8m9The superision, auditing and disciplining

of members or participants!

.

8a9 To suspend for a period not e2ceedingtwele 8#9 months or to reoke theregistration of a self-regulatoryorganization, or to censure or imposelimitations on the actiities, functions,and operations of such self-organization,if the Commission $nds that such a self-regulatory organization has willfullyiolated or is unable to comply with anyproision of this Code or of the rules andregulations thereunder, or its own or hasfailed to enforce compliance therewith

by a member of, person associated witha member, or a participant in such self-regulatory organization'

8b9 To e2pel from a self-regulatoryorganization any member thereof or anyparticipant therein who is sub@ect to anorder of the Commission under Section; of this Code or is found to haewillfully iolated any proision of thisCode or suspend for a period note2ceeding twele 8#9 months foriolation of any proision of this Code orany other laws administered by the

Commission, or rules and regulationsthereunder, or e4ected, directly orindirectly, any transaction for any personwho, such member or participant hadreason to beliee, was iolating in

respect of such transaction any of suchproisions' and

8c9 To remoe from the o:ce or censure anyo:cer or director of a self-regulatoryorganization if it $nds that such o:cer ordirector has iolated any proision of thisCode, any other law administered by theCommission, the rules or regulationsthereunder, or the rules of such self-

regulatory organization, abused hisauthority, without reasonable@usti$cation or e2cuse has failed toenforce compliance with any of suchproisions!

.

authorized to discipline a member of orparticipant in such self-regulatoryorganization, or any person associatedwith a member, including thesuspension or e2pulsion of such member

or participant, and the suspension or barfrom being associated with a member, ifsuch person has engage in acts orpractices inconsistent with @ust ande=uitable principles of fair trade or inwillful iolation of any proision of theCode, any other law administered by theCommission, the rules or regulationsthereunder, or the rules of the self-regulatory organization! %n anydisciplinary proceeding by a self-regulatory organization 8other than asummary proceeding pursuant toparagraph 8b9 of this subsection9 theself-regulatory organization shall bringspeci$c charges, proide notice to theperson charged, a4ord the personcharged with an opportunity to defendagainst the charges, and keep a recordof the proceedings! 1 determination toimpose a disciplinary sanction shall besupported by a written statement of theo4enses, a summary of the eidencepresented and a statement of thesanction imposed!

8b9 1 self-regulatory organization maysummarily& 8%9 Suspend a member,participant or person associated with amember who has been or is e2pelled orsuspended from any other self-regulatory organization' or 8ii9 Suspend amember who the self-regulatoryorganization $nds to be in such $nancialor operating di:culty that the memberor participant cannot be permitted tocontinue to do business as a memberwith safety to inestors, creditors, othermembers, participants or the self-

regulatory organization& Provided' Thatthe self-regulatory organizationimmediately noti$es the Commission ofthe action taken! 1ny person aggrieedby a summary action pursuant to thisparagraph shall be promptly a4orded an


21/31

opportunity for a hearing by theassociation in accordance with theproisions of paragraph 8a9 of thissubsection! The Commission, by order,may stay a summary action on its ownmotion or upon application by anyperson aggrieed thereby, if theCommission determines summarily orafter due notice and hearing 8which

hearing may consist solely of thesubmission of a:daits or presentationof oral arguments9 that a stay isconsistent with the public interest andthe protection of inestors!

.

such person from becoming so associated!Hithin thirty 8CHAPTER I

AC)UISITION AND TRANSFER OF

SECURITIES AND SETTLE!ENT OF

TRANSACTION IN SECURITIES

Section "1. Prohi!ition on 9se of

9nregistered Clearing Agency. %t shall beunlawful for any broker, dealer, salesman,associated person of a broker or dealer, orclearing agency, directly or indirectly, to makeuse of any facility of a clearing agency in*hilippines to make delieries in connection

with transaction in securities or to reduce thenumber of settlements of securities transactionsor to allocate securities settlementresponsibilities or to proide for the centralhandling of securities so that transfers, loansand pledges and similar transaction can bemade by bookkeeping entry or otherwise tofacilitate the settlement of securitiestransactions without physical deliery of

securities certi$cates, unless such clearingagency is registered as such under Section .of this Code or is e2empted from suchregistration upon application by the clearingagency because, in the opinion of theCommission, by reason of the limited olume oftransactions which are settled using theclearing agency, it is not practicable and notnecessary or appropriate in the public interestor for the protection of inestors to re=uire suchregistration!

Section "2. Registration of Clearing

Agencies. - .!#! 1ny clearing agency may beregistered as such with the Commission underthe terms and conditions hereinafter proided inthis Section, by $ling an application forregistration in such form and containing suchinformation and supporting documents as theCommission by rule shall prescribe, includingthe following&

8a9 1n undertaking to comply and enforcecompliance by its participants with theproisions of this Code, and anyamendments thereto, and theimplementing rules or regulations madeor to be made thereunder, and theclearing agencyAs rules'

8b9 The organizational charts of the62change, its rules of procedure, and listof its o:cers and participants'

8c9 Copies of the clearing agencyAs rules!

.!! ?o registration of a clearing agency shallbe granted unless the rules of the clearingagency include proision for&

8a9 The e2pulsions, suspension, ordisciplining of a participant for iolations

of this Code, or any other 1ctadministered by the Commission, therules, regulations, and ordersthereunder, or the clearing agencyAsrules'

8b9 1 fair procedure for the disciplining ofparticipants, the denial of participationrights to any person seeking to be aparticipant, and the prohibition orlimitation of any person from access toserices o4ered by the clearing agency'

8c9 The e=uitable allocation of reasonabledues, fees, and other charges among

participants'8d9 *reention of fraudulent and

manipulatie acts and practices,promotion of @ust and e=uitableprinciples of trade, and, in general,


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protection of inestors and the publicinterest'

8e9 The transparent, prompt and accurateclearance and settlement of transactionsin securities handled by the clearingagency' and

8f9 The establishment and oersight of afund to guarantee the prompt andaccurate clearance and settlement of

transaction e2ecuted on an e2change,including a re=uirement that memberseach contribute an amount based ontheir and a releant percentage of thedaily e2posure of the 8.9 largest tradingbrokers which ade=uately reIectstrading risks undertaken or pursuant toanother formula set forth in Commissionrules or regulations or order, uponapplication& *roided, howeer, That aclearing agency engaged in the businessof securities depository shall be e2emptfrom this re=uirement!

.!! %n the case of an application $led pursuantto this section, the Commission shall grantregistration if it is $nds That the re=uirements ofthis code and the rules and regulationsthereunder with respect to the applicant haebeen satis$ed, and shall deny registration if itdoes not make such $nding!

.!.! >pon appropriate application inaccordance with the rules and regulations of theCommission and upon such terms as theCommission may deem necessary for theprotection of inestors, a clearing agency maywithdraw its registration or suspend itsoperation or resume the same!

Section "3. 9ncerticated Securities! ?otwithstanding Section 3 of the CorporationCode of the *hilippines& .!#! 1 corporationwhose securities are registered pursuant to thisCode or listed on securities e2change may&

8a9 %f so resoled by its oard of )irectorsand agreed by a shareholder, inestor orsecurities intermediary, issue shares to,

or record the transfer of some or all itsshares into the name of saidshareholders, inestors or, securitiesintermediary in the form of uncerti$edsecurities! The use of uncerti$edsecurities in these circumstances shallbe without pre@udice to the rights of thesecurities intermediary subse=uently tore=uire the corporation to issue acerti$cate in respect of any sharesrecorded in its name' and

8b9 %f so proided in its articles of incorporation and by-laws, issue all of

the shares of a particular class in theform of >ncerti$cated securities andsub@ect to a condition that inestors maynot re=uire the corporation to issue acerti$cate in respect of any sharesrecorded in their name!

.!! The Commission by rule may allow othercorporations to proide in their articles ofincorporation and by-laws for the use ofuncerti$cated securities!

.!! Transfers of securities, including anuncerti$cated securities, may be alidly madeand consummated by appropriate book-entries

in the securities intermediaries, or in the stockand transfer book held by the corporation or thestock transfer agent and such bookkeepingentries shall be binding on the parties to thetransfer! 1 transfer under this subsection hasthe e4ect of the deliery of a security in bearerform or duly indorsed in blank representing the=uantity or amount of security or righttransferred, including the unrestrictednegotiability of that security by reason of suchdeliery! oweer, transfer of uncerti$catedshares shall only be alid, so far as thecorporation is concerned, when a transfer is

recorded in the books of the corporation so asto show the names of the parties to the transferand the number of shares transferred!

oweer, nothing in this Code shall complianceby banking and other institutions under thesuperision of the angko Sentral ng *ilipinasand their stockholders with the applicableceilings on shareholding prescribed underpertinent banking laws and regulations!

Section "". #videntiary ;alue of ClearingAgency Record. The o:cial records and bookentries of a clearing agency shall constitute thebest eidence of such transactions betweenclearing agency shall constitute the bestbetween clearing agency and its participantsA ormembersA clients to proe their rights, title andentitlement with respect to the book-entrysecurity holdings of the participants ormembers held on behalf of the clients!oweer, the corporation shall not be bound bythe foregoing transactions unless the corporatesecretary is duly noti$ed in such manner as theCommission may proide!

Section "#. Pledging a Security or InterestTherein. %n addition to other methodsrecognized by law, a pledge of, including anuncerti$cated security, is properly constitutedand the instrument proing the right pledgedshall be considered deliered to the creditorunder 1rticles


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agencyAs rules! oweer, the corporation shallnot be bound by the foregoing transactionsunless the corporate secretary is duly noti$ed insuch manner as the Commission may proide!

Section "%. Issuer5s Resonsi!ility for6rongful Transfer to Registered ClearingAgency. - The registration of a transfer of asecurity into the name of and by a registered

clearing agency or its name of or by aregistered clearing agency or its nominee shallbe $nal and conclusie unless the clearingagency had notice of an aderse claim beforethe registration was made! The aboeproisions which the claimant may hae againstthe issuer for wrongful registration in suchcircumstances!

Section "7. Power of the Commission 6ithResect to Securities wnershi. TheCommission is authorize, haing due regard tothe public interest and the protection of

inestors, to promulgate rules and regulationswhich&

.5!#! Jalidate the transfer of securities by book-entries rather than the deliery of physicalcerti$cates'

.5!! 6stablish when a person ac=uires asecurity or an interest therein and whendeliery of a security to a purchaser occurs'

.5!! 6stablish which records constitute thebest eidence of a personAs interests in asecurity and the e4ect of any errors inelectronic records of ownership'

.5!.! Codify the rights of inestors who chooseto hold their securities indirectly through aregistered clearing agency and/ or othersecurities intermediaries'

.5!0! Codify the duties of securitiesintermediaries 8including clearing agencies9 whohold securities on behalf of inestors' and

.5!3 Die $rst priority to any claims of aregistered clearing agency against a participantarising from a failure by the participant to meetits obligations under the clearing agencyAs rulesin respect of the clearing and settlement oftransactions in securities, in a dissolution of theparticipant, and any such rules and regulationshall bind the issuers of the securities, inestorsin the securities, any third parties with interestsin the securities, and the creditors of aparticipant of a registered clearing agency!

CHAPTER II

!ARGIN AND CREDIT

Section .7! *argin Requirements! .7!#! (orthe purpose of preenting the e2cessie use ofcredit for the purchase or carrying of securities,the Commission, in accordance with the credit

and monetary policies that may be promulgatedfrom time to time by the Bonetary oard of theangko Sentral ng *ilipinas, shall prescribedrules and regulations with respect to theamount of credit that may be e2tended on anysecurity! (or the e2tension of credit, such rulesand regulations shall be based upon thefollowing standard&

1n amount not greater than the whicheer isthe higher of

8a9 Si2ty-$e per centum 830G9 of thecurrent market price of the security, or

8b9 +ne hundred per centum8#


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credit for the purpose of purchasing or carryingany security, only in accordance with such rulesand regulations as the Commission shallprescribe to preent the e2cessie use of creditfor the purchasing or carrying of or trading insecurities in circumention of the otherproisions of this Section!! Such rules andregulations may impose upon all loans made forthe purpose of purchasing or carrying securities

limitations similar to those imposed uponmembers, brokers, or dealers by Subsection.7! and the rules and regulations thereunder!This subsection and the rules and regulationsthereunder shall not apply&

8a9 To a credit e2tension made by a personnot in the ordinary course of business'

8b9 8b9 to a loan to a dealer to aid in the$nancing of the distribution of securitiesto customers not through the medium ofan 62change' or

8c9 8c9 To such other credit e2tension as theCommission shall e2empt from the

operation of this subsection and therules and regulations thereunder uponspeci$ed terms and conditions for statedperiod!

Section "9. Restrictions on 7orrowings !y3em!ers8 7ro2ers8 and Dealers. %t shall beunlawful for any registered broker or dealer, ormember of an 62change, directly or indirectly'

.;!#! To permit in the ordinary course ofbusiness as a broker or dealer his aggregateindebtedness including customersA creditbalances, to e2ceed such percentage of the netcapital 8e2clusie of $2ed assets and alue of62change membership9 employed in thebusiness, but not e2ceeding in any case tothousand percentum 8,


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0#!.! %t shall be unlawful for any person to aid,abet, counsel, command, induce or procure anyiolation of this Code, or any rule, regulation ororder of the Commission thereunder!

0#!0! 6ery person who substantially assists theact or omission of any person primarily liableunder Sections 05, 07, 0; and 3< of this Code,

with knowledge or in reckless disregard thatsuch act or omission is wrongful, shall be @ointlyand seerally liable as an aider and abettor fordamages resulting from the conduct of theperson primarily liable& Provided' ho&ever'Thatan aider and abettor shall be liable only to thee2tent of his relatie contribution in causingsuch damages in comparison to that of theperson primarily liable, or the e2tent to whichthe aider and abettor was un@ustly enrichedthereby, whicheer is greater!

Section #2. Accounts and Records8

Reorts8 #$amination of #$changes8mem!ers8 and thers. 0!#! 6eryregistered 62change, broker or dealer, transferagent, clearing agency, securities association,and other self-regulatory organization, andeery other person re=uired to register underthis Code, shall make, keep and presere forsuch periods, records, furnish such copiesthereof, and make such reports, as theCommission by its rules and regulations mayprescribe! Such accounts, correspondence,memoranda, papers, books, and other recordsshall be sub@ect at any time to such reasonableperiodic, special or other e2aminations byrepresentaties of the Commission as theCommission may deem necessary orappropriate in the public interest of for theprotection of inestors!

0!! 1ny brother, dealer or other persone2tending credit, who is sub@ect to the rules andregulations prescribed by the Commissionpursuant to this Code, shall make such reportsto the Commission as may be necessary orappropriate to enable it to perform the functions

conferred upon it by this Code!

0!! (or purposes of this Section, the term"records refers to accounts, correspondence,memoranda, tapes, discs, papers, books andother documents or transcribed information ofany type, whether written or electronic incharacter!

Section #3. Investigations8 In%unctions andProsecution of /enses. 0!#! TheCommission may, in its discretion, make suchinestigations as it deems necessary to

determine whether any person has iolated or isabout to iolate any proision of this Code, anyrule, regulation or order thereunder, or any ruleof an 62change, registered securitiesassociation, clearing agency, other self-regulatory organization, and may re=uire or

permit any person to $le with it a statement inwriting, under oath or otherwise, as theCommission shall determine, as to all facts andcircumstances concerning the matter to beinestigated! The Commission may publishinformation concerning any such iolations, andto inestigate any fact, condition, practice ormatter which it may deem necessary or properto aid in the enforcement of the proisions of

this Code, in the prescribing of rules andregulations thereunder, or in securinginformation to sere as a basis forrecommending further legislation concerningthe matters to which this Code relates&Provided' ho&ever, That any person re=uestedor subpoenaed to produce documents or testifyin any inestigation shall simultaneously benoti$ed in writing of the purpose of suchinestigation& Provided' further, That all criminalcomplaints for iolations of this Code, and theimplementing rules and regulations enforced oradministered by the Commission shall be

referred to the )epartment of Eustice forpreliminary inestigation and prosecutionbefore the proper court& Provided' furthermore,That in instances where the law allowsindependent ciil or criminal proceedings ofiolations arising from the same act, theCommission shall take appropriate action toimplement the same&provided' !nally'That theinestigation, prosecution, and trial of suchcases shall be gien priority!

0!! (or the purpose of any such inestigation,or any other proceeding under this Code, theCommission or any o:cer designated by it isempowered to administer oaths anda:rmations, subpoena witnesses, compelattendance, take eidence, re=uire theproduction of any book, paper, correspondence,memorandum, or other record which theCommission deems releant or material to thein=uiry, and to perform such other actsnecessary in the conduct of such inestigationor proceedings!

0!! Hheneer it shall appear to the

Commission that any person has engaged or isabout to engage in any act or practiceconstituting a iolation of any proision of thisCode, any rule, regulation or order thereunder,or any rule of an 62change, registered securitiesassociation, clearing agency or other self-regulatory organization, it may issue an order tosuch person to desist from committing such actor practice& Provided' ho&ever' That theCommission shall not charge any person withiolation of the rules of an 62change or otherself-regulatory organization unless it appears tothe Commission that such 62change or other

self-regulatory organization is unable orunwilling to take action against such person!1fter $nding that such person has engaged inany such act or practice and that there is areasonable likelihood of continuing, further orfuture iolations by such person, the


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Commission may issue e"parte a cease anddesist order for a ma2imum period of ten 8#

%J! %n the case of a iolation of Section., a $ne of no more than three 89times the pro$t gained or lossaoided as result of the purchase,

sale or communication proscribed bysuch Section, and

J! +ther penalties within the power ofthe Commission to impose!

0.!! The imposition of the foregoingadministratie sanctions shall be withoutpre@udice to the $ling of criminal chargesagainst the indiiduals responsible for theiolation!

0.!! The Commission shall hae the power toissue writs of e2ecution to enforce the

proisions of the Section and to enforcepayment of the fees and other dues collectibleunder this Code!Section ##. Settlement /ers. 00!#! 1t anytime, during an inestigation or proceedingunder this Code, parties being inestigatedand/or charged may propose in writing an o4erof settlement with the Commission!

00!! >pon receipt of such o4er of settlement,the Commission may consider the o4er basedon timing, the nature of the inestigation orproceeding, and the public interest!

00!! The Commission may only agree to asettlement o4er based on its $ndings that suchsettlement is in the public interest! 1nyagreement to settle shall hae no legal e4ectuntil publicly disclosed! Such decision may bemade without a determination of guilt on thepart of the person making the o4er!

00!.! The Commission shall adopt rules andprocedures goerning the $ling, reiew,withdrawal, form of re@ection and acceptance of

such o4ers!

Section #%. Civil :ia!ilities on Account ofFalse Registration Statement. 03!#! 1nyperson ac=uiring a security, the registrationstatement of which or any part thereof containson its e4ectiity an untrue statement of amaterial fact or omits to state a material factre=uired to be stated therein or necessary tomake such statements not misleading, and whosu4ers damage, may sue and recoer damagesfrom the following enumerated persons, unlessit is proed that at the time of such ac=uisition

he knew of such untrue statement or omission&8a9 The issuer and eery person who signed

the registration statement&8b9 6ery person who was a director of, or

any other person performing similarfunctions, or a partner in, the issuer at


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the time of the $ling of the registrationstatement or any part, supplement oramendment thereof with respect towhich his liability is asserted'

8c9 6ery person who is named in theregistration statement as being or aboutto become a director of, or a personperforming similar functions, or apartner in, the issuer and whose written

consent thereto is $led with theregistration statement'

8d9 6ery auditor or auditing $rm named ashaing certi$ed any $nancial statementsused in connection with the registrationstatement or prospectus!

8e9 6ery person who, with his writtenconsent, which shall be $led with theregistration statement, has been namedas haing prepared or certi$ed any partof the registration statement, or ashaing prepared or certi$ed any reportor aluation which is used in connection

with the registration statement, withrespect to the statement, report, oraluation, which purports to hae beenprepared or certi$ed by him!

8f9 6ery selling shareholder whocontributed to and certi$ed as to theaccuracy of a portion of the registrationstatement, with respect to that portionof the registration statement whichpurports to hae been contributed byhim!

8g9 6ery underwriter with respect to suchsecurity!

03!! %f the person who ac=uired the security didso after the issuer has made generally aailableto its security holders an income statementcoering a period of at least twele 8#9 monthsbeginning from the e4

Revised Securities Act

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Transcript of Revised Securities Act