04BAROPS_SecuritiesRegulationCode_163to183 4.doc

8/10/2019 04BAROPS_SecuritiesRegulationCode_163to183 4.doc

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THE SECURITIES

REGULATION CODE(RA 8799)

IOVERVIEW:

THE FINANCIAL MARKETS

A. Capital Ma!"t#

The places to go if you want to raise newmoney

1. Equity Capital for the investor, thestock market provides a varialereturn

a. !tock "arket

!ecurity eg, shares ofstock

#. $et Capital for the lender, themoney or ond market provides afi%ed return

a. "oney "arket for short termdets, ie, those normally

maturing within 1 year fromdate of issuance

!ecurity commercial paper

&an unsecured '() of acompany, issued on a discountasis, promising to pay theholder the full face value

thereof upon redemption*

. +ond "arket for long termdets, ie, those normally

maturing after a year from dateof issuance

!ecurity unk onds &high

yield onds having highinterest rates and are issuedy lower credit ratedcompanies or companies with

no credit rating*

+. N$%&Capital Ma!"t#

The places to go if you want to hedge ormitigate the risks attached to holding

capital assets

1. Commodity "arket The instrumentstraded in this market are not present

assets like shares of stock,commercial papers or onds utfuture contracts calling for delivery of

an asset - for this reason, acommodity market is usually referredto as a futures market. &eg,agricultural products, metals andfinancial instruments*

!ecurity a futures contract &onewhich entitles the holder to uy orsell a specific amount of the

underlying commodityrepresented y the contract in aprearranged, deliverale grade ata specific date in the future at a

specified price.

#. oreign E%change "arket Thismarket is an over/the/counter market

conducted y international anks anddoes not have a central location

!ecurity a forward e%change

contract

0. (ptions "arket 't enales aninvestor to purchase an option givinghim the right to uy or sell a specificnumer of shares at a future date, at

a specific price. or this right, theinvestor either pays or receivesmoney ut &ust like in a commodity

market* the money involved is only afraction of the market value of theshares concerned.

!ecurity call or put options

II

OVERVIEW OF THE LAW

A. Stat" '$li

The !tate shall estalish a sociallyconscious, free market that regulates

itself, encourages the widest participationof ownership in enterprises, enhances thedemocratiation of wealth, promotes thedevelopment of the capital market,

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protect investors, ensures full and fairdisclosure aout securities, minimies if

not totally eliminates insider trading andother fraudulent or manipulative devices

and practices which create distortions inthe free market.

+. '$/"# a%+ F,%ti$%# $4 t*" SEC

The shall have, among others, thefollowing powers and functions?1. overnment-

#. ormulate policies andrecommendations on issuesconcerning the securities market,advise Congress and other

government agencies on all aspectsof the securities market

0. Approve, reect, suspend, revoke orrequire amendments to registration

statements, and registration andlicensing applications-

@. ;egulate, investigate or supervisethe activities of persons-

. !upervise, monitor, suspend or takeover the activities of e%changes,

clearing agencies and other !;(s-B. 'mpose sanctions for the violation of

laws, rules, regulations and orders-. 9repare, approve, amend or repeal

rules, regulations and orders-D. Enlist the aid and support of and:or

deputie any and all enforcement

agencies of the >overnment, as wellas any private institution,corporation, firm, association orperson-

. 'ssue cease and desist orders to

prevent fraud or inury-1F. 9unish for contempt of the

Commission, oth direct andindirect-

11. Compel the officers of anyregistered corporation or association

to call meetings of stockholders ormemers-

1#. 'ssue supoena duces tecum andsummon witnesses to appear,

search and seiure of all documents,papers, files and records, ta%returns, and ooks of accounts ofany entity or person under

investigation-10. !uspend, or revoke the franchise or

certificate of registration of

corporations, partnerships orassociations-

1@. !uch other powers as may eprovided y law as well as those

which may e implied from, or whichare necessary or incidental.

The CommissionGs urisdiction over allcases enumerated under !ec of 9$ F#/

A is herey transferred to the Courts ofgeneral urisdiction or the appropriate;egional Trial Court.

The Commission shall retain urisdiction

over pending cases involving intra/corporate disputes sumitted for finalresolution which should e resolved within1 year from the enactment of this Code.

The Commission shall retain urisdictionover pending suspension of payments:rehailitation cases filed as of

0F 7une #FFF until finally disposed.

C. D"4i%iti$% $4 T"0#

1. S",iti"# & are shares, participation

or interests in a corporation or in acommercial enterprise or profit/

making venture and evidenced y acertificate, contract, instrument,

whether written or electronic incharacter. 't includes?

&a* !hares of stock, onds,

deentures, notes, evidences ofindetedness, asset/ackedsecurities-

&* 'nvestment contracts, certificatesof interest or participation in aprofit sharing agreement,certificates of deposit for a futuresuscription-

&c* ractional undivided interests inoil, gas or other mineral rights-

&d* $erivatives like option andwarrants-

&e* Certificates of assignments,certificates of participation, trust

certificates, voting trustcertificates or similar instruments-

&f* 9roprietary or non proprietarymemership certificates

incorporations- and&g* (ther instruments as may in the

future e determined y theCommission.

#. I##," & the originator, maker,oligor, or creator of the security.



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0. 5$!" & a person engaged in the

usiness of uying and sellingsecurities for the account of others.

@. D"al" & any person who uys and

sells securities for his:her ownaccount in the ordinary course ofusiness.

. A##$iat"+ p"#$% $4 a 2$!" $+"al"/ an employee thereof who,directly e%ercises control ofsupervisory authority, ut does not

include a salesman, or an agent or aperson whose functions are solelyclerical or ministerial.

B. Cl"ai%- A-"%/ any person whoacts as intermediary in makingdeliveries upon payment to effectsettlement in securities transactions.

. E3*a%-" & an organied

marketplace or facility that ringstogether uyers and sellers and

e%ecutes trades of securities and:orcommodities.

D. I%#i+" 6

&a* the issuer-&* a director or officer &or person

performing similar functions* of,or a person controlling theissuer-

&c* a person whose relationship or

former relationship to the issuergives or gave him access tomaterial information aout the

issuer or the security that is notgenerally availale to the pulic-

&d* a government employee, ordirector, or officer of ane%change, clearing agency

and:or self/regulatoryorganiation who has access tomaterial information aout anissuer or a security that is not

generally availale to the pulic-or

&e* a person who learns suchinformation y a communication

from any of the foregoinginsiders.

. '$0$t" & a person who, actingalone or with others, takes initiativein founding and organiing the

usiness or enterprise of the issuerand receives consideration therefor.

1F. R"-i#tati$% #tat"0"%t & is theapplication for the registration of

securities required to e filed with theCommission

11. Sal"#0a% & a natural person,

employed as such or as an agent, ya dealer, issuer or roker to uy andsell securities.

1#. U%+"/it" & a person whoguarantees on a firm commitmentand:or declared est effort asis thedistriution and sale of securities of

any kind y another company.

$. R"-i#tati$% $4 S",iti"#

!ecurities shall not e sold or offered forsale or distriution within the 9hilippines,without a registration statement duly filed

with and approved y the Commission.

1. Fili%- $4 R"-i#tati$% Stat"0"%t

All securities shall e registeredthrough the filing y the issuer in the

main office of the Commission, of asworn registration statement. The

registration statement shall includeany prospectus required or permitted

to e delivered.

The information required forregistration shall include, among

others the effect of the securitiesissue on ownership, on the mi% ofownership, especially foreign and local

ownership.The registration statement shall esigned y

the issuerGs e%ecutive officer

principal operating officer

principal financial officer

comptroller

principal accounting officer

corporate secretary or

persons performing similar

functions

Accompanied +y a duly verified

resolution of the oard of directors.

The written consent of the e%pertnamed as having certified any part ofthe registration statement or anydocument used in connection

therewith shall also e filed.



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Hhere the registration statement

includes shares to e sold y sellingshareholders, a written certification

y such selling shareholders as tothe accuracy of any part of the

registration statement contriuted toy such selling shareholders shallalso e filed.

#. 'a0"%t $4 F""

The issuer shall pay to the

Commission a fee of not more than1:1F of 1I of the ma%imumaggregate price at which suchsecurities are proposed to e

offered. The Commission shallprescrie y rule diminishing fees ininverse proportion to the value ofthe aggregate price of the offering.

0. N$ti" $4 Fili%-

6otice of the filing shall eimmediately pulished y the issuer

in # newspapers of generalcirculation in the 9hilippines, once a

week for # consecutive weeks, or insuch other manner as the

Commission shall prescrie, recitingthat?

a registration statement has

een filed,

the registration statement, as

well as the papers attached

thereto are open to inspection, copies shall e furnished to

interested parties at suchreasonale charge as theCommission may prescrie.

@. Wit*+a/al $4 R"-i#tati$%Stat"0"%t

A registration statement may ewithdrawn y the issuer only withthe consent of the Commission.

. A0"%+0"%t# t$ R"-i#tati$%

Stat"0"%t

'f a registration statement is on itsface incomplete or inaccurate in any

material respect, the Commissionshall issue an order directing the

amendment of the registrationstatement. )pon compliance with

such order, the amended registrationstatement shall ecome effective.

An amendment filed pi$ t$ t*"

"44"ti1" +at" of the registrationstatement shall recommence the @day period within which the

Commission shall act on a registrationstatement.

An amendment filed a4t" t*""44"ti1" +at" of the registration

statement shall ecome effective onlyupon such date as determined y theCommission.

'f any change occurs in the facts setforth in a registration statement, theissuer shall file an amendment theretosetting forth the change.

B. A"pta%" $ R""ti$% 2 SEC

Hithin @ days after the date of filing

of the registration statement, or ysuch later date to which the issuerhas consented, the Commission shalldeclare the registration statement

effective or reected, unless theapplicant is allowed to amend theregistration statement.

a* A"pta%"

The Commission shall declare theregistration statement to e

effective if it finds that theregistration statement together

with all the other papers anddocuments attached thereto, is on

its face complete and that therequirements have een complied

with.

* R""ti$% R"1$ati$%

The Commission may reect aregistration statement and refuseregistration of the security, orrevoke the effectivity of a

registration statement and theregistration of the securitythereunder after due notice andhearing if it finds that?

The issuer?



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The order shall e deemed confidential,

and shall not e pulished.

)pon the issuance of the suspensionorder, no further offer or sale of such

security shall e made until the same islifted or set aside y the Commission.(therwise, such sale shall e void.

6otice of issuance of such order shall egiven to the issuer and every dealer androker who shall have notified theCommission of an intention to sell such

security.

. E3"0pt S",iti"# a%+ Ta%#ati$%#

1. E3"0pt S",iti"#

&a* Any security issued or

guaranteed y the >overnmentof the 9hilippines, or y any

political sudivision or agencythereof, or y any person acting

as an instrumentality of said>overnment.

&* Any security issued orguaranteed y the government

of any country with which the9hilippines maintains diplomatic

relations, or y any state,province or political sudivisionthereof on the asis of reciprocity.

&c* Certificates issued y a receiveror y a trustee in ankruptcyduly approved y the proper

adudicatory ody.&d* Any security or its derivatives

the sale or transfer of which isunder the supervision andregulation of the (ffice of the

'nsurance Commission,


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incurred, or no commission,compensation or remuneration

is paid or given, and only whenthe purpose for soliciting, giving

or taking of such suscriptionsis to comply with the

requirements of such law as tothe percentage of the capitalstock which should e

suscried efore it can eregistered and dulyincorporated, or its authoriedcapital increased.

&* The e%change of securities y

the issuer with its e%istingsecurity holders e%clusively,where no commission or otherremuneration is paid.

&k* The sale of securities y anissuer to fewer than #F personsin the 9hilippines during anytwelve/month period.

&l* The sale of securities to any ofthe following qualified uyers?

+ank-

;egistered investment

house-

'nsurance company-

9ension fund or retirement

plan maintained y the>overnment or any politicalsudivision or managed y

a ank or other personsauthoried y the +angko!entral to engage in trustfunctions-

'nvestment company- or

!uch other person as the

Commission determine asqualified uyers, on the

asis of such factors asfinancial sophistication, net

worth, knowledge, ande%perience in financial and

usiness matters, oramount of assets under

management.

The Commission may e%empt othertransactions, if it finds that the

requirement of registration is notnecessary in the pulic interest orfor the protection of the investors

such as y reason of the smallamount involved or the limitedcharacter of the pulic offering.

0. '$"+," t$ ,ali4 4$E3"0pti$%

Any person applying for an e%emption

shall file with the Commission a noticeidentifying the e%emption relied upon

on such form and at such time as theCommission y rule may prescrieand with such notice shall pay to the

Commission a fee equivalent to 1:1Fof 1I of the ma%imum aggregateprice or issued value of the securities.

>. T"%+" O44" a%+ '$3 S$liitati$%

1. T"%+" O44"#

'ati"# R";,i"+ t$ 0a!"T"%+" O44"

&a* Any person or group ofpersons acting in concert who

intends to acquire at least1I of any class of any

equity security of a listedcorporation or of any class of

any equity security of acorporation with assets of at

least 9F,FFF,FFF and having#FF or more stockholders

with at least 1FF shares eachor

&* who intends to acquire atleast 0FI of such equity over

a period of 1# months shallmake a tender offer tostockholders y filing with the

Commission a declaration tothat effect- and furnish theissuer a statement containingsuch of the information as theCommission may prescrie.

Withdrawal of tender Offer!ecurities deposited pursuant to atender offer or request or

invitation for tenders may ewithdrawn y or on ehalf of the

depositor at any time throughoutthe period that the tender offer

remains open and if the securitiesdeposited have not een

previously accepted for payment,and at any time after BF daysfrom the date of the originaltender offer or request or

invitation, e%cept as theCommission may otherwiseprescrie.



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Securities offered exceed

required quantityHhere the securities offered

e%ceed that which a person orgroup of persons is ound or

willing to take up and pay for,the securities that are suect ofthe tender offer shall e taken

up as nearly as may e pro rata,disregarding fractions, accordingto the numer of securitiesdeposited y each depositor.

The provisions of this susectionshall also apply to securitiesdeposited within 1F days afternotice of an increase in the

consideration offered to securityholders is first pulished or sentor given to security holders.

Vaiati$%# $4 T"%+" O44"Hhere any person varies the

terms of a tender offer orrequest or invitation for tenders

efore the e%piration thereof yincreasing the consideration

offered to holders of suchsecurities, such person shall pay

the increased consideration toeach security holder whose

securities are taken up and paidfor whether or not suchsecurities have een taken upy such person efore the

variation of the tender offer orrequest or invitation.

#. '$3 S$liitati$%#9ro%ies must e

in writing

signed y the stockholder or

his duly authoried

representative and

filed efore the scheduled

meeting with the corporatesecretary.

)nless otherwise provided in thepro%y, it shall e valid only for themeeting for which it is intended. 6opro%y shall e valid and effective for

a period longer than years at onetime.

6o roker or dealer shall give any

pro%y, consent or authoriation to aperson other than the customer,

without the e%press writtenauthoriation of such customer.

A roker or dealer who holds or

acquires the pro%y for at least 1FI orsuch percentage as the Commission

may prescrie of the outstandingshare of the issuer, shall sumit a

report identifying the eneficial ownerwithin 1F days after such acquisition,for its own account or customer, to

the issuer of the security, to theE%change where the security is tradedand to the Commission.

0. F""# 4$ T"%+" O44"# a%+ C"tai%'$3 S$liitati$%#At the time of filing with theCommission of any statement

required for any tender offer or forpro%y or consent solicitation, theCommission may require that theperson making such filing pay a fee of

not more than 1:1F of 1I of?

The proposed aggregate purchase

price in the case of a transactionunder !ections #F or #.#-

The proposed payment in cash,

and the value of any securities or

property to e transferred in theacquisition, merger orconsolidation, or the cash andvalue of any securities proposed

to e received upon the sale ordisposition of such assets in thecase of a solicitation under!ection #F.


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month thereafter, if there has een achange in such ownership during such

month, shall also file a statementindicating his ownership at the close of

the calendar month and such changes ashave occurred during such calendar

month.

or the purpose of preventing the unfair

use of information which may have eenotained y such eneficial owner,director, or officer y reason of hisrelationship to the issuer

any profit realied y him from

any purchase and sale, or anysale and purchase, of any equity

security of such issuer withinany period of less than si% &B*

months,o unless such security was

acquired in good faith in

connection with a detpreviously contracted,

shall inure to and erecoverale y the issuer,irrespective of any intention of

holding the security purchasedor of not repurchasing thesecurity sold for a periode%ceeding B months.

!uit to recover such profit may e

instituted efore the ;TC y the issuer,or y the owner of any security of the

issuer in the name and in ehalf of theissuer if the issuer shall fail or refuse to

ring such suit within BF days afterrequest or shall fail diligently to

prosecute the same thereafter.6o such suit shall e rought more

than t# years after the date suchprofit was realied.

't shall e unlawful for any eneficial

owner, director, or officer to sell anyequity security of such issuer if theperson selling?

&a* $oes not own the security sold-or

&* 'f owning the security, does notdeliver it against such sale

within #F days thereafter, ordoes not within days after

such sale deposit it in the mailsor other usual channels of

transportation-

+ut no person shall e deemed to haveviolated this susection if he proves that

notwithstanding the e%ercise of good faithhe was unale to make such delivery or

deposit within such time, or that to do sowould cause undue inconvenience or

e%pense.

The provisions shall not apply to anypurchase and:or sale of an equity security

not then or thereafter held y himin an investment account,

y a dealer in the ordinary course

of his usiness and incident to theestalishment or maintenance y

him of a primary or secondarymarket, otherwise than on anE%change, for such security.

1. Ma%ip,lati$% $4 S",it 'i"#

't shall e unlawful for any person

acting for himself or through a dealeror roker, directly or indirectly?

&a* To create a false or misleading

appearance of active trading inany listed security traded in an

E%change or any other tradingmarket?

+y effecting any transaction

in such security which involves

no change in the eneficialownership thereof-

+y entering an order or

orders for the purchase or saleof such security with theknowledge that asimultaneous order or orders

of sustantially the same sie,time and price, for the sale or

purchase of any such security,has or will e entered y or for

the same or different parties-or

+y performing similar act

where there is no change ineneficial ownership.

&* To effect, alone or with others, aseries of transactions in securitiesthat?

;aises their price to induce

the purchase of a security-

$epresses their price to

induce the sale of a security-or



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Creates active trading to

induce such a purchase orsale through manipulativedevices such as marking theclose, painting the tape,

squeeing the float, hypeand dump, oiler roomoperations and such othersimilar devices.

&c* To circulate or disseminateinformation that the price of anysecurity listed in an E%change

will or is likely to rise or fallecause of manipulative market

operations of any one or morepersons conducted for the

purpose of raising or depressingthe price of the security for the

purpose of inducing thepurchase or sale of suchsecurity.

&d* To make false or misleading

statement with respect to anymaterial fact, which he knew orhad reasonale ground to

elieve was so false ormisleading, for the purpose ofinducing the purchase or sale ofany security listed or traded in

an E%change.

&e* To effect any series of transactions for the purchase

and:or sale of any securitytraded in an E%change for the

purpose of pegging, fi%ing orstailiing the price of such

security, unless otherwiseallowed y this Code or y rules

of the Commission.

#. I%#i+" Ta+i%-

'ati"# $1""+ :

'nsider

insiderGs spouse or relatives y

affinity or consanguinity withinthe second degree, legitimate orcommon/law,

't shall e unlawful for an insider tosell or uy a security of the issuer,

while in possession of materialinformation with respect to the

issuer or the security that is notgenerally availale to the pulic,

unless?

&a* The insider proves that theinformation was not gained from

such relationship- or&* 'f the other party selling to or

uying from the insider &or hisagent* is identified, the insider

proves?

that he disclosed the

information to the other party,

or that he had reason to elieve

that the other party otherwiseis also in possession of theinformation.

A purchase or sale of a security of theissuer shall e presumed to have eeneffected while in possession of

material non/pulic information iftransacted after such informationcame into e%istence ut prior todissemination of such information to

the pulic and the lapse of areasonale time for the market to

asor such information

This presumption shall e reuttedupon a showing y the purchaser or

seller that he was not aware of thematerial non/pulic information at thetime of the purchase or sale.

Mat"ial %$%&p,2li i%4$0ati$%:'t has not een generally disclosed tothe pulic and would likely affect the

market price of the security aftereing disseminated to the pulic andthe lapse of a reasonale time for the

market to asor the information- orwould e considered y a reasonaleperson important under thecircumstances in determining hiscourse of action whether to uy, sell

or hold a security.

't shall e unlawful for any insider tocommunicate material non/pulic

information aout the issuer or thesecurity to any person who, y virtue

of the communication, ecomes aninsider, where the insidercommunicating the information knowsor has reason to elieve that such

person will likely uy or sell a securityof the issuer while in possession ofsuch information.



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Insider Trading in Relation toTender Offers

a.* 't shall e unlawful where atender offer has commenced oris aout to commence for?

Any person &other than the

tender offeror* who is inpossession of material non/pulic information relating tosuch tender offer, to uy orsell the securities of the

issuer that are sought or toe sought y such tenderoffer if such person knows orhas reason to elieve that

o the information is

non/pulic ando has een acquired

directly or indirectly

from the tenderofferor, those acting

on its ehalf, theissuer of the

securities, or anyinsider of such

issuer- and

Any tender offeror, those

acting on its ehalf, the

issuer of the securities, andany insider to communicatematerial non/pulicinformation relating to the

tender offer to any otherperson.

J. R"-,lati$% $4 Ma!"t '$4"##i$%al#a%+ Ot*" E%titi"#

1. R"-i#tati$% $4 5$!"#eneral ;ule ?

o 6o person shall engage in the

usiness of uying or selling

securities in the 9hilippines asa roker or dealer, or act as asalesman, or an associated

person of any roker or dealerunless registered as such withthe Commission.

o 6o registered roker or dealer

shall employ any salesman orany associated person, and no

issuer shall employ any

salesman, who is not registeredas such with the Commission.

o Ni$la# 1# CA (=998)?

The futility of petitionerKs actionecame more pronounced ythe fact that he tradedsecurities for the account of

others without the necessarylicense from the !EC. Clearly,such omission was in violationof !ection 1 of the ;evised

!ecurities Act.

The purpose of the statuterequiring the registration of

rokers selling securities andthe filing of data regarding

securities which they propose tosell, is to protect the pulic andstrengthen the securitiesmechanism.

American urisprudenceemphasies the principle that?Lan unlicensed person may not

recover compensation forservices as a roker where astatute or ordinance requiring alicense is applicale and such

statute or ordinance is of aregulatory nature, was enactedin the e%ercise of the policepower for the purpose of

protecting the pulic, requires alicense as evidence of

qualification and fitness, ande%pressly precludes an

unlicensed person fromrecovering compensation y

suit, or at least manifests anintent to prohiit and renderunlawful the transaction ofusiness y an unlicensed

person.L

He see no reason not to applythe same rule in our

urisdiction. !tock markettrading, a technical and highlyspecialied institution in the9hilippines, must e entrusted

to individuals with provenintegrity, competence andknowledge, who have dueregard to the requirements of

the law.



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E%ception?The Commission may

conditionally orunconditionally e%empt any

roker, dealer, salesman,associated person of anyroker or dealer, or any class

of the foregoing, fromregistration as it deemsconsistent with the pulicinterest and the protection ofinvestors.

'$"+,":

o A 2$!" $ +"al" may

apply for registration y filingwith the Commission a writtenapplication.

o ;egistration of a #al"#0a%

$ $4 a% a##$iat"+ p"#$%

$4 a "-i#t""+ 2$!" $+"al" may e made upon

written application filed withthe Commission y such

salesman or associatedperson. A salesman shall notinclude any employee of anissuer whose compensation is

not determined directly orindirectly on sales of securities of the issuer.

#. ,ali4iati$%# $4 Ma!"t'$4"##i$%al#

The Commission shall promulgaterules and regulations prescriingthe qualifications for registrationof each category of applicant,

which shall, among other things,require as a condition for

registration that?

&a* 'f a natural person, theapplicant satisfactorily

pass a writtene%amination as to hisproficiency and knowledgein the area of activity for

which registration&* 'n the case of a roker or

dealer, the applicantsatisfy a minimum net

capital and provide aond or other security as

the Commission mayprescrie

&c* 'f located outside of the9hilippines, the applicant

files a written consent toservice of process.

0. SEC Ati$%

Hithin 0F days after the filing ofany application, the Commissionshall y order?

&a* >rant registration if itdetermines that therequirements of this!ection and the

qualifications forregistration have eensatisfied- or

&* $eny said registration.

The names and addresses of all

persons approved for registrationand all orders of the Commission

with respect thereto shall erecorded in a ;egister of

!ecurities "arket 9rofessionalskept in the office of the

Commission which shall e opento pulic inspection.

@. C$%ti%,i%- R";,i"0"%t#

o Every person registered shall

file with the Commissioninformation necessary to keep

the application for registrationcurrent and accurate,.

o Every person registered shall

pay to the Commission anannual fee. )pon notice y the

Commission that such annualfee has not een paid as

required, the registration ofsuch person shall e suspended

until payment has een made.

. T"0i%ati$% $4 R"-i#tati$%

The registration of a salesman or

associated person shall eautomatically terminated upon thecessation of his affiliation with saidregistered roker or dealer, or with

an issuer in the case of a salesmanemployed, appointed or authoriedy such issuer.



174


13/22

The registered roker or dealer, or

issuer, as the case may e, shallfile with the Commission a notice

of separation of such salesman orassociated person.

B. R"1$ati$%< R"4,#al $

S,#p"%#i$% $4 R"-i#tati$% $45$!"#< D"al"#< Sal"#0"%a%+ A##$iat"+ '"#$%#

'f, after due notice and hearing,

the Commission determines theapplicant or registrant?

&a*


14/22

emphasied. 't is for this reasonthat the !;C provides for stricter

rules on e%change regulation. The!;C devotes a whole chapter on

e%changes and other securitiestrading markets, and it is replete

with provisions designed toprofessionalie the e%change,encourage greater pulic

participation, ensure increasedtransparency, greater responsiilityand improve corporate governance.These provisions are not found inthe Corporation Code and are meant

as additional legal requirementsapplicale only to e%changes.

't is thus incorrect to argue that the

provisions of the Corporation Codealone govern the operation ofe%changes. Hhile the CorporationCode applies to corporations in

general, the !;C is a special lawthat primarily governs the regulation

of e%changes. As etween a specificstatute and a general statute, the

former must prevail since it evincesthe legislative intent more clearly

than a general statute does.

Thus the !EC has the power ofsupervision over e%changes.

!upervision entails overseeing orthe power or authority to see thatsuordinate suect performs itsduties. 'f the latter fails or neglects

to fulfill them the former may takesuch action or step as prescried ylaw to make them perform its

duties. 'n this specific instance, the!EC can even take over themanagement of the e%change asauthoried y the !;C.

#. R"-i#tati$% '$"+,"

Any E%change may e registered as

such with the Commission y filingan application for registration in

such form and containing suchinformation and supporting

documents as the Commission yrule shall prescrie, including the

following?

&a* An undertaking to comply andenforce compliance y its

memers with the provisionsof this Code, its implementing

rules or regulations and therules of the E%change-

&* The organiational charts of theE%change, rules of procedure,

and a list of its officers andmemers-

&c* Copies of the rules of theE%change- and

&d* An undertaking that in the event

a memer firm ecomesinsolvent or when the E%changeshall have found that thefinancial condition of itsmemer firm has so

deteriorated that it cannotreadily meet the demands of itscustomers for the delivery ofsecurities and:or payment of

sales proceeds, the E%changeshall take over the operation ofthe insolvent memer firm andimmediately proceed to settle

the memer firmGs liailities toits customers.

;egistration of an E%change shall e

granted upon compliance with thefollowing provisions?

&a* That the applicant is organied as

a stock corporation-&* That the applicant is engaged

solely in the usiness ofoperating an e%change?9rovided, however, That theCommission may e%empting an

E%change organied as a stockcorporation and owned andcontrolled y another uridical

person from this restriction-&c* Hhere the E%change is organied

as a stock corporation, that noperson may eneficially own orcontrol, directly or indirectly,

more than I of the votingrights of the E%change and noindustry or usiness group mayeneficially own or control more

than #FI of the voting rights ofthe E%change? 9rovided,

however, That the Commissionmay adopt rules, regulations or

issue an order, uponapplication, e%empting an

applicant from this prohiitionwhere it finds that suchownership or control will notnegatively impact on the

e%changeGs aility to effectivelyoperate in the pulic interest-



176


15/22

&d* The e%pulsion, suspension, ordisciplining of a memer and

persons associated with amemer for conduct or

proceeding inconsistent withust and equitale principles

of fair trade, and for violationsof provisions of this Code orthe rules of the E%change-

&e* A fair procedure for thedisciplining of memers andpersons associated withmemers, the denial ofmemership to any person

seeking to e a memer, thearring of any person fromassociation with a memer,and the prohiition or

limitation of any person fromaccess to services offered ythe E%change-

&f* That the rokers in the oard of

the E%change shall compriseof not more than @I of such

oard and shallproportionately represent the

E%change memership interms of volume:value of

trade and paid up capital, andthat any natural person

associated with a uridicalentity that is a memer shall

himself e deemed to e amemer for this purpose-

&g* or the oard of the E%changeto include in its composition

&h* &i* the president of theE%change, and&ii* no less than 1I of the

remaining memers of theoard to e comprised of 0independent directors andpersons who represent theinterests of issuers, investors,

and other market participants,who are not associated withany roker or dealer ormemer of the E%change for a

period of # years prior tohis:her appointment.

6o officer or employee of a

memer, its susidiaries oraffiliates or related interests

shall ecome an independentdirector? 9rovided, however,That the Commission may yrule, regulation, or order upon

application, permit thee%change organied as a stock

corporation to use a differentgovernance structure?

9rovided, further, That the

Commission is satisfied that theE%change is acting in the pulic

interest and is ale toeffectively operate as a self/regulatory organiation under

this Code.

&i* The president and othermanagement of the E%changeto consist only of persons who

are not memers and are notassociated in any capacity,directly or indirectly with anyroker or dealer or memer or

listed company of theE%change? 9rovided, That theE%change may only appoint,and a person may only serve,

as an officer of the e%change ifsuch person has not een a

memer or affiliated with anyroker, dealer, or memer of

the E%change for a period of atleast # years prior to such

appointment-&* The transparency of transactions

on the E%change-&k* The equitale allocation of

reasonale dues, fees, andother charges among memersand issuers and other personsusing any facility or system

which the E%change operates orcontrols-

&l* 9revention of fraudulent and

manipulative acts and practices,promotion of ust and equitaleprinciples of trade, and, ingeneral, protection of investorsand the pulic interest- and

&m* The transparent, prompt andaccurate clearance andsettlement of transactionseffected on the E%change.

0. S"-"-ati$% a%+ Li0itati$% $4F,%ti$%# $4 M"02"#< 5$!"#

a%+ D"al"#

't shall e unlawful for any memer/roker of an E%change to effect anytransaction on such E%change for?

its own account,



177


16/22

the account of an associated

person, or

an account with respect to

which it or an associated person

thereof e%ercises investmentdiscretion

9rovided, however, That this sectionshall not make unlawful

&a* Any transaction y a memer/roker acting in the capacityof a market maker-

&* Any transaction reasonaly

necessary to carry on an odd/lot transactions-

&c* Any transaction to offset atransaction made in error-

and&d* Any other transaction of a

similar nature as may edefined y the Commission.

S" Opi%i$% >== (?@@)

The aove/quoted !ec. 00.#. of the !;Cis not found in the old ;evised !ecurities

Act, nor in the Corporation Code. 'tems&c*, &f* and &g* thereof are all intended

to encourage greater pulicparticipation, ensure increasedtransparency, greater responsiility andimprove corporate governance.

!usection &c* mandates that theownership of the stocks of the e%changee roadened and democratied,

therey ensuring greater pulicparticipation.

(n the other hand, !usections &f* and&g* mandate a oard composition whereno more than @I of the seats shall eoccupied y rokers, and no less than1I to e comprised of &0* independent

directors and persons representing othersectors of the market. Hith respect to

independent directors, their election inthe +oard is intended to ensure that the

+oard will faithfully discharge itsfiduciary responsiilities to its

stockholders.

These provisions aim for a morerepresentative, democratic, independent

+oard of $irectors that is autonomousfrom the control of any sector of themarket.

". I%+"p"%+"%t Di"t$#

Any corporation with

a class of equity securities listed for

trading on an E%change or

with assets in e%cess of

9F,FFF,FFF.FF and having #FF ormore holders, at least of #FF of whichare holding at least 1FF shares of aclass of its equity securities or whichhas sold a class of equity securities to

the pulic pursuant to an effectiveregistration statement

!hall have at least # independent

directors or such independent directorsshall constitute at least #FI of thememers of such oard, whichever is thelesser.

An Mindependent directorN shall mean a

person other than an officer or employeeof the corporation, its parent or

susidiaries, or any other individualhaving a relationship with the corporation,

which would interfere with the e%ercise ofindependent udgment in carrying out theresponsiilities of a director.

6. S"l4&R"-,lat$ O-a%iBati$%#

1. S$p" D"4i%iti$%

The Commission shall have the powerto register as a self/regulatory

organiation organiations whoseoperations are related to or connectedwith the securities market such as utnot limited to

associations of rokers and

dealers,

transfer agents,

custodians,

fiscal and paying agents,

computer services,

news disseminating services,

pro%y solicitors,

statistical agencies,

securities rating agencies, and securities information processors

Hhich are engaged in the usiness of?

&a* Collecting, processing, orpreparing for distriution or



178


17/22

pulication, or assisting,participating in, or coordinating

the distriution or pulicationof, information with respect to

transactions in or quotations forany security- or

&* $istriuting or pulishing on acurrent and continuing asis,information with respect to such

transactions or quotations.

#. R"-i#tati$%

An association of rokers anddealers may e registered as asecurities association y filing withthe Commission an application for

registration.

!uch association shall not eregistered unless the Commission

determines that?

&a* The association is so organiedand has the capacity to e ale

to carry out the purposes of thisCode and to comply with, and to

enforce compliance y itsmemers with the provisions of

this Code.&* The rules of the association,

notwithstanding anything in theCorporation Code to thecontrary, provide that?

Any registered roker

or dealer may ecome amemer of the

association- There e%ist a fair

representation of itsmemers to serve on the+oard of $irectors and in

the administration of itsaffairs, and that any

natural personassociated with a

uridical entity that is amemer shall himself e

deemed to e a memerfor this purpose-

The +oard of $irectors

of the associationincludes in its

composition? &a* Thepresident of the

association and &*9ersons who represent

the interests of issuersand pulic investors and

are not associated withany roker or dealer or

memer of theassociation- that the

president and othermanagement of the

association not e amemer or associatedwith any roker, dealer or

memer of theassociation-

or the equitale

allocation of reasonale

dues, fees, and othercharges among memers

and issuers and otherpersons using any facility

or system which theassociation operates or

controls-

or the prevention of

fraudulent and

manipulative acts andpractices, the promotion

of ust and equitaleprinciples of trade, and

the protection of investorsand the pulic interest-

That its memers e

appropriately disciplinedfor violation of any

provision of this Code-

That a fair procedure for

the disciplining of memers, the denial ofmemership to any person

seeking memershiptherein, the arring of anyperson from ecomingassociated with a memer

thereof, and theprohiition or limitation y

the association of anyperson with respect to

access to services offeredy the association or a

memer thereof.

0. D"%ial $4 M"02"#*ip E0pl$0"%t

&a* A registered securities associationshall deny memership to any

person who is not a registeredroker or dealer.&* A registered securities association

may deny memership to, orcondition the memership of, a

registered roker or dealer ifsuch roker or dealer?



179


18/22

$oes not meet the

standards of financialresponsiility,operational capaility,training, e%perience,

or competence thatare prescried y therules of theassociation- or

&ii*


19/22

To permit in the ordinary course

of usiness his aggregateindetedness includingcustomersG credit alances, toe%ceed such percentage of the

net capital &e%clusive of fi%edassets and value of E%changememership* employed in theusiness, ut not e%ceeding in

any case #,FFFI, as theCommission may prescrie.

To pledge, mortgage, or

otherwise encumer anysecurity carried for the account

of any customer undercircumstances?

o That will permit the

commingling of hissecurities, without his

written consent, with thesecurities of any customer-

o That will permit

such securities to ecommingled with the

securities of any personother than a ona fidecustomer- or

o That will permit

such securities to epledged, mortgaged orencumered, or suected

to any lien or claim of thepledgee, for a sum in

e%cess of the aggregateindetedness of such

customers in respect ofsuch securities.

To lend or arrange for the

lending of any security carriedfor the account of any customer

without the written consent ofsuch customer.

@. E%4$"0"%t $4 Ma-i%R";,i"0"%t# a%+ R"#titi$%#

$% 5$$/i%-

To prevent indirect violations of themargin requirements, the roker or

dealer shall require the customer innon/margin transactions to pay theprice of the security within such

period as the Commission mayprescrie, which shall in no casee%ceed the prescried settlementdate.

(therwise, the roker shall sell thesecurity purchased starting on the

ne%t trading day ut not eyond 1Ftrading days following the last day for

the customer to pay such purchaseprice, unless such sale cannot e

effected within said period forustifiale reasons.

The sale shall e without preudice tothe right of the roker or dealer to

recover any deficiency from thecustomer.

9. A+0i%i#tati1" Sa%ti$%# a%+

S"ttl"0"%t O44"#

1. A+0i%i#tati1" Sa%ti$%#

'f, after due notice and hearing, theCommission finds that?

&a* There is a violation of this Code,

its rules, or its orders-&* Any registered roker or dealer,

associated person thereof hasfailed reasonaly to supervise

another person who commitsany such violation-

&c* Any registrant or other personhas, in a registration statement

or in other reports, applications,accounts, records or documents

made any untrue statement ofa material fact, or omitted tostate any material fact requiredto e stated therein or

necessary to make thestatements therein notmisleading-

&d* or, in the case of an underwriter,has failed to conduct an inquirywith reasonale diligence toinsure that a registrationstatement is accurate and

complete in all materialrespects- or

&e* Any person has refused to permitany lawful e%aminations into its

affairs,

The imposition of administrativesanctions shall e without preudice to

the filing of criminal charges.

#. S"ttl"0"%t O44"#

At any time, during an investigation or

proceeding under this Code, partieseing investigated and:or charged



181


20/22

may propose in writing an offer ofsettlement with the Commission.

The Commission may consider the

offer ased on timing, the nature ofthe investigation or proceeding, and

the pulic interest.

The Commission may only agree to

a settlement offer ased on itsfindings that such settlement is inthe pulic interest. Any agreementto settle shall have no legal effectuntil pulicly disclosed. !uch

decision may e made without adetermination of guilt on the part ofthe person making the offer.

O. Ci1il Lia2iliti"#

1. O% A$,%t $4 Fal#" R"-i#tati$%Stat"0"%t

Who ay sue$

Any person

acquiring a security, the

registration statement of whichor any part thereof contains on

its effectivity an untruestatement of a material fact oromits to state a material factrequired to e stated therein or

necessary to make suchstatements not misleading, and

who suffers damage

'f the person who acquired thesecurity did so after the issuer hasmade generally availale to itssecurity holders an incomestatement covering a period of at

least 1# months, then the right ofrecovery shall e conditioned on

proof that such person acquired thesecurity relying upon such untrue

statement.

Who ay %e sued$&a* The issuer and every person

who signed the registration

statement-&* Every person who was a director

or a partner in the issuer atthe time of the filing of the

registration statement or anypart, supplement oramendment thereof-

&c* Every person who is named in theregistration statement as eing

or aout to ecome a directoror a partner-

&d* Every auditor or auditing firmnamed as having certified any

financial statements used inconnection with the registrationstatement or prospectus.

&e* Every person who, with hiswritten consent has eennamed as having prepared orcertified any part of theregistration statement, or as

having prepared or certified anyreport or valuation which isused in connection with theregistration statement.

&f* Every selling shareholder whocontriuted to and certified asto the accuracy of a portion ofthe registration statement.

&g* Every underwriter with respect tosuch security.

'$##i2l" D"4"%#" :

!uch person may allege that at the

time of such acquisition he knew of nosuch untrue statement or omission?

#. O% A$,%t $4 I%#i+" Ta+i%-

W*$ 0a 2" #,"+

Any insider who violates !usection#.1 and any person in the case of atender offer who violates !usection

#.@ &a*&i*, or any rule or regulationthereunder, y purchasing or selling asecurity while in possession ofmaterial information not generallyavailale to the pulic, shall e liale

in a suit rought y any investor who,contemporaneously with the purchaseor sale of securities that is the suectof the violation, purchased or sold

securities of the same class unlesssuch insider, or such person in the

case of a tender offer, proves thatsuch investor knew the information or

would have purchased or sold at thesame price regardless of disclosure of

the information to him.An insider who communicatesmaterial non/pulic information, shalle ointly and severally liale with and

to the same e%tent as, the insider, orperson in the case of a tender offer.



182


21/22

;. Li0itati$% $4 Ati$%#

6o action shall e maintained to enforce

any liaility created under !ection B&false registration statement* or

&false prospectus. Communications,reports* unless rought within # yearsafter the +i#$1" of the untrue

statement or the omission.

'f the action is to enforce a liailitycreated under !usection .1&a*&registration of securities*, unless

rought within # years after the1i$lati$% upon which it is ased.

'n no event shall any such action e

rought to enforce a liaility createdunder !ection B or !usection .1 &a*more than years after the security wasona fide $44""+ t$ t*" p,2li, or

under !usection .1 &* &sale asedon false prospectus, communications,

reports* more than years after the#al".

6o action shall e maintained to enforce

any liaility created under any otherprovision of this Code unless rought?

within # years after the

+i#$1" of the factsconstituting the cause of actionand

within years after such

a,#" $4 ati$% a,"+

!. Da0a-"# t$ 2" A/a+"+

1. A0$,%t# Ki%+# $4 Da0a-"#

All suits to recover damages

pursuant to !ections B &falseregistration statement*, &false

prospectus, communications,reports*, D &fraud in connection

with securities transactions*, &manipulation of prices*, BF

&commodity futures contracts andpre/need plans* and B1 &insidertrading* shall e rought efore the;TC, which shall have e%clusive

urisdiction to hear and decide suchsuits.

The Court is herey authoried to

award damages in an amount note%ceeding triple the amount of thetransaction plus actual damages.

E%emplary damages may also e

awarded in cases of ad faith, fraud,malevolence or wantonness in the

violation of this Code.

The Court is also authoried to awardattorneyGs fees not e%ceeding 0FI of

the award.

#. '"#$%# lia2l" t$ pa

All persons, including the issuer, heldliale under the provisions of !ectionsB, , D, , BF and B1 shallcontriute equally to the total liaility

adudged herein.

'n no case shall the principalstockholders, directors and other

officers, recover their contriution tothe liaility from the issuer.


22/22

entity responsile for the violation. 'fsuch officer is an alien, he shall in

addition to the penalties prescried, edeported.

23oryeth +aldrias.*"a+5 26ayna "alayang.+"p,t5 2$ionne !anche.aa+#5 27am 7aco.+"#i-%5

184

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