THE SECURITIES REGULATION CODE buys sells securities for his/her own Be it enacted by the Senate and the House account in the ordinary course of business. of Representative of the Philippines in the 3.5. "Associated person of a broker or Congress assembled: dealer" is an employee therefor whom, CHAPTER I directly exercises control of supervisory TITLE AND DEFINITIONS authority, but does not include a Section 1. Title. - This shall be known as salesman, or an agent or a person whose "The Securities Regulation Code" functions are solely clerical or Section 2. Declaration of State Policy. ministerial. The State shall establish a socially 3.6. "Clearing Agency" is any person who conscious, free market that regulates acts as intermediary in making itself, encourage the widest participation deliveries upon payment effect settlement of ownership in enterprises, enhance the in securities transactions. democratization of wealth, promote the 3.7. "Exchange" is an organized market development of the capital market, protect place or facility that brings together investors, ensure full and fair disclosure buyers and sellers and executes trade of about securities, minimize if not totally securities and/or commodities. eliminate insider trading and other 3.8. "Insider" means (a) the issuer; (b) a fraudulent or manipulative devices and director or officer (or any person practices which create distortions in the performing similar functions) of, or a free market. To achieve these ends, this person controlling the issuer; gives or Securities gave him access to material information Regulation Code is hereby enacted. about the issuer or the security that is Section 3. Definition of Terms. - 3.1. not generally available to the public; (d) A "Securities" are shares, participation or government employee, director, or interests in a corporation or in a officer of an exchange, clearing agency commercial enterprise or profit-making and/or self-regulatory organization venture and evidenced by a certificate, who has access to material information contract, instruments, whether written or about an issuer or a security that is electronic in character. It includes: not generally available to the public; or (e) (a) Shares of stocks, bonds, debentures, a person who learns such notes evidences of indebtedness, asset- information by a communication from any backed securities; forgoing insiders. (b) Investment contracts, certificates of 3.9. "Pre-need plans" are contracts which interest or participation in a profit sharing provide for the performance of agreement, certifies of deposit for a future future services of or the payment of future subscription; monetary considerations at the time (c) Fractional undivided interests in oil, gas actual need, for which plan holders pay in or other mineral rights; cash or installment at stated prices, (d) Derivatives like option and warrants; with or without interest or insurance (e) Certificates of assignments, certificates coverage and includes life, pension, of participation, trust certificates, voting education, interment, and other plans trust certificates or similar instruments which the Commission may from time to (f) Proprietary or nonproprietary time approve. membership certificates in corporations; 3.10. "Promoter" is a person who, acting and alone or with others, takes initiative (g) Other instruments as may in the future in founding and organizing the business or be determined by the Commission. enterprise of the issuer and 3.2. "Issuer" is the originator, maker, receives consideration therefor. obligor, or creator of the security. 3.11. "Prospectus" is the document made 3.3. "Broker" is a person engaged in the by or an behalf of an issuer, business of buying and selling underwriter or dealer to sell or offer securities for the account of others. securities for sale to the public through registration statement filed with the Chairperson shall execute and administer Commission. the policies, decisions, orders and 3.12. "Registration statement" is the resolutions approved by the Commission application for the registration of and shall have the general executive securities required to be filed with the direction and supervision of the work and Commission. operation of the Commission and its 3.13. "Salesman" is a natural person, members, bodies, boards, offices, employed as such as an agent, by a personnel and all its administrative dealer, issuer or broker to buy and sell business. securities. 4.4. The salary of the Chairperson and the 3.14. "Uncertificated security" is a security Commissioners shall be fixed by evidenced by electronic or similar the President of the Philippines based on records. the objective classification system, 3.15. "Underwriter" is a person who at a sum comparable to the members of guarantees on a firm commitment and/or the Monetary Board and declared best effort basis the distribution commensurate importance and and sale of securities of any kind by responsibilities attached to the position. another company. 4.5. The Commission shall hold meetings CHAPTER II at least once a week for the conduct SECURITIES AND EXCHANGE COMMISSION of business or as often as may be Section 4. Administrative Agency. 4.1. necessary upon the call of the Chairperson This Code shall be administered by or upon the request of (3) Commissioners. the Security and Exchange Commission The notice of the meeting shall be (hereinafter referred to as the given to all Commissioners and the "Commission") as a Collegial body, presence of three (3) Commissioners shall composed of a chairperson and (4) constitute a quorum. In the absence of the Commissioners, appointed by the Chairperson, the most senior President for a term of (7) seven years Commissioner shall act as presiding officer each of the meeting. and who shall serves as such until their 4.6. The Commission may, for purposes of successor shall have been appointed efficiency, delegate any of its and qualified. A Commissioner appointed functions to any department of office of to fill a vacancy occurring prior to the Commission, an individual the expiration of the term for which his/her Commissioner or staff member of the predecessor was appointed, shall Commission except its review or serve only for the unexpired portion of appellate authority and its power to adopt, their terms under Presidential Decree alter and supplement any rule or No. 902-A. Unless the context indicates regulation. otherwise, the term "Commissioner" The commission may review upon its own includes the Chairperson. initiative or upon the petition of any 4.2. The Commissioners must be natural- interested party any action of any born citizens of the Philippines, at department or office, individual least forty (40) years of age for the Commissioner, or staff member of the Chairperson and at least thirty-five (35) Commission. years of age for the Commissioners, of Section 5. Powers and Functions of the good moral character, or Commission. 5.1. The commission unquestionable integrity, of known probity shall act with transparency and shall have and patriotism, and with recognized the powers and functions provided competence in social and economic by this code, Presidential Decree No. 902- disciplines: Provided, That the majority of A, the Corporation Code, the Commissioners, including the Chairperson, Investment Houses law, the Financing shall be members of the Philippine Company Act and other existing laws. Bar. Pursuant thereto the Commission shall 4.3. The chairperson is chief executive have, among others, the following officer of the Commission. The powers and functions: (a) Have jurisdiction and supervision over any proceedings of the Commission and in all corporations, partnership appropriate cases, order the or associations who are the grantees of examination, search and seizure of all primary franchises and/or a documents, papers, files and license or a permit issued by the records, tax returns and books of accounts Government; of any entity or person under (b) Formulate policies and investigation as may be necessary for the recommendations on issues concerning proper disposition of the the cases before it, subject to the provisions of securities market, advise Congress and existing laws; other government agencies on (m) Suspend, or revoke, after proper all aspect of the securities market and notice and hearing the franchise or propose legislation and certificate of registration of corporations, amendments thereto; partnership or associations, (c) Approve, reject, suspend, revoke or upon any of the grounds provided by law; require amendments to and registration statements, and registration (n) Exercise such other powers as may be and licensing applications; provided by law as well as (d) Regulate, investigate or supervise the those which may be implied from, or activities of persons to ensure which are necessary or incidental compliance; to the carrying out of, the express powers (e) Supervise, monitor, suspend or take granted the Commission to over the activities of achieve the objectives and purposes of exchanges, clearing agencies and other these laws. SROs; 5.2. The Commissions jurisdiction over all (f) Impose sanctions for the violation of cases enumerated under section 5 laws and rules, regulations and of Presidential Decree No. 902-A is hereby orders, and issued pursuant thereto; transferred to the Courts of (g) Prepare, approve, amend or repeal general jurisdiction or the appropriate rules, regulations and orders, Regional Trial Court: Provided, That the and issue opinions and provide guidance Supreme Court in the exercise of its on and supervise compliance authority may designate the Regional with such rules, regulation and orders; Trial Court branches that shall exercise (h) Enlist the aid and support of and/or jurisdiction over the cases. The deputized any and all Commission shall retain jurisdiction over enforcement agencies of the Government, pending cases involving intracorporate civil or military as well as any disputes submitted for final resolution private institution, corporation, firm, which should be resolved association or person in the within one (1) year from the enactment of implementation of its powers and function this Code. The Commission shall under its Code; retain jurisdiction over pending suspension (i) Issue cease and desist orders to of payment/rehabilitation cases prevent fraud or injury to the filed as of 30 June 2000 until finally investing public; disposed. (j) Punish for the contempt of the Section 6. Indemnification and Commission, both direct and indirect, Responsibilities of Commissioners. 6.1. in accordance with the pertinent The provisions of and penalties prescribed Commission shall indemnify each by the Rules of Court; Commissioner and other officials of the (k) Compel the officers of any registered Commission, including personnel corporation or association to performing supervision and examination call meetings of stockholders or members functions for all cost and expenses thereof under its supervision; reasonably incurred by such persons in (l) Issue subpoena duces tecum and connection with any civil or criminal summon witnesses to appear in actions, suits or proceedings to be liable for gross negligence or misconduct. In the Section 7. Reorganization. 7.1. To event of settlement or compromise, achieve the goals of this Code, indemnification shall be provided only in consistent with the Civil Service laws, the connection with such matters Commission is hereby authorized to covered by the settlement as to which the provide for its reorganization, to Commission is advised by external streamline its structure and operations, counsel that the persons to be indemnified upgrade its human resource component did not commit any gross and enable it to more efficiently and negligence or misconduct. The costs and effectively perform its functions and expenses incurred in defending the exercise its power under this Code. aforementioned action, suit or proceeding 7.2. All positions of the Commissions shall may be paid by the Commission in be governed by a compensation advance of the final disposition of such and position classification system and action, suit or proceeding upon receipt qualification standards approved by the of an undertaking by or on behalf of the Commission based on comprehensive job Commissioner, officer or employee to analysis and audit of actual duties repay the amount advanced should it and personal responsibilities. The ultimately be determined by the compensation plan shall be comparable Commission that he/she is not entitled to with the prevailing compensation plan in be indemnified as provided in this the Bangko Sentral ng Pilipinas and subsection. other government financial institutions 6.2. The Commissioners, officers and and shall be subject to periodic review employees of the Commission who by the Commission no more than once willfully violate this Code or who are guilty every two (2) years without prejudice of negligence, abuse or acts of to yearly merit review or increases based malfeasance or fail to exercise on productivity and efficiency. The extraordinary diligence in the performance Commission shall, therefore, be exempt of from laws, rules, and regulations on their duties shall be held liable for any loss compensation, position classification and or injury suffered by the qualifications standards. The Commission or other institutions such as a Commission shall, however, endeavor to result of such violation, negligence, make its system conform as closely abuse, or malfeasance, or failure to as possible with the principles under the exercise extraordinary diligence. Similar Compensation and Position responsibility shall apply to the Classification Act of 1989 (Republic Act. Commissioners, officers and employees of 6758, as amended). the CHAPTER III Commission for (1) the disclosure of any REGISTRATION OF SECURITIES information, discussion or resolution Section 8. Requirement of Registration of of the Commission of a confidential Securities. 8.1. Securities shall nature, or about the confidential not be sold or offered for sale or operations of the Commission unless the distribution within the Philippines, without disclosure is in connection with the a performance of official functions with the registration statement duly filed with and Commission or prior authorization of approved by the Commission. Prior the Commissioners; or (2) the use of such to such sale, information on the securities, information for personal gain or to in such form and with such the detriment of the government, the substance as the Commission may Commission or third parties: Provided, prescribe, shall be made available to each however, That any data or information prospective purchaser. required to be submitted to the 8.2. The Commission may conditionally President and/or Congress or its approve the registration statement appropriate committee, or to be published under such terms as it may deem under the provisions of this Code shall not necessary. be considered confidential. 8.3. The Commission may specify the Bureau of Internal Revenue. terms and conditions under which any (e) Any security issued by a bank except written communication, including any its own shares of stock. summary prospectus, shall be deemed 9.2. The Commission may, by rule or not to constitute an offer for sale under regulation after public hearing, add to this Section. the foregoing any class of securities if it 8.4. A record of the registration of finds that the enforcement of this securities shall be kept in Register Code with respect to such securities is not Securities in which shall be recorded necessary in the public interest and orders entered by the Commission with for the protection of investors. respect such securities. Such register and Section 10. Exempt Transactions. 10.1. all documents or information with The requirement of registration the respect to the securities registered under Subsection 8.1 shall not apply to therein shall be open to public the sale of any security in any of the inspection at reasonable hours on following transactions: business days. (a) At any judicial sale, or sale by an 8.5. The Commission may audit the executor, administrator, guardian financial statements, assets and other or receiver or trustee in insolvency or information of firm applying for bankruptcy. registration of its securities whenever it (b) By or for the account of a pledge deems holder, or mortgagee or any of a the same necessary to insure full pledge lien holder selling of offering for disclosure or to protect the interest of the sale or delivery in the ordinary investors and the public in general. course of business and not for the purpose Section 9. Exempt Securities. 9.1. The of avoiding the provision of requirement of registration under this Code, to liquidate a bonafide debt, a Subsection 8.1 shall not as a general rule security pledged in good faith apply to any of the following classes as security for such debt. of securities: (c) An isolated transaction in which any (a) Any security issued or guaranteed by security is sold, offered for sale, the Government of the subscription or delivery by the owner Philippines, or by any political subdivision therefore, or by his representative or agency thereof, or by any for the owners account, such sale or offer person controlled or supervised by, and for sale or offer for sale, acting as an instrumentality of subscription or delivery not being made in said Government. the course of repeated and (b) Any security issued or guaranteed by successive transaction of a like character the government of any country by such owner, or on his with which the Philippines maintains account by such representative and such diplomatic relations, or by any owner or representative not state, province or political subdivision being the underwriter of such security. thereof on the basis of reciprocity: (d) The distribution by a corporation Provided, That the Commission may actively engaged in the business require compliance with the form authorized by its articles of incorporation, and content for disclosures the of securities to its Commission may prescribe. stockholders or other security holders as a (c) Certificates issued by a receiver or by a stock dividend or other trustee in bankruptcy duly distribution out of surplus. approved by the proper adjudicatory body. (e) The sale of capital stock of a (d) Any security or its derivatives the sale corporation to its own stockholders or transfer of which, by law, is exclusively, where no commission or other under the supervision and regulation of remuneration is paid or given the Office of the Insurance directly or indirectly in connection with the Commission, Housing and Land Use Rule sale of such capital stock. Regulatory Board, or the (f) The issuance of bonds or notes secured holders exclusively, where no commission by mortgage upon real or other remuneration is paid estate or tangible personal property, when or given directly or indirectly for soliciting the entire mortgage together such exchange. with all the bonds or notes secured (k) The sale of securities by an issuer to thereby are sold to a single fewer than twenty (20) persons purchaser at a single sale. in the Philippines during any twelve-month (g) The issue and delivery of any security period. in exchange for any other (l) The sale of securities to any number of security of the same issuer pursuant to a the following qualified buyers: right of conversion entitling the (i) Bank; holder of the security surrendered in (ii) Registered investment house; exchange to make such (iii) Insurance company; conversion: Provided, That the security so (iv) Pension fund or retirement plan surrendered has been maintained by the registered under this Code or was, when Government of the Philippines or any sold, exempt from the political subdivision thereof provision of this Code, and that the or manage by a bank or other persons security issued and delivered in authorized by the Bangko exchange, if sold at the conversion price, Sentral to engage in trust functions; would at the time of such (v) Investment company or; conversion fall within the class of (vi) Such other person as the Commission securities entitled to registration under may rule by determine this Code. Upon such conversion the par as qualified buyers, on the basis of such value of the security factors as financial surrendered in such exchange shall be sophistication, net worth, knowledge, and deemed the price at which the experience in financial securities issued and delivered in such and business matters, or amount of assets exchange are sold. under management. (h) Brokers transaction, executed upon 10.2. The Commission may exempt other customers orders, on any transactions, if it finds that the registered Exchange or other trading requirements of registration under this market. Code is not necessary in the public (i) Subscriptions for shares of the capitals interest or for the protection of the stocks of a corporation prior investors such as by the reason of the to the incorporation thereof or in small amount involved or the limited pursuance of an increase in its character of the public offering. authorized capital stocks under the 10.3. Any person applying for an Corporation Code, when no exemption under this Section, shall file expense is incurred, or no commission, with compensation or remuneration the Commission a notice identifying the is paid or given in connection with the sale exemption relied upon on such form or disposition of such and at such time as the Commission by securities, and only when the purpose for the rule may prescribe and with such soliciting, giving or taking of notice shall pay to the Commission fee such subscription is to comply with the equivalent to one-tenth (1/10) of one requirements of such law as to percent (1%) of the maximum value the percentage of the capital stock of a aggregate price or issued value of the corporation which should be securities. subscribed before it can be registered and Section 11. Commodity Futures Contracts. duly incorporated, or its - No person shall offer, sell or authorized, capital increase. enter into commodity futures contracts (j) The exchange of securities by the except in accordance with the rules, issuer with the existing security regulations and orders the Commission may prescribe in the public interest. The Commission shall promulgate rules registration statement shares to be sold and regulations involving commodity by selling shareholders, a written futures contracts to protect investors to certification by such selling shareholders ensure the development of a fair and as to the accuracy of any part of the transparent commodities market. registration statement contributed to by Section 12. Procedure of Registration such selling shareholders shall be Securities. - 12.1. All securities filed. required to be registered under Subsection 12.5. (a) Upon filing of the registration 8. I shall be registered through the statement, the issuer shall pay to the filing by the issuer in the main office of the Commission a fee of not more than one- Commission, of a sworn tenth (1/10) of one per centum (1%) registration statement with the respect to of the maximum aggregate price at which such securities, in such form and such securities are proposed to be containing such information and document offered. The Commission shall prescribe as the Commission prescribe. The by the rule diminishing fees in registration statement shall include any inverse proportion the value of the prospectus required or permitted to be aggregate price of the offering. delivered under Subsections 8.2, 8.3, and (b) Notice of the filing of the registration 8.4. statement shall be immediately 12.2. In promulgating rules governing the published by the issuer, at its own content of any registration statement expense, in two (2) newspapers of (including any prospectus made a part general circulation in the Philippines, once thereof or annex thereto), the a week for two (2) Commission may require the registration consecutive weeks, or in such other statement to contain such manner as the Commission by the information or documents as it may, by rule shall prescribe, reciting that a rule, prescribe. It may dispense with registration statement for the sale of any such requirements, or may require such securities has been filed, and that additional information or documents, aforesaid registration statement, including written information from an as well as the papers attached thereto are expert, depending on the necessity open to inspection at the thereof or their applicability to the class of Commission during business hours, and securities sought to be registered. copies thereof, photostatic or 12.3. The information required for the otherwise, shall be furnished to interested registration of any kind, and all parties at such reasonable securities, shall include, among others, the charge as the Commission may prescribe. effect of the securities issue on 12.6. Within forty-five (45) days after the ownership, on the mix of ownership, date of filing of the registration especially foreign and local ownership. statement, or by such later date to which 12.4. The registration statement shall be the issuer has consented, the signed by the issuers executive Commission shall declare the registration officer, its principal operating officer, its statement effective or rejected, principal financial officer, its unless the applicant is allowed to amend comptroller, its principal accounting the registration statement as officer, its corporate secretary, or persons provided in Section 14 hereof. The performing similar functions accompanied Commission shall enter an order declaring by a duly verified resolution of the the registration statement to be effective board of directors of the issuer if it finds that the registration corporation. The written consent of the statement together with all the other expert papers and documents attached thereto, named as having certified any part of the is on its face complete and that the registration statement or any requirements have been complied with. document used in connection therewith The Commission may impose such terms shall also be filed. Where the and conditions as may be necessary or appropriate for the therein not misleading; or protection of the investors. (c) The issuer, any officer, director or 12.7. Upon affectivity of the registration controlling person performing statement, the issuer shall state under similar functions, or any under writer has oath in every prospectus that all been convicted, by a registration requirements have been met competent judicial or administrative body, and upon plea of guilty, or that all information are true and correct as otherwise, of an offense involving moral represented by the issuer or the turpitude and /or fraud or is one making the statement. Any untrue enjoined or restrained by the Commission statement of fact or omission to state a or other competent or material fact required to be stated herein administrative body for violations of or necessary to make the statement securities, commodities, and other therein not misleading shall constitute related laws. fraud. For the purposes of this subsection, the Section 13. Rejection and Revocation of term "competent judicial or Registration of Securities. 13.1. administrative body" shall include a The Commission may reject a registration foreign court of competent jurisdiction as statement and refuse registration of provided for under Rules of Court. the security there-under, or revoke the 13.2. The Commission may compel the affectivity of a registration statement production of all the books and papers and the registration of the security there- of such issuer, and may administer oaths under after the due notice and to, and examine the officers of such hearing by issuing an order to such effect, the issuer or any other person connected setting forth its finding in respect therewith as to its business and thereto, if it finds that: affairs. (a) The issuer: 13.3. If any issuer shall refuse to permit an (i) Has been judicially declared insolvent; examination to be made by the (ii) Has violated any of the provision of this Commission, its refusal shall be ground for Code, the rules the refusal or revocation of the promulgate pursuant thereto, or any order registration of its securities. of the Commission of 13.4. If the Commission deems its which the issuer has notice in connection necessary, it may issue an order with the offering for suspending the offer and sale of the which a registration statement has been securities pending any investigation. The filed order shall state the grounds for taking (iii) Has been or is engaged or is about to such action, but such order of engage in fraudulent suspension although binding upon the transactions; persons notified thereof, shall be (iv) Has made any false or misleading deemed confidential, and shall not be representation of material published. Upon the issuance of the facts in any prospectus concerning the suspension order, no further offer or sale issuer or its securities; of such security shall be made until (v) Has failed to comply with any the same is lifted or set aside by the requirements that the Commission. Otherwise, such sale shall Commission may impose as a condition for be void. registration of the 13.5. Notice of issuance of such order shall security for which the registration be given to the issuer and every statement has been filed; or dealer and broker who shall have notified (b) The registration statement is on its the Commission of an intention to face incomplete or inaccurate in sell such security. any material respect or includes any 13.6. A registration statement may be untrue statements of a material fact withdrawn by the issuer only with the required to be stated therein or necessary consent of the Commission. to make the statement Section 14. Amendment to the incorrect, inadequate or incomplete in any Registration Statement. 14.1. If a material respect, or the sale or registration statement is on its face offering for sale of the security registered incomplete or inaccurate in any material thereunder may work or tend to respect, the Commission shall issue an work a fraud, the Commission may require order directing the amendment of the from the issuer such further registration statement. Upon compliance information as may in its judgement be with such order, the amended necessary to enable the Commission registration statement shall become to ascertain whether the registration of effective in accordance with the such security should be revoked on procedure mentioned in Subsection 12.6 any ground specified in this Code. The hereof. Commission may also suspend the 14.2. An amendment filed prior to the right to sell and offer for the sale such effective date of the registration security pending further investigation, statement shall recommence the forty-five by entering an order specifying the (45) day period within which the grounds for such action, and by notifying Commission shall act on a registration the issuer, underwriter, dealer or broker statement. An amendment filed after known as participating in such the effective date of the registration offering. statement shall become effective only 15.2. The refusal to furnish information upon such date as determined by the required by the Commission may be a Commission. ground for the issuance of an order of 14.3. If any change occurs in the facts set suspension pursuant to Subsection forth in a registration statement, the 15.1. Upon the issuance of any such order issuer shall file an amendment thereto and notification to the issuer, setting forth the change. underwriter, dealer or broken know as 14.4. If, at any time, the Commission finds participating in such offering, no further that the registration statement offer or sale of any such security shall be contains any false statement or omits to made until the same is lifted or set state any fact required to be stated aside by the Commission. Otherwise such therein or necessary to make the sale shall be void. statements therein not misleading, the 15.3. Upon issuance of an order of Commission may conduct an examination, suspension, the Commission shall conduct and, after due notice and hearing, a hearing. If the Commission determines issue an order suspending the affectivity that the sale of any security should registration statement. If the be revoked is shall issue an order statement is duly amended, the prohibiting sale of such security. suspension order may be lifted. 15.4. Until the issuance of a final order, 14.5. In making such examination the the suspension of the right to sell, Commission or any officer or officers though binding upon the persons notified designated by it may administer oaths and there of, shall be deemed affirmations and shall have access confidential, and shall not be published, to, and may demand the production of, unless it shall appear that the order of any books, records or documents suspension has been violated after notice. relevant to the examination. Failure of the If, however, the Commission finds issuer, underwriter, or any other that the sale of the security will neither be person to cooperate, or his obstruction or fraudulent nor result in fraud, it shall refusal to undergo an examination, forthwith issue an order revoking the order shall be a ground for the issuance of a of suspension, and such security suspension order. shall be restored to its status as a Section 15. Suspension of Registration. - registered security as of the date of such 15.1. If at any time, the information order of suspension. contained in the registration statement CHAPTER IV filed is or has become misleading, REGULATION OF PRE-NEED PLANS Section 16. Pre-Need Plans. No person year after the year such registration shall sell or offer for sale to the became effective if such issuer, as public any pre-need plan except in of the first day of any such fiscal year, has accordance with rules and regulations less than one hundred (100) which the Commission shall prescribe. holder of such class securities or such Such rules shall regulate the sale of other number as the Commission pre-need plans by, among other things, shall prescribe and it notifies the requiring the registration of pre-need Commission of such; plans, licensing persons involved in the (b) An issuer with a class of securities sale of pre- need plans, requiring listed for trading on an Exchange; disclosures to prospective plan holders, and prescribing advertising guidelines, (c) An issuer with assets of at least Fifty providing for uniform accounting system, million pesos (50,000,000.00) reports and recording keeping with or such other amount as the Commission respect to such plans, imposing capital, shall prescribe, and having bonding and other financial two hundred (200) or more holder each responsibility, and establishing trust funds holding at least one hundred for the payment of benefits under (100) share of a class of its equity such plans. securities: Provided, however, That CHAPTER V the obligation of such issuer to file report REPORTORIAL REQUIREMENTS shall be terminate ninety (90) Section 17. Periodic and Other Reports of days after notification to the Commission Issuer. 17.1. Every issuer by the issuer that the number satisfying the requirements in Subsection of its holders holding at least one hundred 17.2 hereof shall file with the (100) share reduced to less Commission: than one hundred (100). (a) Within one hundred thirty-five (135) 17.3. Every issuer of a security listed for days, after the end of the trading on an Exchange a copy of issuers fiscal year, or such other time as any report filed with the Commission the Commission may under Subsection 17.1. hereof. prescribe, an annual report which shall 17.4. All reports (including financial include, among others, a statements) required to be filed with the balance sheet, profit and loss statement Commission pursuant to Subsection 17.1 and statement of cash flows, hereof shall be in such form, contain for such last fiscal year, certified public such information and be filed at such accountant, an a management times as the Commission shall discussion and analysis of results of prescribe, and shall be in lieu of any operation; and periodical or current reports or financial (b) Such other periodical reports for statements otherwise required to be filed interim fiscal periods and current under the Commission shall reports on significant developments of the prescribe. issuer as the Commission 17.5. Every issuer which has a class of may prescribe as necessary to keep equity securities satisfying any of the current information on the requirements in Subsection 17.2 shall operation of the business and financial furnish to each holder of such equity condition of the issuer. security an annual report in such form and 17.2. The reportorial requirements of containing such information as the Subsection 17.1 shall apply to the Commission shall prescribe. following: 17.6. Within such period as the (a) An issuer which has sold a class of its Commission may prescribe preceding the securities pursuant to a annual meeting of the holders of any registration under section 12 hereof: equity security of a class entitled to vote Provided however, That the at such meeting , the issuer shall transmit obligation of such issuer to file reports to such holders an annual report in shall be suspended for any fiscal conformity with subsection 17.5. Section 18. Reports by five per centum persons with whom such contracts, (5%) Holders of Equity Securities. arrangements, or understanding 18.1. In every case in which an issuer have been entered into, and giving the satisfies the requirements of details thereof. Subsection 17.2 hereof any person who 18.2. If any change occurs in the facts set acquires directly or indirectly the forth in the statements, an beneficial ownership of more than five of amendment shall be transmitted to the per centum (5%) of such class or in issuer, the Exchange and the excess of such lesser per centum as the Commission. Commission by rule may prescribe, 18.3. The Commission, may permit any shall, within ten (10) days after such person to file in lieu of the statement acquisition or such reasonable time as required by subsection 17.1 hereof, a fixed by the Commission, submit to the notice stating the name of such person, issuer of the securities, to the the shares of any equity securities subject Exchange where the security is traded, to Subsection 17.1 which are and to the Commission a sworn owned by him, the date of their acquisition statement containing the following and such other information as the information and such order information as commission may specify, if it appears to the Commission may require in the public the commission that such securities interest or for the protection of were acquired by such person in the investors. ordinary course of his business and were (a) The personal background, identity, not acquired for the purpose of and do not residence, and citizenship of, and have the effect of changing or the nature of such beneficial ownership influencing the control of the issuer nor in by, such person and all other connection with any transaction person by whom or on whose behalf the having such purpose or effect. purchases are effected; in the CHAPTER VI event the beneficial owner is a juridical PROTECTION OF SHAREHOLDERS person, the of business of the INTERESTS beneficial owner shall also be reported; Section 19. Tender Offers. Any person or (b) If the purpose of the purchases or group of persons acting in prospective purchases is to concert who intends to acquire at least acquire control of the business of the 15% of any class of any equity security issuer of the securities, any plans of a listed corporation of any class of any or proposals which such persons may have equity security of a corporation with that will effect a major assets of at least fifty million pesos change in its business or corporate (50,000,000.00) and having two structure; hundred(200) or more stockholders at (c) The number of shares of such security least one hundred shares each or who which are beneficially owned, intends to acquire at least thirty and the number of shares concerning percent(30%) of such equity over a period which there is a right to acquire, of directly or indirectly, by; (i) such person, twelve months(12) shall make a tender and (ii) each associate of such offer to stockholders by filling with the person, giving the background, identity, Commission a declaration to that effect; residence, and citizenship of and furnish the issuer, a statement each such associate; and containing such of the information (d) Information as to any contracts, required in Section 17 of this Code as the arrangements, or understanding Commission may prescribe. Such person with any person with respect to any or group of persons shall publish all securities of the issuer including but request or invitations or tender offer or not limited to transfer, joint ventures, loan requesting such tender offers or option arrangements, puts subsequent to the initial solicitation or or call guarantees or division of losses or request shall contain such information profits, or proxies naming the as the Commission may prescribe, and request or invitation. shall be filed with the Commission and 19.2. It shall be lawful for any person to sent to the issuer not alter than the time make any untrue statement of a copies of such materials are first material fact or omit to state any material published or sent or given to security fact necessary in order to make the holders. statements made in the light of the (a) Any solicitation or recommendation to circumstances under which they are the holders of such a security made, to accept or reject a tender offer or not mis-leading, or to engaged to any request or invitation for tenders shall fraudulent, deceptive or manipulative be made in accordance with such rules acts or practices, in connection with any and regulations as may be tender offer or request or invitation prescribe. for tenders, or any solicitation for any (b) Securities deposited pursuant to a security holders in opposition to or in tender offer or request or favor of any such favor of any such offer, invitation for tenders may be withdrawn request, or invitation. The by or on behalf of the depositor Commission shall, for the purposes of this at any time throughout the period that subsection, define and prescribe tender offer remains open and if means reasonably designed to prevent, the securities deposited have not been such acts and practices as are previously accepted for fraudulent, deceptive and manipulative. payment, and at any time after sixty (60) Section 20. Proxy solicitations. - 20.1. days from the date of the Proxies must be issued and proxy original tender offer to request or solicitation must be made in accordance invitation, except as the Commission with rules and regulations to be may otherwise prescribe. issued by the Commission; (c) Where the securities offered exceed 20.2. Proxies must be in writing, signed by that which person or group of the stockholder or his duly persons is bound or willing to take up and authorized representative and file before pay for, the securities that are the scheduled meeting with the subject of the tender offers shall be taken corporate secretary. up us nearly as may be pro 20.3. Unless otherwise provided in the data, disregarding fractions, according to proxy, it shall be valid only for the the number of securities meeting for which it is intended. No proxy deposited to each depositor. The provision shall be valid only for the meting for of this subject shall also which it is intended. No proxy shall be apply to securities deposited within ten valid and effective for a period longer (10) days after notice of increase than five (5) years at one time. in the consideration offered to security 20.4. No broker or dealer shall give any holders, as described in proxy, consent or any authorization, in paragraph (e) of this subsection, is first respect of any security carried for the published or sent or given to account of the customer, to a person security holders. other than the customer, without written (d) Where any person varies the terms of authorization of such customer. a tender offer or request or 20.5. A broker or dealer who holds or invitation for tenders before the expiration acquire the proxy for at least ten percent thereof by increasing the (10%) or such percentage as the consideration offered to holders of such commission may prescribe of the securities, such person shall outstanding share of such issuer, shall pay the increased consideration to each submit a report identifying the security holder whose beneficial owner of ten days after such securities are taken up and paid for acquisition, for its own account or whether or not such securities have customer, to the issuer of security, to the been taken up by such person before the exchange where the security is variation of the tender offer or traded and to the Commission. Section 21. Fees of Tender Offers and issuer of such security, shall file, at the Certain Proxy Solicitations. At the time either such requirement is first time of filling with the Commission of any satisfied or after ten days after he statement required under Section 19 becomes such a beneficial owner, director, for any tender offer or Section 72.2 for or officer, a statement form the issuer purchases, or Section 20 for Commission and, if such security is listed proxy or consent solicitation, The for Commission may require that the person trading on an exchange, also with the making such filing pay a fee of not more exchange of the amount of all the equity than one-tenth (1/10)(1%) of; security of such issuer of which he is the 21.1. The propose aggregate purchase beneficial owner, and within ten days price in the case of a transaction after the close of each calendar month under Section 20 or 72.2; or thereafter, if there has been a change 21.2. The proposed payment in cash, and in such ownership at the close of the ion value of any securities or calendar month and such changes in his property to be transferred in the ownership as have occurred during such acquisition, merger or consolidating, or calendar month. the 23.2. For the purpose of preventing the cash and value of any securities proposed unfair use of information which may to be received upon the sale have been obtained by such beneficial disposition of such assets in the case of a owner, director or officer by reason of solicitation under Section 20. The his relationship to the issuer, any profit Commission shall prescribe by rule realized by him from any purchase or diminishing fees in inverse proportion to sale, or any sale or purchase, of any the value of the aggregate price of the equity security of such issuer within any offering. period of less than (6) months unless such Section 22. Internal Record Keeping and security was acquired in good faith Accounting Control. - Every issuer in connection with a debt previously which has a class of securities that contracted, shall inure to and be satisfies the requirements of Subsection recoverable by the issuer, irrespective of 17.2 shall: any intention of holding the security 22.1. Device and maintain a system of purchased or of not repurchasing the internal accounting controls sufficient security sold for a period exceeding six to provide reasonable assurance that: (a) (6) months. Suit to recover such profit Transactions and access to assets may be instituted before the Regional are pursuant to management Trial Court by the issuer, or by the owner authorization; (b) Financial statements are of any security of the issuer in the provided in conformity with generally name and in behalf of the issuer if the accepted accounting principles that are issuer shall fail or refuse to bring such adopted by the Accounting standards suit within sixty (60) days after request or council and the rules promulgated by shall fail diligently to prosecute the the Commission with the regard to the same thereafter, but not such shall be preparation of the financial statements; brought more than two years after the and (c) Recorded assets are compared date such profit was realized. This with existing assets at reasonable Subsection shall not be construed to cover intervals and differences are reconciled. any transaction were such beneficial Section 23. Transactions of Directors owner was not such both time of the officers and Principal Stockholders. owner or the sale, or the sale of purchase, 23.1. Every person who is directly or of the security involved, or any indirectly the beneficial owner of more transaction or transactions which the than ten per centum (10%) of any class of Commission by rules and regulations any equity security which satisfies may exempt as not comprehended within the requirements of subsection 17.2, or the purpose of this subsection. who is a director or an officer of the 23.3. It shall be unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any equity change in the beneficial ownership security of such issuer if the person thereof; selling the principal: (a) Does not own the (ii) By entering an order or orders for the security sold: or (b) If owning the purchase or sale of such security, does not deliver not deliver it security with the knowledge that a against such sale within 20 days simultaneous order or orders of thereafter, or does not within five days substantially the same size, time and after such sale deposit in the mails or price, for the sale or the unusual channels of transportation; purchase of any such security, has or will but no person shall be deemed to be entered by or for the have violated this subsection if he proves same or different parties; or not withstanding the exercise of (iii) By performing similar act where there good faith he was unable to make such is no change in delivery in such time, or that to do so beneficial ownership. would cause undue inconvenience or (b) To affect, alone or with others, a expense. securities or transactions in 23.4. The provisions of subsection 23.2 securities that: (I) Raises their price to shall not apply to any purchase and induce the purchase of a sale, or sale and purchase, and the security, whether of the same or a provisions of Subsection 23.3 shall not different class of the same issuer or apply to any sale, of an equity security not of controlling, controlled, or commonly then or thereafter held by him and controlled company by others; or an investment account, by a dealer in the (iii) Creates active trading to induce such ordinary course of his business and a purchase or sale through incident to the establishment or manipulative devices such as marking the maintenance by him of a primary or close, painting the tape, secondary market, otherwise than on an squeezing the float, hype and dump, boiler Exchange, for such security. The room operations and such Commission may, by such rules and other similar devices. regulations as it deems necessary or (c) To circulate or disseminate information appropriate in the public interest, define that the price of any security and prescribe terms and conditions listed in an Exchange will or is likely to rise with respect to securities held in an or fall because of investment account and transactions manipulative market operations of any made in the ordinary course of business one or more persons conducted and incident to the establishment or for the purpose of raising or depressing maintenance of a primary or secondary the price of the security for the market. purpose of inducing the purpose of sale of CHAPTER VII such security. PROHIBITIONS AND FRAUD, (d) To make false or misleading statement MANIPULATION AND INSIDER TRADING with respect to any material Section 24. Manipulation of Security fact, which he knew or had reasonable Prices; Devices and Practices. 24.1 It ground to believe was so false or shall be unlawful for any person acting for misleading, for the purpose of inducing himself or through a dealer or the purchase or sale of any broker, directly or indirectly: security listed or traded in an Exchange. (a) To create a false or misleading (e) To effect, either alone or others, any appearance of active trading in any series of transactions for the listed security traded in an Exchange of purchase and/or sale of any security any other trading market traded in an Exchange for the (hereafter referred to purposes of this purpose of pegging, fixing or stabilizing Chapter as "Exchange"): the price of such security; (i) By effecting any transaction in such unless otherwise allowed by this Code or security which involves no by rules of the Commission. 24.2. No person shall use or employ, in that is not generally available to the connection with the purchase or sale public, unless: (a) The insider proves that of any security any manipulative or the information was not gained from such deceptive device or contrivance. Neither relationship; or (b) If the other party shall any short sale be effected nor any selling to or buying from the insider (or his stop-loss order be executed in agent) is identified, the insider connection with the purchase or sale of proves: (I) that he disclosed the any security except in accordance information to the other party, or (ii) that with such rules and regulations as the he Commission may prescribe as had reason to believe that the other party necessary or appropriate in the public otherwise is also in possession of interest for the protection of investors. the information. A purchase or sale of a 24.3. The foregoing provisions security of the issuer made by an notwithstanding, the Commission, having insider defined in Subsection 3.8, or such due insiders spouse or relatives by regard to the public interest and the affinity or consanguinity within the second protection of investors, may, by rules and degree, legitimate or common-law, regulations, allow certain acts or shall be presumed to have been effected transactions that may otherwise be while in possession of material prohibited under this Section. nonpublic information if transacted after Section 25. Regulation of Option Trading. such information came into existence No member of an Exchange but prior to dissemination of such shall, directly or indirectly endorse or information to the public and the lapse of guarantee the performance of any put, a call, straddle, option or privilege in relation reasonable time for market to absorb such to any security registered on a information: Provided, however, securities exchange. The terms "put", That this presumption shall be rebutted "call", "straddle", "option", or "privilege" upon a showing by the purchaser or shall not include any registered warrant, seller that he was aware of the material right or convertible security. nonpublic information at the time of Section 26. Fraudulent Transactions. It the purchase or sale. shall be unlawful for any person, 27.2. For purposes of this Section, directly or indirectly, in connection with information is "material nonpublic" if: (a) It the purchase or sale of any securities has not been generally disclosed to the to: public and would likely affect the 26.1. Employ any device, scheme, or market price of the security after being artifice to defraud; disseminated to the public and the 26.2. Obtain money or property by means lapse of a reasonable time for the market of any untrue statement of a to absorb the information; or (b) material fact of any omission to state a would be considered by a reasonable material fact necessary in order to person important under the make the statements made, in the light of circumstances in determining his course of the circumstances under which they action whether to buy, sell or hold were made, not misleading; or a security. 26.3. Engage in any act, transaction, 27.3. It shall be unlawful for any insider to practice or course of business which communicate material nonpublic operates or would operate as a fraud or information about the issuer or the deceit upon any person. security to any person who, by virtue of Section 27. Insiders Duty to Disclose the When Trading. 27.1. It shall be communication, becomes an insider as unlawful for an insider to sell or buy a defined in Subsection 3.8, where the security of the issuer, while in insider communicating the information possession of material information with knows or has reason to believe that respect to the issuer or the security such person will likely buy or sell a security of the issuer whole in possession of such information. exempt from subsection 28.1 and 28.2 any 27.4. (a) It shall be unlawful where a broker, dealer, salesman, tender offer has commenced or is about associated person of any broker or dealer, to commence for: or any class of the foregoing, as it (i) Any person (other than the tender deems consistent with the public interest offeror) who is in possession of and the protection of investors. material nonpublic information relating to 28.4. The Commission shall promulgate such tender offer, to buy or rules and regulation prescribing the sell the securities of the issuer that are qualifications for registration of each sought or to be sought by such category of applicant, which shall, among tender offer if such person knows or has other things, require as a condition for reason to believe that the registration that: information is nonpublic and has been (a) If a natural person, the applicant acquired directly or indirectly satisfactorily pass a written from the tender offeror, those acting on its examination as to his proficiency and behalf, the issuer of the knowledge in the area of activity securities sought or to be sought by such for which registration is sought; tender offer, or any insider of (b) In the case of a broker or dealer, the such issuer; and applicant satisfy a minimum net (ii) Any tender offeror, those acting on its capital as prescribed by the Commission, behalf, the issuer of the and provide a bond or other securities sought or to be sought by such security as the Commission may prescribe tender offer, and any insider to secure compliance with of such issuer to communicate material the provisions of this Code; and nonpublic information relating to (c) If located outside of the Philippines, the the tender offer to any other person where applicant files a written such communication is likely consent to service of process upon the to result in a violation of Subsection 27.4 Commission pursuant to Section (a)(I). 65 hereof. (b) For purposes of this subsection the 28.5. A broker or dealer may apply for term "securities of the issuer sought or registration by filing with the to be sought by such tender offer" shall Commission a written application in such include any securities convertible or forms and containing such exchangeable into such securities or any information and documents concerning options or rights in any of the such broker or dealer as the foregoing securities. Commission by rule shall prescribe. CHAPTER VIII 28.6. Registration of a salesman or of an REGULATION OF SECURITIES MARKET associated person of a registered PROFESSIONALS broker or dealer may be made upon Section 28. Registration of Brokers, written application filed with the Dealers, Salesmen and Associated Commission by such salesman or Persons. 28.1. No person shall engage in associated person. The application shall the business of buying or selling be securities in the Philippine as a broker or separately signed and certified by the dealer, or act as a salesman, or an registered broker or dealer to which associated person of any broker or dealer such salesman or associated person is to unless registered as such with the become affiliated, or by the issuer in Commission. the case of a salesman employed 28.2. No registered broker or dealer shall appointed or authorized solely by such employ any salesman or any issuer. The application shall be in such associated person, and no issuer shall form and contain such information and employ any salesman, who is not documents concerning the salesman or registered as such with the Commission. associated person as the Commission 28.3. The Commission, by rule or order, by rule shall prescribe. For purposes of may conditionally or unconditionally this Section, a salesman shall not include any employee of an issuer whose such cessation of affiliation, the registered compensation is not determined broker or dealer, issuer as the case directly or indirectly on sales of securities may be, shall file with the Commission a if the issuer. notice of separation of such 28.7. Applications filed pursuant to salesman or associated person. Subsections 28.5 and 28.6 shall be Section 29. Revocation, Refusal or accompanied by a registration fee in such Suspension of Registration of Brokers, reasonable amount prescribed by Dealers, Salesmen and Associated the Commission. Persons. 29.1. Registration under 28.8. Within thirty (30) days after the filing Section 28 of this Code may be refused , of any application under this or any registration granted Section, the Commission shall by order: thereunder may be revoked, suspended, (a) Grant registrations if it determines or limitations placed thereon, by the that the requirements of this Section and Commission if, after due notice and the qualifications for registrations set hearing the Commission determines the forth in its rules and regulations have application or registrant. been satisfied ; or (b) Deny said (a) Has willfully violated any provision of registration. this Code, any rule, regulation 28.9. The names and addresses of all or order made hereunder, or any other law persons approved for the registration administered by the as brokers, dealers, associated persons or Commission, or in the case of a registered salesman and all orders of the broker, dealer or associated Commission with respect thereto shall be persons has failed to supervise, with a recorded in a Register of Securities view to preventing such violation, Market Professionals kept in the office of another person who commits such the Commission which shall be open violation; to public inspection. (b) Has willfully made or caused to be 28.10. Every person registered pursuant to made a materially false or this Section shall file with the misleading statement in any application Commission, in such form as the for registration or report filed Commission shall prescribe, information with the Commission or a self-regulatory necessary to keep the application for organization, or has willfully registration current and accurate, omitted to state any material fact that is including in the case of a broker or dealer required to be stated therein; changes in salesmen, associated (c) Has failed to satisfy the qualifications persons and owners thereof. or requirements for registration 28.11. Every person registered pursuant to prescribed under Section 28 and the rules this Selection shall pay to the and regulations of the Commission an annual fee at such time Commission promulgated thereunder; and in such reasonable amount as (d) Has been convicted, by a competent the Commission shall prescribe. Upon judicial or administrative body notice by the Commission that such of an offense involving moral turpitude, annual fee has not been paid as required, fraud, embezzlement, the registration of such person shall counterfeiting, theft, estafa, be suspended until payment has been misappropriation, forgery, bribery, false made. oath, or perjury, or of a violation of 28.12. The registration of a salesman or securities, commodities, banking, associated person shall be real state or insurance laws; automatically terminated upon the (e) Is enjoined or restrained by a cessation of his affiliation with said competent judicial or administrative registered broker or dealer or with an body from engaging in securities, issuer in the case of a salesman commodities, banking, real state or employed, appointed or authorized by insurance activities or from willfully such issuer. Promptly following any violating laws governing such activities; (f) Is subject to an order of a competent also automatically suspend the judicial or administrative body registration of all salesmen and associated refusing, revoking or suspending any persons affiliated with such broker or registration, licensed or other dealer. The order of the Commission permit under this Code, the rules and refusing, revoking, suspending or placing regulations promulgated limitations on a registration as thereunder, any other law administered by herein above provided, together with its the Commission; findings, shall be entered in the (g) Is subject to an order of a self- Register of Securities Market Professionals. regulatory organization suspending or The suspension or revocation of expelling him from membership or the registration of a dealer or broker shall participating therein or from also automatically suspend the association with a member or participant registration of a dealer or broker shall also thereof; automatically suspend the (h) Has been found by a competent registration of all salesmen and associated judicial or administrative body to persons affiliated with such broker have willfully violated any provisions of or dealer. securities, commodities, 29.4. It shall be sufficient cause for banking, real state or insurance laws, or refusal, revocation or suspension of a has willfully aided, abetted, brokers or dealers registrations, if any counseled, commanded, induced or associated person thereof or any procured such violation; or juridical entity controlled by such (i) Has been judicially declared insolvent. associated person has committed any act For purposes of this subsection, the term or "competent judicial or administrative omission or is subject to any disability body" shall include a foreign court of enumerated in paragraphs (a) through competent jurisdiction and a foreign (i) of Subsection 29. I hereof. financial regulator. Section 30. Transactions and 29.2. (a) In case of charges against a Responsibility of Brokers and Dealers. salesman or associated person, notice 30.1 thereof shall also be given the broker, No brokers or dealer shall deal in or dealer or issuer employing such otherwise buy or sell, for its own account salesman or associated person. or for its own account or for the account of (b) Pending the hearing, the Commission customers, securities listed on an shall have the power to order Exchange issued by any corporation where the suspensions of such brokers, dealers, any stockholders, director, associated persons or associated person or salesman, or salesmans registration: Provided, That authorized clerk of said broker or dealer such order shall state the cause and all the relatives of the foregoing for such suspension. Until the entry of a within the fourth civil degree of final order, the suspension of consanguinity or affinity, is at the same such registration, though binding upon the time holding office in said issuer persons notified thereof, shall corporation as a director, president, vice- be deemed confidential, and shall not be president, manager, treasurer, published, unless it shall comptroller, secretary or any office trust appear that the order of suspension has and responsibility, or is a controlling been violated after notice. of the issuer. 29.3. The orders of the Commission 30.2. No broker or dealer shall effect any refusing, revoking, suspending or placing transaction in securities or induce or limitations on a registration as herein attempt to induce the purchase or sale of above provided, together with its any security except in compliance findings, shall be entered in the Register with such rules and regulations as the of Securities Market Professionals. Commission shall prescribe to ensure The suspension or revocation of the fair and honest dealings in securities and registration of a dealer or broker shall provide financial safeguards and other standards for the operations of require such market to be administered by brokers and dealers, including the a self-regulatory organization establishments of minimum net capital determined by the Commission as capable requirements, the acceptance of of insuring the protection of custody and use of securities of investors comparable to that provided in customers, and the carrying and use of the case of a registered deposits and credit balances of customers. Exchange. Such self-regulatory Section 31. Development of Securities organization must provide a centralized Market Professionals. The marketplace for trading and must satisfy Commission in joint undertaking with self requirements comparable to regulatory organizations, those prescribed for registration of organizations and associations of finance Exchanges in Section 33 of this professionals as well as private Code. educational and research institute shall Section 33. Registration of Exchanges. undertake or facilitate/organize 33.1. Any Exchange may be continuing training, conferences/seminars, registered as such with the Commission updating programs, research and under the terms and conditions developments as well as technology hereinafter provided in this Section and transfer at the latest and advance trends Section 40 hereof, by filing an in issuance and trading of securities, application for registration in such form derivatives, commodity trades and other and containing such information and financial instruments, as well as securities supporting documents as the Commission markets of other countries. by rule shall prescribe, including CHAPTER IX the following: EXCHANGES AND OTHER SECURITIES (a) An undertaking to comply and enforce TRADING MARKETS by its members with the Section 32. Prohibition on Use of provisions of this Code, its implementing Unregistered Exchange; Regulation of rules and regulations and the Over-the-Counter Markets. 32.1. No rules of the Exchange; broker, dealer, salesman, associated (b) The organizational charts of the person of a broker or dealer, or Exchange, Exchange, rules of procedure, and a directly or indirectly shall make use list of its officers and members; of any facility of an Exchange in the (c) Copies of the rules of the Exchange; Philippines to effect any transaction in a and security, or to report such transaction, (d) An undertaking that in the event a unless such Exchange is registered as member firm becomes insolvent such under Section 33 of this Code. or when the Exchange shall have found 32.2. (a) No broker, dealer, salesman or that the financial condition of its associated person of a broker or member firm has so deteriorated that it dealer, singly or in concert with any other cannot readily meet the person, shall make, create or demands of its customers for the delivery operate, or enable another to make, of securities and/or payment create or operate, any trading market, of sales proceeds, the Exchange shall, otherwise than on a registered Exchange, upon order of the Commission, for the buying and selling of any take over the operation of the insolvent security, except in accordance with rules member firm and immediately and regulations the Commission proceed to settle the member firms may prescribe. liabilities to its customers. (b) The Commission may promulgate rules 33.2. Registrations of an Exchange shall and regulations governing be granted upon compliance with the transactions by brokers, dealers, salesmen following provisions: or associated persons of a (a) That the applicant is organized as a broker or dealer, over any facilities of such stock corporation: Provided, trading market and may That any registered Exchange existing prior to the effectivity of this Code shall within one (1) year reorganize more than forty-nine percent (49%) of as a stock corporation such board and shall pursuant to a demutualization plan proportionately represent the Exchange approved by the Commission; membership in terms of (b) That the applicant is engaged solely in volume/value or trade and paid up capital, the business of operating an and that any natural person exchange: Provided, however, That the associated with a juridical entity that is a Commission may adopt rules, member for this regulations or issue an order, upon purpose; Provide, That any registered application, exempting an Exchange Exchange existing prior to the organized as a stock corporation and affectivity of this Code shall immediately owned and controlled by another comply with this requirement; juridical person from the restriction. (g) For the board of the Exchange to (c) Where the Exchange is organized as a include in its composition (1) the stock corporation, that no president of the Exchange, and (ii) no less person may beneficially own or control, than fifty one percent (51%) directly or indirectly, more than of the remaining members of the board to five percent (5%) of the voting rights of be comprised of three (3) the Exchange and no industry or independent directors and persons who business group may beneficially own or represent the interests of control, directly or indirectly, issuers, investors, and other market more than twenty percent (20%) of the participants, who are not voting rights of the associated with any broker or dealer or Exchange: Provided, however,That the member of the Exchange for a Commission may adopt rules, period of two (2) years prior to his/her regulations or issue an order, upon appointment. No officer or application from this prohibition employee of a member, its subsidiaries or where it finds that such ownership or affiliates or related interests control will not negatively impact shall become an independent director: on the exchanges ability to effectively Provided, however, That the operate in the public interest. Commission may by rule, regulation, or (d) The expulsion, suspension, or order upon application, permit disciplining of a member and persons the exchange organized as a stock associated with a member for conduct or corporation to use a different proceeding inconsistent with governance structure: Provided, further, just and equitable principles of fair trade, That the Commission is and for violations of provisions satisfied that the Exchange is acting in the of this Code, or any other Act administered public interest and is able to by the Commission, the effectively operate as a self-regulatory rules, regulations and orders thereunder, organization under this or the rules of the Exchange; Code: Provided, finally, That any (e) A fair procedure for the disciplining of registered exchange existing prior to members and persons the affectivity of this Code shall associated with members, the denial of immediately comply with this membership to any person requirement. seeking to be a member, the barring of (h) The president and other management any person from association of the Exchange to consist with a member, and the prohibition or only of persons who are not members and limitation of any person from are not associated in any association with member, and the capacity, directly or indirectly with any prohibition or limitation of any person broker or dealer or member or from access to services offered by the listed company of the Exchange: Provided, Exchange; That the Exchange may only (f) That the brokers in the board of the appoint, and a person may only serve, as Exchange shall comprise of not an officer of the exchange if such person has not been a member or amount and within such period as the affiliated with any broker, Commission may fix. dealer, or member of the Exchange for a 33.6. Upon appropriate application in period of at least two (2) years accordance with the rules and prior to such appointment; regulations of the Commission and upon (i) The transparency of transactions on the such terms as the Commission may Exchange; deemed necessary for the protection of (j) The equitable allocation of reasonable investors, an exchange may withdraw dues, fees, and other charges its registration or suspend its operations among members and issuers and other or resume the same. persons using any facility or Section 34. Segregation and Limitation of system which the Exchange operates or functions of Members, Broker and controls; Dealers. - 34.1. It shall be unlawful for any (k) Prevention of fraudulent and member-broker of an Exchange to manipulative acts and practices, effect any transaction on such Exchange promotion of just and equitable principles for its own account, the account of of trade, and, in general, an associated person, or an account with protection of investors and the public the respect to which it or an interest; and associated person thereof exercises the (l) The transparent, prompt and accurate investment discretion: Provided, clearance and settlement of however, That this Section shall not make transactions effected on the Exchange. unlawful- 33.3. If the Commission finds that the (a) Any transaction by a member-broker applicant Exchange is capable of acting in the capacity of a complying and enforcing compliance by its market maker; members, and persons associated (b) Any transaction reasonably necessary with such members, with the provisions of to carry on an odd-lot this Code, and the rules of the transactions; Exchange, and that the rules of Exchange (c) Any transaction to offset a transaction are fair, just and adequate, the made in error; and Commission shall cause such Exchange to (d) Any other transaction of a similar be registered. If, after notice due nature as may be defined by the and hearing, the Commission finds Commission. otherwise, the application shall be denied. 34.2. In all instances where the member- 33.4. Within ninety (90) days after the broker effects a transaction on an filing of the application the Commission Exchange for its own account or the may issue an order either granting or account of an associated person or an denying registration as an Exchange, account with the respect to which it unless the Exchange applying for exercises investment discretion, it shall registration shall withdraw its application disclose to such customer at or before the or completion of the transaction it is shall consent to the Commissions acting for its own account: Provided, deferring action on its application for a further, That this fact shall be reflected in stated longer period after the date of the order ticket and the confirmation slip. filing. The filing with the Commission of 34.3. Any member-broker who violates the an application for registration by an provisions of this Section shall be Exchange shall be deemed to have taken subject to the administrative sanctions place upon the receipt thereof. provided in Section 54 of this Code. Amendments to an application may be Section 35. Additional Fees of Exchanges. made In addition to the registration fee upon such terms as the Commission may prescribed in Section 33 of this Code, prescribe. every Exchange shall pay to the 33.5. Upon the registration of an Commission, on a semestral basis on or Exchange, it is shall pay a fee in such before the tenth day of the end of the end of every semester of the calendar 36.5. (a) The Commission may establish or year, a fee in such an amount as the facilitate the establishment of trust Commission shall prescribe, but not more funds which shall be contributed by than one-hundredth of one per Exchanges, brokers, dealers, centum(1%) of the aggregate amount of underwriters, transfer agents, salesmen the sales of securities transacted on and other persons transacting in such Exchange during the preceding securities, as the Commission may calendar year for the privilege of doing require, for the purpose of compensating business, during the preceding calendar investors for the extraordinary losses or year or any part thereof. damage they may suffer due to Section 36. Powers with Respect to business failure or fraud or Exchanges and Other Trading Market. mismanagement of the persons with 36.1. The Commission is authorized, if in whom they its opinion such action is necessary transact, under such rules and regulations or appropriate for the protection of as the Commission may from time investors and the public interest so to time prescribe or approve in the public requires, summarily to suspend trading in interest. any listed security on any Exchange (b) The Commission may, having due or other trading market for a period not regard to the public interest or the exceeding thirty (30) days but not protection of investors, regulate, exceeding ninety (90) days: Provided, supervise, examine, suspend or however, That the Commission otherwise discontinue such and other promptly following the issuance of the similar funds under such rules order of suspension, shall notify the and regulations which the Commission affected issuer of the reasons for such may promulgate, and which may suspension and provide such issuer include taking custody and management with an opportunity for hearing to of the fund itself as well as determine whether the suspension should investments in and disbursements from be lifted. the funds under such forms of 36.2. Wherever two (2) or more Exchanges control and supervision by the or other trading markets exist, the Commission as it may from time to time Commission may require and enforce require. The authority granted to the uniformity of trading regulations in Commission under this subsection and/or between or among said Exchanges shall also apply to all funds established for or other trading markets. the protection of investors, 36.3. In addition to the existing Philippine whether established by the Commission or Stock Exchange, the Commission otherwise. shall have the authority to determine the Section 37. Registration of Innovative and number, size and location of stock Other Trading Markets. The Exchanges, other trading markets and Commission, having due regard for commodity Exchanges and other national economic development, shall similar organizations in the light of encourage competitiveness in the market national or regional requirements for such by promulgating within six (6) activities with the view to promote, months upon the enactment of this Code, enhance, protect, conserve or rationalize rules for the registration and investment. licensing of innovative and other trading 36.4. The Commission, having due regard markets or Exchanges covering, but to the public interest, the protection not limited to, the issuance and trading of of investors, the safeguarding of securities innovative securities, securities of and funds, and maintenance of fair small, medium, growth and venture competition among brokers, dealers, enterprises, and technology-based clearing agencies, and transfer agents, ventures pursuant to Section 33 of this shall promulgate rules and regulations for Code. the prompt and accurate clearance Section 38. Independent Directors. Any and settlement of securities transactions. corporation with a class of equity securities listed for trading on an with respect to transactions in or Exchange or with assets in excess of Fifty quotations for any security; or (b) million pesos (P50,000,000.00) and having Distributing two hundred (200) or more or publishing, whether by means of a holders, at least of two hundred (200) of ticker tape, a communications network, which are holding at least one a terminal display device, or otherwise, on hundred (100) shares of a class of its a current and continuing basis, equity securities or which has sold a information with respect to such class of equity securities to the public transactions or quotations. The pursuant to an effective registration Commission statement in compliance with Section 12 may prescribe rules and regulations which hereof shall have at least two (2) are necessary or appropriate in the independent directors or such public interest or for the protection of independent directors shall constitute at investors to govern self-regulatory least organizations and other organizations twenty percent (20%) of the members of licensed or regulated pursuant to the such board whichever is the lesser. authority granted in Subsection 39.1 For this purpose, an "independent including the requirement of cooperation director" shall mean a person other than within and among, and electronic an integration of the records of, all officer or employee of the corporation, its participants parent or subsidiaries, or any other in the securities market to ensure individual having a relationship with the transparency and facilitate exchange of corporation, which would interfere with information. the exercise of independent judgement in 39.2. An association of brokers and carrying out the responsibilities of a dealers may be registered as a securities director. association pursuant to Subsection 39.3 CHAPTER X by filing with the Commission an REGISTRATION, RESPONSIBILITIES AND application for registration in such form as OVERSIGHT OF SELFREGULATORY the Commission, by rule, may ORGANIZATIONS prescribe containing the rules of the Section 39. Associations of Securities association and such other information Brokers, and Dealers, and Other and documents as the Commission, by Securities Related Organizations. 39.1. rule, may prescribe as necessary or The Commission shall have the appropriate in the public interest or for the power to register as a self-regulatory protection of investors. organization, or otherwise grant 39.3. An association of brokers and licenses, and to regulate, supervise, dealers shall not be registered as a examine, suspend or otherwise securities association unless the discontinue, as a condition for the Commission determines that: operation of organizations whose (a) The association is so organized and operations are related to or connected has the capacity to be able to with the securities market such as but carry out the purposes of this Code and to not limited to associations of brokers and comply with, and to enforce dealers, transfer agents, custodians, compliance by its members and persons fiscal and paying agents, computer associated with its members, services, news disseminating services, with the provisions of this Code, the rules proxy solicitors, statistical agencies, and regulations thereunder, securities rating agencies, and securities and the rules of the association. information processor which are engaged (b) The rules of the association, in business of: (a) Collecting, notwithstanding anything in the processing, or preparing for distribution or Corporation Code to the contrary, provide publication, or assisting, that: participating in, or coordinating the (i) Any registered broker or dealer may distribution or publication of, information become a member of the association; respect to access to services offered by (ii) There exist a fair representation of its the association or a members to serve on the member thereof. Board of Directors of the association and 39.4. (a) A registered securities in the administration of association shall deny membership to any its affairs, and that may any natural person who is not a registered broker or person associated with a dealer. juridical entity that is a member shall (b) A registered securities association may himself be deemed to be a deny membership to, or member for this purpose; condition the membership of, a registered (iii) The Board of Directors of the broker or dealer if such association includes in its broker or dealer: composition: (i) Does not meet the standards of (a) The president of the association and financial responsibility, (b) Person who represent the interests of operational capability, training, experience the issuer and or competence that are public investors and are not associated prescribe by the rules of the association; with any broker or or dealer or member of the association; that (ii) Has engaged, and there is a the president and reasonable likelihood it will again other management of the association not engage, in acts or practices inconsistent be a member or with just and equitable associated with any broker, dealer or principles of fair trade. member of the (c) A registered securities association may association; deny membership to a (iv) For the equitable allocation of registered broker or dealer not engage in reasonable dues, fees, and a type of business in which other charges among member and issuers the rules of the association require and other persons members to be engaged: Provided, using any facility or system which the however, That no registered securities association operates or association may deny controls; membership to a registered broker or (v) For the prevention of fraudulent and dealer by reason of the amount of manipulative acts and business done by the broker or dealer. practices, the promotion of just and A registered securities association may equitable principles of trade, examine and verify the and, in general, the protection of investors qualifications of an applicant to become a and the public interest; member in accordance with (vi) That its members and persons procedure established by the rules of the associated with its members association. shall be appropriately disciplined for (d) A registered securities association may violation of any provision of bar a salesman or person this Code, the rules and regulations associated with a broker or dealer from thereunder, or the rules of the being employed by a member or association; set conditions for the employment of a (vii) That a fair procedure for the salesman or associated if such disciplining of members and person: persons associated with members, the (i) Does not meet the standards of denial of membership to training, experience, or any person seeking membership therein, competence that are prescribe by the the barring of any rules of the association; or person from becoming associated with a (ii) Has engage, and there is a reasonable member thereof, and the likelihood he will again prohibition or limitation by the association engage, in acts or practices inconsistent of any person with with just and equitable principles of fair trade. 40.3. (a) Each self-regulatory organization A registered securities association may shall submit to the Commission for examine and verify the qualifications prior approval any proposed rule or of an applicant to become a salesman or amendment thereto, together with a associated person employed by a concise statement of the reason and effect member in accordance with the of the proposed amendment procedures establish by the rules of the (b) Within sixty (60) days after submission association. A registered association also of a proposed amendment, may require a salesman or the Commission shall, by order, approve associated person employed by a member the proposed amendment. to be registered with the Otherwise, the same may be made association in accordance with the effective by the self-regulatory procedures prescribed in the rules of the organization. association. (c) In the event of an emergency requiring 39.5. In any proceeding by a registered action for the protection of securities association to determine investors, the maintenance of fair and whether a person shall be denied orderly markets, or the membership, or barred from association safeguarding of securities and funds, a with a member, the association shall self-regulatory organization may provide notice to the person under put a proposed amendment into effect review of the specific grounds being summarily; Provided considered for denial, afford him an however, That the copy of the same shall opportunity to defend against the be immediately submitted to allegations, and keep a record of the the Commission. proceedings. A determination by the 40.4. The Commission is further association to deny membership shall be authorized, if after making appropriate supported by a statement setting forth the request in writing to a self-regulatory specific grounds on which the organization that such organization effect denial is based. on its own behalf specified changes in its Section 40. Powers with Respect to Self- rules and practices and, after due to Regulatory Organizations. - 40.1. notice and hearing it determines that such Upon the filing of an application for changes have not been effected, registration as an Exchange under Section and that such changes are not necessary, 33, a registered securities association by the rule or regulation or by under Section 39, a registered clearing order, may alter, abrogate or supplement agency under Section 42, or other self- the rules of such self-regulatory regulatory organization under this organization in so far as necessary or Section, the Commission shall have ninety appropriate to effect such changes in (90) days within which to either respect of such matters as: grant registration should be denied. In the (a) Safeguards in respect of the financial event proceedings are instituted, responsibility of members and the Commission shall have two hundred adequate provision against the evasion of seventy (270) days within which to financial responsibility conclude such proceedings at which time through the use of corporate forms or it shall, by order, grant or deny such special partnerships; registration. (b) The supervision of trading practices; 40.2. Every self-regulatory organization (c) The listing or striking from listing of shall comply with the provision of this any security; Code, the rules and regulations (d) Hours of trading; thereunder, and its own rules, and enforce (e) The manner, methods, and place of compliance therewith, notwithstanding soliciting business; any provisions of the Corporation Code (f) Fictitious accounts; to the contrary, by its members, persons (g) The time and method of making associated with its members of its settlements, payments, and participants. deliveries, and of closing accounts; (h) The transparency of securities any provision of this Code, any other law transactions and prices; administered by the (i) The fixing of reasonable rates of fees, Commission, the rules or regulations interest, listing and other thereunder, or the rules of such charges, but not rates of commission; self-regulatory organization, abused his (j) Minimum units of trading; authority, without reasonable (k) Odd-lot purchases and sales; justification or excuse has failed to enforce (l) Minimum deposits on margin accounts; compliance with any of such and provisions. (m) The supervision, auditing and 40.6. (a) A self-regulatory organization is disciplining of members or authorized to discipline a member of participants. or participant in such self-regulatory 40.5. The Commission, after due notice organization, or any person associated and hearing, is authorized, in the with a member, including the suspension public interest and to protect investors: or expulsion of such member or (a) To suspend for a period not exceeding participant, and the suspension or bar twelve (12) months or to from being associated with a member, revoke the registration of a self-regulatory if such person has engage in acts or organization, or to censure or practices inconsistent with just and impose limitations on the activities, equitable principles of fair trade or in functions, and operations of such willful violation of any provision of the self-organization, if the Commission finds Code, any other law administered by the that such a self-regulatory Commission, the rules or regulations organization has willfully violated or is thereunder, or the rules of the self- unable to comply with any regulatory organization. In any disciplinary provision of this Code or of the rules and proceeding by a self-regulatory regulations thereunder, or its organization (other than a summary own or has failed to enforce compliance proceeding pursuant to paragraph (b) of therewith by a member of, this subsection) the self-regulatory person associated with a member, or a organization shall bring specific charges, participant in such selfregulatory provide notice to the person organization; charged, afford the person charged with (b) To expel from a self-regulatory an opportunity to defend against the organization any member thereof or charges, and keep a record of the any participant therein who is subject to proceedings. A determination to impose a an order of the Commission disciplinary sanction shall be supported by under Section 29 of this Code or is found a written statement of the offenses, to have willfully violated any a summary of the evidence presented and provision of this Code or suspend for a a statement of the sanction period not exceeding twelve (12) imposed. months for violation of any provision of (b) A self-regulatory organization may this Code or any other laws summarily: (I) Suspend a administered by the Commission, or rules member, participant or person associated and regulations thereunder, with a member who has been or effected, directly or indirectly, any or is expelled or suspended from any other transaction for any person who, self-regulatory organization; such member or participant had reason to or (ii) Suspend a member who the self- believe, was violating in regulatory organization finds to respect of such transaction any of such be in such financial or operating difficulty provisions; and that the member or participant (c) To remove from the office or censure cannot be permitted to continue to do any officer or director of a selfregulatory business as a member with safety organization if it finds that such officer or to investors, creditors, other members, director has violated participants or the self-regulatory organization: Provided, That the self- manner consistent with the purposes of regulatory organization this Code, and whether, with due immediately notifies the Commission of regard for the public interest and the the action taken. Any person protection of investors the sanction is aggrieved by a summary action pursuant excessive or oppressive. to this paragraph shall be 40.8. The powers of the Commission under promptly afforded an opportunity for a this Section shall apply to hearing by the association in organized exchanges and registered accordance with the provisions of clearing agencies. paragraph (a) of this subsection. The CHAPTER XI Commission, by order, may stay a ACQUISITION AND TRANSFER OF summary action on its own motion or SECURITIES AND SETTLEMENT OF upon application by any person aggrieved TRANSACTION IN SECURITIES thereby, if the Commission Section 41. Prohibition on Use of determines summarily or after due notice Unregistered Clearing Agency. It shall be and hearing (which hearing unlawful for any broker, dealer, salesman, may consist solely of the submission of associated person of a broker or affidavits or presentation of oral dealer, or clearing agency, directly or arguments) that a stay is consistent with indirectly, to make use of any facility of a the public interest and the clearing agency in Philippines to make protection of investors. deliveries in connection with 40.7. A self-regulatory organization shall transaction in securities or to reduce the promptly notify the Commission of number of settlements of securities any disciplinary sanction on any member transactions or to allocate securities thereof or participant therein, any settlement responsibilities or to provide denial of membership or participation in for the central handling of securities so such organization, or the imposition of that transfers, loans and pledges and any disciplinary sanction on a person similar transaction can be made by associated with a member or a bar of bookkeeping entry or otherwise to such person from becoming so associated. facilitate the settlement of securities Within thirty (30) days after such transactions without physical delivery of notice, any aggrieved person may appeal securities certificates, unless such clearing to the Commission from, or the agency is registered as such Commission from, or the Commission on under Section 42 of this Code or is its own motion within such period, exempted from such registration upon may institute review of, the decision of the application by the clearing agency self-regulatory organization, at the because, in the opinion of the conclusion of which, after due notice and Commission, hearing (which may consist solely of by reason of the limited volume of review of the record before the self- transactions which are settled using the regulatory organization), the Commission clearing agency, it is not practicable and shall affirm, modify or set aside the not necessary or appropriate in the sanction. In such proceeding the public interest or for the protection of Commission shall determine whether the investors to require such registration. aggrieved person has engaged or Section 42. Registration of Clearing omitted to engage in the acts and Agencies. - 42.1. Any clearing agency practices as found by the self-regulatory may be registered as such with the organization, whether such acts and Commission under the terms and practices constitute willful violations of conditions hereinafter provided in this this Code, any other law administered by Section, by filing an application for the Commission, the rules or registration in such form and containing regulations thereunder, or the rules of the such information and supporting self-regulatory organization as documents as the Commission by rule specified by such organization, whether shall prescribe, including the following: such provisions were applied in a (a) An undertaking to comply and enforce clearing agency engaged in the business compliance by its participants of securities depository shall with the provisions of this Code, and any be exempt from this requirement. amendments thereto, and the 42.3. In the case of an application filed implementing rules or regulations made or pursuant to this section, the to be made thereunder, and Commission shall grant registration if it is the clearing agencys rules; finds That the requirements of this (b) The organizational charts of the code and the rules and regulations Exchange, its rules of procedure, thereunder with respect to the applicant and list of its officers and participants; have been satisfied, and shall deny (c) Copies of the clearing agencys rules. registration if it does not make such 42.2. No registration of a clearing agency finding. shall be granted unless the rules of 42.4. Upon appropriate application in the clearing agency include provision for: accordance with the rules and (a) The expulsions, suspension, or regulations of the Commission and upon disciplining of a participant for such terms as the Commission may violations of this Code, or any other Act deem necessary for the protection of administered by the investors, a clearing agency may Commission, the rules, regulations, and withdraw its registration or suspend its orders thereunder, or the operation or resume the same. clearing agencys rules; Section 43. Uncertificated Securities. (b) A fair procedure for the disciplining of Notwithstanding Section 63 of the participants, the denial of Corporation Code of the Philippines: 43.1. participation rights to any person seeking A corporation whose securities are to be a participant, and the registered pursuant to this Code or listed prohibition or limitation of any person from on securities exchange may: access to services offered by (a) If so resolved by its Board of Directors the clearing agency; and agreed by a shareholder, (c) The equitable allocation of reasonable investor or securities intermediary, issue dues, fees, and other charges shares to, or record the among participants; transfer of some or all its shares into the (d) Prevention of fraudulent and name of said shareholders, manipulative acts and practices, investors or, securities intermediary in the promotion of just and equitable principles form of uncertified securities. of trade, and, in general, The use of uncertified securities in these protection of investors and the public circumstances shall be without interest; prejudice to the rights of the securities (e) The transparent, prompt and accurate intermediary subsequently to clearance and settlement of require the corporation to issue a transactions in securities handled by the certificate in respect of any shares clearing agency; and recorded in its name; and (f) The establishment and oversight of a (b) If so provided in its articles of fund to guarantee the prompt incorporation and by-laws, issue all of and accurate clearance and settlement of the shares of a particular class in the form transaction executed on an of Uncertificated securities exchange, including a requirement that and subject to a condition that investors members each contribute an may not require the corporation amount based on their and a relevant to issue a certificate in respect of any percentage of the daily exposure shares recorded in their name. of the (4) largest trading brokers which 43.2. The Commission by rule may allow adequately reflects trading risks other corporations to provide in their undertaken or pursuant to another formula articles of incorporation and by-laws for set forth in Commission rules the use of uncertificated securities. or regulations or order, upon application: 43.3. Transfers of securities, including an Provided, however, That a uncertificated securities, may be validly made and consummated by Code if a securities intermediary indicates appropriate book-entries in the securities by book entry that such security intermediaries, or in the stock and transfer has been credited to a specially book held by the corporation or the designated pledge account in favor of the stock transfer agent and such pledgee. A pledge under this subsection bookkeeping entries shall be binding on has the effect of the delivery of a the security in bearer form or duly indorsed in parties to the transfer. A transfer under blank representing the quantity or this subsection has the effect of the amount of such security or right pledged. delivery of a security in bearer form or In the case of a registered clearing duly indorsed in blank representing the agency, the procedures by which, and the quantity or amount of security or right exact time at which, such bookentries transferred, including the unrestricted are created shall be governed by the negotiability of that security by reason of registered clearing agencys such delivery. However, transfer of rules. However, the corporation shall not uncertificated shares shall only be valid, be bound by the foregoing so far as the corporation is transactions unless the corporate concerned, when a transfer is recorded in secretary is duly notified in such manner the books of the corporation so as as to show the names of the parties to the the Commission may provide. transfer and the number of shares Section 46. Issuers Responsibility for transferred. Wrongful Transfer to Registered However, nothing in this Code shall Clearing Agency. - The registration of a compliance by banking and other transfer of a security into the name of institutions under the supervision of the and by a registered clearing agency or its Bangko Sentral ng Pilipinas and their name of or by a registered clearing stockholders with the applicable ceilings agency or its nominee shall be final and on shareholding prescribed under conclusive unless the clearing agency pertinent banking laws and regulations. had notice of an adverse claim before the Section 44. Evidentiary Value of Clearing registration was made. The above Agency Record. The official provisions which the claimant may have records and book entries of a clearing against the issuer for wrongful agency shall constitute the best registration in such circumstances. evidence of such transactions between Section 47. Power of the Commission With clearing agency shall constitute the Respect to Securities Ownership. best between clearing agency and its The Commission is authorize, having due participants or members clients to regard to the public interest and prove their rights, title and entitlement the protection of investors, to promulgate with respect to the book-entry security rules and regulations which: holdings of the participants or members 47.1. Validate the transfer of securities by held on behalf of the clients. book-entries rather than the However, the corporation shall not be delivery of physical certificates; bound by the foregoing transactions 47.2. Establish when a person acquires a unless the corporate secretary is duly security or an interest therein and notified in such manner as the when delivery of a security to a purchaser Commission may provide. occurs; Section 45. Pledging a Security or Interest 47.3. Establish which records constitute Therein. In addition to other the best evidence of a persons methods recognized by law, a pledge of, interests in a security and the effect of any including an uncertificated security, errors in electronic records of is properly constituted and the instrument ownership; proving the right pledged shall be 47.4. Codify the rights of investors who considered delivered to the creditor under choose to hold their securities Articles 2093 and 2095 of the Civil indirectly through a registered clearing agency and/ or other securities intermediaries; the carrying of undermargined accounts 47.5. Codify the duties of securities for limited periods and under intermediaries (including clearing specified conditions; the withdrawal of agencies) who hold securities on behalf of funds or securities; the transfer of investors; and accounts from one lender to another; 47.6 Give first priority to any claims of a special or different margin requirements registered clearing agency against a for delayed deliveries, short sales, participant arising from a failure by the arbitrage transactions, and securities to participant to meet its obligations under which letter (b) of the second paragraph of the clearing agencys rules in respect of this subsection does not apply; the the clearing and settlement of methods to be used in calculating loans, transactions in securities, in a dissolution and margins and market prices; and of the participant, and any such similar administrative adjustments and rules and regulation shall bind the issuers details. of the securities, investors in the 48.2. No member of an Exchange or securities, any third parties with interests broker or dealer shall, directly or in the securities, and the creditors of indirectly, extend or maintain credit is a participant of a registered clearing extended and maintain credit or arrange agency. for the extension or maintenance of credit CHAPTER XII to or for any customer: MARGIN AND CREDIT (a) On any security unless such credit is Section 48. Margin Requirements. 48.1. extended and maintained in For the purpose of preventing the accordance with the rules and regulations excessive use of credit for the purchase or which the Commission shall carrying of securities, the prescribe under this Section including Commission, in accordance with the credit rules setting credit in relation to and monetary policies that may be net capital of such member, broker or promulgated from time to time by the dealer; and Monetary Board of the Bangko Sentral (b) Without collateral or any collateral ng Pilipinas, shall prescribed rules and other than securities, except (I) to regulations with respect to the amount maintain a credit initially extended in of credit that may be extended on any conformity with rules and security. For the extension of credit, regulations of the Commission and (ii) in such rules and regulations shall be based cases where the extension or upon the following standard: maintenance of credit is not for the An amount not greater than the whichever purpose of purchasing or carrying is the higher of securities or of evading or circumventing (a) Sixty-five per centum (65%) of the the provisions of paragraph (a) current market price of the of this subsection. security, or 48.3 Any person not subject to Subsection (b) One hundred per centum (100%) of the 48.2 hereof shall extend or lowest market price of the maintain credit or arrange for the security during the preceding thirty-six extension or maintenance of credit for the (36) calendar months, but not purpose of purchasing or carrying any more than seventy-five per centum (75%) security, only in accordance with such of the current market price. rules and regulations as the Commission However, the Monetary Board may shall prescribe to prevent the increase or decrease the above excessive use of credit for the purchasing percentages, in order to achieve the or carrying of or trading in securities objectives of the Government with due in circumvention of the other provisions of regard for promotion of the economy and this Section.. Such rules and prevention of the use of excessive regulations may impose upon all loans credit. made for the purpose of purchasing or Such rules and regulations may make carrying securities limitations similar to appropriate provision with respect to those imposed upon members, brokers, or dealers by Subsection 48.2 and due regard to the protection of investors, the rules and regulations may, by rules and regulations, allow thereunder. This subsection and the rules certain transactions that may otherwise and regulations thereunder shall not be prohibited under this subsection. apply: 49.3. To lend or arrange for the lending of (a) To a credit extension made by a person any security carried for the account not in the ordinary course of of any customer without the written business; (b) to a loan to a dealer to aid in consent of such customer or in the financing of the contravention of such rules and distribution of securities to customers not regulations as the Commission shall through the medium of an prescribe. Exchange; or (c) To such other credit Section 50. Enforcement of Margin extension as the Commission Requirement and Restrictions on shall exempt from the operation of this Borrowing. To prevent indirect violations subsection and the rules and of the margin requirements under regulations thereunder upon specified Section 48, the broker or dealer shall terms and conditions for stated require the customer in non-margin period. transactions to pay the price of the Section 49. Restrictions on Borrowings by security purchased for his account within Members, Brokers, and Dealers. such period as the Commission may It shall be unlawful for any registered prescribe, which shall in no case exceed broker or dealer, or member of an the prescribed settlement date. Otherwise, Exchange, directly or indirectly; the broker shall sell the security 49.1. To permit in the ordinary course of purchased starting on the next trading day business as a broker or dealer his but not beyond ten (10) trading aggregate indebtedness including days following the last day for the customers credit balances, to exceed customer to pay such purchase price, such unless such sale cannot be effected within percentage of the net capital (exclusive of said period for justifiable reasons. fixed assets and value of Exchange The sale shall be without prejudice to the membership) employed in the business, right of the broker or dealer to but not exceeding in any case to recover any deficiency from the customer. thousand percentum (2,000%), as the To prevent indirect violation of the Commission may be rules and restrictions on borrowing under Section regulations prescribe as necessary or 49, the broker shall, unless otherwise appropriate in the public interest or for directed by the customer, pay the net the protection of investors. sales price of the securities sold for a 49.2. To pledge, mortgage, or otherwise customer within the same period as above encumber or arrange for the pledge, prescribed by the mortgage, or encumbrance of any security Commission: Provided, That the customer carried for the account of any shall be required to deliver the customer under circumstances: (a) That instruments evidencing the securities as a will permit the commingling of his condition for such payment upon securities, without his written consent, demand by the broker. with the securities of any customer; (b) CHAPTER XIII That will permit such securities to be GENERAL PROVISIONS commingled with the securities of any Section 51. Liabilities of Controlling person other than a bona fide customer; Persons, Aider and Abettor and Other or (c) that will permit such securities Secondary Liability. 51.1. Every person to be pledged, mortgaged or encumbered, who, by or through stock ownership, or subjected to any lien or claim of agency, or otherwise, or in connection the pledgee, for a sum in excess of the with an agreement or understanding aggregate indebtedness of such with one or more other persons, controls customers in respect of such securities. any person liable under this Code or However, the Commission, having the rules or regulations of the Commission organization, and every other person thereunder, shall also be liable required to register under this jointly and severally with and to the same Code, shall make, keep and preserve for extent as such controlled persons to such periods, records, furnish such any person to whom such controlled copies thereof, and make such reports, as person is liable, unless the controlling the Commission by its rules and person proves that, despite the exercise of regulations may prescribe. Such accounts, due diligence on his part, he has correspondence, memoranda, no knowledge of the existence of the facts papers, books, and other records shall be by reason of which the liability of subject at any time to such the controlled person is alleged to exist. reasonable periodic, special or other 51.2. It shall be unlawful for any person, examinations by representatives of the directly, or indirectly, to do any act or Commission as the Commission may deem thing which it would be unlawful for such necessary or appropriate in the person to do under the provisions of public interest of for the protection of this Code or any rule or regulation investors. thereunder. 52.2. Any brother, dealer or other person 51.2. It shall be unlawful for any director extending credit, who is subject to or officer of, or any owner of any the rules and regulations prescribed by securities issued by, any issuer required to the Commission pursuant to this file any document, report or other Code, shall make such reports to the information under this Code or any rule or Commission as may be necessary or regulation of the Commission appropriate to enable it to perform the thereunder, without just cause, to hinder, functions conferred upon it by this delay or obstruct the making or filing Code. of any such document, report, or 52.3. For purposes of this Section, the information. term "records refers to accounts, 51.3. It shall be unlawful for any person to correspondence, memoranda, tapes, discs, aid, abet, counsel, command, papers, books and other induce or procure any violation of this documents or transcribed information of Code, or any rule, regulation or order of any type, whether written or the Commission thereunder. electronic in character. 52.4. Every person who substantially Section 53. Investigations, Injunctions and assists the act or omission of any person Prosecution of Offenses. 53.1. primarily liable under Sections 57, 58, 59 The Commission may, in its discretion, and 60 of this Code, with knowledge make such investigations as it deems or in reckless disregard that such act or necessary to determine whether any omission is wrongful, shall be jointly person has violated or is about to violate and severally liable as an aider and any provision of this Code, any rule, abettor for damages resulting from the regulation or order thereunder, or any conduct of the person primarily liable: rule of an Exchange, registered securities Provided, however, That an aider and association, clearing agency, other abettor shall be liable only to the extent of self-regulatory organization, and may his relative contribution in causing require or permit any person to file with such damages in comparison to that of the it a statement in writing, under oath or person primarily liable, or the otherwise, as the Commission shall extent to which the aider and abettor was determine, as to all facts and unjustly enriched thereby, circumstances concerning the matter to whichever is greater. be Section 52. Accounts and Records, investigated. The Commission may publish Reports, Examination of Exchanges, information concerning any such members, and Others. 52.1. Every violations, and to investigate any fact, registered Exchange, broker or dealer, condition, practice or matter which it transfer agent, clearing agency, securities may deem necessary or proper to aid in association, and other selfregulatory the enforcement of the provisions of this Code, in the prescribing of rules and Commission shall not charge any person regulations thereunder, or in with violation of the rules of an securing information to serve as a basis Exchange or other self-regulatory for recommending further legislation organization unless it appears to the concerning the matters to which this Code Commission that such Exchange or other relates: Provided, however, That self-regulatory organization is any person requested or subpoenaed to unable or unwilling to take action against produce documents or testify in any such person. After finding that such investigation shall simultaneously be person has engaged in any such act or notified in writing of the purpose of such practice and that there is a reasonable investigation: Provided, further, That all likelihood of continuing, further or future criminal complaints for violations of violations by such person, the this Code, and the implementing rules and Commission may issue ex-parte a cease regulations enforced or and desist order for a maximum administered by the Commission shall be period of ten (10) days, enjoining the referred to the Department of violation and compelling compliance with Justice for preliminary investigation and such provision. The Commission may prosecution before the proper transmit such evidence as may be court: Provided, furthermore, That in available concerning any violation of any instances where the law allows provision of this Code, or any rule, independent civil or criminal proceedings regulation or order thereunder, to the of violations arising from the same Department of Justice, which may act, the Commission shall take appropriate institute the appropriate criminal action to implement the proceedings under this Code. same: provided, finally, That the 53.4. Any person who, within his power investigation, prosecution, and trial of but without cause, fails or refuses to such comply with any lawful order, decision or cases shall be given priority. subpoena issued by the Commission 53.2. For the purpose of any such under Subsection 53.2 or Subsection 53.3 investigation, or any other proceeding or Section 64 of this Code, shall under this Code, the Commission or any after due notice and hearing, be guilty of officer designated by it is empowered contempt of the Commission. Such to administer oaths and person shall be fined in such reasonable affirmations,subpoena witnesses, compel amount as the Commission may attendance, determine, or when such failure or refusal take evidence, require the production of is a clear and open defiance of the any book, paper, correspondence, Commissions order, decision or subpoena, memorandum, or other record which the shall be detained under an arrest Commission deems relevant or order issued by the Commission, until material to the inquiry, and to perform such order, decision or subpoena is such other acts necessary in the complied with. conduct of such investigation or Section 54. Administrative Sanctions. proceedings. 54.1. If, after due notice and hearing, 53.3. Whenever it shall appear to the the Commission finds that: (a) There is a Commission that any person has violation of this Code, its rule, or its engaged or is about to engage in any act orders; (b) Any registered broker or dealer, or practice constituting a violation of associated person thereof has any provision of this Code, any rule, failed reasonably to supervise, with a view regulation or order thereunder, or any to preventing violations, another rule of an Exchange, registered securities person subject to supervision who association, clearing agency or commits any such violation; (c) Any other self-regulatory organization, it may registrant or other person has, in a issue an order to such person to registration statement or in other reports, desist from committing such act or applications, accounts, records or practice: Provided, however, That the documents required by law or rules to be filed with the Commission, made any Section 55. Settlement Offers. 55.1. At untrue statement of a material fact, or any time, during an investigation or omitted to state any material fact required proceeding under this Code, parties being to be stated their or necessary to investigated and/or charged may make the statements therein not propose in writing an offer of settlement misleading; or, in the case of an with the Commission. underwriter, 55.2. Upon receipt of such offer of has failed to conduct an inquiry with settlement, the Commission may consider reasonable diligence to insure that a the offer based on timing, the nature of registration statement is accurate and the investigation or proceeding, and complete in all material respects; or (d) the public interest. Any person has refused to permit any 55.3. The Commission may only agree to a lawful examinations into its affairs, it settlement offer based on its shall, in its discretion, and subject only to findings that such settlement is in the the limitations hereinafter public interest. Any agreement to settle prescribed, impose any or all of the shall have no legal effect until publicly following sanctions as may be appropriate disclosed. Such decision may be made in light of the facts and circumstances: without a determination of guilt on the (i) Suspension, or revocation of any part of the person making the offer. registration for the offering of 55.4. The Commission shall adopt rules securities; and procedures governing the filing, (ii) A fine of no less than Ten thousand review, withdrawal, form of rejection and pesos (P10,000.00) nor more acceptance of such offers. than One million pesos (P1,000,000.00) Section 56. Civil Liabilities on Account of plus not more than Two False Registration Statement. 56.1. thousand pesos (P2,000.00) for each day Any person acquiring a security, the of continuing violation; registration statement of which or any (iii) In the case of a violation of Sections part thereof contains on its effectivity an 19.2, 20, 24, 26 and 27, untrue statement of a material fact or disqualification from being an officer, omits to state a material fact required to member of the Board of Directors, be stated therein or necessary to or person performing similar functions, of make such statements not misleading, an issuer required to file and who suffers damage, may sue and reports under Section 17 of this Code or recover damages from the following any other act, rule or regulation enumerated persons, unless it is proved administered by the Commission; that at the time of such acquisition he (iv) In the case of a violation of Section 34, knew of such untrue statement or a fine of no more than three omission: (3) times the profit gained or loss avoided (a) The issuer and every person who as result of the purchase, sale signed the registration statement: or communication proscribed by such (b) Every person who was a director of, or Section, and any other person performing (v) Other penalties within the power of the similar functions, or a partner in, the Commission to impose. issuer at the time of the filing of the 54.2. The imposition of the foregoing registration statement or any part, administrative sanctions shall be without supplement or amendment thereof prejudice to the filing of criminal charges with respect to which his liability is against the individuals responsible asserted; for the violation. (c) Every person who is named in the 54.3. The Commission shall have the registration statement as being or power to issue writs of execution to about to become a director of, or a person enforce the provisions of the Section and performing similar functions, to enforce payment of the fees and or a partner in, the issuer and whose other dues collectible under this Code. written consent thereto is filed with the registration statement; (d) Every auditor or auditing firm named written or oral communication, which as having certified any financial includes an untrue statement of a statements used in connection with the material fact or omits to state a material registration statement or fact necessary in order to make prospectus. the statements, in the light of the (e) Every person who, with his written circumstances under which they were consent, which shall be filed with made, not misleading (the purchaser not the registration statement, has been knowing of such untruth or named as having prepared or omission), and who shall fail in the burden certified any part of the registration of proof that he did not know, statement, or as having prepared or and in the exercise of reasonable care certified any report or valuation which is could not have known, of such used in connection with the untruth or omission, shall be liable to the registration statement, with respect to the person purchasing such statement, report, or security from him, who may sue to recover valuation, which purports to have been the consideration paid for prepared or certified by him. such security with interest thereon, less (f) Every selling shareholder who the amount of any income contributed to and certified as to the received thereon, upon the tender of such accuracy of a portion of the registration security, or for damages if he statement, with respect to that no longer owns the security. portion of the registration statement which 57.2. Any person who shall make or cause purports to have been to be made any statement in any contributed by him. report, or document filed pursuant to this (g) Every underwriter with respect to such Code or any rule or regulation security. thereunder, which statement as at the 56.2. If the person who acquired the time and in the light of the security did so after the issuer has made circumstances under which it was made generally available to its security holders false or misleading with respect to an income statement covering a any material fact, shall be liable to any period of at least twelve (12) months person who, not knowing that such beginning from the effective date of the statement was false or misleading, and registration statement, then the right of relying upon such statement shall recovery under this subsection shall have purchased or sold a security at a be conditioned on proof that such person price which was affected by such acquired the security relying upon statement, for damages caused by such such untrue statement in the registration reliance, unless the person sued statement or relying upon the shall prove that he acted in good faith and registration statement and not knowing of had no knowledge that such such income statement, but such statement was false or misleading. reliance may be established without proof Section 58. Civil Liability of Fraud in of the reading of the registration Connection with Securities Transactions. statement by such person. Any person who engages in any act or Section 57. Civil Liabilities Arising in transaction in violation of Sections Connection With Prospectus, 19.2, 20 or 26, or any rule or regulation of Communications and Reports. 57.1. Any the Commission thereunder, shall person who: be liable to any other person who (a) Offers to sell or sells a security in purchases or sells any security, grants or violation of Chapter III, or refuses to grant any proxy, consent or (b) Offers to sell or sells a security, authorization, or accepts or declines an whether or not exempted by the invitation for tender of a security, as the provisions of this Code, by the use of any case may be, for the damages means or instruments of sustained by such other person as a result transportation or communication, by of such act or transaction. means of a prospectus or other Section 59. Civil Liability for Manipulation tender offer who violates Subsection 27.4 of Security Prices. Any person (a), or any rule or regulation who willfully participates in any act or thereunder, by communicating material transaction in violation of Section 24 nonpublic information, shall be jointly shall be liable to any person who shall and severally liable under Subsection 61.1 purchase or sell any security at a price with, and to the same extent as, which was affected by such act or the insider, or person in the case of a transaction, and the person so injured may tender offer, to whom the sue to recover the damages sustained as communication was directed and who is a result of such act or transaction. liable under Subsection 61.1 by Section 60. Civil Liability with Respect to reason of his purchase or sale of a Commodity Futures Contracts and security. Pre-need Plans. 60.1. Any person who Section 62. Limitation of Actions. 62.1. engages in any act or transactions in No action shall be maintained to willful violation of any rule or regulation enforce any liability created under Section promulgated by the Commission under 56 or 57 of this Code unless Section 11 or 16, which the Commission brought within two (2) years after the denominates at the time of issuance discovery of the untrue statement or the as intended to prohibit fraud in the offer omission, or, if the action is to enforce a and sale of pre-need plans or to liability created under Subsection prohibit fraud, manipulation, fictitious 57.1 (a), unless, brought within two (2) transactions, undue speculation, or other yeas after the violation upon which it is unfair or abusive practices with respect to based. In no event shall an such action be commodity future contracts, shall brought to enforce a liability be liable to any other person sustaining created under Section 56 or Subsection damages as a result of such act or 57.1 (a) more than five (5) years after transaction. the security was bona fide offered to the 60.2. As to each such rule or regulation so public, or under Subsection 57.1 (b0 denominated, the Commission by more than five (5) years after the sale. rule shall prescribe the elements of proof 62.2. No action shall be maintained to required for recovery and any enforce any liability created under any limitations on the amount of damages that other provision of this Code unless brought may be imposed. within two (20 years after the Section 61. Civil Liability on Account of discovery of the facts constituting the Insider Trading. 61.1. Any insider cause of action and within five (5) years who violates Subsection 27.1 and any after such cause of action accrued. person in the case of a tender offer Section 63. Amount of Damages to be who violates Subsection 27.4 (a)(I), or any Awarded. 63.1. All suits to recover rule or regulation thereunder, by damages pursuant to Sections 56, 57, 58, purchasing or selling a security while in 59, 60 and 61 shall be brought possession of material information not before the Regional Trial Court, which shall generally available to the public, shall be have exclusive jurisdiction to hear liable in a suit brought by any and decide such suits. The Court is hereby investor who, contemporaneously with the authorized to award damages in purchase or sale of securities that an amount not exceeding triple the is the subject of the violation, purchased amount of the transaction plus actual or sold securities of the same class damages. unless such insider, or such person in the Exemplary damages may also be awarded case of a tender offer, proves that in cases of bad faith, fraud, such investor knew the information or malevolence or wantonness in the would have purchased or sold at the violation of this Code or the rules and same price regardless of disclosure of the regulations promulgated thereunder. information to him. The Court is also authorized to award 61.2. An insider who violates Subsection attorneys fees not exceeding 27.3 or any person in the case of a thirty percentum (30%) of the award. 63.2. The persons specified in Sections 56, fifteen (15) days from its filing and the 57, 58, 59, 60 and 61 hereof shall resolution thereof shall be made not be jointly and severally liable for the later than ten (10) days from the payment of damages. However, any termination of the hearing. If the person who becomes liable for the Commission payment of such damages may recover fails to resolve the request within the time contribution from any other person who, if herein prescribed, the cease and sued separately, would have been desist order shall automatically be lifted. liable to make the same payment, unless Section 65. Substituted Service Upon the the former was guilty of fraudulent Commission. Service of representation and the latter was not. summons or other process shall be made 63.3. Notwithstanding any provision of law upon the Commission in actions or to the contrary, all persons, legal proceedings against an issuer or any including the issuer, held liable under the person liable under this Code who provisions of Sections 56, 57, 58, is not domiciled in the Philippines. Upon 59, 60 and 61 shall contribute equally to receipt by the Commission of such the total liability adjudged herein. In summons, the Commission shall within ten no case shall the principal stockholders, (10) days thereafter, transmit by directors and other officers of the registered mail a copy of such summons issuer or persons occupying similar and the complaint or other legal positions therein, recover their process to such issuer or person at his last contribution to the liability from the issuer. known address or principal office. However, the right of the issuer to The sending thereof by the Commission, recover from the guilty parties the amount the expenses for which shall be it has contributed under this Section advanced by the party at whose instance shall not be prejudiced. it is made, shall complete such Section 64. Cease and Desist Order. service. 64.1. The Commission, after proper Section 66. Revelation of Information Filed investigation or verification, motu proprio with the Commission. 66.1. All or upon verified complaint by any information filed with the commission in aggrieved party, may issue a cease and compliance with the requirements of desist order without the necessity of this Code shall be made available to any a prior hearing if in its judgment the act or member of the general public, upon practice, unless restrained, will request, in the premises and during operate as a fraud on investors or is regular office hours of the Commission, otherwise likely to cause grave or except as set forth in this Section. irreparable injury or prejudice to the 66.2. Nothing in this Code shall be investing public. construed to require, or to authorize the 64.2. Until the Commission issue a cease Commission to require, the revealing of and desist order, the fact that an trade secrets or processes in any investigation has been initiated or that a application, report, or document filed with complaint has been filed, including the Commission. the contents of the complaint, shall be 66.3. Any person filing any such confidential. Upon issuance of a cease application, report or document may make and desist order, the Commission shall written objection to the public disclosure make public such order and a copy of information contained therein, thereof shall be immediately furnished to stating the grounds for such objection, and each person subject to the order. the Commission may hear 64.3. Any person against whom a cease objections as it deems necessary. The and desist order was issued may, Commission may, in such cases, make within five (5) days from receipt of the available to the public the information order, file a formal request for a lifting contained in any such application, thereof. Said request shall be set for report, or document only when a hearing by the Commission not later than disclosure of such information is required in the public interest or for the protection of thereunder to be deemed a finding by the investors; and copies of information Commission that such statements so made available may be furnished to or report is true and accurate on its face any person having a legitimate interest or that it is not false or misleading. It therein at such reasonable charge and shall be unlawful to make, or cause to be under such reasonable limitations as made, to any prospective purchaser the Commission may prescribe. or seller or a security any representation 66.4. It shall be unlawful for any member, that any such action or failure to act officer, or employee of the by the Commission is to be so construed Commission to disclose to any person or has such effect. other than a member, officer or 67.2. Nothing contained in Subsection employee of the Commission or to use for 67.1 shall, however, be construed as personal benefit, any information an exemption from liability of an employee contained in any application, report, or or officer of the Commission for document filed with the Commission any nonfeasance, misfeasance or which is not made available to the public malfeasance in the discharge of his official pursuant to Subsection 66.3. duties. 66.5. Notwithstanding anything in Section 68. Special Accounting Rules. Subsection 66.4 to the contrary, on The Commission shall have the request authority to make, amend, and rescind from a foreign enforcement authority of such accounting rules and regulations any country whose laws grant as may be necessary to carry out the reciprocal assistance as herein provided, provisions of this Code, including rules the Commission may provide and regulations as may be necessary to assistance in accordance with this carry out the provisions of this Code, subsection, including the disclosure of any including rules and regulations governing information filed with or transmitted to the registration statements and Commission. If the requesting prospectuses for various classes of authority states that it is conducting an securities and issuers, and defining investigation which it deems necessary accounting, technical and trade terms to determine whether any person has used in this Code. Among other things, violated, is violating, or is about to the Commission may prescribe the form or violate any laws relating to securities or forms in which required commodities matters that the information shall be set forth, the items or requesting authority administers or details to be shown in the balance enforces. Such assistance may be sheet and income statement, and the provided without regard to whether the methods to be followed in the facts stated in the request would also preparation of accounts, appraisal or constitute a violation of law of the valuation of assets and liabilities, Philippines. determination of depreciation and Section 67. Effect of action of Commission depletion, differentiation of recurring and and Unlawful Representations non-recurring income, differentiation of with Respect Thereto. 67.1. No action or investment and operating income, and failure to act by the Commission in in the preparation, where the Commission the administration of this Code shall be deems it necessary or desirable of construed to mean that the consolidated balance sheets or income Commission has in any way passed upon accounts of any person directly or the merits of or given approval to indirectly controlling or controlled by the any security or any transactions or issuer, or any person under direct or transactions therein, nor shall such action indirect common control with the issuer. or failure to act with regard to any Section 69. Effect on Existing Law. The statement or report filed with or examined rights and remedies provided by by the Commission pursuant to this Code this Code shall be in addition to any and or the rules and regulations all order rights and remedies that may now exist. However, except as (a) To affect the validity of any loan or provided in Section 56 and 63 hereof, no extension of credit made or of person permitted to maintain a suit for any lien created prior or subsequent to the damages under the provisions of this effectivity of this Code, Code shall recover, through satisfaction of unless at the time of the making of such judgment in one or more actions, a loan or extension of credit or total amount in excess of his actual the creating of such lien, the person damages on account of the act making such loan or extension of complained of: Provided, That exemplary credit or acquiring such lien shall have damages may be awarded in cases actual knowledge of the facts by of bad faith, fraud, malevolence or reason of which the making of such loan wantonness in the violation of this Code or or extension of credit or the the rules and regulations promulgated acquisition of such lien is a violation of the thereunder. provisions of this Code or Section 70. Judicial Review of Commission any rules or regulations thereunder, or Orders. Any person aggrieved (b) To afford a defense to the collection of by an order of the Commission may any debt, obligation or the appeal the order to the Court of Appeals enforcement of any lien by any person by petition for review in accordance with who shall have acquired such the pertinent provisions of the Rules debt, obligation or lien in good faith for of Court. value and without actual Section 71. Validity of Contracts. 71.1. knowledge of the violation of any provision Any condition, stipulation, provision of this Code or any rule or binding any person to waive compliance regulation thereunder affecting the with any provision of this Code or of legality of such debt, obligation or any rule or regulation thereunder, or of lien. any rule of an Exchange required Section 72. Rules and Regulations; thereby, as well as the waiver itself, shall Effectivity. 72.1. This Code shall be be void. self-executory. To effect the provisions and 71.2. Every contract made in violation of purposes of this Code, the any provision of this Code or of any Commission may issue, amend, and rule or regulation thereunder, and every rescind such rules and regulations and contract, including any contract for orders necessary or appropriate, including listing a security or an Exchange rules and regulations defining heretofore or hereafter made, the accounting, technical, and trade terms performance of which involves the used in this Code, and prescribing the violation of, or the continuance of any form or forms in which information relationship or practice in violation of, any required in registration statements, provision of this Code, or any rule applications, and reports to the or regulation thereunder, shall be void: Commission shall be set forth. For (a) As regards the rights of any person purposes of who, in violation of any such its rules or regulations, the Commission provision, rule or regulation, shall have may classify persons, securities, and made or engaged in the other matters within its jurisdiction, performance of any such contract, and prescribe different requirements for (b) As regards the rights of any person different classes of persons, securities, or who, not being a party to such matters, and by rule or order, contract, shall have acquired any right conditionally or unconditionally exempt thereunder with actual any person, security, or transaction, or knowledge of the facts by reason of which class or classes of persons, securities or the making or performance of transactions, from any or all such contract was in violation of any such provisions of this Code. provision, rule or regulation. Failure on the part of the Commission to 71.3. Nothing in this Code shall be issue rules and regulations shall not construed: in any manner affect the self-executory Code, or the rules and regulations nature of this Code. promulgated by the Commission under 72.2. The Commission shall promulgate authority thereof, or any person who, in a rules and regulations providing for registration statement filed under reporting, disclosure and the prevention of this Code, makes any untrue statement of fraudulent, deceptive or a material fact or omits to state any manipulative practices in connection with material fact required to be stated therein the purchase by an issuer, by tender or necessary to make the offer or otherwise, of and equity security statements therein not misleading, shall, of a class issued by it that satisfies upon conviction, suffer a fine of not the requirements of Subsection 17.2. such less than Fifty thousand pesos rules and regulations may require (P50,000.00) nor more than Five million such issuer to provide holders of equity pesos securities of such dates with such (P5,000,000.00) or imprisonment of not information relating to the reasons for less than seven (7) years nor more such purchase, the source of funds, the than twenty-one (21) years, or both in the number of shares to be purchased, the discretion of the court. If the price to be paid for such securities, the offender is a corporation, partnership or method of purchase and such additional association or other juridical entity, information as the Commission the penalty may in the discretion of the deems necessary or appropriate in the court be imposed upon such juridical public interest or for the protection of entity and upon the officer or officers of investors, or which the Commission deems the corporation, partnership, to be material to a determination association or entity responsible for the by holders whether such security should violation, and if such officer is an be sold. alien, he shall in addition to the penalties 72.3. For the purpose of Subsection 72.2, prescribed, be deported without a purchase by or for the issuer or further proceedings after service of any person controlling, controlled by, or sentence. under common control with the issuer, Section 74. Transitory Provisions. The or a purchase subject to the control of the Commission, as organized under issuer or any such person, shall be existing laws, shall continue to exist and deemed to be a purchased by the issuer. exercise its powers, functions and The commission shall have the duties under such laws and this power to make rules and regulations Code:Provided, That until otherwise implementing this subsection, including mandated by a subsequent law, the exemptive rules and regulations covering Commission shall continue to regulate situations in which the Commission and supervise commodity futures deems it unnecessary or inappropriate contracts as provided in Section 11 and that a purchase of the type described preneed in this subsection shall be deemed to be a plans and the pre-need industry as purchase by the issuer for the provided in Section 16 of this Code. purpose of some or all of the provisions of All further requirements herein shall be Subsection 72.2. complied with upon approval of this 72.4. The rules and regulations Code: Provided, however, That compliance promulgated by the Commission shall be may be deferred for such published in two (20 newspapers or reasonable time as the Commission may general circulation in the Philippines, and determine but not to exceed one (1) unless otherwise prescribed by the year from approval of this Code: Provided, Commission, the same shall be effective further, That securities which are fifteen (15) days after the date of the last being offered at the time of effectivity of publication. this Code pursuant to an effective Section 73. Penalties. Any person who registration and permit, may continue to violates any of the provisions of this be offered and sold in accordance with the provisions of the Revised (P100,000,000.00) from its income. Securities Act in effect immediately prior The use of such additional amount shall be to subject to the auditing approval of this Code. requirements, standards and procedures All unexpended funds for the calendar under existing laws. year, properties, equipment and Section 76. Repealing Clause. The records of the Securities and Exchange Revised Securities Act (Batas Commission are hereby retained by Pambansa Blg. 178), as amended, are the Commission as reorganized under this hereby repealed. All other laws, Code and the amount of Two orders, rules and regulations, or parts hundred million pesos (P200,000,000.00) thereof, inconsistent with any provision or such amount necessary to carry of this Code are hereby repealed or out the reorganization provided in this modified accordingly. Code is hereby appropriated. Section 77. Separability Clause. if any All employees of the Commission who portion or provision of this Code is voluntarily retire or are separated from declared unconstitutional or invalid, the the service with the Commission and other portions or provisions hereof, whose retirement or separation has which are not affected thereby shall been approved by the Commission, shall continue in full force and effect. be paid retirement or separation Section 78. Effectivity. This Code shall benefits and other entitlement granted take effect fifteen (15) days after its under existing laws. publication in the Official Gazette or in two Section 75. Partial Use of Income. To (2) newspapers of general carry out the purposes of this Code, circulation. the Commission is hereby authorized, in Approved: July 19, 2000 addition to its annual budget, to (Sgd.)JOSEPH E. ESTRADA retain and utilize an amount equal to One President of the Philippines hundred million pesos