1.

Securities are shares, participation or interests in a corporation or in a commercial

enterprise or profit-making venture and evidenced by a certificate, contract, instrument,
whether written or electronic in character. It includes:

A) Shares of stocks, bonds, notes, debenture, evidences of indebtedness, asset-

backed securities;
B) Investment contracts, certificates of interest or participation in a profit sharing
agreement, certificates of deposit for future subscription;
C) Fractional undivided interests in oil, gas or other mineral rights;
D) Derivatives like option and warrants
E) Certificates of assignments, certificates of participation, trust certificates, voting
trust certificates or similar instruments;
F) Proprietary or non-proprietary membership certificates incorporations; and
G) Other instruments as may in the future be determined by the Commission.

2. Are the stocks considered security? (page )

A “security’ includes “stock” and other listed types of instrument. Although the fact that
the instruments bear the label “stock” is not of itself sufficient to invoke the security law’s
coverage, when an instrument is both called “stock” and bears stock’s usual
characteristics, a purchaser justifiably may assume that the securities laws apply. When
an instrument is labelled “stock” and possesses all of the traditional characteristics of
stock, one is not required to look to the economic substance of the transaction to
determine whether the stock is “security” within the meaning of the security laws.

3. c

4. (page 15-16)

Does Power Homes’ Business constitute sale of an investment?

An investor enrols under the scheme of power homes to be entitled to recruit other
investors and to receive commissions from the investments of those directly recruited by
him. Under the scheme the accumulated amount received by the investor comes
primarily from efforts of his recruits. This business operation or scheme constitutes an
investment contract that is a security under RA 8799. Thus, it must be registered with
the SEC before its sale or offer for sale or distribution to the public.
5. (page 16) Does a non-contributory compulsory pension plan constitute a security?

To determine whether a particular financial relationship constitute an investment

contract, the test is whether the scheme involves an investment of money in a common
enterprise with profits to come solely from the efforts of others. Looking separately at
each element of this test, it is apparent that an employee’s participation in a non
contributory, compulsory pension plan such as the one in question does not comport
with commonly held understanding of an investment contract.

7. The powers of the SEC, over stock exchanges are more limited as compared to its
authority over ordinary corporations. The power of the SEC over stock exchanges do
not include the power to reverse the decisions of the stock exchange.

The SEC cannot act arbitrarily and arrogate unto itself the discretion of approving the
application for listing in the PSE of PALI, since this is a matter addressed to the
discretion of the PSE, a corporate entity, whose business judgments are respected in
the absence of bad faith.

8. D

9. Proof of the existence of fraud is necessary in order for one to be held liable under
the penal provisions of the securities law.

There’s no question that both fidelity and cualoping have been guilty of negligence in
the conduct of their affairs involving the questioned stock certificates. To constitute
however, a violation of the securities law, fraud or deceit, not mere negligence, on the
part of the offender must be established. However it does not imply that negligence
committed by fiedility and cualoping would not at all be actionable, upon the other hand,
such an action belongs not to the SEC but to those whose rights have been injured.

10 (page 77)

Is the Bank required to comply with the respondent SEC’s full disclosure rules despite
its exemption from the securities registration requirements under sec. 5 of RSA?
The mere fact that in regard to its banking functions, Union Bank is already subject to
the supervision of the BSP does not exempt the former from reasonable disclosure
regulations issued by the SEC. These regulations are meant to assure full, fair and
accurate disclosure of information for the protection of the investors in the stock market.
Imposing such regulations is a function within the jurisdiction of the SEC.

11. E

12. Is the trading contract valid? (page 94)

The contract signed by chua purports to be the delivery of goods with the intention that
the difference between the price stipulated and the exchange market price at the time of
the pretended delivery shall be paid by the losser or winner. This is clearly a form of
gambling provided for with unmistakeable certainty under art. 2018. It would thus be
governed by the new civil code and not by the securities law nor the rules and
regulations on commodity future trading.