SECURITIES REGULATION CODE

2019

B.14.

ABC Corp. is a company which shares are listed in the Philippine Stock Exchange. In
2015, 25% of ABC Corp.'s shareholdings were acquired by XYZ, Inc., while 40% of the
same were acquired by RST, Inc., both of which are non-listed private corporations.
Meanwhile, the remaining 35% of ABC Corp.'s shareholdings are held by the public.

In 2018, or three years (3) after it acquired its 25% stake in ABC Corp., XYZ, Inc. sought
to obtain an additional 12% shareholding in ABC Corp. by purchasing some of the
shares owned by RST, Inc. therein. The new acquisition will not, however, result in XYZ,
Inc. gaining majority control of ABC Corp.'s Board.

Is XYZ, Inc. required to conduct a tender offer? Explain. (3%)

B.15.

Mr. P, the President of JKL, Inc. which shares are listed in the Philippine Stock
Exchange, was notified that the corporation has just been awarded a ₱5,000,000,000.00
construction contract by a reputable private company. Before this information could be
disclosed to the public, Mr. P called his stockbroker to purchase 20,000 shares of JKL,
Inc. He also mentioned the transaction to his brother, Mr. B. Mr. B, who was not
involved at all in the business of JKL, Inc., also bought 50,000 shares of JKL, Inc. because
of the tip disclosed to him by Mr. P.

(a) Is the information disclosed by Mr. P to Mr. B considered as material

nonpublic information for purposes of insider trading? Explain. (2%)

(b) Should Mr. P and Mr. B be held liable for insider trading? Explain. (3%)
 2018

Yenkell Cement Corporation (YCC) is a public corporation whose shares are listed at the
PSE. It is 60% owned by Yenkell Holdings Corporation (YHC) and 20% by Yengco
Exploration Inc. (YEI). The remaining 20% is held by the public. YHC is a private non-
listed corporation which, in turn, is 60% owned by Yatlas Mines Inc. (YMI), and 40% by
Yacnotan Consolidated Inc. (YCI). On August 8, 2008, the Board of Directors of YEI
passed a resolution approving the acquisition of 50% and 25% of the shares held by YMI
and YCI, respectively, in the authorized capital stock of YHC.

Yolly, one of the staff members in the office of the Corporate Secretary of YEI, was
immediately asked to type the resolution and file the disclosure with the PSE and the
Securities and Exchange Commission (SEC). Before doing that, she secretly called her
brother who works with a stock brokerage company, to purchase, in the name of Yolly's
husband, 5,000 shares in YCC. After the acquisition was disclosed to the SEC and the
PSE, the market price of YCC increased by 50%.

(a) In acquiring 75% of the total capital stock of YHC, should YEI be required
to do a mandatory tender offer? (2.5%)

(b) Can Yolly be held liable for insider trading? (2.5%)

--------

2017 – no Question on SRC

 2016

XIII

C Corp. is the direct holder of 10% of the shareholdings in U Corp., a nonlisted (not
public) firm, which in turn owns 62% of the shareholdings in H Corp., a publicly listed
company. The other principal stockholder in H Corp. is C Corp. which owns 18% of its
shares. Meanwhile, the majority stocks in U Corp. are owned by B Corp. and V Corp. at
22% and 30%, respectively. B Corp. and V Corp. later sold their respective shares in U
Corp. to C Corp., thereby resulting in the increase of C Corp.'s interest in U Corp.,
whether direct or indirect, to more than 50%.

[a] Explain the Tender Offer Rule under the Securities Regulation Code. (2.5%)

[b] Does the Tender Offer Rule apply in this case where there has been an
indirect acquisition of the shareholdings in H Corp. by C Corp.? Discuss.
(2.5%)

XV

ABC Corp. is engaged in the pawnshop business involving cellphones, laptops and
other gadgets of value. In order to expand its business and attract investors, it offered to
any person who invests at least Pl 00,000.00 a "Promissory Note" where it obligated itself
to pay the holder a 50% return on investment within one month. Due to the attractive
offer, many individuals invested in the company but not one of them was able to realize
any profit after one month.

Has ABC Corp. violated any law with its scheme? Explain. (5%)
 2015

IX.

A. Able Corporation sold securities to 21 non-qualified buyers during a 15-month

period, without registering the securities with the Securities and Exchange Commission.
Did Able Corporation violate the Securities Regulation Code? Explain. (2%)

B. Securities issued by the Philippine government are "exempt securities" and, therefore,
need not be registered with the Securities and Exchange Commission prior to their sale
or offering to the public in the Philippines. What is the rationale behind this
exemption? (2%)

C. Why is the Securities Regulation Code called a "truth in securities law"? (2%)