SECURITIES REGULATION CODE

REPUBLIC ACT No.8799

Declaration of State Policy

The state shall establish a socially conscious, free market that regulates
itself, encourage the widest participation of ownership in enterprise,
enhance the democratization of wealth, promote the development of the
capital market, protect investors, ensure full and fair disclosure about
securities, minimize if not totally eliminate insider trading and other
fraudulent or manipulative devices and practices which create distortions
in free market.

Any doubt in the interpretation of these Rules shall be resolved by the

Commission in the manner which would establish a socially conscious, free
market that regulates itself, encourage the widest participation of
ownership in enterprises, enhance the democratization of wealth, ensure
full and fair disclosure about securities, minimize insider trading and other
fraudulent or manipulative devices and practices, promote the
development of the capital market and protect investors.

KEY PROVISIONS OF THE SRC

Requiring issuers and underwriters to fully disclose all material facts about the issue
or nature of the offering
Mandatory distribution of prospectus and regular filing of financial and operational
reports.
Simplified registration process
Standards for rejection have been made clear and more specific.
The reforms advanced by the SRC to list a few are (1) Securities are defined to
include those securities that the market may develop in the future; (2) Shift from merit
regulation to full disclosure; (3) Expanding the coverage of insider to include person
who receives tip from an insider; (4) allowing investors to recover from insiders who
trade or tip information in violation of insider trading provisions; (5) Transfer of SEC
jurisdiction over all cases enumerated under Section 5 of P.D. 902-A to the Regional
Trial Court designated as commercial court by the Supreme Court.

Definition of Terms

SECURITIES- are shares, participation or interest 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 stock, bonds,
debentures, notes, evidences of indebtedness, asset backed securities; b) investment
contracts, certificates of interest or participation in a profit sharing agreement, certificates
of deposit for a future subscription; c) Fractional undivided interest in oil, gas, or other
mineral rights; d) Derivatives like option and warrants; e) Certificates of assignment,
certificates of participation, trust certificates, voting trust certificates or similar
instruments; f) Proprietary or non-proprietary membership certificates in corporations; g)
Other instruments as may in the future be determined by the Commission.

Shares of stock- are the units into which the capital stock is divided.
Capital Stock- is an amount fixed in the corporate charter.
Insider- means the issuer, a director or officer or persons performing similar functions of,
or a person controlling the issuer, a person whose relationship to the issuer gives or gave
him access to material information about the issuer or the security that is not generally
available to the public, a government employee, or director or officer of an exchange,
clearing agency, and/or self-regulatory organization who has access to material
information about an issuer or a security that is not generally available to the public; or a
person who learns such information by a communication from any of the foregoing
insiders.

PROTECTION OF INVESTING PUBLIC

UNDER THE SECURITIES ACT

In order to protect the investing public, the Securities Act:

1. Requires the registration and/or licensing of securities

2. Requires submission of reports and other financial documents
3. Requires proper disclosure of securities
4.Requires the registration of brokers and salesmen
5. Requires the registration of stock exchanges and clearing agency
The Securities and Exchange Commission is the government agency tasked of
implementing and enforcement of the provisions of the Securities Regulations
Code. The role of the SEC in our national economy cannot be minimized. The
legislature has entrusted to it the serious responsibility of enforcing all laws
affecting corporation and other associations not otherwise vested in some other
government offices.
Section 4 of the Code vest the authority to administer the regulations of
securities under the Code with the Securities and Exchange Commission.

Powers of the Securities and Exchange Commission

Section 5 of the Code provides for the powers of the SEC. It has the following powers
and functions under the Code:

1. Jurisdiction and supervision over all corporations, partnership or association who are
grantees of primary franchises and/or a license or permit issued by the government.
2. Formulate policies and recommendations on issues concerning the securities market, advise
congress and other government agencies on all aspect of the securities market and propose
legislation and amendments thereto.
3. Approve, reject, suspend, revoke or require amendments to registration statements, and
registration and licensing applications.
4. Regulate, investigate or supervise the activities of persons to ensure compliance.
5. Supervise, monitor, suspend, or take over the activities of exchanges, clearing agencies and
other SROs.
6. Impose sanctions for the violation of laws and the rules, regulations and orders issued
pursuant thereto;
7. Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and
provide guidance on and supervise compliance with such rules, regulations and orders.
8. Enlist the aid and support of and/or deputize any and all enforcement agencies of the
government, civil or military s well as any private institution, corporation, firm, association or
person in the implementation of its powers and functions under this code.
9. Issue cease and desist orders to prevent fraud or injury to the investing public.
10. Punish for contempt of the Commission, both direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed by the Rules of Court.
11. Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision.

Powers of the SEC

12. Issue subpoena duces tecum and summon witnesses to appear in any proceedings
of the Commission and in appropriate cases, order the examination, search and seizure
of all documents, papers, files, and records, tax returns, and books of accounts of any
entity or person under investigation as may be necessary for the proper disposition of
the case before it, subject to the provisions of existing laws.
13. Suspend or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnership or associations, upon any of the grounds
provided by law;
14. Exercise such powers as may be provided by law as well as those which may be
implied from, or which are necessary or incidental to the carrying out of, the express
powers granted the Commission to achieve the objectives and purposes of these laws.
The Commissions jurisdiction over all cases enumerated under Section 5 of PD No.902A were transferred to the Regional Trial Court, sitting as special commercial court,
however, it shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within one (1) year
from the enactment of this Code. The Commission also retained jurisdiction over
pending suspension of payments/rehabilitation cases filed as of June 30,2000 until
finally disposed.

POWERS OF SEC TRANSFERRED TO

THE REGIONAL TRIAL COURT-COMMERCIAL COURT

Devices and schemes employed by or any acts of the Board of Directors and/or
stockholder, partners, members of association and organization, business
associates, its officers or partners amounting to fraud, and misrepresentation
which may be detrimental to the interest of the public registered with the
Commission.
Controversies arising out of intra-corporate or partnership relations, between
and among stockholders, members, or associations between any or all of them
and the corporation, partnership or association of which they are stockholders,
members, or associations of which they are stockholders, members or
association respectively between such corporation, partnership, or association
and the state in so far as it concerns their individual franchise or right to exist
as such entity.
Controversies in the election or appointment of directors, trustees, officers, or
managers of such corporation, partnership or association.
The Regional Trial Court, sitting as special commercial court, also exercises
jurisdiction over Corporate Rehabilitation. The Supreme Court has already
promulgated the Rules on Intra-Corporate Dispute and Corporate Rehabilitation.

Registration of Securities

Registration Requirement of Securities (Section 8)- Securities shall not be sold or offered
for sale or distribution within the Philippines, without a registration statement duly filed
with and approved by the Commission. Prior to such sale, information on the securities,
in such form and with such substance as the Commission may prescribe, shall be made
available to each prospective purchaser.
The Commission may conditionally approve the registration statement under such terms
as it may deem necessary.
The Commission may audit the financial statement, assets and other information of a
firm applying for registration of its securities whenever it deems the same necessary to
insure full disclosure or to protect the interest of the investors and the public in general.
The following constitute registration of securities: a) Filing by the issuer or by any dealer
or underwriter interested in the office of the SEC, of sworn registration statement with
respect to such securities; b) Payment of a fee; c) Publication of the filing in two (2)
newspaper of general circulation for two (2) consecutive weeks.
The keystone to the disclosure process are the, a) registration statement; b) the
prospectus.
Reasons behind the requirements of registration: a) to give adequate protection and
reliable information to investing public; b) to have compliance of the law by the issuer;
c) to allow only issuer who is solvent, of good reputation and character, and whose
business is based on sound business principles.

Exempt Securities-Section 9

What the law exempts from registration are the SECURITIES themselves that are
enumerated in section 9 of the Code. Any sale or transaction involving any of the
securities mentioned in section 9 of the Code does not require a previous registration
of the security sold or otherwise disposed of. For instance, a bond issued by the
government of the Philippines may be sold without the necessity of registering the
same.
The following classes of securities are exempt from registration:

1. Any security issued or guaranteed by the government of the Philippines, or by any political
subdivision or agency thereof, or by any person controlled or supervised by, and acting as an
instrumentality of said government.
2. Any security issued or guaranteed by the government of any country with which the
Philippine maintains diplomatic relations, or by any state, province or political subdivision
thereof on the basis of reciprocity: provided, that the Commission may require compliance with
the form and content of disclosures the Commission may prescribed.
3. Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper
adjudicatory body.
4. Any security or its derivatives the sale or transfer of which, by law, is under the supervision
and regulation of the Office of the Insurance Commission, Housing and Land Use Regulatory
Board, or the Bureau of Internal Revenue.
5. Any security issued by a bank except its own shares of stock.

EXEMPT TRANSACTION

Section 10 of the Securities Regulation Code enumerates the exempt transactions where registration under
Section 8.1 of the Code shall not apply to the sale of any securities enumerated in any of the following
transactions enumerated therein.
What is exempted from registration is the transaction or sale of securities and not the securities sold or
disposed.
The following are exempt transactions: 1)At any judicial sale, or sale by an executor, administrator, guardian
or receiver or trustee in insolvency or bankruptcy;2) By or for the account of a pledge holder, or mortgagee
or any other similar lien holder selling or offering for sale or delivery in the ordinary course of business and
not for the purpose of avoiding the provisions of this code, to liquidate a bona fide debt, a security pledged in
good faith as security for such; 3) An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner thereof, or by his representative for the owners account, such sale or
offer for sale, subscription or delivery not being made in the course of repeated or successive transactions of
a like character by such owner, or on his account by such representative and such owner or representative
not being the underwriter of such security; 4) The distribution by a corporation, actively engaged in the
business authorized by its articles of incorporation, of securities to its stockholders or other security holders
as a stock dividend or other distribution out of surplus; 5) The sale of capital stock of a corporation to its own
stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in
connection with the sale of such capital stock; 6) The issuance of bonds or notes secured by mortgage upon
real or tangible personal property, where the entire mortgage together with all the bonds or notes secured
thereby are sold to a single purchaser at a single sale; 7) The issue and delivery of any security in exchange
for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security
surrendered in exchange to make such conversion, provided, that the security so surrendered has been
registered under this code or was, when sold exempt from the provisions of this code, and that the security
issued and delivered in exchange, if sold at a conversion price, would be at the time of such conversion fall
within the class of securities entitled to registration under this code. Upon such conversion the par value of
the security surrendered in exchange shall be deemed the price at which the securities issued and delivered
in such exchange are sold.

EXEMPT TRANSACTION

8) Brokers transactions, executed upon customers orders, on any registered Exchange or other trading
market.
9) Subscription for shares of the capital stock of a corporation prior to incorporation thereof or in
pursuance of an increase in its authorized capital stock under the corporation code, when no expense is
incurred, or no commission, compensation or remuneration is paid or given in connection with the sale
or disposition of such securities, and only when the purpose for soliciting, giving or taking of such
subscription is to comply with the requirements of such law as to the percentage of the capital stock of
a corporation which would be subscribed before it can be registered and duly incorporated, or its
authorized capital stock increased.
10) The exchange of securities by the issuer with its existing security holders exclusively, where no
commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.
11) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during the
twelve-month period.
12) The sale of securities to any number of the following qualified buyers:a) Bank; b) Registered
Investment House; c) Insurance Company; d) Pension Fund or retirement plan maintained by the
government of the Philippines or any political subdivision thereof or managed by a bank or other
persons authorized by the Central Bank to engage in trust functions; d) Investment Company; or such
other person as the Commission may by rule determine as qualified buyers, on the basis of such factors
as financial sophistication, net worth, knowledge, and experience in financial and business matters, or
amount of assets under management.
The Commission may exempt other transactions, if it finds that the requirements of registration under
this code is not necessary in the public interest or for the protection of the investors such as by reason
of the small amount involved or the limited character of the public offering.

COMMODITY FUTURES CONTRACT

No person shall sell, offer or enter into commodity futures contract except in accordance
with rules, regulations, and orders of the Commission may prescribe in the public
interest.

Commodity Future Contract means a contract providing for the making or taking of
delivery at a prescribed time in the future of a specific quantity and quality of a
commodity or the cash value thereof, which is customarily offset prior to the delivery
date, and includes standardize contract having the indicia of commodity futures,
commodity options and commodity leverage, or margin contracts.
Commodity means any goods, articles, services, rights and interests, including in any
group or index of any of the foregoing, in which commodity interest contracts are
presently or in the future dealt in.

The term refers to the purchase in the future of certain types of commodities like oil,
copper, sugar and the like. The purchase shall be at a certain future date. The term refers
to transaction of buying and selling interest in a contract for physical delivery of
commodities in the future. We are not dealing actually with physical delivery, we are
dealing with the buying and selling of interest which is represented by a piece of paper in
a contract for future delivery of commodities.

Example: Warehouse Receipts- Quedans, Bill of Lading. It is the interest that is sold not
the commodity delivery.

REGULATION OF PRE-NEED PLANS

Section 16- No persons shall sell or offer for sale to the public any pre-need plan except
in accordance with the rules and regulations which the Commission shall prescribed.
Such rules shall regulate the sale of pre-need plans by, among other things, requiring
the registration of pre-need plans, licensing persons involved in the sale of pre-need
plans, requiring disclosure to prospective plan holders, prescribing advertising
guidelines, providing uniform accounting system, reports, and record keeping with
respect to such plans, imposing capital, bonding and other financial responsibility, and
establishing trust funds for the payment of benefits under such plans.

Example- Education Plans, Pension or Retirement Plans, and the like.

Features: Pre-Need Companies need to put a trust fund for the payment of benefits;
required to register and submit disclosure statement about the pre-need plan; capital
requirement; put up a bond for payment of any claim; uniform accounting system and
record keeping.

Under the Code, the SEC is the government agency tasked to supervise and regulate the
sale of pre-need plans by any person or entity. Licensing is required under the Code for
any person who shall sell or offer for sale to the public any pre-need plan.

Reportorial Requirements

Purpose of Reporting Requirement: There cannot be honest market without honest publicity.
Manipulation and dishonest practices of the market place thrive upon mystery and secrecy.
Who are required to make or file the periodic report as required by the Code:
1. An issuer which has sold a class of its securities pursuant to a registration under section 12 hereof:
provided, however, that the obligation of such issuer to file shall be suspended for any fiscal year after
the year such registration became effective if such issuer, as of the first day of any fiscal year, has
less that 100 holders of such class of securities or such other number as the Commission shall
prescribe and it notifies the Commission of such.
2. An issuer with a class of securities listed for trading an Exchange;
3. An issuer with assets of at least 50Million Pesos or such amount as the Commission shall prescribe
and having 200 or more holders each holding at least 100 shares of a class of its equity securities:
Provided, however, that the obligation of such issuer to file reports shall be terminated 90 days after
notification to the Commission by the issuer that the number of its holders holding at least 100 shares
is reduced to less than 100 holders.
4. In every case in which an issuer satisfies the requirements of sub-section 17.2 hereof, any person
who acquires directly or indirectly the beneficial ownership of more than 5% of such class or in excess
of such lesser percentum as the Commission by rule may prescribe.
The person mentioned in paragraph 4 shall submit to the issuer, the Exchange where the security is
traded, and to the Commission a sworn statement containing among others the purpose of the
purchase or prospective purchases is to acquire control of the business, the number of shares
beneficially owned and or any contracts or arrangements with other persons with respect to the
securities of the issuer, such requirement is for the protection of the investors and for public interest.

Protection of Shareholder Interest

Tender Offers- Any person or group of persons acting in concert who intends to acquire at least 15% of any class
of any equity security of a listed corporation or of any class of any equity security of a corporation with assets of
at least 50Million and having 200 or more shareholder with at least 100 hundred shares each OR who intends to
acquire at least 30% of such equity over a period of 12 months shall make a tender offer to stockholders by filing
with the Commission a declaration to that effect; and furnish the issuer, a statement containing such information
required under section 17 of this Code as the Commission my prescribed,
Such person or group of persons shall publish all request or invitation for tender, or materials making a tender
offer or requesting or inviting letters of such security.
Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on
behalf of the depositor at any time throughout the period that the tender offer remains open and if the securities
deposited have not been previously accepted for payment, and at anytime after 60 days from date of the
original tender offer or request or invitation, except as the Commission may otherwise prescribed.
Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration
thereof by increasing the consideration offered to holders of such securities, such person shall pay the increased
consideration to each security holder whose securities have been taken up and paid for whether or not such
securities have been taken up by such person before the variation of the tender offer or request or invitation.
Proxy Solicitations- proxies must be issued and proxy solicitation must be made in accordance with rules and
regulations issued by the Commission.
Proxies must be in writing, signed by the stockholder or his duly authorized representative and filed before the
scheduled meeting with the corporate secretary. No proxy shall be valid and effective for a period longer than 5
years at one time. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it was
intended. No broker or dealer shall give any proxy w/o express written consent of the customer or owner.

Shareholder Protection

A broker or dealer who holds or acquire the proxy for at least 10% or such percentage as the
Commission may prescribed of the outstanding share of the issuer shall submit a report identifying the
beneficial owner within 10 days after such acquisition, for its account or customer, to the issuer of
security, to the Exchange where the security is traded and to the Commission.

Transactions of Directors, Officers, and Principal Stockholder- Every person who is directly or indirectly
the beneficial owner of more than 10% of any class of any equity security which satisfies the
requirements of subsection 17.2, or is a director or an officer of the issuer of such security, shall file, at
the time either such requirements is first satisfied or within 10 days after he becomes such as
beneficial owner, director or officer, a statement with the Commission, and if such security is listed or
traded on an Exchange, also with the Exchange, of the amount of all equity securities of such issuer of
which he is the beneficial owner,and within 10 days after the close of each calendar month thereafter,
if there has been a change in such ownership during such month shall file with the Commission and
the Exchange, if such security is traded, a statement indicating his ownership at the close of the
calendar month and such change of ownership as have occurred during such calendar month.
FOR THE PURPOSE OF PREVENTING THE UNFAIR USE OF INFORMATION OBTAINED by such beneficial
owner, director or officer by reason of his relationship to the issuer, any profit realized from any
purchase and sale, or any sale and purchase of any security of such issuer within a period of less than
6 months, unless such security was acquired in good faith in connection with a debt previously
contracted, SHALL INURE TO AND RECOVERABLE BY THE ISSUER, irrespective of any intention of
holding such security purchased or of not repurchasing the security sold for a period exceeding 6
months. SUIT TO RECOVER SUCH PROFIT MAY BE INSTITUTED BEFORE THE REGIONAL TRIAL COURT BY
THE ISSUER, or by the owner of any security of the issuer in the name and in behalf of the issuer, if the
latter fails or refuse to bring such suit within 60 days after request or shall fail to prosecute the same
thereafter, but no such suit shall be brought more than 2 years after the date such profit was realized.

Continuation-Reportorial
Section 17-18

Period of tile to file Report- Every issuer satisfying the requirements in sub-section 17.2 shall file with the
Commission within 135 days after the end of the issuers fiscal year or such other time as the Commission
may prescribe.
The periodic report shall include the following:
1. Balance Sheet
2. Profit and Loss Statement or Income Statement
3. Statement of Cash Flow
4. And such other significant current financial development or condition of the issuer
The above-mentioned reports must be duly certified by an independent certified accountant.
The issuer shall also furnish such reports as the Commission may prescribe the holder of such equity
security.
What is a Stop Order? It is an Order of the Commission suspending the right to sell security providing
further investigation, if, at any time, in the opinion of the Commission, the information contained in the
statement filed is or has become misleading, incorrect, inadequate or incomplete or the sale or offering for
the sale of the security may work or tend to work a fraud.
Purpose of the Stop Order:
1. Enable the Commission to prevent any imposition upon its authority by the filing of any untrue,
inadequate or misleading statement.
2. To avoid any undue interference with private rights.
Equity Securities- means securities which provides the holder thereof with voting rights and shall not
include convertible securities and other derivatives except as provided in the definition of beneficial
owner.

Prohibition on Fraud, Manipulation

and Insider Trading

Manipulation is an artificial control of security prices; it is an attempt to force securities

to sell at prices either above or below those which exist as a result of the normal
operation of supply and demand. The manipulator hopes to profit by creating fictitious
prices at the expense of the general trading public.
Section 24 of the Code enumerates the devices and practices on manipulation of security
prices. To mention some: by creating a false or misleading appearance of active trading
in any listed security traded in an Exchange or any other trading market; by effecting any
transaction in such security which involves no change in the beneficial ownership
thereof; to effect alone or with others, a series of transactions in securities that raises
their price to induce the purchase of a security, whether for the same or a different class
of the same issuer or of a controlling, controlled, or commonly controlled company by
others; depresses their price to induce the sale of security, whether of the same or
different class, of the same issuer or of a controlling, controlled, or commonly controlled
company by others; to circulate or disseminate information that the price of any security
listed in the Exchange will or likely to rise or fall because of manipulative market
operations of any one or more persons conducted for the purpose of raising or depressing
the price of the security for the purpose of inducing the purchase or sale of such security.
Wash sales- a fictitious kind of sale, disallowed on stock and other exchanges, in which
broker who has received orders from one person to buy and from other person to sell a
particular amount of quantity of some particular stock simply transfer the stock from one
principal to the other and pockets the difference instead of executing both orders
separately.

Regulation of Option Trading

Section 25 of the Code- No member of an Exchange shall directly or indirectly endorse

or guarantee the performance of any put, call, straddle, option or privilege in relation
to any security registered on securities exchange. The terms put, call, straddle,
or privilege shall not include any registered warrant, right or convertible security.
The idea is that certain firms issue option good for a limited time in a certain stock for
a certain sum. If the option becomes valuable through market changes during the
options life, then the holder cashes in on his ticket. If the option does not become
valuable, then, the holder does nothing. He is simply through with the transaction,
being out only the price he paid for the option in the beginning.
Types of option:
1. Put- is an agreement through which the maker contracts to receive, if the holder
wishes him to, a certain amount of stock at a certain price with a certain period, in
consideration of a price or fee, from the option holder.
2. Call- it is the reverse of the put. It is an agreement whereby the maker contracts
to deliver, if the holder of the call wishes him to, a certain amount of stock at a certain
price within a certain time, the maker receiving in consideration for his contract, a
certain fee or price from the option holder.
3. Straddle- combination of put and call. It means the double privilege of a put
and call, and secures to the holder the right to demand of the seller at a certain
price within a certain time of shares of specified stock, or to require him to take, at the
same price, within the same time, the same stocks.

Insiders Duty to Disclose

Section 27 of the Code- It shall be unlawful for an insider to sell or buy security of the
issuer, while in possession of material information with respect to the issuer or the security
that is not generally available to the public, unless, the insider proves that the information
was not gained from such relationship or if the other party selling or buying from the
insider or his agent is identified, the insider proves that he disclosed the information to the
other party, or that he had reason to believe that the other party otherwise is also in
possession of the information.
A purchase or sale of security of the issuer made by an insider or such insiders spouse or
relatives by affinity or consanguinity within the second degree, legitimate or common-law,
shall be presumed to have been effected while in possession of material non-public
information if transacted after such information came into existence but prior to
dissemination of such information to the public and the lapse of reasonable time for the
market to absorb such information.
Material Non-public information is defined as: If the information has not been generally
disclosed to the public and would likely affect the market price of the security after being
disseminated to the public and the lapse of a reasonable time for the market to absorb the
information or would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or hold a security.
It shall be unlawful for any insider to communicate material non-public information about
the issuer or the security to any person who, by virtue of the communication, becomes an
insider as defined in this Code. Insider trading is unlawful under this Code.

Regulation of Securities Market

Professionals, Exchanges and Trading Market

Section 28 of the Code- No person shall engage in the business of buying and selling
securities in the Philippines as a broker or dealer, or act as a salesman, or an associated
person of any broker or dealer unless registered as such with the Commission.
No registered broker or dealer shall employ any salesman, or any associated person, and
no issuer shall employ any salesman who is not registered as such with the Commission.
Section 30 of the Code- No broker or dealer shall deal in or otherwise buy or sell, for its
own account or for the account of customers, securities listed on an Exchange issued by a
corporation where any stockholder, director, associated person or salesman, or authorized
clerk of said broker or dealer, and all relatives of the foregoing within the fourth civil
degree of consanguinity or affinity, is at the time holding office in said issuer corporation
as a director, president, vice-president, manager, treasurer, comptroller, secretary or any
office of trust and responsibility, or is a controlling person of the issuer.
Section 32 of the Code- No broker, dealer, salesman, associated person, or Exchange,
directly or indirectly, shall make use of any facility of an Exchange in the Philippines to
effect any transaction in a security, or to report such transaction, unless such Exchange is
registered as such under section 33 of this Code.
Section 33- Any Exchange may be registered as such with the Commission under the
terms and conditions provided in section 40 of the Code by filing an application in such
form with supporting documents as the Commission may prescribed.

Registration of Exchange and Oversight

of Self-Regulatory Organizations

Where the Exchange is organized as a stock corporation, no person may beneficially own
or control, directly or indirectly, more than five percent (5%) of the voting rights of the
Exchange and no industry or business group may beneficially own or control, directly or
indirectly, more than twenty percent (20%) of the voting rights of the Exchange; provided,
however, the Commission may adopt such rules or regulations or issue an order, upon
application, exempting an applicant from this prohibition where it finds that such
ownership or control will not negatively impact on the Exchanges ability to effectively
operate in the public interest.
Independent Directors- mean a person other than an officer or employee of the
corporation, its parent or subsidiaries, or any other individual having a relationship with
the corporation, which would interfere with the exercise of independent judgment in
carrying out the responsibility of a director.
Independent directors are required for corporation with a class of equity securities listed
for trading on an Exchange or with assets in excess of P50M and having 200 or more
holders of at least 100 shares of a class of securities or which has sold a class of equity
securities to the public pursuant to an effective registration statement in compliance with
section 12 of the Code and shall have at least 2 independent directors or such
independent directors shall constitute at least 20% of the members of such board,
whichever is lesser.
Section 39-The Commission has authority and jurisdiction over registration of Associations
of Securities Brokers, Dealers, and other Securities Related Organization.
Any Clearing Agency may be registered as such with the Commission subject to such
terms it may prescribed.

Margin and Credit

and
Liabilities

Section 48 of the Code- For the purpose of preventing the excessive use of credit for the
purchase or carrying of securities, the Commission, in accordance with the credit and
monetary policies that may be promulgated from time to time by the Monetary Board of the
BSP, shall prescribed rules and regulations with respect to the amount of credit that may be
extended on any security. For the extension of credit, such rules and regulations shall be
based upon the following standard: An amount not greater than whichever is higher of; a)
65% of the current price of the security or, b) 100% of the lowest market price of the security
during the preceding 36 calendar months, but not more than 75% of the current market price.
Margin requirements are the statutory and administrative restriction placed upon the
percentage of the value of securities which may be borrowed for the purpose of the purchase
of such securities, the term margin referring to the percentage of the value which must be
paid in cash by the purchaser. Such requirements have been implemented for the purposes of
preventing the excessive use of credit for the purchase or carrying of securities, and of
reducing the aggregate amount of the national credit resources which are directed by
speculation into the stock market and of achieving a more balanced use of such resources.
Under the Securities Regulations Code, any person who violates any of the provision of this
Code or the rules and regulations promulgate by the SEC is either civilly or criminally liable.
See Section 51, 56, 57,58, 59, 60, and 61 of the Code.
Limitations of Actions, see Section 62 of the Code. (2 years and 5 years)