securties regulation code

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SECURTIES REGULATION CODE

CHAPTER ITitle and Definitions

SEC. 1.Title. This shall be known as The SecuritiesRegulation Code.

SEC. 2.Declaration of State Policy. The State shall

establish a socially conscious, free market that regulates itself,encourage the widest participation of ownership in enterprises,enhance the democratization of wealth, promote thedevelopment of the capital market, protect investors, ensurefull and fair disclosure about securities, minimize if not totallyeliminate insider trading and other fraudulent or manipulativedevices and practices which create distortions in the freemarket.To achieve these ends, this Securities Regulation Code ishereby enacted.

SEC.3.Definition of Terms.-3.1. Securities are shares, participation or

interests in a corporation or in a commercialenterprise or profit-making venture and

evidenced by a certificate, contract,instrument, whether written or electronic incharacter. It includes:a) Shares of stock, bonds, debentures,

notes, evidences of indebtedness,asset-backed securities;

b) Investment contracts, certificates ofinterest or participation in a profitsharing agreement, certificates ofdeposit for a 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 certificatesor similar instruments;

f) Proprietary or non proprietarymembership certificates incorporations; and

g) Other instruments as may in thefuture be determined by theCommission.

3.2 Issuer is the originator, maker, obligor, orcreator of the security.

3.3 Broker is a person engaged in the businessof buying and selling securities for theaccount of others.

3.4 Dealer means any person who buys andsells securities for his/her own account in theordinary course of business.

3.5. Associated person of a broker or dealer isan employee thereof who, directly exercisescontrol of supervisory authority, but does notinclude a salesman, or an agent or a personwhose functions are solely clerical orministerial.

3.6. Clearing Agency is any person who acts asintermediary in making deliveries uponpayment to effect settlement in securitiestransactions.

3.7. Exchange is an organized marketplace orfacility that brings together buyers and

sellers and executes trades of securitiesand/or commodities.

3.8. Insider means: (a) the issuer; (b) a directoor officer (or person performing similafunctions) of, or a person controlling theissuer; (c) a person whose relationship oformer relationship to the issuer gives ogave him access to material informationabout the issuer or the security that is nogenerally available to the public; (d) a

government employee, or director, oofficer of an exchange, clearing agencyand/or self-regulatory organization whohas access to material information about anissuer or a security that is not generallyavailable to the public; or (e) a person wholearns such information by a communicationfrom any of the foregoing insiders.

3.9. Pre-Need Plans are contracts which providefor the performance of future services or thepayment of future monetary considerationsat the time of actual need, for whichplanholders pay in cash or installment astated prices, with or without interest oinsurance coverage and includes life

pension, education, interment, and otheplans which the Commission may from timeto time approve.

3.10. Promoter is a person who, acting alone owith others, takes initiative in founding andorganizing the business or enterprise of theissuer and receives consideration therefore.

3.11. Prospectus is the document made by or onbehalf of an issuer, underwriter or dealer tosell or offer securities for sale to the publicthrough a registration statement filed with the

Commission.3.12. Registration statement is the application fo

the registration of securities required to befiled with the Commission.

3.13. Salesman is a natural person, employed assuch or as an agent, by a dealer, issuer obroker to buy and sell securities.

3.14. Uncertificated security is a securityevidenced by electronic or similar records.

3.15. Underwriter is a person who guarantees on afirm commitment and/or declared best efforbasis the distribution and sale of securities oany kind by another company.

CHAPTER IISecurities and Exchange Commission

SEC.4.Administrative Agency.

4.1. This Code shall be administered by theSecurities and Exchange Commission(hereafter the Commission) as a collegiabody, composed of a Chairperson and fou(4) Commissioners, appointed by thePresident for a term of seven (7) years eachand who shall serve as such until theisuccessor shall have been appointed andqualified. A Commissioner appointed to fill avacancy occurring prior to the expiration othe term for which his/her predecessor wasappointed, shall serve only for the unexpiredportion of such term. The incumbenChairperson and Commissioners at the


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effectivity of this Code, shall serve theunexpired portion of their terms underPresidential Decree No. 902-A. Unless thecontext indicates otherwise, the termCommissioner includes the Chairperson.

4.2. The Commissioners must be natural-borncitizens of the Philippines, at least forty (40)years of age for the Chairperson and at leastthirty-five (35) years of age for theCommissioners, of good moral character, ofunquestionable integrity, of known probity

and patriotism, and with recognizedcompetence in social and economic

disciplines:Provided,That the majority ofCommissioners, including the Chairperson,shall be members of the Philippine Bar.

4.3. The Chairperson is chief executive officer ofthe Commission. The Chairperson shallexecute and administer the policies,decisions, orders and resolutions approvedby the Commission and shall have thegeneral executive direction and supervisionof the work and operation of the Commissionand of its members, bodies, boards, offices,personnel and all its administrative business.

4.4. The salary of the Chairperson and theCommissioners shall be fixed by thePresident of the Philippines based on anobjective classification system, at a sumcomparable to the members of the MonetaryBoard and commensurate to the importanceand responsibilities attached to the position.

4.5. The Commission shall hold meetings at leastonce a week for the conduct of business oras often as may be necessary upon call ofthe Chairperson or upon the request of three(3) Commissioners. The notice of themeeting shall be given to all Commissionersand the presence of three (3)

Commissioners shall constitute a quorum.

In the absence of the Chairperson, the mostsenior Commissioner shall act as presidingofficer of the meeting.

4.6. The Commission may, for purposes ofefficiency, delegate any of its functions toany department or office of the Commission,an individual Commissioner or staff memberof the Commission except its review orappellate authority and its power to adopt,alter and supplement any rule or regulation.The Commission may review upon its owninitiative or upon the petition of anyinterested party any action of anydepartment or office, individualCommissioner, or staff member of the

Commission.

SEC. 5.Powers and Functions of the Commission.5.1. The Commission shall act with transparency

and shall have the powers and functionsprovided by this Code, Presidential DecreeNo. 902-A, the Corporation Code, theInvestment Houses Law, the FinancingCompany Act and other existing laws.Pursuant thereto the Commission shall have,among others, the following powers andfunctions:(a) Have jurisdiction and supervision

over all corporations, partnerships

or associations who are thegrantees of primary franchisesand/or a license or permit issued bythe Government;

(b) Formulate policies andrecommendations on issuesconcerning the securities marketadvise Congress and othegovernment agencies on all aspectsof the securities market andpropose legislation and

amendments thereto;(c) Approve, reject, suspend, revoke o

require amendments to registrationstatements, and registration andlicensing applications;

(d) Regulate, investigate or supervisethe activities of persons to ensurecompliance;

(e) Supervise, monitor, suspend or takeover the activities of exchangesclearing agencies and other SROs;

(f) Impose sanctions for the violation olaws and the rules, regulations andorders issued pursuant thereto;

(g) Prepare, approve, amend or repearules, regulations and orders, andissue opinions and provideguidance on and supervisecompliance with such rulesregulations and orders;

(h) Enlist the aid and support of and/odeputize any and all enforcemenagencies of the Government, civil omilitary as well as any privateinstitution, corporation, firmassociation or person in theimplementation of its powers andfunctions under this Code;

(i) Issue cease and desist orders to

prevent fraud or injury to theinvesting public;(j) Punish for contempt of the

Commission, both direct andindirect, in accordance with thepertinent provisions of andpenalties prescribed by the Rules oCourt;

(k) Compel the officers of any registeredcorporation or association to calmeetings of stockholders omembers thereof under itssupervision;

(l) Issue subpoena duces tecumandsummon witnesses to appear in any

proceedings of the Commission andin appropriate cases, order theexamination, search and seizure oall documents, papers, files andrecords, tax returns, and books ofaccounts of any entity or personunder investigation as may benecessary for the proper dispositionof the cases before it, subject to theprovisions of existing laws;

(m) Suspend, or revoke, after propenotice and hearing the franchise ocertificate of registration ocorporations, partnerships o


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associations, upon any of thegrounds provided by law; and

(n) Exercise such other powers as maybe provided by law as well as thosewhich may be implied from, orwhich are necessary or incidental tothe carrying out of, the expresspowers granted the Commission toachieve the objectives andpurposes of these laws.

5.2. The Commissions jurisdiction over all cases

enumerated under Section 5 of PresidentialDecree No. 902-A is hereby transferred tothe Courts of general jurisdiction or theappropriate Regional TrialCourt: Provided,that the Supreme Court inthe exercise of its authority may designatethe Regional Trial Court branches that shallexercise jurisdiction over these cases. TheCommission shall retain jurisdiction overpending cases involving intra-corporatedisputes submitted for final resolution whichshould be resolved within one (1) year fromthe enactment of this Code. TheCommission shall retain jurisdiction over

pending suspension ofpayments/rehabilitation cases filed as of 30June 2000 until finally disposed.

SEC. 6.Indemnification and Responsibilities ofCommissioners.

6.1. The Commission shall indemnify eachCommissioner and other officials of theCommission, including personnel performingsupervision and examination functions for allcosts and expenses reasonably incurred bysuch persons in connection with any civil orcriminal actions, suits or proceedings towhich they may be or made a party byreason of the performance of their functions

or duties, unless they are finally adjudged insuch actions or proceedings to be liable forgross negligence or misconduct.In the event of settlement or compromise,indemnification shall be provided only inconnection with such matters covered by thesettlement as to which the Commission isadvised by external counsel that the personsto be indemnified did not commit any grossnegligence or misconduct.The costs and expenses incurred indefending the aforementioned action, suit orproceeding may be paid by the Commissionin advance of the final disposition of suchaction, suit or proceeding upon receipt of an

undertaking by or on behalf of theCommissioner, officer or employee to repaythe amount advanced should it ultimately bedetermined by the Commission that he/sheis not entitled to be indemnified as providedin this subsection.

6.2. The Commissioners, officers and employeesof the Commission who willfully violate thisCode or who are guilty of negligence, abuseor acts of malfeasance or fail to exerciseextraordinary diligence in the performance oftheir duties shall be held liable for any loss orinjury suffered by the Commission or otherinstitutions as a result of such violation,

negligence, abuse, malfeasance, or failure toexercise extraordinary diligence.Similar responsibility shall apply to theCommissioners, officers and employees othe Commission for (1) the disclosure of anyinformation, discussion or resolution of theCommission of a confidential nature, oabout the confidential operations of theCommission, unless the disclosure is inconnection with the performance of officiafunctions with the Commission or with prio

authorization of the Commissioners; or (2the use of such information for personal gainor to the detriment of the government, theCommission or third parties: Providedhowever,That any data or informationrequired to be submitted to the Presidenand/or Congress or its appropriatecommittee, or to be published under theprovisions of this Code shall not beconsidered confidential.

SEC. 7.Reorganization.

7.1. To achieve the goals of this Code, consistenwith Civil Service laws, the Commission is

hereby authorized to provide for itsreorganization, to streamline its structureand operations, upgrade its human resourcecomponent and enable it to more efficientlyand effectively perform its functions andexercise its powers under this Code.

7.2. All positions of the Commission shall begoverned by a compensation and positionclassification systems and qualificationstandards approved by the Commissionbased on a comprehensive job analysis andaudit of actual duties and responsibilitiesThe compensation plan shall be comparablewith the prevailing compensation plan inthe Bangko Sentral ng Pilipinasand othe

government financial institutions and shall besubject to periodic review by theCommission no more than once every two(2) years without prejudice to yearly merireviews or increases based on productivityand efficiency. The Commission shalltherefore, be exempt from laws, rules, andregulations on compensation, position

classification and qualification standards.The Commission shall, however, endeavoto make its system conform as closely aspossible with the principles under theCompensation and Position Classification

Act of 1989 (Republic Act No. 6758, asamended).

CHAPTER IIIRegistration of Securities

SEC. 8.Requirement of Registration of Securities.

8.1. Securities shall not be sold or offered fosale or distribution within the Philippineswithout a registration statement duly filedwith and approved by the Commission. Prioto such sale, information on the securities, insuch form and with such substance as theCommission may prescribe, shall be madeavailable to each prospective purchaser.


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8.2. The Commission may conditionally approve

the registration statement under suchterms as it may deem necessary.

8.3. The Commission may specify the terms andconditions under which any writtencommunication, including any summaryprospectus, shall be deemed not toconstitute an offer for sale under thisSection.

8.4. A record of the registration of securities shallbe kept in a Register of Securities in which

shall be recorded orders entered by theCommission with respect to such

securities. Such register and alldocuments or information with respect to thesecurities registered therein shall be open topublic inspection at reasonable hours onbusiness days.

8.5. The Commission may audit the financialstatements, assets and other information ofa firm applying for registration of itssecurities whenever it deems the samenecessary to insure full disclosure or toprotect the interest of the investors and thepublic in general.

SEC.9.Exempt Securities.9.1. The requirement of registration under

Subsection 8.1 shall not as a general ruleapply to any of the following classes ofsecurities:a) Any security issued or guaranteed by

the Government of the Philippines,or by any political subdivision oragency thereof, or by any personcontrolled or supervised by, andacting as an instrumentality of saidGovernment.

b) Any security issued or guaranteed bythe government of any country with

which the Philippines maintainsdiplomatic relations, or by any state,province or political subdivisionthereof on the basis of reciprocity:Provided, That the Commissionmay require compliance with theform and content of disclosures theCommission may prescribe.

c) Certificates issued by a receiver or bya trustee in bankruptcy dulyapproved by the properadjudicatory body.

d) Any security or its derivatives the saleor transfer of which, by law, isunder the supervision and

regulation of the Office of theInsurance Commission, Housingand Land Use Regulatory Board, orthe Bureau of Internal Revenue.

e) Any security issued by a bank exceptits own shares of stock.

9.2. The Commission may, by rule or regulationafter public hearing, add to the foregoing anyclass of securities if it finds that theenforcement of this Code with respect tosuch securities is not necessary in the publicinterest and for the protection of investors.

SEC.10.Exempt Transactions.

10.1. The requirement of registration undeSubsection 8.1 shall not apply to the sale ofany security in any of the followingtransactions:a) At any judicial sale, or sale by an

executor, administrator, guardian oreceiver or trustee in insolvency obankruptcy.

b) By or for the account of a pledgeholder, or mortgagee or any othesimilar lien holder selling or offering

for sale or delivery in the ordinarycourse of business and not for thepurpose of avoiding the provisionsof this Code, to liquidate a bonafidedebt, a security pledged ingood faith as security for such debt.

c) An isolated transaction in which anysecurity is sold, offered for salesubscription or delivery by theowner thereof, or by hisrepresentative for the ownersaccount, such sale or offer for salesubscription or delivery not beingmade in the course of repeated andsuccessive transactions of a likecharacter by such owner, or on hisaccount by such representative andsuch owner or representative nobeing the underwriter of suchsecurity.

d) The distribution by a corporationactively engaged in the businessauthorized by its articles oincorporation, of securities to itsstockholders or other securityholders as a stock dividend or othedistribution out of surplus.

e) The sale of capital stock of acorporation to its own stockholders

exclusively, where no commissionor other remuneration is paid ogiven directly or indirectly inconnection with the sale of suchcapital stock.

f) The issuance of bonds or notessecured by mortgage upon reaestate or tangible personaproperty, where the entire mortgagetogether with all the bonds or notessecured thereby are sold to a singlepurchaser at a single sale.

g) The issue and delivery of anysecurity in exchange for any othesecurity of the same issue

pursuant to a right of conversionentitling the holder of the securitysurrendered in exchange to makesuch conversion: Provided, That thesecurity so surrendered has beenregistered under this Code or waswhen sold, exempt from theprovisions of this Code, and that thesecurity issued and delivered inexchange, if sold at the conversionprice, would at the time of suchconversion fall within the class osecurities entitled to registration

under this Code. Upon such


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conversion the par value of thesecurity surrendered in suchexchange shall be deemed theprice at which the securities issuedand delivered in such exchange aresold.

h) Brokers transactions, executed uponcustomers orders, on anyregistered Exchange or othertrading market.

i) Subscriptions for shares of the capital

stock of a corporation prior to theincorporation thereof or inpursuance of an increase in itsauthorized capital stock under theCorporation Code, when noexpense is incurred, or nocommission, compensation orremuneration is paid or given inconnection with the sale ordisposition of such securities, andonly when the purpose for soliciting,giving or taking of suchsubscriptions is to comply with therequirements of such law as to thepercentage of the capital stock of acorporation which should besubscribed before it can beregistered and duly incorporated, orits authorized capital increased.

j) The exchange of securities by theissuer with its existing securityholders exclusively, where nocommission or other remunerationis paid or given directly or indirectlyfor soliciting such exchange.

k) The sale of securities by an issuer tofewer than twenty (20) persons inthe Philippines during any twelve-month period.

l) The sale of securities to any numberof the following qualified buyers:(i) Bank;(ii) Registered investment

house;(iii) Insurance company;(iv) Pension fund or retirement

plan maintained by theGovernment of thePhilippines or any politicalsubdivision thereof ormanaged by a bank orother persons authorizedby the Bangko Sentraltoengage in trust functions;

(v) Investment company; or(vi) Such other person as the

Commission may by ruledetermine as qualifiedbuyers, on the basis ofsuch factors as financialsophistication, net worth,knowledge, andexperience in financial andbusiness matters, oramount of assets undermanagement.

10.2. The Commission may exempt othertransactions, if it finds that the requirements

of registration under this Code is nonecessary in the public interest or for theprotection of the investors such as by reasonof the small amount involved or the limitedcharacter of the public offering.

10.3. Any person applying for an exemption undethis Section, shall file with the Commission anotice identifying the exemption relied uponon such form and at such time as theCommission by rule may prescribe and withsuch notice shall pay to the Commission a

fee equivalent to one-tenth (1/10) of onepercent (1%) of the maximum aggregateprice or issued value of the securities.

SEC. 11.CommodityFutures Contracts. -No personshall offer, sell or enter into commodity futures contractsexcept in accordance with rules, regulations and orders the

Commission may prescribe in the public interest. TheCommission shall promulgate rules and regulations involvingcommodity futures contracts to protect investors to ensure thedevelopment of a fair and transparent commodities market.

SEC. 12.Procedure for Registration of Securities.-12.1. All securities required to be registered unde

Subsection 8.1 shall be registered throughthe filing by the issuer in the main office othe Commission, of a sworn registrationstatement with respect to such securities, insuch form and containing such informationand documents as the Commission shalprescribe. The registration statement shalinclude any prospectus required or permittedto be delivered under Subsections 8.2, 8.3and 8.4.

12.2. In promulgating rules governing the content oany registration statement (including anyprospectus made a part thereof or annexedthereto), the Commission may require theregistration statement to contain such

information or documents as it may, byrule, prescribe. It may dispense with anysuch requirement, or may require additionainformation or documents, including writteninformation from an expert, depending on thenecessity thereof or their applicability to theclass of securities sought to be registered.

12.3. The information required for the registration oany kind, and all securities, shall includeamong others, the effect of the securitiesissue on ownership, on the mix of ownershipespecially foreign and local ownership.

12.4. The registration statement shall be signed bythe issuers executive officer, its principaoperating officer, its principal financial officer

its comptroller, principal accounting officerits corporate secretary or persons performingsimilar functions accompanied by a dulyverified resolution of the board of directors o

the issuer corporation.The written consenof the expert named as having certified anypart of the registration statement or anydocument used in connection therewith shalalso be filed. Where the registrationstatement includes shares to be sold byselling shareholders, a written certification bysuch selling shareholders as to the accuracyof any part of the registration statemen


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contributed to by such selling shareholdersshall also be filed.

12.5. a) Upon filing of the registrationstatement, the issuer shall pay tothe Commission a fee of not morethan one-tenth (1/10) of onepercentum(1%) of the maximumaggregate price at which suchsecurities are proposed to beoffered. The Commission shallprescribe by rule diminishing fees in

inverse proportion to the value ofthe aggregate price of the offering.

b) Notice of the filing of the registrationstatement shall be immediatelypublished by the issuer, at its own

expense, in two (2) newspapersof general circulation in thePhilippines, once a week for two (2)consecutive weeks, or in such othermanner as the Commission by ruleshall prescribe, reciting that aregistration statement for the sale ofsuch security has been filed, andthat the aforesaid registration

statement, as well as the papersattached thereto are open toinspection at the Commissionduring business hours, and copies

thereof, photostatic or otherwise,shall be furnished to interestedparties at such reasonable chargeas the Commission may prescribe.

12.6. Within forty-five (45) days after the date offiling of the registration statement, or by suchlater date to which the issuer has consented,the Commission shall declare the registrationstatement effective or rejected, unless theapplicant is allowed to amend theregistration statement as provided in Section

14 hereof.The Commission shall enter anorder declaring the registration statement tobe effective if it finds that the registrationstatement together with all the other papersand documents attached thereto, is on itsface complete and that the requirements

have been complied with. TheCommission may impose such terms andconditions as may be necessary orappropriate for the protection of theinvestors.

12.7. Upon effectivity of the registration statement,the issuer shall state under oath in everyprospectus that all registration requirementshave been met and that all information are

true and correct as represented by the issueror the one making the statement. Any untruestatement of fact or omission to state amaterial fact required to be stated therein ornecessary to make the statement therein notmisleading shall constitute fraud.

SEC. 13.Rejection and Revocation of Registration ofSecurities.

13.1. The Commission may reject a registrationstatement and refuse registration of thesecurity thereunder, or revoke the effectivityof a registration statement and theregistration of the security thereunder after

due notice and hearing by issuing an ordeto such effect, setting forth its findings inrespect thereto, if it finds that:a) The issuer:

(i) Has been judicially declaredinsolvent;

(ii) Has violated any of theprovisions of this Codethe rules promulgatedpursuant thereto, or anyorder of the Commission

of which the issuer hasnotice in connection withthe offering for which aregistration statement hasbeen filed;

(iii) Has been or is engaged ois about to engage infraudulent transactions;

(iv) Has made any false omisleading representationof material facts in anyprospectus concerning theissuer or its securities;

(v) Has failed to comply with

any requirement that theCommission may imposeas a condition foregistration of the securityfor which the registrationstatement has been filedor

b) The registration statement is on itsface incomplete or inaccurate inany material respect or includesany untrue statement of a materiafact or omits to state a material facrequired to be stated therein onecessary to make the statementstherein not misleading; or

c) The issuer, any officer, director ocontrolling person of the issuer, operson performing similar functionsor any underwriter has beenconvicted, by a competent judiciaor administrative body, upon plea oguilty, or otherwise, of an offenseinvolving moral turpitude and/ofraud or is enjoined or restrained bythe Commission or other competen

judicial or administrative body foviolations of securitiescommodities, and other relatedlaws.For purposes of this subsection, the

term competent judicial oadministrative body shall include aforeign court of competen

jurisdiction as provided for underthe Rules of Court.

13.2. The Commission may compel the productionof all the books and papers of such issuerand may administer oaths to, and examinethe officers of such issuer or any otheperson connected therewith as to itsbusiness and affairs.

13.3. If any issuer shall refuse to permit anexamination to be made by the Commission


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its refusal shall be ground for the refusal orrevocation of the registration of its securities.

13.4. If the Commission deems it necessary, it mayissue an order suspending the offer and sale

of the securities pending any investigation.The order shall state the grounds for takingsuch action, but such order of suspensionalthough binding upon the persons notifiedthereof, shall be deemed confidential, and

shall not be published.Upon the issuanceof the suspension order, no further offer orsale of such security shall be made until thesame is lifted or set aside by the

Commission. Otherwise, such sale shallbe void.

13.5. Notice of issuance of such order shall begiven to the issuer and every dealer andbroker who shall have notified theCommission of an intention to sell suchsecurity.

13.6. A registration statement may be withdrawn bythe issuer only with the consent of theCommission.

SEC. 14.Amendments to the Registration Statement.

14.1. If a registration statement is on its faceincomplete or inaccurate in any materialrespect, the Commission shall issue an orderdirecting the amendment of the registration

statement. Upon compliance with suchorder, the amended registration statementshall become effective in accordance withthe procedure mentioned in Subsection 12.6hereof.

14.2. An amendment filed prior to the effective dateof the registration statement shallrecommence the forty-five (45) day periodwithin which the Commission shall act on a

registration statement. An amendmentfiled after the effective date of the

registration statement shall become effectiveonly upon such date as determined by theCommission.

14.3. If any change occurs in the facts set forth in aregistration statement, the issuer shall file anamendment thereto setting forth the change.

14.4. If, at any time, the Commission finds that aregistration statement contains any falsestatement or omits to state any fact requiredto be stated therein or necessary to makethe statements therein not misleading, theCommission may conduct an examination,and, after due notice and hearing, issue anOrder suspending the effectivity of the

registration statement. If the statement is

duly amended, the suspension order may belifted.

14.5. In making such examination the Commissionor any officer or officers designated by it mayadminister oaths and affirmations and shallhave access to, and may demand theproduction of, any books, records or

documents relevant to the examination.Failure of the issuer, underwriter, or anyother person to cooperate, or his obstructionor refusal to undergo an examination, shallbe a ground for the issuance of a suspensionorder.

SEC.15.Suspension of Registration.15.1. If, at any time, the information contained in the

registration statement filed is or has becomemisleading, incorrect, inadequate oincomplete in any material respect, or thesale or offering for sale of the securityregistered thereunder may work or tend towork a fraud, the Commission may requirefrom the issuer such further information asmay in its judgment be necessary to enablethe Commission to ascertain whether the

registration of such security should berevoked on any ground specified in this

Code.The Commission may also suspendthe right to sell and offer for sale suchsecurity pending further investigation, byentering an order specifying the grounds fosuch action, and by notifying the issuerunderwriter, dealer or broker known asparticipating in such offering.

15.2. The refusal to furnish information required bythe Commission may be a ground for theissuance of an order of suspension pursuan

to Subsection 15.1.Upon the issuance oany such order and notification to the issuer

underwriter, dealer or broker known asparticipating in such offering, no further offeor sale of any such security shall be madeuntil the same is lifted or set aside by the

Commission. Otherwise, such sale shalbe void.

15.3. Upon issuance of an order of suspension, the

Commission shall conduct a hearing.If theCommission determines that the sale of anysecurity should be revoked, it shall issue anorder prohibiting sale of such security.Until the issuance of a final order, thesuspension of the right to sell, thoughbinding upon the persons notified thereofshall be deemed confidential, and shall no

be published, unless it shall appear that theorder of suspension has been violated afte

notice. If, however, the Commission findsthat the sale of the security will neither befraudulent nor result in fraud, it shall forthwithissue an order revoking the order ofsuspension, and such security shall berestored to its status as a registered securityas of the date of such order of suspension.

CHAPTER IVRegulation of Pre-Need Plans

SEC.16.Pre-Need Plans.- No person shall sell or offer fosale to the public any pre-need plan except in accordance withrules and regulations which the Commission shall prescribe.Such rules shall regulate the sale of pre-need plans by, amongother things, requiring the registration of pre-need planslicensing persons involved in the sale of pre-need plansrequiring disclosures to prospective plan holders, prescribingadvertising guidelines, providing for uniform accountingsystem, reports and record keeping with respect to such plansimposing capital, bonding and other financial responsibilityand establishing trust funds for the payment of benefits undesuch plans.


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CHAPTER V

Reportorial Requirements

SEC.17.Periodic and Other Reports of Issuers.17.1. Every issuer satisfying the requirements in

Subsection 17.2 hereof shall file with theCommission:a) Within one hundred thirty-five (135)

days, after the end of the issuersfiscal year, or such other time as

the Commission may prescribe, anannual report which shall include,among others, a balance sheet,profit and loss statement andstatement of cash flows, for suchlast fiscal year, certified by anindependent certified publicaccountant, and a managementdiscussion and analysis of results ofoperations; and

b) Such other periodical reports forinterim fiscal periods and currentreports on significant developmentsof the issuer as the Commission

may prescribe as necessary tokeep current information on theoperation of the business andfinancial condition of the issuer.

17.2. The reportorial requirements of Subsection17.1 shall apply to the following:a) An issuer which has sold a class of

its securities pursuant to aregistration under Section 12hereof: Provided, however,That theobligation of such issuer to filereports shall be suspended for anyfiscal year after the year suchregistration became effective if suchissuer, as of the first day of any

such fiscal year, has less than onehundred (100) holders of such classof securities or such other numberas the Commission shall prescribeand it notifies the Commission ofsuch;

b) An issuer with a class of securitieslisted for trading on an Exchange;and

c) An issuer with assets of at least Fiftymillion pesos (P50,000,000.00) orsuch other amount as theCommission shall prescribe, andhaving Two hundred (200) or moreholders each holding at least One

hundred (100) shares of a class ofits equity securities: Provided,however,That the obligation ofsuch issuer to file reports shall beterminated ninety (90) days afternotification to the Commission bythe issuer that the number of itsholders holding at least onehundred (100) shares is reduced to

less than One hundred(100).17.3. Every issuer of a security listed for trading on

an Exchange shall file with the Exchange acopy of any report filed with the Commissionunder Subsection 17.1 hereof.

17.4. All reports (including financial statementsrequired to be filed with the Commissionpursuant to Subsection 17.1 hereof shall bein such form, contain such information andbe filed at such times as the Commissionshall prescribe, and shall be in lieu of anyperiodical or current reports or financiastatements otherwise required to be filedunder the Corporation Code.

17.5. Every issuer which has a class of equitysecurities satisfying any of the requirements

in Subsection 17.2 shall furnish to eachholder of such equity security an annuareport in such form and containing suchinformation as the Commission shalprescribe.

17.6. Within such period as the Commission mayprescribe preceding the annual meeting othe holders of any equity security of a classentitled to vote at such meeting, the issueshall transmit to such holders an annuareport in conformity with Subsection 17.5.

SEC. 18.Reports by Five per centum (5%) Holders of EquitySecurities.

18.1. In every case in which an issuer satisfies therequirements of Subsection 17.2 hereof, anyperson who acquires directly or indirectly thebeneficial ownership of more than fivepecentum (5%) of such class or in excess ofsuch lesser per centum as the Commissionby rule may prescribe, shall, within ten (10days after such acquisition or suchreasonable time as fixed by the Commissionsubmit to the issuer of the security, to theExchange where the security is traded, andto the Commission a sworn statemencontaining the following information and suchother information as the Commission mayrequire in the public interest or for the

protection of investors:a) The personal background, identity

residence, and citizenship of, andthe nature of such beneficiaownership by, such person and alother persons by whom or onwhose behalf the purchases areeffected; in the event the beneficiaowner is a juridical person, the linesof business of the beneficial owneshall also be reported;

b) If the purpose of the purchases oprospective purchases is to acquirecontrol of the business of the issueof the securities, any plans o

proposals which such persons mayhave that will effect a major changein its business or corporatestructure;

c) The number of shares of suchsecurity which are beneficiallyowned, and the number of sharesconcerning which there is a right toacquire, directly or indirectly, by: (isuch person, and (ii) eachassociate of such person, giving thebackground, identity, residenceand citizenship of each suchassociate; and


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d) Information as to any contracts,arrangements, or understandingwith any person with respect to anysecurities of the issuer including butnot limited to transfer, jointventures, loan or optionarrangements, puts or calls,guarantees or division of losses orprofits, or proxies naming thepersons with whom such contracts,arrangements, or understanding

have been entered into, and givingthe details thereof.

18.2. If any change occurs in the facts set forth inthe statements, an amendment shall betransmitted to the issuer, the Exchange andthe Commission.

18.3. The Commission, may permit any person tofile in lieu of the statement required bySubsection 17.1 hereof, a notice stating thename of such person, the shares of anyequity securities subject to Subsection 17.1which are owned by him, the date of theiracquisition and such other information as theCommission may specify, if it appears to theCommission that such securities wereacquired by such person in the ordinarycourse of his business and were notacquired for the purpose of and do not havethe effect of changing or influencing thecontrol of the issuer nor in connection withany transaction having such purpose oreffect.

CHAPTER VIProtection of Shareholder Interests

SEC.19.Tender Offers.19.1. (a) Any person or group of persons acting

in concertwho intends to acquireat least fifteen per cent (15%) ofany class of any equity security of alisted corporation or of any class ofany equity security of a corporationwith assets of at least Fifty MillionPesos (P50,000,000.00) and havingtwo hundred (200) or morestockholders with at least onehundred (100) shares each or whointends to acquire at least thirty percent (30%) of such equity over aperiod of twelve (12) months shallmake a tender offer to stockholdersby filing with the Commission a

declaration to that effect; andfurnish the issuer, a statementcontaining such of the informationrequired in Section 17 of this Codeas the Commission may

prescribe. Such person or groupof persons shall publish all requestsor invitations for tender, or materialsmaking a tender offer or requestingor inviting letters of such a

security.Copies of any additionalmaterial soliciting or requestingsuch tender offers subsequent tothe initial solicitation or request

shall contain such information asthe Commission may prescribe, andshall be filed with the Commissionand sent to the issuer not later thanthe time copies of such materialsare first published or sent or givento security holders.

b) Any solicitation or recommendation tothe holders of such a security toaccept or reject a tender offer orequest or invitation for tenders

shall be made in accordance withsuch rules and regulations as theCommission may prescribe.

c) Securities deposited pursuant to atender offer or request or invitationfor tenders may be withdrawn by oon behalf of the depositor at anytime throughout the period that thetender offer remains open and if thesecurities deposited have not beenpreviously accepted for paymentand at any time after sixty (60) daysfrom the date of the original tenderoffer or request or invitation, excepas the Commission may otherwiseprescribe.

d) Where the securities offered exceedthat which a person or group ofpersons is bound or willing to takeup and pay for, the securities thaare subject of the tender offer shalbe taken up as nearly as may bepro rata, disregarding fractionsaccording to the number osecurities deposited by eachdepositor. The provisions of thissubsection shall also apply tosecurities deposited within ten (10days after notice of an increase in

the consideration offered to securityholders, as described in paragraph(e) of this subsection, is firspublished or sent or given tosecurity holders.

e) Where any person varies the terms oa tender offer or request oinvitation for tenders before theexpiration thereof by increasing theconsideration offered to holders osuch securities, such person shalpay the increased consideration toeach security holder whosesecurities are taken up and paid fowhether or not such securities have

been taken up by such personbefore the variation of the tendeoffer or request or invitation.

19.2. It shall be unlawful for any person to makeany untrue statement of a material fact oomit to state any material fact necessary inorder to make the statements made, in thelight of the circumstances under which theyare made, not misleading, or to engage inany fraudulent, deceptive, or manipulativeacts or practices, in connection with anytender offer or request or invitation fotenders, or any solicitation of securityholders in opposition to or in favor of any


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such offer, request, or invitation. TheCommission shall, for the purposes of thissubsection, define and prescribe meansreasonably designed to prevent, such actsand practices as are fraudulent, deceptive,or manipulative.

SEC.20.Proxy Solicitations.

20.1. Proxies must be issued and proxy solicitationmust be made in accordance with rules andregulations to be issued by the Commission;

20.2. Proxies must be in writing, signed by thestockholder or his duly authorizedrepresentative and filed before thescheduled meeting with the corporatesecretary.

20.3. Unless otherwise provided in the proxy, itshall be valid only for the meeting for which itis intended. No proxy shall be valid andeffective for a period longer than five (5)years at one time.

20.4. No broker or dealer shall give any proxy,consent or authorization, in respect of anysecurity carried for the account of acustomer, to a person other than the

customer, without the express writtenauthorization of such customer.20.5. A broker or dealer who holds or acquires the

proxy for at least tenper centum(10%) orsuch percentage as the Commission mayprescribe of the outstanding share of theissuer, shall submit a report identifying thebeneficial owner within ten (10) days aftersuch acquisition, for its own account orcustomer, to the issuer of the security, to theExchange where the security is traded andto the Commission.

SEC. 21.Fees for Tender Offers and Certain ProxySolicitations. - At the time of filing with the Commission of any

statement required under Section 19 for any tender offer orSection 72.2 for issuer repurchases, or Section 20 for proxy orconsent solicitation, the Commission may require that the

person making such filing pay a fee ofnot more than one-tenth (1/10) of one percentum (1%) of:

21.1. The proposed aggregate purchase price in thecase of a transaction under Sections 20 or72.2; or

21.2. The proposed payment in cash, and the valueof any securities or property to be transferredin the acquisition, merger or consolidation, orthe cash and value of any securitiesproposed to be received upon the sale ordisposition of such assets in the case of asolicitation under Section 20. TheCommission shall prescribe by rulediminishing fees in inverse proportion to thevalue of the aggregate price of the offering.

SEC. 22.Internal Record Keeping and AccountingControls. - Every issuer which has a class of securities thatsatisfies the requirements of Subsection 17.2 shall:

22.1. Make and keep books, records, and accountswhich, in reasonable detail accurately andfairly reflect the transactions and dispositionsof assets of the issuer;

22.2. Devise and maintain a system of internalaccounting controls sufficient to providereasonable assurances that: (a)

Transactions and access to assets arepursuant to management authorization; (bFinancial statements are prepared inconformity with generally acceptedaccounting principles that are adopted by the

Accounting Standards Council and the rulespromulgated by the Commission with regardto the preparation of financial statementsand (c) Recorded assets are compared withexisting assets at reasonable intervals anddifferences are reconciled.

SEC. 23.Transactions of Directors, Officers and PrincipaStockholders.

23.1. Every person who is directly or indirectly thebeneficial owner of more than tenpecentum(10%) of any class of any equitysecurity which satisfies the requirements ofSubsection 17.2, or who is a director or anofficer of the issuer of such security, shalfile, at the time either such requirement isfirst satisfied or within ten days after hebecomes such a beneficial owner, directoror officer, a statement with the Commissionand, if such security is listed for trading onan Exchange, also with the Exchange, of theamount of all equity securities of such issueof which he is the beneficial owner, andwithin ten (10) days after the close of eachcalendar month thereafter, if there has beena change in such ownership during suchmonth, shall file with the Commission, and ifsuch security is listed for trading on anExchange, shall also file with the Exchange

astatement indicating his ownership at theclose of the calendar month and suchchanges in his ownership as have occurredduring such calendar month.

23.2. For the purpose of preventing the unfair use oinformation which may have been obtained

by such beneficial owner, director, or officeby reason of his relationship to the issuerany profit realized by him from any purchaseand sale, or any sale and purchase, of anyequity security of such issuer within anyperiod of less than six (6) months, unlesssuch security was acquired in good faith inconnection with a debt previously contractedshall inure to and be recoverable by theissuer, irrespective of any intention oholding the security purchased or of norepurchasing the security sold for a period

exceeding six (6) months.Suit to recovesuch profit may be instituted before theRegional Trial Court by the issuer, or by the

owner of any security of the issuer in thename and in behalf of the issuer if the issueshall fail or refuse to bring such suit withinsixty (60) days after request or shall faidiligently to prosecute the same thereafterbut no such suit shall be brought more thantwo (2) years after the date such profit was

realized. This subsection shall not beconstrued to cover any transaction wheresuch beneficial owner was not such both athe time of the purchase and sale, or thesale and purchase, of the security involvedor any transaction or transactions which theCommission by rules and regulations may


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exempt as not comprehended within thepurpose of this subsection.

23.3. It shall be unlawful for any such beneficialowner, director, or officer, directly orindirectly, to sell any equity security of suchissuer if the person selling the security or hisprincipal: (a) Does not own the security sold;or (b) If owning the security, does not deliverit against such sale within twenty (20) daysthereafter, or does not within five (5) daysafter such sale deposit it in the mails or other

usual channels of transportation; but noperson shall be deemed to have violated thissubsection if he proves that notwithstandingthe exercise of good faith he was unable tomake such delivery or deposit within suchtime, or that to do so would cause undueinconvenience or expense.

23.4. The provisions of Subsection 23.2 shall notapply to any purchase and sale, or sale andpurchase, and the provisions of Subsection23.3 shall not apply to any sale, of an equitysecurity not then or thereafter held by him inan investment account, by a dealer in theordinary course of his business and incidentto the establishment or maintenance by himof a primary or secondary market, otherwise

than on an Exchange, for such security.The Commission may, by such rules andregulations as it deems necessary orappropriate in the public interest, define andprescribe terms and conditions with respectto securities held in an investment accountand transactions made in the ordinarycourse of business and incident to theestablishment or maintenance of a primaryor secondary market.

CHAPTER VII

Prohibitions on Fraud, Manipulation and Insider Trading

SEC. 24.Manipulation of Security Prices; Devices andPractices.

24.1 It shall be unlawful for any person acting forhimself or through a dealer or broker, directlyor indirectly:a) To create a false or misleading

appearance of active trading in anylisted security traded in anExchange or any other tradingmarket (hereafter referred topurposes of this Chapter asExchange):(i) By effecting any transaction

in such security whichinvolves no change in thebeneficial ownershipthereof;

(ii) By entering an order ororders for the purchase orsale of such security withthe knowledge that asimultaneous order ororders of substantially thesame size, time and price,for the sale or purchase ofany such security, has orwill be entered by or for

the same or differenparties; or

(iii) By performing similar acwhere there is no changein beneficial ownership.

b) To effect, alone or with others, aseries of transactions in securitiesthat:(i) Raises their price to induce

the purchase of a securitywhether of the same or a

different class of the sameissuer or of a controllingcontrolled, or commonlycontrolled company byothers;

(ii) Depresses their price toinduce the sale of asecurity, whether of thesame or a different classof the same issuer or of acontrolling, controlled, ocommonly controlledcompany by others; or

(iii) Creates active trading toinduce such a purchase osale through manipulativedevices such as markingthe close, painting thetape, squeezing the floathype and dump, boileroom operations and suchother similar devices.

c) To circulate or disseminateinformation that the price of anysecurity listed in an Exchange wilor is likely to rise or fall because ofmanipulative market operations oany one or more personsconducted for the purpose of raising

or depressing the price of thesecurity for the purpose of inducingthe purchase or sale of suchsecurity.

d) To make false or misleadingstatement with respect to anymaterial fact, which he knew or hadreasonable ground to believe wasso false or misleading, for thepurpose of inducing the purchase osale of any security listed or tradedin an Exchange.

e) To effect, either alone or others, anyseries of transactions for thepurchase and/or sale of any

security traded in an Exchange fothe purpose of pegging, fixing ostabilizing the price of suchsecurity, unless otherwise allowedby this Code or by rules of theCommission.

24.2. No person shall use or employ, in connectionwith the purchase or sale of any security anymanipulative or deceptive device ocontrivance. Neither shall any short sale beeffected nor any stop-loss order be executedin connection with the purchase or sale oany security except in accordance with suchrules and regulations as the Commission


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may prescribe as necessary or appropriatein the public interest or for the protection of

investors.24.3. The foregoing provisions notwithstanding, the

Commission, having due regard to the publicinterest and the protection of investors, may,by rules and regulations, allow certain actsor transactions that may otherwise beprohibited under this Section.

SEC. 25.Regulation of Option Trading.- No member of anExchange shall, directly or indirectly endorse or guarantee theperformance of any put, call, straddle, option or privilege inrelation to any security registered on a securities exchange.

The terms put, call, straddle, option, or privilegeshallnot include any registered warrant, right or convertible security.

SEC. 26.Fraudulent Transactions.- It shall be unlawful for anyperson, directly or indirectly, in connection with the purchase orsale of any securities to:

26.1. Employ any device, scheme, or artifice todefraud;

26.2. Obtain money or property by means of anyuntrue statement of a material fact of anyomission to state a material fact necessary in

order to make the statements made, in thelight of the circumstances under which theywere made, not misleading; or

26.3. Engage in any act, transaction, practice orcourse of business which operates or wouldoperate as a fraud or deceit upon anyperson.

SEC. 27.Insiders Duty to Disclose When Trading.-27.1. It shall be unlawful for an insider to sell or buy

a security of the issuer, while in possessionof material information with respect to theissuer or the security that is not generallyavailable to the public, unless: (a) Theinsider proves that the information was not

gained from such relationship; or (b) If theother party selling to or buying from theinsider (or his agent) is identified, the insiderproves: (i) that he disclosed the informationto the other party, or (ii) that he had reasonto believe that the other party otherwise is

also in possession of the information. Apurchase or sale of a security of the issuermade by an insider defined in Subsection3.8, or such insiders spouse or relatives byaffinity or consanguinity within the seconddegree, legitimate or common-law, shall bepresumed to have been effected while inpossession of material non-publicinformation if transacted after such

information came into existence but prior todissemination of such information to thepublic and the lapse of a reasonable time forthe market to absorb suchinformation: Provided, however,That thispresumption shall be rebutted upon ashowing by the purchaser or seller that hewas not aware of the material non-publicinformation at the time of the purchase orsale.

27.2. For purposes of this Section, information ismaterial non-public if: (a) It has not beengenerally disclosed to the public and wouldlikely affect the market price of the security

after being disseminated to the public andthe lapse of a reasonable time for the marketo absorb the information; or (b) would beconsidered by a reasonable personimportant under the circumstances indetermining his course of action whether tobuy, sell or hold a security.

27.3. It shall be unlawful for any insider tocommunicate material non-public informationabout the issuer or the security to anyperson who, by virtue of the communication

becomes an insider as defined in Subsection3.8, where the insider communicating theinformation knows or has reason to believethat such person will likely buy or sell asecurity of the issuer while in possession osuch information.

27.4. a) It shall be unlawful where a tendeoffer has commenced or is about tocommence for:(i) Any person (other than the

tender offeror) who is inpossession of materianon-public informationrelating to such tendeoffer, to buy or sell thesecurities of the issuer thaare sought or to be soughby such tender offer isuch person knows or hasreason to believe that theinformation is non-publicand has been acquireddirectly or indirectly fromthe tender offeror, thoseacting on its behalf, theissuer of the securitiessought or to be sought bysuch tender offer, or anyinsider of such issuer; and

(ii) Any tender offeror, thoseacting on its behalf, theissuer of the securitiessought or to be sought bysuch tender offer, and anyinsider of such issuer tocommunicate materianon-public informationrelating to the tender offeto any other person wheresuch communication islikely to result in a violationof Subsection 27.4 (a)(i).

(b) For purposes of this subsection theterm securities of the issuer sough

or to be sought by such tendeoffer shall include any securitiesconvertible or exchangeable intosuch securities or any options orights in any of the foregoingsecurities.

CHAPTER VIIIRegulation of Securities Market Professionals

SEC. 28.Registration of Brokers, Dealers, Salesmen andAssociated Persons.


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28.1.No person shall engage in the business ofbuying or selling securities in the Philippinesas a broker or dealer, or act as a salesman,or an associated person of any broker ordealer unless registered as such with theCommission.

28.2. No registered broker or dealer shall employany salesman or any associated person, andno issuer shall employ any salesman, who isnot registered as such with the Commission.

28.3. The Commission, by rule or order, may

conditionally or unconditionally exempt fromSubsections 28.1 and 28.2 any broker,dealer, salesman, associated person of anybroker or dealer, or any class of theforegoing, as it deems consistent with thepublic interest and the protection ofinvestors.

28.4. The Commission shall promulgate rules andregulations prescribing the qualifications forregistration of each category of applicant,which shall, among other things, require as acondition for registration that:a) If a natural person, the applicant

satisfactorily pass a written

examination as to his proficiencyand knowledge in the area ofactivity for which registration issought;

b) In the case of a broker or dealer, theapplicant satisfy a minimum netcapital as prescribed by theCommission, and provide a bond orother security as the Commissionmay prescribe to securecompliance with the provisions ofthis Code; and

c) If located outside of the Philippines,the applicant files a written consentto service of process upon the

Commission pursuant to Section 65hereof.

28.5. A broker or dealer may apply for registrationby filing with the Commission a writtenapplication in such form and containing suchinformation and documents concerning suchbroker or dealer as the Commission by ruleshall prescribe.

28.6. Registration of a salesman or of an associatedperson of a registered broker or dealer maybe made upon written application filed withthe Commission by such salesman or

associated person. The application shallbe separately signed and certified by theregistered broker or dealer to which such

salesman or associated person is to becomeaffiliated, or by the issuer in the case of asalesman employed, appointed or authorized

solely by such issuer.The application shallbe in such form and contain such informationand documents concerning the salesman orassociated person as the Commission by

rule shall prescribe. For purposes of thisSection, a salesman shall not include anyemployee of an issuer whose compensationis not determined directly or indirectly onsales of securities of the issuer.

28.7. Applications filed pursuant to Subsections 28.5and 28.6 shall be accompanied by a

registration fee in such reasonable amounprescribed by the Commission.

28.8. Within thirty(30) days after the filing of anyapplication under this Section, theCommission shall by order: (a) Granregistration if it determines that therequirements of this Section and thequalifications for registration set forth in itsrules and regulations have been satisfied; o(b) Deny said registration.

28.9. The names and addresses of all personsapproved for registration as brokers, dealersassociated persons or salesmen and alorders of the Commission with respecthereto shall be recorded in a Register oSecurities Market Professionals kept in theoffice of the Commission which shall beopen to public inspection.

28.10. Every person registered pursuant to thisSection shall file with the Commission, insuch form as the Commission shalprescribe, information necessary to keep theapplication for registration current andaccurate, including in the case of a broker ordealer changes in salesmen, associated

persons and owners thereof.28.11. Every person registered pursuant to thisSection shall pay to the Commission anannual fee at such time and in suchreasonable amount as the Commission shal

prescribe.Upon notice by the Commissionthat such annual fee has not been paid asrequired, the registration of such personshall be suspended until payment has beenmade.

28.12. The registration of a salesman or associatedperson shall be automatically terminatedupon the cessation of his affiliation with saidregistered broker or dealer, or with an issuerin the case of a salesman employed

appointed or authorized by such issuer.Promptly following any such cessation oaffiliation, the registered broker or dealer, oissuer, as the case may be, shall file with theCommission a notice of separation of suchsalesman or associated person.

SEC. 29.Revocation, Refusal or Suspension of Registrationof Brokers, Dealers, Salesmen and Associated Persons.-

29.1. Registration under Section 28 of this Codemay be refused, or any registration grantedthereunder may be revoked, suspended, olimitations placed thereon, by theCommission if, after due notice and hearingthe Commission determines the applicant o

registrant:a) Has willfully violated any provision o

this Code, any rule, regulation oorder made hereunder, or any othelaw administered by theCommission, or in the case of aregistered broker, dealer oassociated person has failed tosupervise, with a view to preventingsuch violation, another person whocommits such violation;

b) Has willfully made or caused to bemade a materially false omisleading statement in any


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application for registration or reportfiled with the Commission or a self-regulatory organization, or haswillfully omitted to state anymaterial fact that is required to bestated therein;

c) Has failed to satisfy the qualificationsor requirements for registrationprescribed under Section 28 andthe rules and regulations of theCommission promulgated

thereunder;d) Has been convicted, by a competent

judicial or administrative body of anoffense involving moral turpitude,fraud, embezzlement,counterfeiting, theft, estafa,misappropriation, forgery, bribery,false oath, or perjury, or of aviolation of securities, commodities,banking, real estate or insurancelaws;

e) Is enjoined or restrained by acompetent judicial or administrativebody from engaging in securities,commodities, banking, real estateor insurance activities or fromwillfully violating laws governingsuch activities;

f) Is subject to an order of a competentjudicial or administrative bodyrefusing, revoking or suspendingany registration, license or otherpermit under this Code, the rulesand regulations promulgated thereunder, any other law administeredby the Commission;

g) Is subject to an order of a self-regulatory organization suspendingor expelling him from membership

or participation therein or fromassociation with a member orparticipant thereof;

h) Has been found by a competentjudicial or administrative body tohave willfully violated anyprovisions of securities,commodities, banking, real estateor insurance laws, or has willfullyaided, abetted, counseled,commanded, induced or procuredsuch violation; or

i) Has been judicially declaredinsolvent.For purposes of this subsection, the

term competent judicial oradministrative body shall include aforeign court of competent

jurisdiction and a foreign financialregulator.

29.2. a) In cases of charges against asalesman or associated person,notice thereof shall also be giventhe broker, dealer or issueremploying such salesman orassociated person.

b) Pending the hearing, the Commissionshall have the power to order thesuspension of such brokers,

dealers, associated persons osalesmans registration: ProvidedThat such order shall state the

cause for such suspension. Untithe entry of a final order, thesuspension of such registrationthough binding upon the personsnotified thereof, shall be deemedconfidential, and shall not bepublished, unless it shall appeathat the order of suspension has

been violated after notice.29.3. The order of the Commission refusing

revoking, suspending or placing limitationson a registration as herein above providedtogether with its findings, shall be entered inthe Register of Securities Marke

Professionals. The suspension orevocation of the registration of a dealer obroker shall also automatically suspend theregistration of all salesmen and associatedpersons affiliated with such broker or dealer.

29.4. It shall be sufficient cause for refusalrevocation or suspension of a broker's odealers registration, if any associated

person thereof or any juridical entitycontrolled by such associated person hascommitted any act or omission or is subjecto any disability enumerated in paragraphs(a) through (i) of Subsection 29.1 hereof.

SEC. 30.Transactions and Responsibility of Brokers andDealers.

30.1. No broker or dealer shall deal in or otherwisebuy or sell, for its own account or for theaccount of customers, securities listed on anExchange issued by any corporation whereany stockholder, director, associated personor salesman, or authorized clerk of saidbroker or dealer and all the relatives of the

foregoing within the fourth civil degree oconsanguinity or affinity, is at the timeholding office in said issuer corporation as adirector, president, vice-president, managertreasurer, comptroller, secretary or any officeof trust and responsibility, or is a controllingperson of the issuer.

30.2. No broker or dealer shall effect anytransaction in securities or induce or attempto induce the purchase or sale of anysecurity except in compliance with such rulesand regulations as the Commission shalprescribe to ensure fair and honest dealingsin securities and provide financial safeguardsand other standards for the operation of

brokers and dealers, including theestablishment of minimum net capitarequirements, the acceptance of custody anduse of securities of customers, and thecarrying and use of deposits and credibalances of customers.

SEC. 31.Development of Securities Market Professionals. The Commission, in joint undertaking with self regulatoryorganizations, organizations and associations of financeprofessionals as well as private educational and researchinstitutions shall undertake or facilitate/organize continuingtraining, conferences/ seminars, updating programs, researchand development as well as technology transfer at the lates


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and advanced trends in issuance and trading of securities,derivatives, commodity trades and other financial instruments,as well as securities markets of other countries.

CHAPTER IXExchanges and Other Securities Trading Markets

SEC. 32.Prohibition on Use of Unregistered Exchange;Regulation of Over-the-Counter Markets.-

32.1. No broker, dealer, salesman, associatedperson of a broker or dealer, or Exchange,

directly or indirectly, shall make use of anyfacility of an Exchange in the Philippines toeffect any transaction in a security, or toreport such transaction, unless suchExchange is registered as such underSection 33 of this Code.

32.2. a) No broker, dealer, salesman orassociated person of a broker ordealer, singly or in concert with anyother person, shall make, create oroperate, or enable another to make,create or operate, any tradingmarket, otherwise than on aregistered Exchange, for the buyingand selling of any security, exceptin accordance with rules andregulations the Commission mayprescribe.

b) The Commission may promulgaterules and regulations governingtransactions by brokers, dealers,salesmen or associated persons ofa broker or dealer, over anyfacilities of such trading market andmay require such market to beadministered by a self-regulatoryorganization determined by theCommission as capable of insuringthe protection of investors

comparable to that provided in thecase of a registered Exchange.Such self-regulatory organizationmust provide a centralizedmarketplace for trading and mustsatisfy requirements comparable tothose prescribed for registration ofExchanges in Section 33 of thisCode.

SEC.33.Registration of Exchanges.33.1. Any Exchange may be registered as such with

the Commission under the terms andconditions hereinafter provided in thisSection and Section 40 hereof, by filing an

application for registration in such form andcontaining such information and supportingdocuments as the Commission by rule shallprescribe, including the following:a) An undertaking to comply and enforce

compliance by its members with theprovisions of this Code, itsimplementing rules or regulationsand the rules of the Exchange;

b) The organizational charts of theExchange, rules of procedure, anda list of its officers and members;

c) Copies of the rules of the Exchange;and

d) An undertaking that in the event amember firm becomes insolvent owhen the Exchange shall havefound that the financial condition oits member firm has so deterioratedthat it cannot readily meet thedemands of its customers for thedelivery of securities and/opayment of sales proceeds, theExchange shall, upon order of theCommission, take over the

operation of the insolvent membefirm and immediately proceed tosettle the member firms liabilities toits customers.

33.2. Registration of an Exchange shall be grantedupon compliance with the followingprovisions:a) That the applicant is organized as a

stock corporation: Provided,Thaany registered Exchange existingprior to the effectivity of this Codeshall within one (1) year reorganizeas a stock corporation pursuant to ademutualization plan approved bythe Commission;

b) That the applicant is engaged solelyin the business of operating anexchange: Provided, however,Thathe Commission may adopt rulesregulations or issue an order, uponapplication, exempting anExchange organized as a stockcorporation and owned andcontrolled by another juridicaperson from this restriction.

c) Where the Exchange is organized asa stock corporation, that no personmay beneficially own or controldirectly or indirectly, more than five

percent (5%) of the voting rights othe Exchange and no industry obusiness group may beneficiallyown or control, directly or indirectlymore than twenty percent (20%) othe voting rights of theExchange:Provided, however,Thathe Commission may adopt rulesregulations or issue an order, uponapplication, exempting an applicanfrom this prohibition where it findsthat such ownership or control wilnot negatively impact on theexchanges ability to effectivelyoperate in the public interest.

d) The expulsion, suspension, odisciplining of a member andpersons associated with a membefor conduct or proceedinginconsistent with just and equitableprinciples of fair trade, and foviolations of provisions of this Codeor any other Act administered bythe Commission, the rulesregulations and orders thereunderor the rules of the Exchange;

e) A fair procedure for the disciplining omembers and persons associatedwith members, the denial o


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membership to any person seekingto be a member, the barring of anyperson from association with amember, and the prohibition orlimitation of any person from accessto services offered by theExchange;

f) That the brokers in the board of theExchange shall comprise of notmore than forty-nine percent (49%)of such board and shall

proportionately represent theExchange membership in terms ofvolume/value of trade and paid upcapital, and that any natural personassociated with a juridical entity thatis a member shall himself bedeemed to be a member for thispurpose: Provided,That anyregistered Exchange existing priorto the effectivity of this Code shallimmediately comply with thisrequirement;

g) For the board of the Exchange toinclude in its composition (i) thepresident of the Exchange, and (ii)no less than fifty one percent (51%)of the remaining members of theboard to be comprised of three (3)independent directors and personswho represent the interests ofissuers, investors, and other marketparticipants, who are not associatedwith any broker or dealer ormember of the Exchange for aperiod of two (2) years prior tohis/her appointment. No officer oremployee of a member, itssubsidiaries or affiliates or relatedinterests shall become an

independent director:Provided,however, That the Commission mayby rule, regulation, or order uponapplication, permit the exchangeorganized as a stock corporation touse a different governancestructure: Provided, further,Thatthe Commission is satisfied that theExchange is acting in the publicinterest and is able to effectivelyoperate as a self-regulatoryorganization under thisCode: Provided, finally,That any

registered exchangeexisting priorto the effectivity of this Code shall

immediately comply with thisrequirement.

h) The president and other managementof the Exchange to consist only ofpersons who are not members andare not associated in any capacity,directly or indirectly with any brokeror dealer or member or listedcompany of theExchange:Provided, That theExchange may only appoint, and aperson may only serve, as anofficer of the exchange if suchperson has not been a member or

affiliated with anybroker, dealeror member of the Exchange for aperiod of at least two (2) years priorto such appointment;

i) The transparency of transactions onthe Exchange;

j) The equitable allocation oreasonable dues, fees, and othecharges among members andissuers and other persons usingany facility or system which the

Exchange operates or controls;k) Prevention of fraudulent and

manipulative acts and practicespromotion of just and equitableprinciples of trade, and, in generalprotection of investors and thepublic interest; and

l) The transparent, prompt andaccurate clearance and settlemenof transactions effected on theExchange.

33.3. If the Commission finds that the applicanExchange is capable of complying andenforcing compliance by its members, and

persons associated with such members, withthe provisions of this Code, its rules andregulations, and the rules of the Exchangeand that the rules of the Exchange are fair

just and adequate, the Commission sha

cause such Exchange to be registered. Ifafter notice due and hearing, theCommission finds otherwise, the applicationshall be denied.

33.4. Within ninety (90) days after the filing of theapplication the Commission may issue anorder either granting or denying registrationas an Exchange, unless the Exchangeapplying for registration shall withdraw itsapplication or shall consent to the

Commissions deferring action on itsapplication for a stated longer period after

the date of filing. The filing with theCommission of an application for registrationby an Exchange shall be deemed to have

taken place upon the receipt thereof.Amendments to an application may be madeupon such terms as the Commission mayprescribe.

33.5. Upon the registration of an Exchange, it shalpay a fee in such amount and within suchperiod as the Commission may fix.

33.6. Upon appropriate application in accordancewith the rules and regulations of theCommission and upon such terms as the

Commission may deem necessary for theprotection of investors, an Exchange maywithdraw its registration or suspend itsoperations or resume the same.

SEC. 34.Segregation and Limitation of Functions oMembers, Brokers and Dealers.

34.1. It shall be unlawful for any member-broker oan Exchange to effect any transaction onsuch Exchange for its own account, theaccount of an associated person, or anaccount with respect to which it or anassociated person thereof exercisesinvestment discretion: Provided


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however,That this section shall not makeunlawful -a) Any transaction by a member-broker

acting in the capacity of a marketmaker;

b) Any transaction reasonablynecessary to carry on an odd-lottransactions;

c) Any transaction to offset a transactionmade in error; and

d) Any other transaction of a similar

nature as may be defined by theCommission.

34.2. In all instances where the member-brokereffects a transaction on an Exchange for itsown account or the account of an associatedperson or an account with respect to which itexercises investment discretion, it shalldisclose to such customer at or before thecompletion of the transaction it is acting forits own account: Provided, further,That thisfact shall be reflected in the order ticket and

the confirmation slip.34.3. Any member-broker who violates the

provisions of this Section shall be subject to

the administrative sanctions provided inSection 54 of this Code.

SEC.35.Additional Fees of Exchanges.- In addition to theregistration fee prescribed in Section 33 of this Code, everyExchange shall pay to the Commission, on a semestral basison or before the tenth day of the end of every semester of thecalendar year, a fee in such an amount as the Commissionshall prescribe, but not more than one-hundredth of onepercentum(1%) of the aggregate amount of the sales of securitiestransacted on such Exchange during the preceding calendaryear, for the privilege of doing business, during the precedingcalendar year or any part thereof.

SEC. 36.Powers with Respect to Exchanges and Other

Trading Market.36.1. The Commission is authorized, if in its opinion

such action is necessary or appropriate forthe protection of investors and the publicinterest so requires, summarily to suspendtrading in any listed security on anyExchange or other trading market for aperiod not exceeding thirty (30) days or, withthe approval of the President of thePhilippines, summarily to suspend all tradingon any securities Exchange or other tradingmarket for a period of more than thirty (30)but not exceeding ninety (90) days:Provided,however,That the Commission, promptlyfollowing the issuance of the order of

suspension, shall notify the affected issuer ofthe reasons for such suspension and providesuch issuer with an opportunity for hearing todetermine whether the suspension should belifted.

36.2. Wherever two or more Exchanges or othertrading markets exist, the Commission mayrequire and enforce uniformity of tradingregulations in and/or between or among saidExchanges or other trading markets.

36.3. In addition to the existing Philippine StockExchange, the Commission shall have theauthority to determine the number, size andlocation of stock Exchanges, other trading

markets and commodity Exchanges andother similar organizations in the light ofnational or regional requirements for suchactivities with the view to promote, enhanceprotect, conserve or rationalize investment.

36.4. The Commission, having due regard to thepublic interest, the protection of investorsthe safeguarding of securities and funds, andmaintenance of fair competition amongbrokers, dealers, clearing agencies, andtransfer agents, shall promulgate rules and

regulations for the prompt and accurateclearance and settlement of securitiestransactions.

36.5. a) The Commission may establish ofacilitate the establishment of trusfunds which shall be contributed byExchanges, brokers, dealersunderwriters, transfer agentssalesmen and other personstransacting in securities, as theCommission may require, for thepurpose of compensating investorsfor the extraordinary losses odamage they may suffer due tobusiness failure or fraud omismanagement of the personswith whom they transact, undesuch rules and regulations as theCommission may from time to time

prescribe or approve in thepublicinterest.

b) The Commission may, having dueregard to the public interest or theprotection of investors, regulatesupervise, examine, suspend ootherwise discontinue such andother similar funds under such rulesand regulations which theCommission may promulgate, and

which may include taking custodyand management of the fund itselas well as investments in anddisbursements from the fundsunder such forms of control andsupervision by the Commission as i

may from time to time require.The authority granted to theCommission under this subsectionshall also apply to all fundsestablished for the protection oinvestors, whether established bythe Commission or otherwise.

SEC. 37.Registration of Innovative and Other Trading

Markets.- The Commission, having due regard for nationaeconomic development, shall encourage competitiveness inthe market by promulgating within six (6) months upon theenactment of this Code, rules for the registration and licensingof innovative and other trading markets or Exchangescovering, but not limited to, the issuance and trading oinnovative securities, securities of small, medium, growth andventure enterprises, and technology-based ventures pursuanto Section 33 of this Code.

SEC. 38.Independent Directors.- Any corporation with aclass of equity securities listed for trading on an Exchange orwith assets in excess of Fifty million pesos (P50,000,000.00and having two hundred (200) or more holders, at least of two


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hundred (200) of which are holding at least one hundred (100)shares of a class of its equity securities or which has sold aclass of equity securities to the public pursuant to an effectiveregistration statement in compliance with Section 12 hereofshall have at least two (2) independent directors or suchindependent directors shall constitute at least twenty percent(20%) of the members of such board, whichever is the

lesser. For this purpose, an independent director shallmean a person other than an officer or employee of thecorporation, its parent or subsidiaries, or any other individualhaving a relationship with the corporation, which would

interfere with the exercise of independent judgment in carryingout the responsibilities of a director.

CHAPTER XRegistration, Responsibilities and Oversight of Self-

Regulatory Organizations

SEC. 39.Associations of Securities Brokers, and Dealers,and Other Securities Related Organizations.

39.1. The Commission shall have the power toregister as a self-regulatory organization, orotherwise grant licenses, and to regulate,supervise, examine, suspend or otherwise

discontinue, as a condition for the operationof organizations whose operations arerelated to or connected with the securitiesmarket such as but not limited toassociations of brokers and dealers, transferagents, custodians, fiscal and paying agents,computer services, news disseminatingservices, proxy solicitors, statisticalagencies, securities rating agencies, andsecurities information processors which areengaged in the business of: (a) Collecting,processing, or preparing for distribution orpublication, or assisting, participating in, orcoordinating the distribution or publication of,information with respect to transactions in or

quotations for any security; or (b) Distributingor publishing, whether by means of a tickertape, a communications network, a terminaldisplay device, or otherwise, on a currentand continuing basis, information with

respect to such transactions or quotations.The Commission may prescribe rules andregulations which are necessary orappropriate in the public interest or for theprotection of investors to govern self-regulatory organizations and otherorganizations licensed or regulated pursuantto the authority granted in Subsection 39.1including the requirement of cooperationwithin and among, and electronic integration

of the records of, all participants in thesecurities market to ensure transparencyand facilitate exchange of information.

39.2. An association of brokers and dealers may beregistered as a securities associationpursuant to Subsection 39.3 by filing with theCommission an application for registration insuch form as the Commission, by rule, mayprescribe containing the rules of theassociation and such other information anddocuments as the Commission, by rule, mayprescribe as necessary or appropriate in thepublic interest or for the protection ofinvestors.

39.3. An association of brokers and dealers shalnot be registered as a securities associationunless the Commission determines that:a) The association is so organized and

has the capacity to be able to carryout the purposes of this Code andto comply with, and to enforcecompliance by its members andpersons associated with itsmembers, with the provisions of thisCode, the rules and regulations

thereunder, and the rules of theassociation.

b) The rules of the associationnotwithstanding anything in theCorporation Code to the contraryprovide that:(i) Any registered broker o

dealer may become amember of theassociation;

(ii) There exist a fairepresentation of itsmembers to serve on theBoard of Directors of theassociation and in theadministration of its affairsand that any naturaperson associated with a

juridical entity that is amember shall himself bedeeme

securties regulation code

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