RA 8997 - Securities Act

8/13/2019 RA 8997 - Securities Act

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REPUBLIC ACT NO. 8799

THE SECURITIES REGULATION CODE

Be it enacted by the Senate and the House of Representative of the Philippinesin the Congress assembled:

CHAPTER I

TITLE AND DEFINITIONS

Section 1.Title.- This shall be known as "The Securities Regulation Code"

Section 2. Declaration of State Policy. The State shall establish a sociallyconscious, free market that regulates itself, encourage the widest participation ofownership in enterprises, enhance the democratization of wealth, promote the

deelopment of the capital market, protect inestors, ensure full and fairdisclosure about securities, minimize if not totally eliminate insider trading andother fraudulent or manipulatie deices and practices which create distortions inthe free market! To achiee these ends, this Securities Regulation Code ishereby enacted!

Section 3. Definition of Terms. - !#! "Securities" are shares, participation orinterests in a corporation or in a commercial enterprise or profit-making entureand eidenced by a certificate, contract, instruments, whether written orelectronic in character! $t includes%

&a' Shares of stocks, bonds, debentures, notes eidences ofindebtedness, asset-backed securities(

&b' $nestment contracts, certificates of interest or participation in a profitsharing agreement, certifies of deposit for a future subscription(

&c' )ractional undiided interests in oil, gas or other mineral rights(

&d' *eriaties like option and warrants(

&e' Certificates of assignments, certificates of participation, trust

certificates, oting trust certificates or similar instruments

&f' +roprietary or nonproprietary membership certificates in corporations(and

&g' ther instruments as may in the future be determined by theCommission!


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!#! "Salesman" is a natural person, employed as such as an agent, by adealer, issuer or broker to buy and sell securities!

!#/! ";ncertificated security" is a security eidenced by electronic or similarrecords!

!#1! ";nderwriter" is a person who guarantees on a firm commitment and0ordeclared best effort basis the distribution and sale of securities of any kind byanother company!

CHAPTER II

SECURITIES AND ECHANGE CO!!ISSION

Section ".dministrative gency. /!#! This Code shall be administered by theSecurity and 63change Commission &hereinafter referred to as the"Commission"' as a Collegial body, composed of a chairperson and &/'

Commissioners, appointed by the +resident for a term of &5' seen years eachand who shall seres as such until their successor shall hae been appointedand :ualified! 2 Commissioner appointed to fill a acancy occurring prior to thee3piration of the term for which his0her predecessor was appointed, shall sereonly for the une3pired portion of their terms under +residential *ecree smembers, bodies, boards, offices, personnel and all its administratie business!

/!/! The salary of the Chairperson and the Commissioners shall be fi3ed by the

+resident of the +hilippines based on the ob=ectie classification system, at asum comparable to the members of the ?onetary .oard and commensurateimportance and responsibilities attached to the position!

/!1! The Commission shall hold meetings at least once a week for the conduct ofbusiness or as often as may be necessary upon the call of the Chairperson orupon the re:uest of &' Commissioners! The notice of the meeting shall be giento all Commissioners and the presence of three &' Commissioners shall

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constitute a :uorum! $n the absence of the Chairperson, the most seniorCommissioner shall act as presiding officer of the meeting!

/!4! The Commission may, for purposes of efficiency, delegate any of itsfunctions to any department of office of the Commission, an indiidual

Commissioner or staff member of the Commission e3cept its reiew or appellateauthority and its power to adopt, alter and supplement any rule or regulation!

The commission may reiew upon its own initiatie or upon the petition of anyinterested party any action of any department or office, indiidual Commissioner,or staff member of the Commission!

Section #. Po!ers and "unctions of the Commission! 1!#! The commissionshall act with transparency and shall hae the powers and functions proided bythis code, +residential *ecree


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institution, corporation, firm, association or person in the implementation ofits powers and function under its Code(

&i' $ssue cease and desist orders to preent fraud or in=ury to the inestingpublic(

&=' +unish for the contempt of the Commission, both direct and indirect, inaccordance with the pertinent proisions of and penalties prescribed bythe Rules of Court(

&k' Compel the officers of any registered corporation or association to callmeetings of stockholders or members thereof under its superision(

&l' $ssue subpoena duces tecum and summon witnesses to appear in anyproceedings of the Commission and in appropriate cases, order thee3amination, search and seizure of all documents, papers, files and

records, ta3 returns and books of accounts of any entity or person underinestigation as may be necessary for the proper disposition of the casesbefore it, sub=ect to the proisions of e3isting laws(

&m' Suspend, or reoke, after proper notice and hearing the franchise orcertificate of registration of corporations, partnership or associations, uponany of the grounds proided by law( and

&n' 63ercise such other powers as may be proided by law as well asthose which may be implied from, or which are necessary or incidental tothe carrying out of, the e3press powers granted the Commission to

achiee the ob=ecties and purposes of these laws!

1!! The Commission>s =urisdiction oer all cases enumerated under section 1 of+residential *ecree


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indemnification shall be proided only in connection with such matters coeredby the settlement as to which the Commission is adised by e3ternal counsel thatthe persons to be indemnified did not commit any gross negligence ormisconduct! The costs and e3penses incurred in defending the aforementionedaction, suit or proceeding may be paid by the Commission in adance of the final

disposition of such action, suit or proceeding upon receipt of an undertaking by oron behalf of the Commissioner, officer or employee to repay the amountadanced should it ultimately be determined by the Commission that he0she isnot entitled to be indemnified as proided in this subsection!

4!! The Commissioners, officers and employees of the Commission who willfullyiolate this Code or who are guilty of negligence, abuse or acts of malfeasanceor fail to e3ercise e3traordinary diligence in the performance of their duties shallbe held liable for any loss or in=ury suffered by the Commission or otherinstitutions such as a result of such iolation, negligence, abuse, or malfeasance,or failure to e3ercise e3traordinary diligence! Similar responsibility shall apply to

the Commissioners, officers and employees of the Commission for ' thedisclosure of any information, discussion or resolution of the Commission of aconfidential nature, or about the confidential operations of the Commissionunless the disclosure is in connection with the performance of official functionswith the Commission or prior authorization of the Commissioners( or &' the useof such information for personal gain or to the detriment of the goernment, theCommission or third parties% +roided, howeer, That any data or informationre:uired to be submitted to the +resident and0or Congress or its appropriatecommittee, or to be published under the proisions of this Code shall not beconsidered confidential!

Section 7.Reorgani$ation. 5!#! To achiee the goals of this Code, consistentwith the Ciil Serice laws, the Commission is hereby authorized to proide for its

reorganization, to streamline its structure and operations, upgrade its humanresource component and enable it to more efficiently and effectiely perform itsfunctions and e3ercise its power under this Code!

5!! 2ll positions of the Commissions shall be goerned by a compensation andposition classification system and :ualification standards approed by theCommission based on comprehensie =ob analysis and audit of actual duties andpersonal responsibilities! The compensation plan shall be comparable with thepreailing compensation plan in the .angko Sentral ng +ilipinas and othergoernment financial institutions and shall be sub=ect to periodic reiew by theCommission no more than once eery two &' years without pre=udice to yearlymerit reiew or increases based on productiity and efficiency! The Commissionshall, therefore, be e3empt from laws, rules, and regulations on compensation,position classification and :ualifications standards! The Commission shall,howeer, endeaor to make its system conform as closely as possible with theprinciples under the Compensation and +osition Classification 2ct of #878&Republic 2ct! 4517, as amended'!

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CHAPTER III

REGISTRATION OF SECURITIES

Section 8.Re%uirement of Registration of Securities! 7!#! Securities shall notbe sold or offered for sale or distribution within the +hilippines, without a

registration statement duly filed with and approed by the Commission! +rior tosuch sale, information on the securities, in such form and with such substance asthe Commission may prescribe, shall be made aailable to each prospectiepurchaser!

7!! The Commission may conditionally approe the registration statement undersuch terms as it may deem necessary!

7!! The Commission may specify the terms and conditions under which anywritten communication, including any summary prospectus, shall be deemed notto constitute an offer for sale under this Section!

7!/! 2 record of the registration of securities shall be kept in Register Securitiesin which shall be recorded orders entered by the Commission with respect suchsecurities! Such register and all documents or information with the respect to thesecurities registered therein shall be open to public inspection at reasonablehours on business days!

7!1! The Commission may audit the financial statements, assets and otherinformation of firm applying for registration of its securities wheneer it deems thesame necessary to insure full disclosure or to protect the interest of the inestorsand the public in general!

Section 9. &'empt Securities! 8!#! The re:uirement of registration underSubsection 7!# shall not as a general rule apply to any of the following classes ofsecurities%

&a' 2ny security issued or guaranteed by the Aoernment of the+hilippines, or by any political subdiision or agency thereof, or by anyperson controlled or superised by, and acting as an instrumentality ofsaid Aoernment!

&b' 2ny security issued or guaranteed by the goernment of any country

with which the +hilippines maintains diplomatic relations, or by any state,proince or political subdiision thereof on the basis of reciprocity%+roided, That the Commission may re:uire compliance with the form andcontent for disclosures the Commission may prescribe!

&c' Certificates issued by a receier or by a trustee in bankruptcy dulyapproed by the proper ad=udicatory body!

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&d' 2ny security or its deriaties the sale or transfer of which, by law, isunder the superision and regulation of the ffice of the $nsuranceCommission, @ousing and and ;se Rule Regulatory .oard, or the.ureau of $nternal Reenue!

&e' 2ny security issued by a bank e3cept its own shares of stock!

8!! The Commission may, by rule or regulation after public hearing, add to theforegoing any class of securities if it finds that the enforcement of this Code withrespect to such securities is not necessary in the public interest and for theprotection of inestors!

Section 1%.&'empt Transactions! #9!#! The re:uirement of registration underSubsection 7!# shall not apply to the sale of any security in any of the followingtransactions%

&a' 2t any =udicial sale, or sale by an e3ecutor, administrator, guardian orreceier or trustee in insolency or bankruptcy!

&b' .y or for the account of a pledge holder, or mortgagee or any of apledge lien holder selling of offering for sale or deliery in the ordinarycourse of business and not for the purpose of aoiding the proision of thisCode, to li:uidate a bonafidedebt, a security pledged in good faith assecurity for such debt!

&c' 2n isolated transaction in which any security is sold, offered for sale,subscription or deliery by the owner therefore, or by his representatie for

the owner>s account, such sale or offer for sale or offer for sale,subscription or deliery not being made in the course of repeated andsuccessie transaction of a like character by such owner, or on hisaccount by such representatie and such owner or representatie notbeing the underwriter of such security!

&d' The distribution by a corporation actiely engaged in the businessauthorized by its articles of incorporation, of securities to its stockholdersor other security holders as a stock diidend or other distribution out ofsurplus!

&e' The sale of capital stock of a corporation to its own stockholderse3clusiely, where no commission or other remuneration is paid or giendirectly or indirectly in connection with the sale of such capital stock!

&f' The issuance of bonds or notes secured by mortgage upon real estateor tangible personal property, when the entire mortgage together with allthe bonds or notes secured thereby are sold to a single purchaser at asingle sale!

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&g' The issue and deliery of any security in e3change for any othersecurity of the same issuer pursuant to a right of conersion entitling theholder of the security surrendered in e3change to make such conersion%Provided, That the security so surrendered has been registered under thisCode or was, when sold, e3empt from the proision of this Code, and that

the security issued and deliered in e3change, if sold at the conersionprice, would at the time of such conersion fall within the class ofsecurities entitled to registration under this Code! ;pon such conersionthe par alue of the security surrendered in such e3change shall bedeemed the price at which the securities issued and deliered in suche3change are sold!

&h' .roker>s transaction, e3ecuted upon customer>s orders, on anyregistered 63change or other trading market!

&i' Subscriptions for shares of the capitals stocks of a corporation prior to

the incorporation thereof or in pursuance of an increase in its authorizedcapital stocks under the Corporation Code, when no e3pense is incurred,or no commission, compensation or remuneration is paid or gien inconnection with the sale or disposition of such securities, and only whenthe purpose for soliciting, giing or taking of such subscription is to complywith the re:uirements of such law as to the percentage of the capital stockof a corporation which should be subscribed before it can be registeredand duly incorporated, or its authorized, capital increase!

&=' The e3change of securities by the issuer with the e3isting securityholders e3clusiely, where no commission or other remuneration is paid or

gien directly or indirectly for soliciting such e3change!

&k' The sale of securities by an issuer to fewer than twenty &9' persons inthe +hilippines during any twele-month period!

&l' The sale of securities to any number of the following :ualified buyers%

&i' .ank(

&ii' Registered inestment house(

&iii' $nsurance company(

&i' +ension fund or retirement plan maintained by the Aoernmentof the +hilippines or any political subdiision thereof or manage bya bank or other persons authorized by the .angko Sentral toengage in trust functions(

&' $nestment company or(

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&i' Such other person as the Commission may rule by determineas :ualified buyers, on the basis of such factors as financialsophistication, net worth, knowledge, and e3perience in financialand business matters, or amount of assets under management!

#9!! The Commission may e3empt other transactions, if it finds that there:uirements of registration under this Code is not necessary in the publicinterest or for the protection of the inestors such as by the reason of the smallamount inoled or the limited character of the public offering!

#9!! 2ny person applying for an e3emption under this Section, shall file with theCommission a notice identifying the e3emption relied upon on such form and atsuch time as the Commission by the rule may prescribe and with such noticeshall pay to the Commission fee e:uialent to one-tenth #9' of one percentD' of the ma3imum alue aggregate price or issued alue of the securities!

Section 11.Commodity "utures Contracts! -


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functions accompanied by a duly erified resolution of the board of directors ofthe issuer corporation! The written consent of the e3pert named as haingcertified any part of the registration statement or any document used inconnection therewith shall also be filed! Ehere the registration statement sharesto be sold by selling shareholders, a written certification by such selling

shareholders as to the accuracy of any part of the registration statementcontributed to by such selling shareholders shall be filed!

#!1! &a' ;pon filing of the registration statement, the issuer shall pay to theCommission a fee of not more than one-tenth #9' of oneper centumD' ofthe ma3imum aggregate price at which such securities are proposed to beoffered! The Commission shall prescribe by the rule diminishing fees in inerseproportion the alue of the aggregate price of the offering!

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registration of the security there-under after the due notice and hearing byissuing an order to such effect, setting forth its finding in respect thereto, if it findsthat%

&a' The issuer%

&i' @as been =udicially declared insolent(

&ii' @as iolated any of the proision of this Code, the rulespromulgate pursuant thereto, or any order of the Commission ofwhich the issuer has notice in connection with the offering for whicha registration statement has been filed

&iii' @as been or is engaged or is about to engage in fraudulenttransactions(

&i' @as made any false or misleading representation of materialfacts in any prospectus concerning the issuer or its securities(

&' @as failed to comply with any re:uirements that the Commissionmay impose as a condition for registration of the security for whichthe registration statement has been filed( or

&b' The registration statement is on its face incomplete or inaccurate inany material respect or includes any untrue statements of a material factre:uired to be stated therein or necessary to make the statement thereinnot misleading( or

&c' The issuer, any officer, director or controlling person performing similarfunctions, or any under writer has been conicted, by a competent =udicialor administratie body, upon plea of guilty, or otherwise, of an offenseinoling moral turpitude and 0or fraud or is en=oined or restrained by theCommission or other competent or administratie body for iolations ofsecurities, commodities, and other related laws!

)or the purposes of this subsection, the term "competent =udicial oradministratie body" shall include a foreign court of competent =urisdiction asproided for under Rules of Court!

#!! The Commission may compel the production of all the books and papers ofsuch issuer, and may administer oaths to, and e3amine the officers of such theissuer or any other person connected therewith as to its business and affairs!

#!! $f any issuer shall refuse to permit an e3amination to be made by theCommission, its refusal shall be ground for the refusal or reocation of theregistration of its securities!

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#!/! $f the Commission deems its necessary, it may issue an order suspendingthe offer and sale of the securities pending any inestigation! The order shallstate the grounds for taking such action, but such order of suspension althoughbinding upon the persons notified thereof, shall be deemed confidential, and shallnot be published! ;pon the issuance of the suspension order, no further offer or

sale of such security shall be made until the same is lifted or set aside by theCommission! therwise, such sale shall be oid!

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Section 1#. Suspension of Registration. - #1!#! $f at any time, the informationcontained in the registration statement filed is or has become misleading,incorrect, inade:uate or incomplete in any material respect, or the sale or offeringfor sale of the security registered thereunder may work or tend to work a fraud,the Commission may re:uire from the issuer such further information as may in

its =udgement be necessary to enable the Commission to ascertain whether theregistration of such security should be reoked on any ground specified in thisCode! The Commission may also suspend the right to sell and offer for the salesuch security pending further inestigation, by entering an order specifying thegrounds for such action, and by notifying the issuer, underwriter, dealer or brokerknown as participating in such offering!

#1!! The refusal to furnish information re:uired by the Commission may be aground for the issuance of an order of suspension pursuant to Subsection #1!#!;pon the issuance of any such order and notification to the issuer, underwriter,dealer or broken know as participating in such offering, no further offer or sale of

any such security shall be made until the same is lifted or set aside by theCommission! therwise such sale shall be oid!

#1!! ;pon issuance of an order of suspension, the Commission shall conduct ahearing! $f the Commission determines that the sale of any security should bereoked is shall issue an order prohibiting sale of such security!

#1!/! ;ntil the issuance of a final order, the suspension of the right to sell, thoughbinding upon the persons notified there of, shall be deemed confidential, andshall not be published, unless it shall appear that the order of suspension hasbeen iolated after notice! $f, howeer, the Commission finds that the sale of the

security will neither be fraudulent nor result in fraud, it shall forthwith issue anorder reoking the order of suspension, and such security shall be restored to itsstatus as a registered security as of the date of such order of suspension!

CHAPTER I&

REGULATION OF PRE'NEED PLANS

Section 1$.Pre(+eed Plans.


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Section 17.Periodic and ,ther Reports of #ssuer.#5!#! 6ery issuer satisfyingthe re:uirements in Subsection #5! hereof shall file with the Commission%

&a' Eithin one hundred thirty-fie ' days, after the end of the issuer>sfiscal year, or such other time as the Commission may prescribe, an

annual report which shall include, among others, a balance sheet, profitand loss statement and statement of cash flows, for such last fiscal year,certified public accountant, an a management discussion and analysis ofresults of operation( and

&b' Such other periodical reports for interim fiscal periods and currentreports on significant deelopments of the issuer as the Commission mayprescribe as necessary to keep current information on the operation of thebusiness and financial condition of the issuer!

#5!! The reportorial re:uirements of Subsection #5!# shall apply to the following%

&a' 2n issuer which has sold a class of its securities pursuant to aregistration under section # hereof% Provided ho!ever- That theobligation of such issuer to file reports shall be suspended for any fiscalyear after the year such registration became effectie if such issuer, as ofthe first day of any such fiscal year, has less than one hundred c'holder of such class securities or such other number as the Commissionshall prescribe and it notifies the Commission of such(

&b' 2n issuer with a class of securities listed for trading on an 63change(and

&c' 2n issuer with assets of at least )ifty million pesos &19,999,999!99' orsuch other amount as the Commission shall prescribe, and haing twohundred &99' or more holder each holding at least one hundred c'share of a class of its e:uity securities% Provided- ho!ever, That theobligation of such issuer to file report shall be terminate ninety &89' daysafter notification to the Commission by the issuer that the number of itsholders holding at least one hundred c' share reduced to less than onehundred c'!

#5!! 6ery issuer of a security listed for trading on an 63change a copy of any

report filed with the Commission under Subsection #5!#! hereof!

#5!/! 2ll reports &including financial statements' re:uired to be filed with theCommission pursuant to Subsection #5!# hereof shall be in such form, containsuch information and be filed at such times as the Commission shall prescribe,and shall be in lieu of any periodical or current reports or financial statementsotherwise re:uired to be filed under the Commission shall prescribe!

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#5!1! 6ery issuer which has a class of e:uity securities satisfying any of there:uirements in Subsection #5! shall furnish to each holder of such e:uitysecurity an annual report in such form and containing such information as theCommission shall prescribe!

#5!4! Eithin such period as the Commission may prescribe preceding the annualmeeting of the holders of any e:uity security of a class entitled to ote at suchmeeting , the issuer shall transmit to such holders an annual report in conformitywith subsection #5!1!

Section 18. Reports by five per centum /01 Holders of &%uity Securities. #7!#! $n eery case in which an issuer satisfies the re:uirements of Subsection#5! hereof any person who ac:uires directly or indirectly the beneficialownership of more than fie of per centum &1D' of such class or in e3cess ofsuch lesser per centum as the Commission by rule may prescribe, shall, withinten ' days after such ac:uisition or such reasonable time as fi3ed by the

Commission, submit to the issuer of the securities, to the 63change where thesecurity is traded, and to the Commission a sworn statement containing thefollowing information and such order information as the Commission may re:uirein the public interest or for the protection of inestors!

&a' The personal background, identity, residence, and citizenship of, andthe nature of such beneficial ownership by, such person and all otherperson by whom or on whose behalf the purchases are effected( in theeent the beneficial owner is a =uridical person, the of business of thebeneficial owner shall also be reported(

&b' $f the purpose of the purchases or prospectie purchases is to ac:uirecontrol of the business of the issuer of the securities, any plans orproposals which such persons may hae that will effect a ma=or change inits business or corporate structure(

&c' The number of shares of such security which are beneficially owned,and the number of shares concerning which there is a right to ac:uire,directly or indirectly, by( &i' such person, and &ii' each associate of suchperson, giing the background, identity, residence, and citizenship of eachsuch associate( and

&d' $nformation as to any contracts, arrangements, or understanding withany person with respect to any securities of the issuer including but notlimited to transfer, =oint entures, loan or option arrangements, puts or callguarantees or diision of losses or profits, or pro3ies naming the personswith whom such contracts, arrangements, or understanding hae beenentered into, and giing the details thereof!

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#7!! $f any change occurs in the facts set forth in the statements, an amendmentshall be transmitted to the issuer, the 63change and the Commission!

#7!! The Commission, may permit any person to file in lieu of the statementre:uired by subsection #5!# hereof, a notice stating the name of such person, the

shares of any e:uity securities sub=ect to Subsection #5!# which are owned byhim, the date of their ac:uisition and such other information as the commissionmay specify, if it appears to the commission that such securities were ac:uiredby such person in the ordinary course of his business and were not ac:uired forthe purpose of and do not hae the effect of changing or influencing the control ofthe issuer nor in connection with any transaction haing such purpose or effect!

CHAPTER &I

PROTECTION OF SHAREHOLDERS INTERESTS

Section 19.Tender ,ffers! 2ny person or group of persons acting in concert

who intends to ac:uire at least #1D of any class of any e:uity security of a listedcorporation of any class of any e:uity security of a corporation with assets of atleast fifty million pesos &19,999,999!99' and haing two hundred&99' or morestockholders at least one hundred shares each or who intends to ac:uire at leastthirty percent&9D' of such e:uity oer a period of twele months' shall makea tender offer to stockholders by filling with the Commission a declaration to thateffect( and furnish the issuer, a statement containing such of the informationre:uired in Section #5 of this Code as the Commission may prescribe! Suchperson or group of persons shall publish all re:uest or initations or tender offeror re:uesting such tender offers subse:uent to the initial solicitation or re:uestshall contain such information as the Commission may prescribe, and shall be

filed with the Commission and sent to the issuer not alter than the time copies ofsuch materials are first published or sent or gien to security holders!

&a' 2ny solicitation or recommendation to the holders of such a security toaccept or re=ect a tender offer or re:uest or initation for tenders shall bemade in accordance with such rules and regulations as may be prescribe!

&b' Securities deposited pursuant to a tender offer or re:uest or initationfor tenders may be withdrawn by or on behalf of the depositor at any timethroughout the period that tender offer remains open and if the securitiesdeposited hae not been preiously accepted for payment, and at any

time after si3ty &49' days from the date of the original tender offer tore:uest or initation, e3cept as the Commission may otherwise prescribe!

&c' Ehere the securities offered e3ceed that which person or group ofpersons is bound or willing to take up and pay for, the securities that aresub=ect of the tender offers shall be taken up us nearly as may be prodata, disregarding fractions, according to the number of securitiesdeposited to each depositor! The proision of this sub=ect shall also apply

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to securities deposited within ten ' days after notice of increase in theconsideration offered to security holders, as described in paragraph &e' ofthis subsection, is first published or sent or gien to security holders!

&d' Ehere any person aries the terms of a tender offer or re:uest or

initation for tenders before the e3piration thereof by increasing theconsideration offered to holders of such securities, such person shall paythe increased consideration to each security holder whose securities aretaken up and paid for whether or not such securities hae been taken upby such person before the ariation of the tender offer or re:uest orinitation!

#8!! $t shall be lawful for any person to make any untrue statement of a materialfact or omit to state any material fact necessary in order to make the statementsmade in the light of the circumstances under which they are made, not mis-leading, or to engaged to any fraudulent, deceptie or manipulatie acts or

practices, in connection with any tender offer or re:uest or initation for tenders,or any solicitation for any security holders in opposition to or in faor of any suchfaor of any such offer, re:uest, or initation! The Commission shall, for thepurposes of this subsection, define and prescribe means reasonably designed topreent, such acts and practices as are fraudulent, deceptie and manipulatie!

Section 2%. Pro'y solicitations! - 9!#! +ro3ies must be issued and pro3ysolicitation must be made in accordance with rules and regulations to be issuedby the Commission(

9!! +ro3ies must be in writing, signed by the stockholder or his duly authorized

representatie and file before the scheduled meeting with the corporatesecretary!

9!! ;nless otherwise proided in the pro3y, it shall be alid only for the meetingfor which it is intended!


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Section 21."ees of Tender ,ffers and Certain Pro'y Solicitations! 2t the timeof filling with the Commission of any statement re:uired under Section #8 for anytender offer or Section 5! for issuer purchases, or Section 9 for pro3y orconsent solicitation, The Commission may re:uire that the person making suchfiling pay a fee of not more than one-tenth #9'D' of(

#!#! The propose aggregate purchase price in the case of a transaction underSection 9 or 5!( or

#!! The proposed payment in cash, and ion alue of any securities or propertyto be transferred in the ac:uisition, merger or consolidating, or the cash andalue of any securities proposed to be receied upon the sale disposition of suchassets in the case of a solicitation under Section 9! The Commission shallprescribe by rule diminishing fees in inerse proportion to the alue of theaggregate price of the offering!

Section 22. #nternal Record 2eeping and ccounting Control! - 6ery issuerwhich has a class of securities that satisfies the re:uirements of Subsection #5!shall%

!#! *eice and maintain a system of internal accounting controls sufficient toproide reasonable assurance that% &a' Transactions and access to assets arepursuant to management authorization( &b' )inancial statements are proided inconformity with generally accepted accounting principles that are adopted by the

2ccounting standards council and the rules promulgated by the Commission withthe regard to the preparation of the financial statements( and &c' Recordedassets are compared with e3isting assets at reasonable interals and differences

are reconciled!

Section 23.Transactions of Directors officers and Principal Stoc3holders! !#!6ery person who is directly or indirectly the beneficial owner of more than tenper centum D' of any class of any e:uity security which satisfies there:uirements of subsection #5!, or who is a director or an officer of the issuer ofsuch security, shall file, at the time either such re:uirement is first satisfied orafter ten days after he becomes such a beneficial owner, director, or officer, astatement form the Commission and, if such security is listed for trading on ane3change, also with the e3change of the amount of all the e:uity security of suchissuer of which he is the beneficial owner, and within ten days after the close of

each calendar month thereafter, if there has been a change in such ownership atthe close of the calendar month and such changes in his ownership as haeoccurred during such calendar month!

!! )or the purpose of preenting the unfair use of information which may haebeen obtained by such beneficial owner, director or officer by reason of hisrelationship to the issuer, any profit realized by him from any purchase or sale, orany sale or purchase, of any e:uity security of such issuer within any period of

+age #8 of 11


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less than &4' months unless such security was ac:uired in good faith inconnection with a debt preiously contracted, shall inure to and be recoerableby the issuer, irrespectie of any intention of holding the security purchased or ofnot repurchasing the security sold for a period e3ceeding si3 &4' months! Suit torecoer 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 ofthe issuer if the issuer shall fail or refuse to bring such suit within si3ty &49' daysafter re:uest or shall fail diligently to prosecute the same thereafter, but not suchshall be brought more than two years after the date such profit was realized! ThisSubsection shall not be construed to coer any transaction were such beneficialowner was not such both time of the owner or the sale, or the sale of purchase,of the security inoled, or any transaction or transactions which the Commissionby rules and regulations may e3empt as not comprehended within the purpose ofthis subsection!

!! $t shall be unlawful for any such beneficial owner, director or officer, directly

or indirectly, to sell any e:uity security of such issuer if the person selling theprincipal% &a' *oes not own the security sold% or &b' $f owning the security, doesnot delier not delier it against such sale within 9 days thereafter, or does notwithin fie days after such sale deposit in the mails or the unusual channels oftransportation( but no person shall be deemed to hae iolated this subsection ifhe proes not withstanding the e3ercise of good faith he was unable to makesuch deliery in such time, or that to do so would cause undue inconenience ore3pense!

!/! The proisions of subsection ! shall not apply to any purchase and sale,or sale and purchase, and the proisions of Subsection ! shall not apply to

any sale, of an e:uity security not then or thereafter held by him and aninestment account, by a dealer in the ordinary course of his business andincident to the establishment or maintenance by him of a primary or secondarymarket, otherwise than on an 63change, for such security! The Commission may,by such rules and regulations as it deems necessary or appropriate in the publicinterest, define and prescribe terms and conditions with respect to securities heldin an inestment account and transactions made in the ordinary course ofbusiness and incident to the establishment or maintenance of a primary orsecondary market!

CHAPTER &II

PROHIBITIONS AND FRAUD) !ANIPULATION AND INSIDER TRADING

Section 2". 4anipulation of Security Prices5 Devices and Practices! /!# $tshall be unlawful for any person acting for himself or through a dealer or broker,directly or indirectly%

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&a' To create a false or misleading appearance of actie trading in anylisted security traded in an 63change of any other trading market&hereafter referred to purposes of this Chapter as "63change"'%

&i' .y effecting any transaction in such security which inoles no

change in the beneficial ownership thereof(

&ii' .y entering an order or orders for the purchase or sale of suchsecurity with the knowledge that a simultaneous order or orders ofsubstantially the same size, time and price, for the sale or purchaseof any such security, has or will be entered by or for the same ordifferent parties( or

&iii' .y performing similar act where there is no change in beneficialownership!

&b' To affect, alone or with others, a securities or transactions in securitiesthat% &$' Raises their price to induce the purchase of a security, whether ofthe same or a different class of the same issuer or of controlling,controlled, or commonly controlled company by others( or &iii' Createsactie trading to induce such a purchase or sale through manipulatiedeices such as marking the close, painting the tape, s:ueezing the float,hype and dump, boiler room operations and such other similar deices!

&c' To circulate or disseminate information that the price of any securitylisted in an 63change will or is likely to rise or fall because of manipulatiemarket operations of any one or more persons conducted for the purpose

of raising or depressing the price of the security for the purpose ofinducing the purpose of sale of such security!

&d' To make false or misleading statement with respect to any materialfact, which he knew or had reasonable ground to beliee was so false ormisleading, for the purpose of inducing the purchase or sale of anysecurity listed or traded in an 63change!

&e' To effect, either alone or others, any series of transactions for thepurchase and0or sale of any security traded in an 63change for thepurpose of pegging, fi3ing or stabilizing the price of such security( unless

otherwise allowed by this Code or by rules of the Commission!

/!!


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/!! The foregoing proisions notwithstanding, the Commission, haing dueregard to the public interest and the protection of inestors, may, by rules andregulations, allow certain acts or transactions that may otherwise be prohibitedunder this Section!

Section 2#.Regulation of ,ption Trading.


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considered by a reasonable person important under the circumstances indetermining his course of action whether to buy, sell or hold a security!

5!! $t shall be unlawful for any insider to communicate material nonpublicinformation about the issuer or the security to any person who, by irtue of the

communication, becomes an insider as defined in Subsection !7, where theinsider communicating the information knows or has reason to beliee that suchperson will likely buy or sell a security of the issuer whole in possession of suchinformation!

5!/! &a' $t shall be unlawful where a tender offer has commenced or is about tocommence for%

&i' 2ny person &other than the tender offeror' who is in possession ofmaterial nonpublic information relating to such tender offer, to buy or sellthe securities of the issuer that are sought or to be sought by such tender

offer if such person knows or has reason to beliee that the information isnonpublic and has been ac:uired directly or indirectly from the tenderofferor, those acting on its behalf, the issuer of the securities sought or tobe sought by such tender offer, or any insider of such issuer( and

&ii' 2ny tender offeror, those acting on its behalf, the issuer of thesecurities sought or to be sought by such tender offer, and any insider ofsuch issuer to communicate material nonpublic information relating to thetender offer to any other person where such communication is likely toresult in a iolation of Subsection 5!/ &a'&$'!

&b' )or purposes of this subsection the term "securities of the issuer sought or tobe sought by such tender offer" shall include any securities conertible ore3changeable into such securities or any options or rights in any of the foregoingsecurities!

CHAPTER &III

REGULATION OF SECURITIES !AR*ET PROFESSIONALS

Section 28. Registration of Bro3ers- Dealers- Salesmen and ssociatedPersons. 7!#!


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7!! The Commission, by rule or order, may conditionally or unconditionallye3empt from subsection 7!# and 7! any broker, dealer, salesman, associatedperson of any broker or dealer, or any class of the foregoing, as it deemsconsistent with the public interest and the protection of inestors!

7!/! The Commission shall promulgate rules and regulation prescribing the:ualifications for registration of each category of applicant, which shall, amongother things, re:uire as a condition for registration that%

&a' $f a natural person, the applicant satisfactorily pass a writtene3amination as to his proficiency and knowledge in the area of actiity forwhich registration is sought(

&b' $n the case of a broker or dealer, the applicant satisfy a minimum netcapital as prescribed by the Commission, and proide a bond or othersecurity as the Commission may prescribe to secure compliance with the

proisions of this Code( and

&c' $f located outside of the +hilippines, the applicant files a writtenconsent to serice of process upon the Commission pursuant to Section41 hereof!

7!1! 2 broker or dealer may apply for registration by filing with the Commissiona written application in such forms and containing such information anddocuments concerning such broker or dealer as the Commission by rule shallprescribe!

7!4! Registration of a salesman or of an associated person of a registeredbroker or dealer may be made upon written application filed with the Commissionby such salesman or associated person! The application shall be separatelysigned and certified by the registered broker or dealer to which such salesman orassociated person is to become affiliated, or by the issuer in the case of asalesman employed appointed or authorized solely by such issuer! Theapplication shall be in such form and contain such information and documentsconcerning the salesman or associated person as the Commission by rule shallprescribe! )or purposes of this Section, a salesman shall not include anyemployee of an issuer whose compensation is not determined directly orindirectly on sales of securities if the issuer!

7!5! 2pplications filed pursuant to Subsections 7!1 and 7!4 shall beaccompanied by a registration fee in such reasonable amount prescribed by theCommission!

7!7! Eithin thirty &9' days after the filing of any application under this Section,the Commission shall by order% &a' Arant registrations if it determines that the

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re:uirements of this Section and the :ualifications for registrations set forth in itsrules and regulations hae been satisfied ( or &b' *eny said registration!

7!8! The names and addresses of all persons approed for the registration asbrokers, dealers, associated persons or salesman and all orders of the

Commission with respect thereto shall be recorded in a Register of Securities?arket +rofessionals kept in the office of the Commission which shall be open topublic inspection!

7!#9! 6ery person registered pursuant to this Section shall file with theCommission, in such form as the Commission shall prescribe, informationnecessary to keep the application for registration current and accurate, includingin the case of a broker or dealer changes in salesmen, associated persons andowners thereof!

7!##! 6ery person registered pursuant to this Selection shall pay to the

Commission an annual fee at such time and in such reasonable amount as theCommission shall prescribe! ;pon notice by the Commission that such annualfee has not been paid as re:uired, the registration of such person shall besuspended until payment has been made!

7!#! The registration of a salesman or associated person shall be automaticallyterminated upon the cessation of his affiliation with said registered broker ordealer or with an issuer in the case of a salesman employed, appointed orauthorized by such issuer! +romptly following any such cessation of affiliation,the registered broker or dealer, issuer as the case may be, shall file with theCommission a notice of separation of such salesman or associated person!

Section 29. Revocation- Refusal or Suspension of Registration of Bro3ers-Dealers- Salesmen and ssociated Persons. 8!#! Registration under Section7 of this Code may be refused , or any registration granted thereunder may bereoked, suspended, or limitations placed thereon, by the Commission if, afterdue notice and hearing the Commission determines the application or registrant!

&a' @as willfully iolated any proision of this Code, any rule, regulation ororder made hereunder, or any other law administered by the Commission,or in the case of a registered broker, dealer or associated persons hasfailed to superise, with a iew to preenting such iolation, another

person who commits such iolation(

&b' @as willfully made or caused to be made a materially false ormisleading statement in any application for registration or report filed withthe Commission or a self-regulatory organization, or has willfully omitted tostate any material fact that is re:uired to be stated therein(

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&c' @as failed to satisfy the :ualifications or re:uirements for registrationprescribed under Section 7 and the rules and regulations of theCommission promulgated thereunder(

&d' @as been conicted, by a competent =udicial or administratie body of

an offense inoling moral turpitude, fraud, embezzlement, counterfeiting,theft, estafa, misappropriation, forgery, bribery, false oath, or per=ury, or ofa iolation of securities, commodities, banking, real state or insurancelaws(

&e' $s en=oined or restrained by a competent =udicial or administratie bodyfrom engaging in securities, commodities, banking, real state or insuranceactiities or from willfully iolating laws goerning such actiities(

&f' $s sub=ect to an order of a competent =udicial or administratie bodyrefusing, reoking or suspending any registration, licensed or other permit

under this Code, the rules and regulations promulgated thereunder, anyother law administered by the Commission(

&g' $s sub=ect to an order of a self-regulatory organization suspending ore3pelling him from membership or participating therein or from associationwith a member or participant thereof(

&h' @as been found by a competent =udicial or administratie body to haewillfully iolated any proisions of securities, commodities, banking, realstate or insurance laws, or has willfully aided, abetted, counseled,commanded, induced or procured such iolation( or

&i' @as been =udicially declared insolent!

)or purposes of this subsection, the term "competent =udicial or administratiebody" shall include a foreign court of competent =urisdiction and a foreignfinancial regulator!

8!! &a' $n case of charges against a salesman or associated person, noticethereof shall also be gien the broker, dealer or issuer employing such salesmanor associated person!

&b' +ending the hearing, the Commission shall hae the power to orderthe suspensions of such broker>s, dealers, associated person>s orsalesman>s registration% Provided, That such order shall state the causefor such suspension! ;ntil the entry of a final order, the suspension ofsuch registration, though binding upon the persons notified thereof, shallbe deemed confidential, and shall not be published, unless it shall appearthat the order of suspension has been iolated after notice!

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8!! The orders of the Commission refusing, reoking, suspending or placinglimitations on a registration as herein aboe proided, together with its findings,shall be entered in the Register of Securities ?arket +rofessionals! Thesuspension or reocation of the registration of a dealer or broker shall alsoautomatically suspend the registration of all salesmen and associated persons

affiliated with such broker or dealer! The order of the Commission refusing,reoking, suspending or placing limitations on a registration as herein aboeproided, together with its findings, shall be entered in the Register of Securities?arket +rofessionals! The suspension or reocation of the registration of adealer or broker shall also automatically suspend the registration of a dealer orbroker shall also automatically suspend the registration of all salesmen andassociated persons affiliated with such broker or dealer!

8!/! $t shall be sufficient cause for refusal, reocation or suspension of abroker>s or dealer>s registrations, if any associated person thereof or any =uridicalentity controlled by such associated person has committed any act or omission or

is sub=ect to any disability enumerated in paragraphs &a' through &i' of Subsection8! $ hereof!

Section 3%.Transactions and Responsibility of Bro3ers and Dealers! 9!#


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CHAPTER I

ECHANGES AND OTHER SECURITIES TRADING !AR*ETS

Section 32.Prohibition on 8se of 8nregistered &'change5 Regulation of ,ver(the(Counter 4ar3ets.!#!


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the operation of the insolent member firm and immediately proceed tosettle the member firm>s liabilities to its customers!

!! Registrations of an 63change shall be granted upon compliance with thefollowing proisions%

&a' That the applicant is organized as a stock corporation% Provided, Thatany registered 63change e3isting prior to the effectiity of this Code shallwithin one ' year reorganize as a stock corporation pursuant to ademutualization plan approed by the Commission(

&b' That the applicant is engaged solely in the business of operating ane3change% Provided- ho!ever, That the Commission may adopt rules,regulations or issue an order, upon application, e3empting an 63changeorganized as a stock corporation and owned and controlled by another

=uridical person from the restriction!

&c' Ehere the 63change is organized as a stock corporation, that noperson may beneficially own or control, directly or indirectly, more thanfie percent &1D' of the oting rights of the 63change and no industry orbusiness group may beneficially own or control, directly or indirectly, morethan twenty percent &9D' of the oting rights of the 63change% Provided-ho!ever-That the Commission may adopt rules, regulations or issue anorder, upon application from this prohibition where it finds that suchownership or control will not negatiely impact on the e3change>s ability toeffectiely operate in the public interest!

&d' The e3pulsion, suspension, or disciplining of a member and personsassociated with a member for conduct or proceeding inconsistent with =ustand e:uitable principles of fair trade, and for iolations of proisions of thisCode, or any other 2ct administered by the Commission, the rules,regulations and orders thereunder, or the rules of the 63change(>

&e' 2 fair procedure for the disciplining of members and personsassociated with members, the denial of membership to any personseeking to be a member, the barring of any person from association with amember, and the prohibition or limitation of any person from associationwith member, and the prohibition or limitation of any person from access

to serices offered by the 63change(

&f' That the brokers in the board of the 63change shall comprise of notmore than forty-nine percent &/8D' of such board and shallproportionately represent the 63change membership in terms ofolume0alue or trade and paid up capital, and that any natural personassociated with a =uridical entity that is a member for this purpose(

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Provide- That any registered 63change e3isting prior to the affectiity ofthis Code shall immediately comply with this re:uirement(

&g' )or the board of the 63change to include in its composition ' thepresident of the 63change, and &ii' no less than fifty one percent &1#D' of

the remaining members of the board to be comprised of three &'independent directors and persons who represent the interests of issuers,inestors, and other market participants, who are not associated with anybroker or dealer or member of the 63change for a period of two &' yearsprior to his0her appointment!


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Commission shall cause such 63change to be registered! $f, after notice due andhearing, the Commission finds otherwise, the application shall be denied!

!/! Eithin ninety &89' days after the filing of the application the Commissionmay issue an order either granting or denying registration as an 63change,

unless the 63change applying for registration shall withdraw its application orshall consent to the Commission>s deferring action on its application for a statedlonger period after the date of filing! The filing with the Commission of anapplication for registration by an 63change shall be deemed to hae taken placeupon the receipt thereof! 2mendments to an application may be made upon suchterms as the Commission may prescribe!

!1! ;pon the registration of an 63change, it is shall pay a fee in such amountand within such period as the Commission may fi3!

!4! ;pon appropriate application in accordance with the rules and regulations

of the Commission and upon such terms as the Commission may deemednecessary for the protection of inestors, an e3change may withdraw itsregistration or suspend its operations or resume the same!

Section 3". Segregation and 9imitation of functions of 4embers- Bro3er andDealers. ( /!#! $t shall be unlawful for any member-broker of an 63change toeffect any transaction on such 63change for its own account, the account of anassociated person, or an account with the respect to which it or an associatedperson thereof e3ercises the inestment discretion% Provided- ho!ever- That thisSection shall not make unlawful-

&a' 2ny transaction by a member-broker acting in the capacity of a marketmaker(

&b' 2ny transaction reasonably necessary to carry on an odd-lottransactions(

&c' 2ny transaction to offset a transaction made in error( and

&d' 2ny other transaction of a similar nature as may be defined by theCommission!

/!! $n all instances where the member-broker effects a transaction on an63change for its own account or the account of an associated person or anaccount with the respect to which it e3ercises inestment discretion, it shalldisclose to such customer at or before the completion of the transaction it isacting for its own account% Provided- further- That this fact shall be reflected inthe order ticket and the confirmation slip!

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/!! 2ny member-broker who iolates the proisions of this Section shall besub=ect to the administratie sanctions proided in Section 1/ of this Code!

Section 3#.dditional "ees of &'changes. $n addition to the registration feeprescribed in Section of this Code, eery 63change shall pay to the

Commission, on a semestral basis on or before the tenth day of the end of theend of eery semester of the calendar year, a fee in such an amount as theCommission shall prescribe, but not more than one-hundredth of oneper centumD' of the aggregate amount of the sales of securities transacted on such63change during the preceding calendar year for the priilege of doing business,during the preceding calendar year or any part thereof!

Section 3$. Po!ers !ith Respect to &'changes and ,ther Trading 4ar3et. 4!#! The Commission is authorized, if in its opinion such action is necessary orappropriate for the protection of inestors and the public interest so re:uires,summarily to suspend trading in any listed security on any 63change or other

trading market for a period not e3ceeding thirty &9' days but not e3ceedingninety &89' days% Provided- ho!ever, That the Commission promptly following theissuance of the order of suspension, shall notify the affected issuer of thereasons for such suspension and proide such issuer with an opportunity forhearing to determine whether the suspension should be lifted!

4!! Ehereer two &' or more 63changes or other trading markets e3ist, theCommission may re:uire and enforce uniformity of trading regulations in and0orbetween or among said 63changes or other trading markets!

4!! $n addition to the e3isting +hilippine Stock 63change, the Commission shall

hae the authority to determine the number, size and location of stock63changes, other trading markets and commodity 63changes and other similarorganizations in the light of national or regional re:uirements for such actiitieswith the iew to promote, enhance, protect, consere or rationalize inestment!

4!/! The Commission, haing due regard to the public interest, the protection ofinestors, the safeguarding of securities and funds, and maintenance of faircompetition among brokers, dealers, clearing agencies, and transfer agents,shall promulgate rules and regulations for the prompt and accurate clearanceand settlement of securities transactions!

4!1! &a' The Commission may establish or facilitate the establishment of trustfunds which shall be contributed by 63changes, brokers, dealers, underwriters,transfer agents, salesmen and other persons transacting in securities, as theCommission may re:uire, for the purpose of compensating inestors for thee3traordinary losses or damage they may suffer due to business failure or fraudor mismanagement of the persons with whom they transact, under such rulesand regulations as the Commission may from time to time prescribe or approein the public interest!

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&b' The Commission may, haing due regard to the public interest or theprotection of inestors, regulate, superise, e3amine, suspend orotherwise discontinue such and other similar funds under such rules andregulations which the Commission may promulgate, and which mayinclude taking custody and management of the fund itself as well as

inestments in and disbursements from the funds under such forms ofcontrol and superision by the Commission as it may from time to timere:uire! The authority granted to the Commission under this subsectionshall also apply to all funds established for the protection of inestors,whether established by the Commission or otherwise!

Section 37. Registration of #nnovative and ,ther Trading 4ar3ets. TheCommission, haing due regard for national economic deelopment, shallencourage competitieness in the market by promulgating within si3 &4' monthsupon the enactment of this Code, rules for the registration and licensing ofinnoatie and other trading markets or 63changes coering, but not limited to,

the issuance and trading of innoatie securities, securities of small, medium,growth and enture enterprises, and technology-based entures pursuant toSection of this Code!

Section 38. #ndependent Directors. 2ny corporation with a class of e:uitysecurities listed for trading on an 63change or with assets in e3cess of )iftymillion pesos &+19,999,999!99' and haing two hundred &99' or more holders,at least of two hundred &99' of which are holding at least one hundred c'shares of a class of its e:uity securities or which has sold a class of e:uitysecurities to the public pursuant to an effectie registration statement incompliance with Section # hereof shall hae at least two &' independent

directors or such independent directors shall constitute at least twenty percent&9D' of the members of such board whicheer is the lesser! )or this purpose,an "independent director" shall mean a person other than an officer or employeeof the corporation, its parent or subsidiaries, or any other indiidual haing arelationship with the corporation, which would interfere with the e3ercise ofindependent =udgement in carrying out the responsibilities of a director!

CHAPTER

REGISTRATION) RESPONSIBILITIES AND O&ERSIGHT OF SELF'

REGULATOR+ ORGANI,ATIONS

Section 39. ssociations of Securities Bro3ers- and Dealers- and ,therSecurities Related ,rgani$ations! 8!#! The Commission shall hae the powerto register as a self-regulatory organization, or otherwise grant licenses, and toregulate, superise, e3amine, suspend or otherwise discontinue, as a conditionfor the operation of organizations whose operations are related to or connectedwith the securities market such as but not limited to associations of brokers anddealers, transfer agents, custodians, fiscal and paying agents, computerserices, news disseminating serices, pro3y solicitors, statistical agencies,

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securities rating agencies, and securities information processor which areengaged in business of% &a' Collecting, processing, or preparing for distribution orpublication, or assisting, participating in, or coordinating the distribution orpublication of, information with respect to transactions in or :uotations for anysecurity( or &b' *istributing or publishing, whether by means of a ticker tape, a

communications network, a terminal display deice, or otherwise, on a currentand continuing basis, information with respect to such transactions or :uotations!The Commission may prescribe rules and regulations which are necessary orappropriate in the public interest or for the protection of inestors to goern self-regulatory organizations and other organizations licensed or regulated pursuantto the authority granted in Subsection 8!# including the re:uirement ofcooperation within and among, and electronic integration of the records of, allparticipants in the securities market to ensure transparency and facilitatee3change of information!

8!! 2n association of brokers and dealers may be registered as a securities

association pursuant to Subsection 8! by filing with the Commission anapplication for registration in such form as the Commission, by rule, mayprescribe containing the rules of the association and such other information anddocuments as the Commission, by rule, may prescribe as necessary orappropriate in the public interest or for the protection of inestors!

8!! 2n association of brokers and dealers shall not be registered as asecurities association unless the Commission determines that%

&a' The association is so organized and has the capacity to be able tocarry out the purposes of this Code and to comply with, and to enforce

compliance by its members and persons associated with its members,with the proisions of this Code, the rules and regulations thereunder, andthe rules of the association!

&b' The rules of the association, notwithstanding anything in theCorporation Code to the contrary, proide that%

&i' 2ny registered broker or dealer may become a member of theassociation(

&ii' There e3ist a fair representation of its members to sere on the

.oard of *irectors of the association and in the administration of itsaffairs, and that may any natural person associated with a =uridicalentity that is a member shall himself be deemed to be a member forthis purpose(

&iii' The .oard of *irectors of the association includes in itscomposition%

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&a' The president of the association and

&b' +erson who represent the interests of the issuer andpublic inestors and are not associated with any broker ordealer or member of the association( that the president and

other management of the association not be a member orassociated with any broker, dealer or member of theassociation(

&i' )or the e:uitable allocation of reasonable dues, fees, and othercharges among member and issuers and other persons using anyfacility or system which the association operates or controls(

&' )or the preention of fraudulent and manipulatie acts andpractices, the promotion of =ust and e:uitable principles of trade,and, in general, the protection of inestors and the public interest(

&i' That its members and persons associated with its membersshall be appropriately disciplined for iolation of any proision ofthis Code, the rules and regulations thereunder, or the rules of theassociation(

&ii' That a fair procedure for the disciplining of members andpersons associated with members, the denial of membership to anyperson seeking membership therein, the barring of any person frombecoming associated with a member thereof, and the prohibition orlimitation by the association of any person with respect to access to

serices offered by the association or a member thereof!

8!/! &a' 2 registered securities association shall deny membership to anyperson who is not a registered broker or dealer!

&b' 2 registered securities association may deny membership to, orcondition the membership of, a registered broker or dealer if such brokeror dealer%

&i' *oes not meet the standards of financial responsibility,operational capability, training, e3perience or competence that are

prescribe by the rules of the association( or

&ii' @as engaged, and there is a reasonable likelihood it will againengage, in acts or practices inconsistent with =ust and e:uitableprinciples of fair trade!

&c' 2 registered securities association may deny membership to aregistered broker or dealer not engage in a type of business in which the

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rules of the association re:uire members to be engaged% Provided-ho!ever-That no registered securities association may deny membershipto a registered broker or dealer by reason of the amount of business doneby the broker or dealer!

2 registered securities association may e3amine and erify the:ualifications of an applicant to become a member in accordance withprocedure established by the rules of the association!

&d' 2 registered securities association may bar a salesman or personassociated with a broker or dealer from being employed by a member orset conditions for the employment of a salesman or associated if suchperson%

&i' *oes not meet the standards of training, e3perience, orcompetence that are prescribe by the rules of the association( or

&ii' @as engage, and there is a reasonable likelihood he will againengage, in acts or practices inconsistent with =ust and e:uitableprinciples of fair trade!

2 registered securities association may e3amine and erify the :ualifications ofan applicant to become a salesman or associated person employed by amember in accordance with the procedures establish by the rules of theassociation! 2 registered association also may re:uire a salesman or associatedperson employed by a member to be registered with the association inaccordance with the procedures prescribed in the rules of the association!

8!1! $n any proceeding by a registered securities association to determinewhether a person shall be denied membership, or barred from association with amember, the association shall proide notice to the person under reiew of thespecific grounds being considered for denial, afford him an opportunity to defendagainst the allegations, and keep a record of the proceedings! 2 determination bythe association to deny membership shall be supported by a statement settingforth the specific grounds on which the denial is based!

Section "%.Po!ers !ith Respect to Self(Regulatory ,rgani$ations. ( /9!#! ;ponthe filing of an application for registration as an 63change under Section , a

registered securities association under Section 8, a registered clearing agencyunder Section /, or other self-regulatory organization under this Section, theCommission shall hae ninety &89' days within which to either grant registrationshould be denied! $n the eent proceedings are instituted, the Commission shallhae two hundred seenty &59' days within which to conclude such proceedingsat which time it shall, by order, grant or deny such registration!

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/9!! 6ery self-regulatory organization shall comply with the proision of thisCode, the rules and regulations thereunder, and its own rules, and enforcecompliance therewith, notwithstanding any proisions of the Corporation Code tothe contrary, by its members, persons associated with its members of itsparticipants!

/9!! &a' 6ach self-regulatory organization shall submit to the Commission forprior approal any proposed rule or amendment thereto, together with a concisestatement of the reason and effect of the proposed amendment

&b' Eithin si3ty &49' days after submission of a proposed amendment, theCommission shall, by order, approe the proposed amendment!therwise, the same may be made effectie by the self-regulatoryorganization!

&c' $n the eent of an emergency re:uiring action for the protection of

inestors, the maintenance of fair and orderly markets, or thesafeguarding of securities and funds, a self-regulatory organization mayput a proposed amendment into effect summarily( Provided ho!ever- Thatthe copy of the same shall be immediately submitted to the Commission!

/9!/! The Commission is further authorized, if after making appropriate re:uest inwriting to a self-regulatory organization that such organization effect on its ownbehalf specified changes in its rules and practices and, after due to notice andhearing it determines that such changes hae not been effected, and that suchchanges are not necessary, by the rule or regulation or by order, may alter,abrogate or supplement the rules of such self-regulatory organization in so far as

necessary or appropriate to effect such changes in respect of such matters as%

&a' Safeguards in respect of the financial responsibility of members andade:uate proision against the easion of financial responsibility throughthe use of corporate forms or special partnerships(

&b' The superision of trading practices(

&c' The listing or striking from listing of any security(

&d' @ours of trading(

&e' The manner, methods, and place of soliciting business(

&f' )ictitious accounts(

&g' The time and method of making settlements, payments, and delieries,and of closing accounts(

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&h' The transparency of securities transactions and prices(

&i' The fi3ing of reasonable rates of fees, interest, listing and othercharges, but not rates of commission(

&=' ?inimum units of trading(

&k' dd-lot purchases and sales(

&l' ?inimum deposits on margin accounts( and

&m' The superision, auditing and disciplining of members or participants!

/9!1! The Commission, after due notice and hearing, is authorized, in the publicinterest and to protect inestors%

&a' To suspend for a period not e3ceeding twele ' months or to reokethe registration of a self-regulatory organization, or to censure or imposelimitations on the actiities, functions, and operations of such self-organization, if the Commission finds that such a self-regulatoryorganization has willfully iolated or is unable to comply with any proisionof this Code or of the rules and regulations thereunder, or its own or hasfailed to enforce compliance therewith by a member of, person associatedwith a member, or a participant in such self-regulatory organization(

&b' To e3pel from a self-regulatory organization any member thereof orany participant therein who is sub=ect to an order of the Commission under

Section 8 of this Code or is found to hae willfully iolated any proisionof this Code or suspend for a period not e3ceeding twele ' months foriolation of any proision of this Code or any other laws administered bythe Commission, or rules and regulations thereunder, or effected, directlyor indirectly, any transaction for any person who, such member orparticipant had reason to beliee, was iolating in respect of suchtransaction any of such proisions( and

&c' To remoe from the office or censure any officer or director of a self-regulatory organization if it finds that such officer or director has iolatedany proision of this Code, any other law administered by the

Commission, the rules or regulations thereunder, or the rules of such self-regulatory organization, abused his authority, without reasonable=ustification or e3cuse has failed to enforce compliance with any of suchproisions!

/9!4! &a' 2 self-regulatory organization is authorized to discipline a member of orparticipant in such self-regulatory organization, or any person associated with amember, including the suspension or e3pulsion of such member or participant,

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and the suspension or bar from being associated with a member, if such personhas engage in acts or practices inconsistent with =ust and e:uitable principles offair trade or in willful iolation of any proision of the Code, any other lawadministered by the Commission, the rules or regulations thereunder, or the rulesof the self-regulatory organization! $n any disciplinary proceeding by a self-

regulatory organization &other than a summary proceeding pursuant to paragraph&b' of this subsection' the self-regulatory organization shall bring specificcharges, proide notice to the person charged, afford the person charged with anopportunity to defend against the charges, and keep a record of the proceedings!

2 determination to impose a disciplinary sanction shall be supported by a writtenstatement of the offenses, a summary of the eidence presented and a statementof the sanction imposed!

&b' 2 self-regulatory organization may summarily% &$' Suspend a member,participant or person associated with a member who has been or ise3pelled or suspended from any other self-regulatory organization( or &ii'

Suspend a member who the self-regulatory organization finds to be insuch financial or operating difficulty that the member or participant cannotbe permitted to continue to do business as a member with safety toinestors, creditors, other members, participants or the self-regulatoryorganization% Provided- That the self-regulatory organization immediatelynotifies the Commission of the action taken! 2ny person aggrieed by asummary action pursuant to this paragraph shall be promptly afforded anopportunity for a hearing by the association in accordance with theproisions of paragraph &a' of this subsection! The Commission, by order,may stay a summary action on its own motion or upon application by anyperson aggrieed thereby, if the Commission determines summarily or

after due notice and hearing &which hearing may consist solely of thesubmission of affidaits or presentation of oral arguments' that a stay isconsistent with the public interest and the protection of inestors!

/9!5! 2 self-regulatory organization shall promptly notify the Commission of anydisciplinary sanction on any member thereof or participant therein, any denial ofmembership or participation in such organization, or the imposition of anydisciplinary sanction on a person associated with a member or a bar of suchperson from becoming so associated! Eithin thirty &9' days after such notice,any aggrieed person may appeal to the Commission from, or the Commissionfrom, or the Commission on its own motion within such period, may institutereiew of, the decision of the self-regulatory organization, at the conclusion ofwhich, after due notice and hearing &which may consist solely of reiew of therecord before the self-regulatory organization', the Commission shall affirm,modify or set aside the sanction! $n such proceeding the Commission shalldetermine whether the aggrieed person has engaged or omitted to engage inthe acts and practices as found by the self-regulatory organization, whether suchacts and practices constitute willful iolations of this Code, any other lawadministered by the Commission, the rules or regulations thereunder, or the rules

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of the self-regulatory organization as specified by such organization, whethersuch proisions were applied in a manner consistent with the purposes of thisCode, and whether, with due regard for the public interest and the protection ofinestors the sanction is e3cessie or oppressie!

/9!7! The powers of the Commission under this Section shall apply to organizede3changes and registered clearing agencies!

CHAPTER I

AC(UISITION AND TRANSFER OF SECURITIES AND SETTLE!ENT OF

TRANSACTION IN SECURITIES

Section "1. Prohibition on 8se of 8nregistered Clearing gency. $t shall beunlawful for any broker, dealer, salesman, associated person of a broker ordealer, or clearing agency, directly or indirectly, to make use of any facility of aclearing agency in +hilippines to make delieries in connection with transaction in

securities or to reduce the number of settlements of securities transactions or toallocate securities settlement responsibilities or to proide for the central handlingof securities so that transfers, loans and pledges and similar transaction can bemade by bookkeeping entry or otherwise to facilitate the settlement of securitiestransactions without physical deliery of securities certificates, unless suchclearing agency is registered as such under Section / of this Code or ise3empted from such registration upon application by the clearing agencybecause, in the opinion of the Commission, by reason of the limited olume oftransactions which are settled using the clearing agency, it is not practicable andnot necessary or appropriate in the public interest or for the protection ofinestors to re:uire such registration!

Section "2.Registration of Clearing gencies. - /!#! 2ny clearing agency maybe registered as such with the Commission under the terms and conditionshereinafter proided in this Section, by filing an application for registration in suchform and containing such information and supporting documents as theCommission by rule shall prescribe, including the following%

&a' 2n undertaking to comply and enforce compliance by its participantswith the proisions of this Code, and any amendments thereto, and theimplementing rules or regulations made or to be made thereunder, and theclearing agency>s rules(

&b' The organizational charts of the 63change, its rules of procedure, andlist of its officers and participants(

&c' Copies of the clearing agency>s rules!

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&a' The e3pulsions, suspension, or disciplining of a participant foriolations of this Code, or any other 2ct administered by the Commission,the rules, regulations, and orders thereunder, or the clearing agency>srules(

&b' 2 fair procedure for the disciplining of participants, the denial ofparticipation rights to any person seeking to be a participant, and theprohibition or limitation of any person from access to serices offered bythe clearing agency(

&c' The e:uitable allocation of reasonable dues, fees, and other chargesamong participants(

&d' +reention of fraudulent and manipulatie acts and practices,promotion of =ust and e:uitable principles of trade, and, in general,protection of inestors and the public interest(

&e' The transparent, prompt and accurate clearance and settlement oftransactions in securities handled by the clearing agency( and

&f' The establishment and oersight of a fund to guarantee the prompt andaccurate clearance and settlement of transaction e3ecuted on ane3change, including a re:uirement that members each contribute anamount based on their and a releant percentage of the daily e3posure ofthe &/' largest trading brokers which ade:uately reflects trading risksundertaken or pursuant to another formula set forth in Commission rulesor regulations or order, upon application% +roided, howeer, That a

clearing agency engaged in the business of securities depository shall bee3empt from this re:uirement!

/!! $n the case of an application filed pursuant to this section, the Commissionshall grant registration if it is finds That the re:uirements of this code and therules and regulations thereunder with respect to the applicant hae beensatisfied, and shall deny registration if it does not make such finding!

/!/! ;pon appropriate application in accordance with the rules and regulationsof the Commission and upon such terms as the Commission may deemnecessary for the protection of inestors, a clearing agency may withdraw its

registration or suspend its operation or resume the same!

Section "3. 8ncertificated Securities!


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of some or all its shares into the name of said shareholders, inestors or,securities intermediary in the form of uncertified securities! The use ofuncertified securities in these circumstances shall be without pre=udice tothe rights of the securities intermediary subse:uently to re:uire thecorporation to issue a certificate in respect of any shares recorded in its

name( and

&b' $f so proided in its articles of incorporation and by-laws, issue all ofthe shares of a particular class in the form of ;ncertificated securities andsub=ect to a condition that inestors may not re:uire the corporation toissue a certificate in respect of any shares recorded in their name!

/!! The Commission by rule may allow other corporations to proide in theirarticles of incorporation and by-laws for the use of uncertificated securities!

/!! Transfers of securities, including an uncertificated securities, may be alidly

made and consummated by appropriate book-entries in the securitiesintermediaries, or in the stock and transfer book held by the corporation or thestock transfer agent and such bookkeeping entries shall be binding on the partiesto the transfer! 2 transfer under this subsection has the effect of the deliery of asecurity in bearer form or duly indorsed in blank representing the :uantity oramount of security or right transferred, including the unrestricted negotiability ofthat security by reason of such deliery! @oweer, transfer of uncertificatedshares shall only be alid, so far as the corporation is concerned, when a transferis recorded in the books of the corporation so as to show the names of theparties to the transfer and the number of shares transferred!

@oweer, nothing in this Code shall compliance by banking and other institutionsunder the superision of the .angko Sentral ng +ilipinas and their stockholderswith the applicable ceilings on shareholding prescribed under pertinent bankinglaws and regulations!

Section "".&videntiary alue of Clearing gency Record! The official recordsand book entries of a clearing agency shall constitute the best eidence of suchtransactions between clearing agency shall constitute the best between clearingagency and its participants> or members> clients to proe their rights, title andentitlement with respect to the book-entry security holdings of the participants ormembers held on behalf of the clients! @oweer, the corporation shall not be

bound by the foregoing transactions unless the corporate secretary is dulynotified in such manner as the Commission may proide!

Section "#. Pledging a Security or #nterest Therein! $n addition to othermethods recognized by law, a pledge of, including an uncertificated security, isproperly constituted and the instrument proing the right pledged shall beconsidered deliered to the creditor under 2rticles 98 and 981 of the CiilCode if a securities intermediary indicates by book entry that such security has

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been credited to a specia

RA 8997 - Securities Act

Documents

Transcript of RA 8997 - Securities Act