SECURITIES REGULATION CODEREPUBLIC ACT No.8799 Declaration of State Policy • The state shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprise, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in free market. • Any doubt in the interpretation of these Rules shall be resolved by the Commission in the manner which would establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, ensure full and fair disclosure about securities, minimize insider trading and other fraudulent or manipulative devices and practices, promote the development of the capital market and protect investors. The reforms advanced by the SRC to list a few are (1) Securities are defined to include those securities that the market may develop in the future. (4) allowing investors to recover from insiders who trade or tip information in violation of insider trading provisions. (5) Transfer of SEC jurisdiction over all cases enumerated under Section 5 of P.D. 902-A to the Regional Trial Court designated as commercial court by the Supreme Court. Simplified registration process Standards for rejection have been made clear and more specific. (3) Expanding the coverage of “insider” to include person who receives “tip” from an insider. .KEY PROVISIONS OF THE SRC • • • • • Requiring issuers and underwriters to fully disclose all material facts about the issue or nature of the offering Mandatory distribution of prospectus and regular filing of financial and operational reports. (2) Shift from merit regulation to full disclosure. is an amount fixed in the corporate charter. bonds. Insider. and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available to the public. It includes: a) Shares of stock. contract. evidences of indebtedness. . participation or interest in a corporation or in a commercial enterprise or profit making venture and evidenced by a certificate. a government employee. b) investment contracts. a director or officer or persons performing similar functions of. certificates of participation.are the units into which the capital stock is divided. d) Derivatives like option and warrants. f) Proprietary or non-proprietary membership certificates in corporations. debentures. clearing agency. a person whose relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public. e) Certificates of assignment. g) Other instruments as may in the future be determined by the Commission. voting trust certificates or similar instruments. notes. instrument. or a person who learns such information by a communication from any of the foregoing insiders. c) Fractional undivided interest in oil. certificates of deposit for a future subscription.Definition of Terms • SECURITIES. Capital Stock. whether written or electronic in character.are shares. gas. or a person controlling the issuer. • • • Shares of stock. asset backed securities. certificates of interest or participation in a profit sharing agreement. or director or officer of an exchange.means the issuer. trust certificates. or other mineral rights. Requires the registration and/or licensing of securities 2. Requires proper disclosure of securities 4. The role of the SEC in our national economy cannot be minimized. Section 4 of the Code vest the authority to administer the regulations of securities under the Code with the Securities and Exchange Commission.Requires the registration of brokers and salesmen 5. the Securities Act: – – – – – 1. . The legislature has entrusted to it the serious responsibility of enforcing all laws affecting corporation and other associations not otherwise vested in some other government offices. Requires the registration of stock exchanges and clearing agency The Securities and Exchange Commission is the government agency tasked of implementing and enforcement of the provisions of the Securities Regulations Code. Requires submission of reports and other financial documents 3.PROTECTION OF INVESTING PUBLIC UNDER THE SECURITIES ACT • In order to protect the investing public. monitor. firm. amend or repeal rules. regulations and orders. 7. advise congress and other government agencies on all aspect of the securities market and propose legislation and amendments thereto. Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision. regulations and orders. 2. regulations and orders issued pursuant thereto. civil or military s well as any private institution. clearing agencies and other SROs. both direct and indirect. 10. 9. Prepare. or take over the activities of exchanges. 5. suspend. and registration and licensing applications. partnership or association who are grantees of primary franchises and/or a license or permit issued by the government. in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court. corporation. Enlist the aid and support of and/or deputize any and all enforcement agencies of the government. suspend. Supervise. Jurisdiction and supervision over all corporations. 6. and issue opinions and provide guidance on and supervise compliance with such rules. reject. Issue cease and desist orders to prevent fraud or injury to the investing public. . It has the following powers and functions under the Code: – – – – – – – – – – – 1. Punish for contempt of the Commission. association or person in the implementation of its powers and functions under this code. revoke or require amendments to registration statements. 11. Impose sanctions for the violation of laws and the rules. Approve. 8. Formulate policies and recommendations on issues concerning the securities market.Powers of the Securities and Exchange Commission • Section 5 of the Code provides for the powers of the SEC. approve. investigate or supervise the activities of persons to ensure compliance. Regulate. 4. 3. 2000 until finally disposed. however. and records. tax returns. Exercise such powers as may be provided by law as well as those which may be implied from. and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the case before it. sitting as special commercial court.Powers of the SEC • 12. the express powers granted the Commission to achieve the objectives and purposes of these laws. search and seizure of all documents. Suspend or revoke. order the examination. The Commission’s jurisdiction over all cases enumerated under Section 5 of PD No. 13. 14. subject to the provisions of existing laws. papers. The Commission also retained jurisdiction over pending suspension of payments/rehabilitation cases filed as of June 30. partnership or associations. or which are necessary or incidental to the carrying out of. . Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases. after proper notice and hearing the franchise or certificate of registration of corporations.902A were transferred to the Regional Trial Court. files. upon any of the grounds provided by law. it shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. sitting as special commercial court. The Supreme Court has already promulgated the Rules on Intra-Corporate Dispute and Corporate Rehabilitation. officers. Controversies arising out of intra-corporate or partnership relations. partnership. partners. . members. or association and the state in so far as it concerns their individual franchise or right to exist as such entity. or associations between any or all of them and the corporation. between and among stockholders. also exercises jurisdiction over Corporate Rehabilitation. or managers of such corporation. members or association respectively between such corporation. and misrepresentation which may be detrimental to the interest of the public registered with the Commission. partnership or association of which they are stockholders. Controversies in the election or appointment of directors. partnership or association. business associates. The Regional Trial Court. trustees. members of association and organization. or associations of which they are stockholders. its officers or partners amounting to fraud. members.POWERS OF SEC TRANSFERRED TO THE REGIONAL TRIAL COURT-COMMERCIAL COURT • • • • Devices and schemes employed by or any acts of the Board of Directors and/or stockholder. of good reputation and character. shall be made available to each prospective purchaser. information on the securities. in such form and with such substance as the Commission may prescribe.Securities shall not be sold or offered for sale or distribution within the Philippines. . Prior to such sale. The following constitute registration of securities: a) Filing by the issuer or by any dealer or underwriter interested in the office of the SEC. c) Publication of the filing in two (2) newspaper of general circulation for two (2) consecutive weeks. The keystone to the disclosure process are the. b) Payment of a fee. The Commission may audit the financial statement. without a registration statement duly filed with and approved by the Commission. c) to allow only issuer who is solvent. b) to have compliance of the law by the issuer. The Commission may conditionally approve the registration statement under such terms as it may deem necessary. a) registration statement. of sworn registration statement with respect to such securities. assets and other information of a firm applying for registration of its securities whenever it deems the same necessary to insure full disclosure or to protect the interest of the investors and the public in general. b) the prospectus. and whose business is based on sound business principles.Registration of Securities • • • • • • Registration Requirement of Securities (Section 8). Reasons behind the requirements of registration: a) to give adequate protection and reliable information to investing public. The following classes of securities are exempt from registration: – – – – – 1. Any sale or transaction involving any of the securities mentioned in section 9 of the Code does not require a previous registration of the security sold or otherwise disposed of. Housing and Land Use Regulatory Board. or the Bureau of Internal Revenue.Exempt Securities-Section 9 • • What the law exempts from registration are the SECURITIES themselves that are enumerated in section 9 of the Code. Any security or its derivatives the sale or transfer of which. or by any political subdivision or agency thereof. is under the supervision and regulation of the Office of the Insurance Commission. or by any state. 5. that the Commission may require compliance with the form and content of disclosures the Commission may prescribed. by law. Any security issued or guaranteed by the government of any country with which the Philippine maintains diplomatic relations. . For instance. Any security issued or guaranteed by the government of the Philippines. province or political subdivision thereof on the basis of reciprocity: provided. Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body. 3. and acting as an instrumentality of said government. Any security issued by a bank except its own shares of stock. 2. 4. or by any person controlled or supervised by. a bond issued by the government of the Philippines may be sold without the necessity of registering the same. 2) By or for the account of a pledge holder. or mortgagee or any other similar lien holder selling or offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provisions of this code.1 of the Code shall not apply to the sale of any securities enumerated in any of the following transactions enumerated therein. 5) The sale of capital stock of a corporation to its own stockholders exclusively. or sale by an executor. to liquidate a bona fide debt. of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus. a security pledged in good faith as security for such. 6) The issuance of bonds or notes secured by mortgage upon real or tangible personal property. or on his account by such representative and such owner or representative not being the underwriter of such security.EXEMPT TRANSACTION • • • Section 10 of the Securities Regulation Code enumerates the exempt transactions where registration under Section 8. 3) An isolated transaction in which any security is sold. such sale or offer for sale. 7) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make such conversion. The following are exempt transactions: 1)At any judicial sale. What is exempted from registration is the transaction or sale of securities and not the securities sold or disposed. offered for sale. that the security so surrendered has been registered under this code or was. would be at the time of such conversion fall within the class of securities entitled to registration under this code. where the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale. subscription or delivery not being made in the course of repeated or successive transactions of a like character by such owner. provided. subscription or delivery by the owner thereof. when sold exempt from the provisions of this code. . 4) The distribution by a corporation. where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock. actively engaged in the business authorized by its articles of incorporation. administrator. guardian or receiver or trustee in insolvency or bankruptcy. or by his representative for the owner’s account. if sold at a conversion price. Upon such conversion the par value of the security surrendered in exchange shall be deemed the price at which the securities issued and delivered in such exchange are sold. and that the security issued and delivered in exchange. where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. d) Pension Fund or retirement plan maintained by the government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Central Bank to engage in trust functions. knowledge. .EXEMPT TRANSACTION • • • • • • 8) Broker’s transactions. net worth. b) Registered Investment House. and only when the purpose for soliciting. or its authorized capital stock increased. on the basis of such factors as financial sophistication. The Commission may exempt other transactions. d) Investment Company. if it finds that the requirements of registration under this code is not necessary in the public interest or for the protection of the investors such as by reason of the small amount involved or the limited character of the public offering. 9) Subscription for shares of the capital stock of a corporation prior to incorporation thereof or in pursuance of an increase in its authorized capital stock under the corporation code. or such other person as the Commission may by rule determine as qualified buyers. giving or taking of such subscription is to comply with the requirements of such law as to the percentage of the capital stock of a corporation which would be subscribed before it can be registered and duly incorporated. when no expense is incurred. 11) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during the twelve-month period. compensation or remuneration is paid or given in connection with the sale or disposition of such securities. executed upon customer’s orders. c) Insurance Company. or amount of assets under management. on any registered Exchange or other trading market. 12) The sale of securities to any number of the following qualified buyers:a) Bank. and experience in financial and business matters. 10) The exchange of securities by the issuer with its existing security holders exclusively. or no commission. and includes standardize contract having the indicia of commodity futures. • • The term refers to the purchase in the future of certain types of commodities like oil. Commodity means any goods. Bill of Lading. The term refers to transaction of buying and selling interest in a contract for physical delivery of commodities in the future. including in any group or index of any of the foregoing. commodity options and commodity leverage. and orders of the Commission may prescribe in the public interest. • Commodity Future Contract means a contract providing for the making or taking of delivery at a prescribed time in the future of a specific quantity and quality of a commodity or the cash value thereof. articles. offer or enter into commodity futures contract except in accordance with rules. . sugar and the like. regulations. The purchase shall be at a certain future date. we are dealing with the buying and selling of interest which is represented by a piece of paper in a contract for future delivery of commodities. in which commodity interest contracts are presently or in the future dealt in. rights and interests. • Example: Warehouse Receipts.COMMODITY FUTURES CONTRACT • No person shall sell. services. We are not dealing actually with physical delivery. It is the interest that is sold not the commodity delivery. copper.Quedans. or margin contracts. which is customarily offset prior to the delivery date. among other things. required to register and submit disclosure statement about the pre-need plan. bonding and other financial responsibility. Pension or Retirement Plans.Education Plans.REGULATION OF PRE-NEED PLANS • Section 16. prescribing advertising guidelines. Such rules shall regulate the sale of pre-need plans by. requiring disclosure to prospective plan holders. providing uniform accounting system. put up a bond for payment of any claim. uniform accounting system and record keeping. • Example. and the like. and establishing trust funds for the payment of benefits under such plans. and record keeping with respect to such plans. • Under the Code. . • Features: Pre-Need Companies need to put a trust fund for the payment of benefits. imposing capital. the SEC is the government agency tasked to supervise and regulate the sale of pre-need plans by any person or entity. reports. requiring the registration of pre-need plans.No persons shall sell or offer for sale to the public any pre-need plan except in accordance with the rules and regulations which the Commission shall prescribed. Licensing is required under the Code for any person who shall sell or offer for sale to the public any pre-need plan. capital requirement. licensing persons involved in the sale of pre-need plans. 2 hereof. that the obligation of such issuer to file reports shall be terminated 90 days after notification to the Commission by the issuer that the number of its holders holding at least 100 shares is reduced to less than 100 holders. 3. In every case in which an issuer satisfies the requirements of sub-section 17. and to the Commission a sworn statement containing among others the purpose of the purchase or prospective purchases is to acquire control of the business. that the obligation of such issuer to file shall be suspended for any fiscal year after the year such registration became effective if such issuer. the Exchange where the security is traded. 2. any person who acquires directly or indirectly the beneficial ownership of more than 5% of such class or in excess of such lesser percentum as the Commission by rule may prescribe. however. such requirement is for the protection of the investors and for public interest.Reportorial Requirements • • • • • • • Purpose of Reporting Requirement: There cannot be honest market without honest publicity. however. Manipulation and dishonest practices of the market place thrive upon mystery and secrecy. 4. the number of shares beneficially owned and or any contracts or arrangements with other persons with respect to the securities of the issuer. has less that 100 holders of such class of securities or such other number as the Commission shall prescribe and it notifies the Commission of such. Who are required to make or file the periodic report as required by the Code: 1. . as of the first day of any fiscal year. The person mentioned in paragraph 4 shall submit to the issuer. An issuer with a class of securities listed for trading an Exchange. An issuer with assets of at least 50Million Pesos or such amount as the Commission shall prescribe and having 200 or more holders each holding at least 100 shares of a class of its equity securities: Provided. An issuer which has sold a class of its securities pursuant to a registration under section 12 hereof: provided. No broker or dealer shall give any proxy w/o express written consent of the customer or owner.Protection of Shareholder Interest • • • • • • Tender Offers.proxies must be issued and proxy solicitation must be made in accordance with rules and regulations issued by the Commission. Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities. Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on behalf of the depositor at any time throughout the period that the tender offer remains open and if the securities deposited have not been previously accepted for payment. and at anytime after 60 days from date of the original tender offer or request or invitation. such person shall pay the increased consideration to each security holder whose securities have been taken up and paid for whether or not such securities have been taken up by such person before the variation of the tender offer or request or invitation. No proxy shall be valid and effective for a period longer than 5 years at one time. a statement containing such information required under section 17 of this Code as the Commission my prescribed. Proxies must be in writing. Unless otherwise provided in the proxy. . and furnish the issuer. or materials making a tender offer or requesting or inviting letters of such security. Such person or group of persons shall publish all request or invitation for tender. Proxy Solicitations. signed by the stockholder or his duly authorized representative and filed before the scheduled meeting with the corporate secretary. it shall be valid only for the meeting for which it was intended.Any person or group of persons acting in concert who intends to acquire at least 15% of any class of any equity security of a listed corporation or of any class of any equity security of a corporation with assets of at least 50Million and having 200 or more shareholder with at least 100 hundred shares each OR who intends to acquire at least 30% of such equity over a period of 12 months shall make a tender offer to stockholders by filing with the Commission a declaration to that effect. except as the Commission may otherwise prescribed. of the amount of all equity securities of such issuer of which he is the beneficial owner. unless such security was acquired in good faith in connection with a debt previously contracted.and within 10 days after the close of each calendar month thereafter. if such security is traded. or by the owner of any security of the issuer in the name and in behalf of the issuer. if the latter fails or refuse to bring such suit within 60 days after request or shall fail to prosecute the same thereafter. and if such security is listed or traded on an Exchange. to the Exchange where the security is traded and to the Commission.2. for its account or customer. to the issuer of security. shall file. irrespective of any intention of holding such security purchased or of not repurchasing the security sold for a period exceeding 6 months. any profit realized from any purchase and sale. or any sale and purchase of any security of such issuer within a period of less than 6 months. a statement indicating his ownership at the close of the calendar month and such change of ownership as have occurred during such calendar month. Officers.Every person who is directly or indirectly the beneficial owner of more than 10% of any class of any equity security which satisfies the requirements of subsection 17. • . FOR THE PURPOSE OF PREVENTING THE UNFAIR USE OF INFORMATION OBTAINED by such beneficial owner. at the time either such requirements is first satisfied or within 10 days after he becomes such as beneficial owner. also with the Exchange. director or officer. or is a director or an officer of the issuer of such security.Shareholder Protection • A broker or dealer who holds or acquire the proxy for at least 10% or such percentage as the Commission may prescribed of the outstanding share of the issuer shall submit a report identifying the beneficial owner within 10 days after such acquisition. director or officer by reason of his relationship to the issuer. SUIT TO RECOVER SUCH PROFIT MAY BE INSTITUTED BEFORE THE REGIONAL TRIAL COURT BY THE ISSUER. if there has been a change in such ownership during such month shall file with the Commission and the Exchange. a statement with the Commission. and Principal Stockholder. but no such suit shall be brought more than 2 years after the date such profit was realized. SHALL INURE TO AND RECOVERABLE BY THE ISSUER. • Transactions of Directors. in the opinion of the Commission. To avoid any undue interference with private rights. Enable the Commission to prevent any imposition upon its authority by the filing of any untrue. Purpose of the Stop Order: 1. The issuer shall also furnish such reports as the Commission may prescribe the holder of such equity security. What is a Stop Order? It is an Order of the Commission suspending the right to sell security providing further investigation. inadequate or incomplete or the sale or offering for the sale of the security may work or tend to work a fraud. And such other significant current financial development or condition of the issuer The above-mentioned reports must be duly certified by an independent certified accountant. Statement of Cash Flow 4. Balance Sheet 2. incorrect.Continuation-Reportorial Section 17-18 • • • • • • • • • • • • • Period of tile to file Report. . the information contained in the statement filed is or has become misleading.2 shall file with the Commission within 135 days after the end of the issuer’s fiscal year or such other time as the Commission may prescribe. at any time.Every issuer satisfying the requirements in sub-section 17. The periodic report shall include the following: 1. Profit and Loss Statement or Income Statement 3. 2. inadequate or misleading statement. if. Equity Securities.means securities which provides the holder thereof with voting rights and shall not include convertible securities and other derivatives except as provided in the definition of beneficial owner. to effect alone or with others. whether of the same or different class. depresses their price to induce the sale of security. controlled. controlled. disallowed on stock and other exchanges. it is an attempt to force securities to sell at prices either above or below those which exist as a result of the normal operation of supply and demand. whether for the same or a different class of the same issuer or of a controlling. by effecting any transaction in such security which involves no change in the beneficial ownership thereof. Section 24 of the Code enumerates the devices and practices on manipulation of security prices. The manipulator hopes to profit by creating fictitious prices at the expense of the general trading public. . a series of transactions in securities that raises their price to induce the purchase of a security.a fictitious kind of sale. Manipulation and Insider Trading • • • Manipulation is an artificial control of security prices. To mention some: by creating a false or misleading appearance of active trading in any listed security traded in an Exchange or any other trading market. or commonly controlled company by others. Wash sales. or commonly controlled company by others. in which broker who has received orders from one person to buy and from other person to sell a particular amount of quantity of some particular stock simply transfer the stock from one principal to the other and pockets the difference instead of executing both orders separately. of the same issuer or of a controlling.Prohibition on Fraud. to circulate or disseminate information that the price of any security listed in the Exchange will or likely to rise or fall because of manipulative market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security for the purpose of inducing the purchase or sale of such security. It means the double privilege of a “put” and “call”. if the holder wishes him to. in consideration of a price or fee. If the option does not become valuable. within the same time. being out only the price he paid for the option in the beginning. “call”. or to require him to take. the maker receiving in consideration for his contract. The idea is that certain firms issue option good for a limited time in a certain stock for a certain sum. 3. It is an agreement whereby the maker contracts to deliver.No member of an Exchange shall directly or indirectly endorse or guarantee the performance of any put. then. straddle.it is the reverse of the “put”. 2. a certain fee or price from the option holder. a certain amount of stock at a certain price within a certain time. Types of option: 1. The terms “put”. a certain amount of stock at a certain price with a certain period.Regulation of Option Trading • • • • • • Section 25 of the Code.combination of “put” and “call”. call. option or privilege in relation to any security registered on securities exchange. if the holder of the call wishes him to. or “privilege” shall not include any registered warrant. . Straddle. Put. He is simply through with the transaction. and secures to the holder the right to demand of the seller at a certain price within a certain time of shares of specified stock. from the option holder. at the same price.is an agreement through which the maker contracts to receive. “straddle”. right or convertible security. Call. the same stocks. then the holder cashes in on his ticket. the holder does nothing. If the option becomes valuable through market changes during the option’s life. becomes an insider as defined in this Code. Material Non-public information is defined as: If the information has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information or would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy.Insider’s Duty to Disclose • • • • Section 27 of the Code. It shall be unlawful for any insider to communicate material non-public information about the issuer or the security to any person who. the insider proves that he disclosed the information to the other party.It shall be unlawful for an insider to sell or buy security of the issuer. or that he had reason to believe that the other party otherwise is also in possession of the information. by virtue of the communication. shall be presumed to have been effected while in possession of material non-public information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of reasonable time for the market to absorb such information. unless. the insider proves that the information was not gained from such relationship or if the other party selling or buying from the insider or his agent is identified. Insider trading is unlawful under this Code. A purchase or sale of security of the issuer made by an insider or such insider’s spouse or relatives by affinity or consanguinity within the second degree. legitimate or common-law. sell or hold a security. while in possession of material information with respect to the issuer or the security that is not generally available to the public. . or an associated person of any broker or dealer unless registered as such with the Commission. unless such Exchange is registered as such under section 33 of this Code. or act as a salesman. shall make use of any facility of an Exchange in the Philippines to effect any transaction in a security. treasurer.No broker or dealer shall deal in or otherwise buy or sell. Section 32 of the Code. Exchanges and Trading Market • • • • • Section 28 of the Code. vice-president. secretary or any office of trust and responsibility. Section 33. or authorized clerk of said broker or dealer. or any associated person. and all relatives of the foregoing within the fourth civil degree of consanguinity or affinity. or to report such transaction. dealer. directly or indirectly. manager. No registered broker or dealer shall employ any salesman. is at the time holding office in said issuer corporation as a director. for its own account or for the account of customers.No broker.Any Exchange may be registered as such with the Commission under the terms and conditions provided in section 40 of the Code by filing an application in such form with supporting documents as the Commission may prescribed.Regulation of Securities Market Professionals.No person shall engage in the business of buying and selling securities in the Philippines as a broker or dealer. and no issuer shall employ any salesman who is not registered as such with the Commission. associated person. securities listed on an Exchange issued by a corporation where any stockholder. or Exchange. . or is a controlling person of the issuer. comptroller. associated person or salesman. Section 30 of the Code. president. salesman. director. Independent Directors. more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control. Section 39-The Commission has authority and jurisdiction over registration of Associations of Securities Brokers. .Registration of Exchange and Oversight of Self-Regulatory Organizations • • • • • Where the Exchange is organized as a stock corporation. or any other individual having a relationship with the corporation. directly or indirectly. whichever is lesser. more than twenty percent (20%) of the voting rights of the Exchange. Dealers. which would interfere with the exercise of independent judgment in carrying out the responsibility of a director. its parent or subsidiaries.mean a person other than an officer or employee of the corporation. upon application. provided. the Commission may adopt such rules or regulations or issue an order. however. Any Clearing Agency may be registered as such with the Commission subject to such terms it may prescribed. exempting an applicant from this prohibition where it finds that such ownership or control will not negatively impact on the Exchange’s ability to effectively operate in the public interest. and other Securities Related Organization. directly or indirectly. no person may beneficially own or control. Independent directors are required for corporation with a class of equity securities listed for trading on an Exchange or with assets in excess of P50M and having 200 or more holders of at least 100 shares of a class of securities or which has sold a class of equity securities to the public pursuant to an effective registration statement in compliance with section 12 of the Code and shall have at least 2 independent directors or such independent directors shall constitute at least 20% of the members of such board. shall prescribed rules and regulations with respect to the amount of credit that may be extended on any security. a) 65% of the current price of the security or. See Section 51. see Section 62 of the Code. 56.For the purpose of preventing the excessive use of credit for the purchase or carrying of securities. such rules and regulations shall be based upon the following standard: An amount not greater than whichever is higher of. the term “margin” referring to the percentage of the value which must be paid in cash by the purchaser. Such requirements have been implemented for the purposes of preventing the excessive use of credit for the purchase or carrying of securities. and 61 of the Code. 59. For the extension of credit. (2 years and 5 years) . in accordance with the credit and monetary policies that may be promulgated from time to time by the Monetary Board of the BSP. the Commission. Margin requirements are the statutory and administrative restriction placed upon the percentage of the value of securities which may be borrowed for the purpose of the purchase of such securities.58. and of reducing the aggregate amount of the national credit resources which are directed by speculation into the stock market and of achieving a more balanced use of such resources.Margin and Credit and Liabilities • • • • Section 48 of the Code. b) 100% of the lowest market price of the security during the preceding 36 calendar months. Under the Securities Regulations Code. but not more than 75% of the current market price. any person who violates any of the provision of this Code or the rules and regulations promulgate by the SEC is either civilly or criminally liable. Limitations of Actions. 57. 60.