Securities Regulation Code

R.A. 8799

JGA Medina
PLS Bus Org II
Sec. 2. PURPOSE/POLICY:

1. To establish a socially conscious, self-regulatory free market;

2. To encourage the widest participation of ownership in enterprises;
3. To enhance the democratization of wealth;
4. To promote the development of the capital market;
5. To protect investors;
6. To ensure full and fair disclosure about securities;
7. To minimize if not totally eliminate insider trading and other fraudulent
or manipulative devices and practices which create distortions in the
free market.
SECURITIES Defined:
Shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture
and evidenced by a certificate, contract, instruments, whether written or electronic in character. It
includes:
(a) Shares of stocks, bonds, debentures, notes, asset-backed securities, and evidences of indebtedness
(all are debts except for shares);
(b) Investment contracts, certificates of interest or participation in a profit sharing agreement,
certificates of deposit for a future subscription;
(c) Fractional undivided interests in oil, gas or other mineral rights;
(d) Derivatives like option (call/put options) and warrants (right to subscribe to new shares before expiry
date);
(e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates
or similar instruments
(f) Proprietary or nonproprietary membership certificates in corporations; and
(g) Other instruments as may in the future be determined by the Commission.
Power Homes Unlimited Corp. v. Securities and Exchange Commission,
G.R. No. 164182, February 26, 2008

Howey Test: Based on the 1946 US case of of SEC v. W.J. Howey Co. defining an investment contract. R.A. No.
8799 follows the flexible concept for it defines an investment contract as a contract, transaction or scheme
(collectively "contract") whereby a person invests his money in a common enterprise and is led to expect profits
not solely but primarily from the efforts of others.
Thus, to be a security subject to regulation by the SEC, an investment contract in our jurisdiction must be proved
to be:
(1) an investment of money,
(2) in a common enterprise,
(3) with expectation of profits,
(4) primarily from efforts of others.

Virata v. Ng Wee,
G.R. Nos. 220926, 221058, 221109, 221135 & 221218, July 5, 2017

In this jurisdiction, the Court employs the Howey test to determine whether or not the security being offered
takes the form of an investment contract. The case served as the foundation for the domestic definition of the
said security.
Promoter:
a person who, acting alone or with others, takes initiative in founding and organizing the business or
enterprise of the issuer and receives consideration therefor.
Broker:
a person engaged in the business of buying and selling securities for the account of others
Dealer:
any person who buys sells securities for his/her own account in the ordinary course of business.
Associated person of a broker or dealer:
an employee who directly exercises control of supervisory authority, but does not include a salesman,
or an agent or a person whose functions are solely clerical or ministerial. (Basically a compliance
officer per functions under SRC Rule 28.1)
Salesman:
a natural person, employed as such as an agent, by a dealer, issuer or broker to buy and sell securities
Underwriter:
a person who guarantees on a firm commitment (buys the whole issue for resale) and/or declared
best effort basis the distribution and sale of securities of any kind by another company
Clearing Agency:
any person who acts as intermediary in making deliveries upon payment effect
settlement in securities transactions
Exchange:
an organized market place or facility that brings together buyers and sellers and
executes trade of securities and/or commodities.
Prospectus:
the document made by or an behalf of an issuer, underwriter or dealer to sell or
offer securities for sale to the public through registration statement filed with the
Commission (a digest of important information about issuer and the securities).
Registration statement:
the application for the registration of securities required to be filed with the
Commission (must be approved before commencing sale)
Uncertificated security:
a security without a certificate bu evidenced by electronic or similar records.
Issuer:
the originator, maker, obligor, or creator of the security
Insider:
(a) the issuer;
(b) a director or officer -or any person performing similar functions- of, or a person controlling,
the issuer;
(c) gives or gave him access to material information (one that could change market price or
value of securities or affect investment decision) about the issuer or the security that is not
generally available to the public;
(d) A government employee, director, or officer of an exchange, clearing agency and/or self-
regulatory organization who has access to material information about an issuer or a
security that is not generally available to the public; or
(e) a person who learns such information by a communication from any forgoing insiders (Sec.
27.3 where the insider communicating the information knows or has reason to believe that
such person will likely buy or sell a security of the issuer while in possession of such
information)
(Under Sec. 27.1 Insiders include spouse or relatives by affinity or consanguinity within the
second degree, legitimate or common-law)
Sec. 5. POWERS AND FUNCTIONS OF THE COMMISSION:
(a) Jurisdiction and supervision over all corporations, partnership or associations;
(b)Formulate policies and recommendations;
(c) Approve, reject, suspend, revoke registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over exchanges, clearing agencies, SRO’s (Self-Regulating Organizations);
(f) Impose sanctions;
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance;
(h)Enlist the aid and support of and/or deputize any and all enforcement agencies;
(i) Issue cease and desist orders;
(j) Punish for the contempt;
(k) Compel meetings of stockholders or members thereof under its supervision;
(l) Issue subpoena duces tecum and summon witnesses, order the examination, search and seizure of all
documents, papers, files and records, tax returns and books of accounts;
(m) Suspend, or revoke, franchise or certificate of registration of corporations, partnership or associations;
(n) Exercise such other powers as may be provided by law as well as those which may be implied from.
Contention: Having been vested with purely administrative authority, the SEC can only impose administrative
sanctions such as the imposition of administrative fines, the suspension or revocation of registrations with the SEC,
and the like. Petitioner further contends that in the absence of any specific grant of jurisdiction by Congress, the
SEC cannot, by mere administrative regulation, confer on itself that jurisdiction. Petitioner's stance fails to
persuade.
In taking cognizance of respondent's complaint against petitioner and eventually rendering a judgment which
ordered the latter to make a tender offer, the SEC was acting pursuant to Rule 19 (13) of the Amended
Implementing Rules and Regulations of the Securities Regulation Code, to wit:
13. Violation
If there shall be violation of this Rule by pursuing a purchase of equity shares of a public company at threshold
amounts without the required tender offer, the Commission, upon complaint, may nullify the said acquisition and
direct the holding of a tender offer. This shall be without prejudice to the imposition of other sanctions under the
Code.
The foregoing rule emanates from the SEC's power and authority to regulate, investigate or supervise the activities
of persons to ensure compliance with the Securities Regulation Code, more specifically the provision on mandatory
tender offer under Section 19 thereof.
(Cemco Holdings, Inc. v. National Life Insurance Co. of the Philippines, Inc., G.R. No. 171815, [August 7, 2007]
Section 8. Requirement of Registration of Securities.
8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without
a registration statement duly filed with and approved by the Commission (offering period
where sale can be made only starts when registration statement is approved). Prior to such
sale, information on the securities as Sec may prescribe, shall be made available to each
prospective purchaser (pre-offering period).
8.2. The Commission may conditionally approve the registration statement.
8.3. The Commission may specify the terms and conditions under which any written
communication, including any summary (preliminary) prospectus, shall be deemed not to
constitute an offer for sale.
8.4. A record of the registration of securities shall be kept in Register Securities which shall be
open to public inspection at reasonable hours on business days.
8.5. The Commission may audit the financial statements, assets and other information of firm
applying for registration of its securities.
Public Offering SRC Rule 3: indiscriminate offering of securities to anyone who will buy (adverts, etc.)
Sec. 9. Securities EXEMPT from registration:
(a) Issued or guaranteed by the Government, its subdivision, agency or any
person controlled or supervised by, and acting as an instrumentality
thereof.
(b) Issued or guaranteed by the government of any country with which the
Philippines maintains diplomatic relations;
(c) Certificates issued by a receiver or by a trustee in bankruptcy;
(d) Any security or its derivatives the sale or transfer of which, by law, is
under the IC, HLURB, or BIR.
(e) Any security issued by a bank (banks supervised by BSP therefore excludes
foreign banks)) except its own shares of stock.
See: SRC Rules 9.1
Sec. 10. Sale Transactions EXEMPT from registration: (confirmation by SEC optional but suggested)
(a) At any judicial sale in insolvency or bankruptcy;
(b) Sale of a security pledged in good faith by or for the account of a pledge holder, or mortgagee;
(c) An isolated transaction by the owner or by his representative not being made in the course of
repeated and successive transactions (case to case basis depending on facts);
(d) The distribution by a corporation of stock dividends or other distribution out of surplus;
(e) The sale of capital stock of a corporation to its own stockholders exclusively;
(f) The issuance of bonds or notes secured by mortgage upon real estate or tangible personal
property, when sold to a single purchaser at a single sale.
(g) The issue and delivery of any security in exchange for any other security of the same issuer
pursuant to a right of conversion (ex. Stock Swaps);
(h) Broker’s transaction, executed upon customer’s orders, on any registered Exchange or other
trading market.
Sec. 10. Sale Transactions EXEMPT from registration: (continued)
(i)Subscriptions for shares prior to the incorporation or due to increase in its authorized capital stock.
(j)The exchange of securities by the issuer with existing security holders exclusively, without
commission or other remuneration;
(k) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any
twelve-month period. (Private Placement)
(l) The sale of securities to any number of the following qualified buyers (can look after themselves
vis-à-vis regular investor which is who SRC seeks to protect) :
• Bank;
• Registered investment house;
• Insurance company;
• Pension fund or retirement plan maintained by the Government or managed by a bank or other
persons authorized by the Bangko Sentral to engage in trust functions;
• Investment company or;
• Such other person as the Commission may rule by determine as qualified buyers.
Sec. 11. Commodity Futures Contracts.
• See Personal Property Securities Act RA 11057. No Rules Yet
• In Onapal v. CA, commodities trading was characterized by SC as gambling pursuant to Art.
2018 of the Civil Code.

Sec. 12. Procedure of Registration Securities.

• Filing by the issuer a registration statement with SEC including any prospectus required or
permitted to be delivered.
• Payment of filing fee.
• Publication of Notice
• Declaration of Effectivity w/in 45 days from filing (if no amendments)
• Issuer’s Oath
• Sale of Securities (SRC Rules 8.1)
• Notice of Offering Completion or Termination (SRC Rules 8.1)
• Shelf Registration [unsold during offering period but for re-offering) (SRC Rules 8.1)
Sec. 13. Rejection and Revocation of Registration of Securities.
• Insolvent;
• Violated provisions of Code or Rules;
• Is, about to, or had engaged in fraudulent transactions;
• Made false or misleading representations of material facts in prospectus;
• Fails to comply with conditions for registration set by SEC.
 Sec. 14. Amendment to the Registration Statement.
• If registration statement is incomplete or inaccurate
 Sec. 15. Suspension of Registration.
• If at any time information in registration statement become misleading, incorrect,
inadequate or incomplete in any material fact or sale may work or tend to work a
fraud.
 Sec. 16. Pre-Need Plans. (Transferred to Insurance Commission )
Section 17. Periodic and Other Reports of Issuers.
Files with the SEC an annual report which shall include, among others, Financial Statements and a
management discussion and analysis of results of operation:
(a) An issuer which has sold a class of its securities pursuant to a registration under section 12 hereof:
(b) An issuer with a class of securities listed for trading on an Exchange; and
(c) An issuer with assets of at least Fifty million pesos (50,000,000.00) or such other amount as the
Commission shall prescribe, and having two hundred (200) or more holder each holding at least one
hundred (100) share of a class of its equity securities.
(b and c are what are referred to as Public Corporations)
Section 18. Reports by 5% Holders of Equity Securities.
In every case in which any person who acquires directly or indirectly the beneficial ownership of more
than five of per centum (5%) shall report to the Issuer/Exchange/SEC via sworn statement: Personal
background; Purpose of purchase; No. of shares beneficially owned, contracts, rights, arrangement,
understanding as to securities of issuer.
 PROTECTION of SHAREHOLDER INTEREST
• Tender Offer: a publicly announced intention by a person acting alone or in concert
with other persons to acquire equity securities of a public company, i.e., one listed on an
exchange, among others. The term is also defined as "an offer by the acquiring person to
stockholders of a public company for them to tender their shares therein on the terms
specified in the offer." Tender offer is in place to protect the interests of minority
stockholders of a target company against any scheme that dilutes the share value of
their investments. It affords such minority shareholders the opportunity to withdraw or
exit from the company under reasonable terms, a chance to sell their shares at the same
price as those of the majority stockholders. Osmeña III v. SSS, G.R. No. 165272, (08/17/07)
• Proxy Solicitations
• Internal Record Keeping and Accounting Controls
• Transaction Of Directors, Officers, Principal Stockholders
Section 19. Tender Offers. Any person or group of persons acting in concert who intends to acquire at
least . . . of any class of any equity security of a Public Company . . . SHALL MAKE A TENDER OFFER TO
STOCKHOLDERS by filling with the Commission a declaration to that effect; and furnish the issuer, a
statement containing such of the information required in Section 17 of this Code as the Commission
may prescribe. Based on SRC Rule 19:
• the threshold for Mandatory Tender Offer is 35%.
• If acquisition less than 35% but will result in ownership of at least 51%, Tender offer required;
• If mandatory, share valuation based on the highest price paid for by offeror during the past 6 months.
• In any tender offer other than by issuer, Issuer prohibited from issuing or granting options on
unissued shares; create or issue securities carrying conversion rights into or subscription for shares;
sell dispose or buy assets worth 5% or more of total assets prior to acquisition period; enter into
contracts other than in the ordinary course of business.
• It shall be unlawful for any person to undertake fraudulent, deceptive, or manipulative act or practice
in connection with a tender offer.
Section 20. Proxy solicitations. - Proxies must be issued and proxy solicitation must be made
in accordance with rules and regulations issued by the Commission;
20.2. Proxies must be in writing, signed by the stockholder or his duly authorized
representative and file before the scheduled meeting with the corporate secretary.
20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which
it is intended. No proxy shall be valid and effective for a period longer than five (5)
years at one time.
20.4. No broker or dealer shall give any proxy, consent or any authorization, in respect of
any security carried for the account of the customer, to a person other than the
customer, without written authorization of such customer.
20.5. A broker or dealer who holds or acquire the proxy for at least ten percent (10%) of the
outstanding share of such issuer, shall submit a report identifying the beneficial owner.
• Prohibited to solicit undated or post-dated proxies.
Section 22. Internal Record Keeping and Accounting Control.
Section 23. Transactions of Directors officers and Principal Stockholders.
• Every person who is directly or indirectly the beneficial owner of more than
ten per centum (10%) or who is a director or an officer of the issuer of such
security, shall file, a statement form with the Commission.
• Short-swing profit: For the purpose of preventing the unfair use of
information which may have been obtained by reason of his relationship to
the issuer, any profit realized by him from any purchase and sale, or any sale
and purchase, of any equity security of such issuer within any period of less
than (6) months unless such security was acquired in good faith in
connection with a debt previously contracted, shall inure to and be
recoverable by the issuer.
• Speculative Transactions prohibited: Short Selling and Sales against the box.
What is “Short Selling”?
Short Selling is the act of selling a stock that is not owned by the investor and is usually done
because of an expectation that the stock price will drop. Example:
• An investor believes that Palugi Inc. shares trading at P100 per share will decline.
• Investor borrows 100 shares from a broker (interests are of course factored in) while short selling
those shares to the market. Investor thus “shorts” 100 shares of Palugi Inc. which he borrowed.
• A week later, Palugi Inc’s. price falls to P90.
• Investor buys 100 shares of Palugi Inc. stocks from the open market at a price of P90 per share
and returns those shares to the broker. This is “closing” or “covering” the short position. Investor
then makes a profit of P10 per share which is a total of P1,000.
• However, if the stock price increases to P110 per share, investor will need to buy-to-cover the 100
shares from the open market at the current price of P110 per share. The loss for this short sale
transaction will be P1000 since the shares were bought back at a higher price.
• Either way, Broker earns through commissions and interests.

Selling short against the box? Selling short securities that are held in safekeeping or owned.
PROHIBITIONS AND FRAUD, MANIPULATION AND INSIDER TRADING
Section 24. Manipulation of Security Prices; Devices and Practices. –
(a) To create a false or misleading appearance of active trading in any listed security traded in an
Exchange;
(i) By effecting any transaction which involves no change in the beneficial ownership (wash sale);
(ii)By entering into an order for the purchase or sale of security with the knowledge that a
simultaneous order of substantially the same size, time and price, for the sale or purchase of any
such security, has or will be entered by or for the same or different parties; (matched orders); or
(iii) By performing similar act where there is no change in beneficial ownership.
(b) To affect, alone or with others, a series of transactions in securities that (i) Raises or depresses their
price to induce the purchase or sale of a security, or (ii) Creates active trading to induce such a
purchase or sale through manipulative devices such as marking the close, painting the tape,
squeezing the float, hype and dump, boiler room operations and such other similar devices.
(c) To circulate or disseminate information that the price of any listed security will or is likely to rise or
fall because of manipulative market operations.
(d) To make false or misleading statement with respect to any material fact, which he knew or had
reasonable ground to believe was so false or misleading, to induce the purchase or sale of any
security listed/traded.
(e) To effect any series of transactions for the purchase and/or sale of any security listed/traded for the
purpose of pegging, fixing or stabilizing the price of such security;
 24.2. No person shall use or employ, in connection with the purchase or sale of any security any
manipulative or deceptive device or contrivance. Neither shall any short sale be effected nor any stop-
loss order be executed in connection with the purchase or sale of any security except in accordance
with such rules and regulations as the Commission may prescribe.
Section 25. Regulation of Option Trading. – No member of an Exchange shall, directly or indirectly
endorse or guarantee the performance of any put, call, straddle, option or privilege in relation to any
security registered on a securities exchange. The terms -
Options: Contracts that give buyer the right but not the obligation to buy or sell at a
predetermined price (strike price) on or before a date (expiry date).
Call : Right to buy
Put : Right to sell
Straddle: Option to buy or sell or both.
Privilege:
shall not include any registered warrant, right or convertible security.
Section 26. Fraudulent Transactions. – It shall be unlawful for any person, directly or indirectly, in connection with
the purchase or sale of any securities to:
26.1. Employ any device, scheme, or artifice to defraud;
26.2. Obtain money or property by means of any untrue statement of a material fact of any omission to state a
material fact necessary;
26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or
deceit upon any person.

SRC Rule 24 Prohibits:

• Use of Information obtained in fiduciary capacity
• Prohibited Representations as to registration with the Commission by securities intermediary or brokers and dealers
• Representing that a security is a particular type of security which is inconsistent with SRC definition;
• Representation that a security to be sold, transferred, pledged, etc. has been authorized by owner when it has not.
Section 27. Insider’s Duty to Disclose When Trading. –
It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material
information with respect to the issuer or the security that is not generally available to the public,
UNLESS:
(a)The insider proves that the information was not gained from such relationship; or
(b) If the other party selling to or buying from the insider or his agent is identified, the insider proves:
(I) that he disclosed the information to the other party, or
(II) that he had reason to believe that the other party otherwise is also in possession of the
information.
A purchase or sale of a 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, shall be presumed to
have been effected while in possession of material nonpublic information if transacted after such
information came into existence but prior to dissemination of such information to the public and the
lapse of a reasonable time for market to absorb such information. Exception: Buyer or seller proves he
was not aware of material non-public info.
27.2. For purposes of this Section, information is "material nonpublic" if:
(a) It 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
(b) would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or
hold a security.
 27.3. It shall be unlawful for any insider to communicate material nonpublic
information about the issuer or the security to any person who, by virtue of the
communication, becomes an insider as defined in Subsection 3.8, where the
insider communicating the information knows or has reason to believe that such
person will likely buy or sell a security of the issuer whole in possession of such
information.
27.4. It shall be unlawful where a tender offer has commenced or is about to commence for:
 (i) Any person (other than the tender offeror) who is in possession of material nonpublic
information relating to such tender offer, to buy or sell the securities of the issuer that are
sought or to be sought by such tender offer if such person knows or has reason to believe
that the information is nonpublic and has been acquired directly or indirectly from the
tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought
by such tender offer, or any insider of such issuer; and
(ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be
sought by such tender offer, and any insider of such issuer to communicate material
nonpublic information relating to the tender offer to any other person where such
communication is likely to result in a violation of Subsection 27.4 (a)(I).
For purposes of this subsection the term "securities of the issuer sought or to be sought by such
tender offer" shall include any securities convertible or exchangeable into such securities or any
options or rights in any of the foregoing securities.
REGULATION OF SECURITIES MARKET PROFESSIONALS
Section 28. Registration of Brokers, Dealers, Salesmen and Associated
Persons. –
 
28.1. No person shall engage in the business of buying or selling securities
in the Philippine as a broker or dealer, or act as a salesman, or an
associated person of any broker or dealer unless registered as such with
the Commission.
 
28.2. No registered broker or dealer shall employ any salesman or any
associated person, and no issuer shall employ any salesman, who is not
registered as such with the Commission.
 
Section 29. Revocation, Refusal or Suspension of Registration of Brokers, Dealers, Salesmen and Associated
Persons.
(a) Has willfully violated SRC or SEC rules, or registered broker, dealer or associated persons failed to supervise in
order to prevent such violation, another person who commits such violation;
(b) Has willfully made or omitted to state a materially false or misleading statement in any application for registration
or report;
(c) Has failed to satisfy the qualifications or requirements for registration;
(d) Has been convicted, of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa,
misappropriation, forgery, bribery, false oath, or perjury, or violation of securities, commodities, banking, real state
or insurance laws;
(e) Is enjoined from engaging in securities, commodities, banking, real state or insurance activities;
(f) Is subject to an order refusing, revoking or suspending any registration, license or permit under the SRC or SEC
rules.
(g) Is subject to an order of a self-regulatory organization suspending or expelling him from membership;
(h) Found to have willfully violated any provisions of securities, commodities, banking, real state or insurance laws, or
has willfully aided, abetted, counseled, commanded, induced or procured such violation; or
(i) Has been judicially declared insolvent.
Section 30. Transactions and Responsibility of Brokers and Dealers. –
30.1 No broker or dealer shall deal in securities listed on an Exchange where:
• stockholders, director, associated person or salesman, or authorized clerk of said broker or
dealer and all the relatives of the foregoing within the fourth civil degree of consanguinity
or affinity
is at the same time holding office in said issuer corporation as
• a director, president, vice-president, manager, treasurer, comptroller, secretary or any
office of trust and responsibility, or is a controlling of the issuer.
(to avoid insider trading)
30.2. No broker or dealer shall effect any transaction in securities or induce or attempt to
induce the purchase or sale of any security except in compliance SEC rules and regulations
to ensure fair and honest dealings in securities and provide financial safeguards.
Section 31. Development of Securities Market Professionals. –
 EXCHANGES AND OTHER SECURITIES TRADING MARKETS
Section 32. Prohibition on Use of Unregistered Exchange; Regulation of Over-the-Counter
Markets. –
No broker, dealer, salesman, associated person of a broker or dealer, or Exchange, directly or
indirectly shall make use of any facility of an Exchange in the Philippines to effect any
transaction in a security, or to report such transaction, unless such Exchange is registered.
No broker, dealer, salesman or associated person of a broker or dealer, singly or in concert
with any other person, shall make, create or operate, or enable another to make, create or
operate, any trading market, otherwise than on a registered Exchange.
The Commission may promulgate rules and regulations governing transactions by brokers,
dealers, salesmen or associated persons of a broker or dealer, over any facilities of such
trading market. Such self-regulatory organization must provide a centralized marketplace for
trading and must satisfy requirements comparable to those prescribed for registration of
Exchanges.
33.2. Registrations of an Exchange shall be granted upon compliance with the
following provisions:
(a) That the applicant is organized as a stock corporation:
(b) That the applicant is engaged solely in the business of operating an exchange:
(c) No person may beneficially own or control, directly or indirectly, more than
five percent (5%) of the voting rights of the Exchange and no industry or
business group may beneficially own or control, directly or indirectly, more
than twenty percent (20%) of the voting rights of the Exchange
(d) The expulsion, suspension, or disciplining of a member and persons
associated with a member for conduct
(e) A fair procedure for the disciplining of members and persons associated with
members,
33.2. Registrations of an Exchange shall be granted upon compliance with the following provisions:
(f) That the brokers in the board of the Exchange shall comprise of not more than forty-nine percent (49%);
(g) 51% of the Board must be non-brokers, or dealers or member of the Exchange for a period of two (2)
years prior to his/her appointment, three of whom must be independent directors. No officer or employee
of a member, its subsidiaries or affiliates or related interests shall become an independent director.
(h) The president and other management of the Exchange to consist only of persons who are not members
and are not associated in any capacity, directly or indirectly with any broker or dealer or member or listed
company of the Exchange: and has not been so for a period of at least two (2) years prior to such
appointment;
(i) The transparency of transactions on the Exchange;
(j) The equitable allocation of reasonable dues, fees, and other charges among members and issuers;
(k) Prevention of fraudulent and manipulative acts and practices, promotion of just and equitable principles of
trade, and, in general, protection of investors and the public interest; and
(l) The transparent, prompt and accurate clearance and settlement of transactions effected on the Exchange.
Section 34. Segregation and Limitation of functions of Members, Broker and
Dealers. - 34.1. It shall be unlawful for any member-broker of an Exchange to
effect any transaction on such Exchange for its own account, the account of an
associated person, or an account with the respect to which it or an associated
person thereof exercises the investment discretion (proprietary trading
dealing for its own account): Provided, that the following are lawful:
(a) Any transaction by a member-broker acting in the capacity of a market
maker; (buying difference to save deal)
(b) Any transaction reasonably necessary to carry on an odd-lot transactions;
(c) Any transaction to offset a transaction made in error; and
(d) Any other transaction of a similar nature defined by the Commission.
Section 38. Independent Directors. – Any corporation with a class of equity
securities listed for trading on an Exchange or with assets in excess of Fifty
million pesos (P50,000,000.00) and having two hundred (200) or more
holders, at least of two hundred (200) of which are holding at least one
hundred (100) shares of a class of its equity securities or which has sold a
class of equity securities to the public pursuant to an effective registration
statement in compliance with Section 12 hereof shall have at least two (2)
independent directors or such independent directors shall constitute at
least twenty percent (20%) of the members of such board whichever is
the lesser. For this purpose, an "independent director" shall mean a
person other than an officer or employee of the corporation, its parent or
subsidiaries, or any other individual having a relationship with the
corporation, which would interfere with the exercise of independent
judgement in carrying out the responsibilities of a director.
REGISTRATION, RESPONSIBILITIES AND OVERSIGHT OF SELFREGULATORY
ORGANIZATIONS

An Exchange under Sec 33;

Associations of Securities Brokers, and Dealers, and Other Securities
Related Organizations under Section 39.
Clearing Agencies under Sec. 42
ACQUISITION AND TRANSFER OF SECURITIES AND SETTLEMENT OF TRANSACTION
IN SECURITIES

Section 41. Prohibition on Use of Unregistered Clearing Agency.

. . . unless such clearing agency is registered as such under Section 42
of this Code or is exempted from such registration upon application by
the clearing agency because, in the opinion of the Commission, by
reason of the limited volume of transactions which are settled using the
clearing agency, it is not practicable and not necessary or appropriate in
the public interest or for the protection of investors to require such
registration
Section 43. Uncertificated Securities. – Notwithstanding Section 63 (now 62) of the
Corporation Code of the Philippines: 43.1. A corporation whose securities are
registered pursuant to this Code or listed on securities exchange may:
(a) If so resolved by its Board and agreed by a shareholder, investor or securities
intermediary, issue shares to, or record the transfer of some or all its shares into
the name of said shareholders, investors or, securities intermediary in the form
of uncertified securities. The use of uncertified securities in these circumstances
shall be without prejudice to the rights of the securities intermediary subsequently
to require the corporation to issue a certificate in respect of any shares recorded in
its name; and
(b) If so provided in its articles of incorporation and by-laws, issue all of the shares of a
particular class in the form of Uncertificated Securities and subject to a condition
that investors may not require the corporation to issue a certificate in respect of
any shares recorded in their name.
43.3. Transfers of securities, including an uncertificated securities, may be
validly made and consummated by appropriate book-entries in the
securities intermediaries, or in the stock and transfer book held by the
corporation or the stock transfer agent and such bookkeeping entries
shall be binding on the parties to the transfer. A transfer under this
subsection has the effect of the delivery of a security in bearer form or
duly indorsed in blank representing the quantity or amount of security or
right transferred, including the unrestricted negotiability of that security by
reason of such delivery. However, transfer of uncertificated shares shall
only be valid, so far as the corporation is concerned, when a transfer is
recorded in the books of the corporation so as to show the names of the
parties to the transfer and the number of shares transferred.
 MARGIN & CREDIT
Your want to buy 1,000 shares of UTANG INC. for P5 per share but you only want to spend P3,500. If
you buy the shares on margin, you actually borrow P1,500 from your brokerage firm and use the
UTANG INCas collateral for your loan. This original loan amount as a percentage of the investment
amount is called the initial margin.
If the value of TANG INC. shares drops past a certain point, say 25% of the original P5,000 value (or
P1.25 per share; this point is called the maintenance margin), the brokerage firm may make a margin
call, meaning that within a few days you must deposit more cash or sell some of the shares to offset
all or part of the difference between the actual stock price and the maintenance margin.
• Margin accounts allow investors to make investments with their brokers' money.
• They act as leverage and can thus magnify gains. They can also magnify losses.
• A brokerage firm can sell an investor's securities without notification or even sue if the investor
does not fulfill a margin call.
[Link]
Section 48. Margin Requirements. –

48.1. For the extension of credit, such rules and regulations shall be based
upon the following standard:

An amount not greater than the whichever is the higher of –

(a) Sixty-five per centum (65%) of the current market price of the security, or

(b) One hundred per centum (100%) of the lowest market price of the
security during the preceding thirty-six (36) calendar months, but not
more than seventy-five per centum (75%) of the current market price.
Section 49. Restrictions on Borrowings by Members, Brokers, and Dealers. – It shall be unlawful to
directly or indirectly:
• To permit in the ordinary course of business aggregate indebtedness including customers’ credit
balances, to exceed such percentage of the net capital employed in the business as may be determined
by the SEC.
• To pledge, mortgage, or otherwise encumber any security carried for the account of any customer
under circumstances:
(a) That will permit the commingling of his securities, without customer’s written consent;
(b) That will permit commingling with the securities of any person other than a bona fide customer; or
(c) that will permit such securities to be pledged, mortgaged or encumbered, or subjected to any lien
or claim of the pledgee, for a sum in excess of the aggregate indebtedness.
However, the Commission, may allow certain transactions that may otherwise be prohibited under this
subsection.
49.3. To lend or arrange for the lending of any security carried for the account of any customer without
the written consent of such customer.
 GENERAL PROVISIONS

Section 51. Liabilities of Controlling Persons, Aider and Abettor and Other
Secondary Liability.
51.1. Every person who, by or through stock ownership, agency, or
otherwise, or in connection with an agreement or understanding with one
or more other persons, controls any person liable under this Code or the
rules or regulations of the Commission thereunder, shall also be liable
jointly and severally with and to the same extent as such controlled
persons to any person to whom such controlled person is liable, unless
the controlling person proves that, despite the exercise of due diligence on
his part, he has no knowledge of the existence of the facts by reason of
which the liability of the controlled person is alleged to exist.
Section 56. Civil Liabilities on Account of False Registration Statement
Section 58. Civil Liability of Fraud in Connection with Securities Transactions. Section Section 59.
Civil Liability for Manipulation of Security Prices.
Section 60. Civil Liability with Respect to Commodity Futures Contracts
Section 61. Civil Liability on Account of Insider Trading
Section 62. Limitation of Actions. –
62.1. No action shall be maintained to enforce any liability created under Section 56 or 57 of
this Code unless brought within two (2) years after the discovery of the untrue statement
or the omission, or, if the action is to enforce a liability created under Subsection 57.1 (a),
unless, brought within two (2) yeas after the violation upon which it is based. In no event
shall an such action be brought to enforce a liability created under Section 56 or
Subsection 57.1 (a) more than five (5) years after the security was bona fide offered to
the public, or under Subsection 57.1 (b0 more than five (5) years after the sale.
-END-