REPUBLIC ACT NO.

8799
SECURITIES REGULATION CODE

CHAPTER I
Title and Definitions

SECTION 1. Title. This shall be known as The

Securities Regulation Code.

SEC. 2. Declaration of State Policy. The State

shall establish a socially conscious, free market
that regulates itself, encourage the widest
participation of ownership in enterprises, enhance
the democratization of wealth, promote 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 the free market.

To achieve these ends, this Securities Regulation

Code is hereby enacted.

SEC. 3. Definition of Terms.

 3.1. Securities are shares, participation or
interests in a corporation or in a commercial
enterprise or profit-making venture and evidenced
by a certificate, contract, instrument, whether
written or electronic in character. It includes:
(a) Shares of stock, bonds, debentures, notes,
evidences of indebtedness, asset-backed securities;
(b) Investment contracts, certificates of interest or
participation in a profit sharing agreement,
certificates of deposit for a future subscription;
(c) Fractional undivided interests in oil, gas or
other mineral rights;
(d) Derivatives like option and warrants;
(e) Certificates of assignments, certificates of
participation, trust certificates, voting trust
certificates or similar instruments;
(f) Proprietary or non proprietary membership
certificates incorporations; and
(g) Other instruments as may in the future be
determined by the Commission.
3.2 Issuer is the originator, maker, obligor, or
creator of the security.

3.3 Broker is a person engaged in the business of

buying and selling securities for the account of
others. chan robles virtual law library

3.4 Dealer means any person who buys and sells

securities for his/her own account in the ordinary
course of business.
 3.5. Associated person of a broker or dealer is
an employee thereof 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.

3.6. Clearing Agency is any person who acts as

intermediary in making deliveries upon payment
to effect settlement in securities transactions.

3.7. Exchange is an organized marketplace or

facility that brings together buyers and sellers and
executes trades of securities and/or commodities.

3.8. Insider means: (a) the issuer; (b) a director

or officer (or person performing similar functions)
of, or a person controlling the issuer; (c) a person
whose relationship or former 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; (d) a
government employee, or director, or officer of an
exchange, clearing agency and/or self-regulatory
organization who has access to material
information about an issuer or a security that is
not generally available to the public; or (e) a
 person who learns such information by a
communication from any of the foregoing insiders.

3.9. Pre-Need Plans are contracts which provide

for the performance of future services or the
payment of future monetary considerations at the
time of actual need, for which planholders pay in
cash or installment at stated prices, with or
without interest or insurance coverage and
includes life, pension, education, interment, and
other plans which the Commission may from time
to time approve.

3.10. Promoter is 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.

3.11. Prospectus is the document made by or on

behalf of an issuer, underwriter or dealer to sell or
offer securities for sale to the public through a
registration statement filed with the Commission.

3.12. Registration statement is the application

for the registration of securities required to be
filed with the Commission.
3.13. Salesman is a natural person, employed as
such or as an agent, by a dealer, issuer or broker
to buy and sell securities.

3.14. Uncertificated security is a security

evidenced by electronic or similar records.

3.15. Underwriter is a person who guarantees on

a firm commitment and/or declared best effort
basis the distribution and sale of securities of any
kind by another company.

CHAPTER II
Securities and Exchange Commission

SEC. 4. Administrative Agency. -

4.1. This Code shall be administered by the

Securities and Exchange Commission (hereafter
the Commission) as a collegial body, composed
of a Chairperson and four (4) Commissioners,
appointed by the President for a term of seven (7)
years each and who shall serve as such until their
successor shall have been appointed and qualified.
A Commissioner appointed to fill a vacancy
occurring prior to the expiration of the term for
which his/her predecessor was appointed, shall
serve only for the unexpired portion of such term.
The incumbent Chairperson and Commissioners at
 the effectivity of this Code, shall serve the
unexpired portion of their terms under
Presidential Decree No. 902-A. Unless the context
indicates otherwise, the term Commissioner
includes the Chairperson. chan robles virtual law library

4.2. The Commissioners must be natural-born

citizens of the Philippines, at least forty (40) years
of age for the Chairperson and at least thirty-five
(35) years of age for the Commissioners, of good
moral character, of unquestionable integrity, of
known probity and patriotism, and with
recognized competence in social and economic
disciplines: Provided, That the majority of
Commissioners, including the Chairperson, shall
be members of the Philippine Bar.

4.3. The Chairperson is the chief executive officer

of the Commission. The Chairperson shall execute
and administer the policies, decisions, orders and
resolutions approved by the Commission and shall
have the general executive direction and
supervision of the work and operation of the
Commission and of its members, bodies, boards,
offices, personnel and all its administrative
business.

4.4. The salary of the Chairperson and the

Commissioners shall be fixed by the President of
the Philippines based on an objective classification
system, at a sum comparable to the members of
the Monetary Board and commensurate to the
importance and responsibilities attached to the
position.

4.5. The Commission shall hold meetings at least

once a week for the conduct of business or as
often as may be necessary upon call of the
Chairperson or upon the request of three (3)
Commissioners. The notice of the meeting shall be
given to all Commissioners and the presence of
three (3) Commissioners shall constitute a
quorum. In the absence of the Chairperson, the
most senior Commissioner shall act as presiding
officer of the meeting.

4.6. The Commission may, for purposes of

efficiency, delegate any of its functions to any
department or office of the Commission, an
individual Commissioner or staff member of the
Commission except its review or appellate
authority and its power to adopt, alter and
supplement any rule or regulation.

The Commission may review upon its own

initiative or upon the petition of any interested
party any action of any department or office,
 individual Commissioner, or staff member of the
Commission.

SEC. 5. Powers and Functions of the Commission.-

5.1. The Commission shall act with transparency
and shall have the powers and functions provided
by this Code, Presidential Decree No. 902-A, the
Corporation Code, the Investment Houses Law, the
Financing Company Act and other existing laws.
Pursuant thereto the Commission shall have,
among others, the following powers and
functions:chanroblesvirtualawlibrary

(a) Have jurisdiction and supervision over all

corporations, partnerships or associations who are
the grantees of primary franchises and/or a
license or permit issued by the Government; chan robles virtual law library

(b) Formulate policies and recommendations on

issues concerning the securities market, advise
Congress and other government agencies on all
aspects of the securities market and propose
legislation and amendments thereto;

(c) Approve, reject, suspend, revoke or require

amendments to registration statements, and
registration and licensing applications;

(d) Regulate, investigate or supervise the activities

of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over the
activities of exchanges, clearing agencies and
other SROs;

(f) Impose sanctions for the violation of laws and

the rules, regulations and orders issued pursuant
thereto;

(g) Prepare, approve, amend or repeal rules,

regulations and orders, and issue opinions and
provide guidance on and supervise compliance
with such rules, regulations and orders;

(h) Enlist the aid and support of and/or deputize

any and all enforcement agencies of the
Government, civil or military as well as any
private institution, corporation, firm, association
or person in the implementation of its powers and
functions under this Code;

(i) Issue cease and desist orders to prevent fraud or

injury to the investing public;

(j) Punish for contempt of the Commission, both

direct and indirect, in accordance with the
pertinent provisions of and penalties prescribed by
the Rules of Court;

(k) Compel the officers of any registered

corporation or association to call meetings of
stockholders or members thereof under its
supervision;

(l) Issue subpoena duces tecum and summon

witnesses to appear in any proceedings of the
Commission and in appropriate cases, order the
examination, search and seizure of all documents,
papers, files and records, tax returns, and books of
accounts of any entity or person under
investigation as may be necessary for the proper
disposition of the cases before it, subject to the
provisions of existing laws;

(m) Suspend, or revoke, after proper notice and

hearing the franchise or certificate of registration
of corporations, partnerships or associations, upon
any of the grounds provided by law; and

(n) Exercise such other powers as may be provided

by law as well as those which may be implied from,
or which are necessary or incidental to the
carrying out of, the express powers granted the
Commission to achieve the objectives and
purposes of these laws.
5.2. The Commissions jurisdiction over all cases
enumerated under Section 5 of Presidential Decree
No. 902-A is hereby transferred to the Courts of
general jurisdiction or the appropriate Regional
Trial Court: Provided, that the Supreme Court in
the exercise of its authority may designate the
Regional Trial Court branches that shall exercise
jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases
involving intra-corporate disputes submitted for
final resolution which should be resolved within
one (1) year from the enactment of this Code. The
Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed
as of 30 June 2000 until finally disposed.
chan robles virtual law library
 SEC. 6. Indemnification and Responsibilities of
Commissioners.- 6.1. The Commission shall
indemnify each Commissioner and other officials
of the Commission, including personnel
performing supervision and examination functions
for all costs and expenses reasonably incurred by
such persons in connection with any civil or
criminal actions, suits or proceedings to which
they may be or made a party by reason of the
performance of their functions or duties, unless
they are finally adjudged in such actions or
proceedings to be liable for gross negligence or
misconduct.

In the event of settlement or compromise,

indemnification shall be provided only in
connection with such matters covered by the
settlement as to which the Commission is advised
by external counsel that the persons to be
indemnified did not commit any gross negligence
or misconduct.

The costs and expenses incurred in defending the

aforementioned action, suit or proceeding may be
paid by the Commission in advance of the final
disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the
Commissioner, officer or employee to repay the
amount advanced should it ultimately be
determined by the Commission that he/she is not
entitled to be indemnified as provided in this
subsection.

6.2. The Commissioners, officers and employees of

the Commission who willfully violate this Code or
who are guilty of negligence, abuse or acts of
malfeasance or fail to exercise extraordinary
diligence in the performance of their duties shall
be held liable for any loss or injury suffered by the
Commission or other institutions as a result of
such violation, negligence, abuse, malfeasance,
or failure to exercise extraordinary diligence.
Similar responsibility shall apply to the
Commissioners, officers and employees of the
Commission for (1) the disclosure of any
information, discussion or resolution of the
Commission of a confidential nature, or about the
confidential operations of the Commission, unless
the disclosure is in connection with the
performance of official functions with the
Commission or with prior authorization of the
Commissioners; or (2) the use of such information
for personal gain or to the detriment of the
government, the Commission or third parties:
Provided, however, That any data or information
required to be submitted to the President and/or
Congress or its appropriate committee, or to be
published under the provisions of this Code shall
not be considered confidential.
SEC. 7. Reorganization.- 7.1. To achieve the goals
of this Code, consistent with Civil Service laws,
the Commission is hereby authorized to provide
for its reorganization, to streamline its structure
and operations, upgrade its human resource
component and enable it to more efficiently and
effectively perform its functions and exercise its
powers under this Code.

7.2. All positions of the Commission shall be

governed by a compensation and position
classification systems and qualification standards
approved by the Commission based on a
comprehensive job analysis and audit of actual
duties and responsibilities. The compensation plan
shall be comparable with the prevailing
compensation plan in the Bangko Sentral ng
Pilipinas and other government financial
institutions and shall be subject to periodic review
by the Commission no more than once every two
(2) years without prejudice to yearly merit reviews
or increases based on productivity and efficiency.
The Commission shall, therefore, be exempt from
laws, rules, and regulations on compensation,
position classification and qualification standards.
The Commission shall, however, endeavor to make
its system conform as closely as possible with the
principles under the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758,
as amended).
CHAPTER III
Registration of Securities
SEC. 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. Prior to such sale,
information on the securities, in such form and
with such substance as the Commission may
prescribe, shall be made available to each
prospective purchaser.

8.2. The Commission may conditionally approve

the registration statement under such terms as it
may deem necessary.

8.3. The Commission may specify the terms and

conditions under which any written
communication, including any summary
prospectus, shall be deemed not to constitute an
offer for sale under this Section.

8.4. A record of the registration of securities shall

be kept in a Register of Securities in which shall
be recorded orders entered by the Commission
with respect to such securities. Such register and
all documents or information with respect to the
securities registered therein shall be open to
public inspection at reasonable hours on business
days.chan robles virtual law library
 8.5. The Commission may audit the financial
statements, 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.

SEC. 9. Exempt Securities. -

9.1. The requirement of registration under
Subsection 8.1 shall not as a general rule apply to
any of the following classes of securities:

(a) Any security issued or guaranteed by the

Government of the Philippines, or by any political
subdivision or agency thereof, or by any person
controlled or supervised by, and acting as an
instrumentality of said Government.

(b) Any security issued or guaranteed by the

government of any country with which the
Philippines maintains diplomatic relations, or by
any state, province or political subdivision thereof
on the basis of reciprocity: Provided, That the
Commission may require compliance with the
form and content of disclosures the Commission
may prescribe.

(c) Certificates issued by a receiver or by a trustee

in bankruptcy duly approved by the proper
adjudicatory body.
(d) Any security or its derivatives the sale or
transfer of which, by law, is under the supervision
and regulation of the Office of the Insurance
Commission, Housing and Land Use Regulatory
Board, or the Bureau of Internal Revenue.

(e) Any security issued by a bank except its own

shares of stock.
9.2. The Commission may, by rule or regulation
after public hearing, add to the foregoing any class
of securities if it finds that the enforcement of
this Code with respect to such securities is not
necessary in the public interest and for the
protection of investors.

SEC. 10. Exempt Transactions. - 10.1. The

requirement of registration under Subsection 8.1.
shall not apply to the sale of any security in any of
the following transactions:chanroblesvirtualawlibrary

(a) At any judicial sale, or sale by an executor,

administrator, guardian or receiver or trustee in
insolvency or bankruptcy.

(b) By or for the account of a pledge holder, or

mortgagee or any other similar lien holder selling
or offering for sale or delivery in the ordinary
course of business and not for the purpose of
avoiding the provisions of this Code, to liquidate a
bona fide debt, a security pledged in good faith as
security for such debt.
(c) An isolated transaction in which any security is
sold, offered for sale, subscription or delivery by
the owner thereof, or by his representative for the
owners account, such sale or offer for sale,
subscription or delivery not being made in the
course of repeated and successive transactions of
a like character by such owner, or on his account
by such representative and such owner or
representative not being the underwriter of such
security.

(d) The distribution by a corporation, actively

engaged in the business authorized by its articles
of incorporation, of securities to its stockholders
or other security holders as a stock dividend or
other distribution out of surplus.

(e) The sale of capital stock of a corporation to its

own stockholders exclusively, where no
commission or other remuneration is paid or given
directly or indirectly in connection with the sale
of such capital stock.

(f) The issuance of bonds or notes secured by

mortgage upon real estate or tangible personal
property, where the entire mortgage together with
all the bonds or notes secured thereby are sold to
a single purchaser at a single sale.

(g) The issue and delivery of any security in

exchange for any other security of the same issuer
pursuant to a right of conversion entitling the
holder of the security surrendered in exchange to
make such conversion: Provided, That the security
so surrendered has been registered under this
Code or was, when sold, exempt from the
provisions of this Code, and that the security
issued and delivered in exchange, if sold at the
conversion price, would at the time of such
conversion fall within the class of securities
entitled to registration under this Code. Upon
such conversion the par value of the security
surrendered in such exchange shall be deemed the
price at which the securities issued and delivered
in such exchange are sold.

(h) Brokers transactions, executed upon

customers orders, on any registered Exchange or
other trading market.

(i) Subscriptions for shares of the capital stock of a

corporation prior to the incorporation thereof or
in pursuance of an increase in its authorized
capital stock under the Corporation Code, when no
expense is incurred, or no commission,
compensation or remuneration is paid or given in
connection with the sale or disposition of such
securities, and only when the purpose for
soliciting, giving or taking of such subscriptions is
to comply with the requirements of such law as to
the percentage of the capital stock of a
corporation which should be subscribed before it
can be registered and duly incorporated, or its
authorized capital increased.

(j) The exchange of securities by the issuer with its

existing security holders exclusively, where no
commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange.
(k) The sale of securities by an issuer to fewer than
twenty (20) persons in the Philippines during any
twelve-month period.

(l) The sale of securities to any number of the

following qualified buyers: chanroblesvirtualawlibrary

(i) Bank;chan robles virtual law library

(ii) Registered investment house;

(iii) Insurance company;

(iv) 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 Bangko Sentral to
engage in trust functions;

(v) Investment company; or

(vi) Such other person as the Commission may by

rule determine as qualified buyers, on the basis of
such factors as financial sophistication, net worth,
knowledge, and experience in financial and
business matters, or amount of assets under
management.

10.2. The Commission may exempt other

transactions, if it finds that the requirements of
registration under this Code is not necessary in
the public interest or for the protection of the
investors such as by reason of the small amount
involved or the limited character of the public
offering.
10.3. Any person applying for an exemption under
this Section, shall file with the Commission a
notice identifying the exemption relied upon on
such form and at such time as the Commission by
rule may prescribe and with such notice shall pay
to the Commission a fee equivalent to one-tenth
(1/10) of one percent (1%) of the maximum
aggregate price or issued value of the securities.

SEC. 11. Commodity Futures Contracts.- No

person shall offer, sell or enter into commodity
futures contracts except in accordance with rules,
regulations and orders the Commission may
prescribe in the public interest. The Commission
shall promulgate rules and regulations involving
commodity futures contracts to protect investors
to ensure the development of a fair and
transparent commodities market.

SEC. 12. Procedure for Registration of Securities.

-
12.1. All securities required to be registered under
Subsection 8.1 shall be registered through the
filing by the issuer in the main office of the
Commission, of a sworn registration statement
with respect to such securities, in such form and
containing such information and documents as the
Commission shall prescribe. The registration
statement shall include any prospectus required or
permitted to be delivered under Subsections 8.2,
8.3 and 8.4.

12.2. In promulgating rules governing the content

of any registration statement (including any
prospectus made a part thereof or annexed
thereto), the Commission may require the
registration statement to contain such
information or documents as it may, by rule,
prescribe. It may dispense with any such
requirement, or may require additional
information or documents, including written
information from an expert, depending on the
necessity thereof or their applicability to the class
of securities sought to be registered.chan robles virtual law library

12.3. The information required for the registration

of any kind, and all securities, shall include,
among others, the effect of the securities issue on
ownership, on the mix of ownership, especially
foreign and local ownership.

12.4. The registration statement shall be signed by

the issuers executive officer, its principal
operating officer, its principal financial officer, its
comptroller, principal accounting officer, its
corporate secretary or persons performing similar
functions accompanied by a duly verified
 resolution of the board of directors of the issuer
corporation. The written consent of the expert
named as having certified any part of the
registration statement or any document used in
connection therewith shall also be filed. Where the
registration statement includes shares to be sold
by selling shareholders, a written certification by
such selling shareholders as to the accuracy of any
part of the registration statement contributed to
by such selling shareholders shall also be filed.

12.5. (a) Upon filing of the registration statement,

the issuer shall pay to the Commission a fee of not
more than one-tenth (1/10) of one per centum
(1%) of the maximum aggregate price at which
such securities are proposed to be offered. The
Commission shall prescribe by rule diminishing
fees in inverse proportion to the value of the
aggregate price of the offering.

(b) Notice of the filing of the registration

statement shall be immediately published by the
issuer, at its own expense, in two (2) newspapers of
general circulation in the Philippines, once a week
for two (2) consecutive weeks, or in such other
manner as the Commission by rule shall prescribe,
reciting that a registration statement for the sale
of such security has been filed, and that the
aforesaid registration statement, as well as the
papers attached thereto are open to inspection at
the Commission during business hours, and copies
 thereof, photostatic or otherwise, shall be
furnished to interested parties at such reasonable
charge as the Commission may prescribe.

12.6. Within forty-five (45) days after the date of

filing of the registration statement, or by such
later date to which the issuer has consented, the
Commission shall declare the registration
statement effective or rejected, unless the
applicant is allowed to amend the registration
statement as provided in Section 14 hereof. The
Commission shall enter an order declaring the
registration statement to be effective if it finds
that the registration statement together with all
the other papers and documents attached thereto,
is on its face complete and that the requirements
have been complied with. The Commission may
impose such terms and conditions as may be
necessary or appropriate for the protection of the
investors.

12.7. Upon effectivity of the registration

statement, the issuer shall state under oath in
every prospectus that all registration requirements
have been met and that all information are true
and correct as represented by the issuer or the one
making the statement. Any untrue statement of
fact or omission to state a material fact required
to be stated therein or necessary to make the
statement therein not misleading shall constitute
fraud.
SEC. 13. Rejection and Revocation of Registration
of Securities. - 13.1. The Commission may reject a
registration statement and refuse registration of
the security thereunder, or revoke the effectivity
of a registration statement and the registration of
the security thereunder after due notice and
hearing by issuing an order to such effect, setting
forth its findings in respect thereto, if it finds
that: chanroblesvirtualawlibrary

(a) The issuer:

chanroblesvirtualawlibrary

(i) Has been judicially declared insolvent;

(ii) Has violated any of the provisions of this Code,

the rules promulgated pursuant thereto, or any
order of the Commission of which the issuer has
notice in connection with the offering for which a
registration statement has been filed;

(iii) Has been or is engaged or is about to engage in

fraudulent transactions;

(iv) Has made any false or misleading

representation of material facts in any prospectus
concerning the issuer or its securities;

(v) Has failed to comply with any requirement that

the Commission may impose as a condition for
registration of the security for which the
registration statement has been filed; or
(b) The registration statement is on its face
incomplete or inaccurate in any material respect
or includes any untrue statement of a material
fact or omits to state a material fact required to be
stated therein or necessary to make the
statements therein not misleading; or
(c) The issuer, any officer, director or controlling
person of the issuer, or person performing similar
functions, or any underwriter has been convicted,
by a competent judicial or administrative body,
upon plea of guilty, or otherwise, of an offense
involving moral turpitude and/or fraud or is
enjoined or restrained by the Commission or other
competent judicial or administrative body for
violations of securities, commodities, and other
related laws.
chan robles virtual law library

For purposes of this subsection, the term

competent judicial or administrative body shall
include a foreign court of competent jurisdiction
as provided for under the Rules of Court.

13.2. The Commission may compel the production

of all the books and papers of such issuer, and may
administer oaths to, and examine the officers of
such issuer or any other person connected
therewith as to its business and affairs.

13.3. If any issuer shall refuse to permit an

examination to be made by the Commission, its
refusal shall be ground for the refusal or
revocation of the registration of its securities.
 13.4. If the Commission deems it necessary, it
may issue an order suspending the offer and sale
of the securities pending any investigation. The
order shall state the grounds for taking such
action, but such order of suspension although
binding upon the persons notified thereof, shall be
deemed confidential, and shall not be published.
Upon 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 the
Commission. Otherwise, such sale shall be void.

13.5. Notice of issuance of such order shall be

given to the issuer and every dealer and broker
who shall have notified the Commission of an
intention to sell such security.

13.6. A registration statement may be withdrawn

by the issuer only with the consent of the
Commission.

SEC. 14. Amendments to the Registration

Statement. - 14.1. If a registration statement is on
its face incomplete or inaccurate in any material
respect, the Commission shall issue an order
directing the amendment of the registration
statement. Upon compliance with such order, the
amended registration statement shall become
 effective in accordance with the procedure
mentioned in Subsection 12.6 hereof.

14.2. An amendment filed prior to the effective

date of the registration statement shall
recommence the forty-five (45) day period within
which the Commission shall act on a registration
statement. An amendment filed after the effective
date of the registration statement shall become
effective only upon such date as determined by
the Commission.

14.3. If any change occurs in the facts set forth in

a registration statement, the issuer shall file an
amendment thereto setting forth the change.

14.4. If, at any time, the Commission finds that a

registration statement contains any false
statement or omits to state any fact required to be
stated therein or necessary to make the
statements therein not misleading, the
Commission may conduct an examination, and,
after due notice and hearing, issue an Order
suspending the effectivity of the registration
statement. If the statement is duly amended, the
suspension order may be lifted.
14.5. In making such examination the Commission
or any officer or officers designated by it may
administer oaths and affirmations and shall have
access to, and may demand the production of, any
books, records or documents relevant to the
examination. Failure of the issuer, underwriter, or
any other person to cooperate, or his obstruction
or refusal to undergo an examination, shall be a
ground for the issuance of a suspension order.

SEC. 15. Suspension of Registration. - 15.1. If, at

any time, the information contained in the
registration statement filed is or has become
misleading, incorrect, inadequate or incomplete in
any material respect, or the sale or offering for
sale of the security registered thereunder may
work or tend to work a fraud, the Commission may
require from the issuer such further information
as may in its judgment be necessary to enable the
Commission to ascertain whether the registration
of such security should be revoked on any ground
specified in this Code. The Commission may also
suspend the right to sell and offer for sale such
security pending further investigation, by entering
an order specifying the grounds for such action,
and by notifying the issuer, underwriter, dealer or
broker known as participating in such offering.

15.2. The refusal to furnish information required

by the Commission may be a ground for the
issuance of an order of suspension pursuant to
 Subsection 15.1. Upon the issuance of any such
order and notification to the issuer, underwriter,
dealer or broker known 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 the Commission. Otherwise, such sale
shall be void.

15.3. Upon issuance of an order of suspension, the

Commission shall conduct a hearing. If the
Commission determines that the sale of any
security should be revoked, it shall issue an order
prohibiting sale of such security.
Until the issuance of a final order, the suspension
of the right to sell, though binding upon the
persons notified thereof, shall be deemed
confidential, and shall not be published, unless it
shall appear that the order of suspension has been
violated after notice. If, however, the Commission
finds that the sale of the security will neither be
fraudulent nor result in fraud, it shall forthwith
issue an order revoking the order of suspension,
and such security shall be restored to its status as
a registered security as of the date of such order of
suspension. chan robles virtual law library

CHAPTER IV
Regulation of Pre-Need Plans

SEC.16. Pre-Need Plans. - No person shall sell or

offer for sale to the public any pre-need plan
except in accordance with rules and regulations
which the Commission shall prescribe. Such rules
shall regulate the sale of pre-need plans by, among
other things, requiring the registration of pre-need
plans, licensing persons involved in the sale of pre-
need plans, requiring disclosures to prospective
plan holders, prescribing advertising guidelines,
providing for uniform accounting system, reports
and record keeping with respect to such plans,
imposing capital, bonding and other financial
responsibility, and establishing trust funds for the
payment of benefits under such plans.

CHAPTER V
Reportorial Requirements

SEC. 17. Periodic and Other Reports of Issuers.

-17.1. Every issuer satisfying the requirements in
Subsection 17.2 hereof shall file with the
Commission: chanroblesvirtualawlibrary

(a) Within one hundred thirty-five (135) days, after

the end of the issuers fiscal year, or such other
time as the Commission may prescribe, an annual
report which shall include, among others, a
balance sheet, profit and loss statement and
statement of cash flows, for such last fiscal year,
certified by an independent certified public
accountant, and a management discussion and
analysis of results of operations; and

(b) Such other periodical reports for interim fiscal

periods and current reports on significant
 developments of the issuer as the Commission
may prescribe as necessary to keep current
information on the operation of the business and
financial condition of the issuer.

17.2.The reportorial requirements of Subsection

17.1 shall apply to the following: chanroblesvirtualawlibrary

(a) An issuer which has sold a class of its securities

pursuant to a registration under Section 12 hereof:
Provided, however, That the obligation of such
issuer to file reports shall be suspended for any
fiscal year after the year such registration became
effective if such issuer, as of the first day of any
such fiscal year, has less than one hundred (100)
holders of such class of securities or such other
number as the Commission shall prescribe and it
notifies the Commission of such;

(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 (P50,000,000.00) or such other amount as
the Commission shall prescribe, and having Two
hundred (200) or more holders each holding at
least One hundred (100) shares of a class of its
 equity securities: Provided, however, That the
obligation of such issuer to file reports shall be
terminated ninety (90) days after notification to
the Commission by the issuer that the number of
its holders holding at least one hundred (100)
shares is reduced to less than One hundred (100). chan robles virtual law library

17.3. Every issuer of a security listed for trading

on an Exchange shall file with the Exchange a
copy of any report filed with the Commission
under Subsection 17.1 hereof.

17.4. All reports (including financial statements)

required to be filed with the Commission pursuant
to Subsection 17.1 hereof shall be in such form,
contain such 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 statements otherwise required to be filed
under the Corporation Code.

17.5. Every issuer which has a class of equity

securities satisfying any of the requirements in
Subsection 17.2 shall furnish to each holder of
such equity security an annual report in such form
and containing such information as the
Commission shall prescribe.
 17.6. Within such period as the Commission may
prescribe preceding the annual meeting of the
holders of any equity security of a class entitled to
vote at such meeting, the issuer shall transmit to
such holders an annual report in conformity with
Subsection 17.5.

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

of Equity Securities. - 18.1. In every case in which
an issuer satisfies the requirements of Subsection
17.2 hereof, any person who acquires directly or
indirectly the beneficial ownership of more than
five per centum (5%) of such class or in excess of
such lesser per centum as the Commission by rule
may prescribe, shall, within ten (10) days after
such acquisition or such reasonable time as fixed
by the Commission, submit to the issuer of the
security, to the Exchange where the security is
traded, and to the Commission a sworn statement
containing the following information and such
other information as the Commission may require
in the public interest or for the protection of
investors:
chanroblesvirtualawlibrary

(a) The personal background, identity, residence,

and citizenship of, and the nature of such
beneficial ownership by, such person and all other
persons by whom or on whose behalf the purchases
are effected; in the event the beneficial owner is a
juridical person, the lines of business of the
beneficial owner shall also be reported;
(b) If the purpose of the purchases or prospective
purchases is to acquire control of the business of
the issuer of the securities, any plans or proposals
which such persons may have that will effect a
major change in its 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 acquire,
directly or indirectly, by: (i) such person, and (ii)
each associate of such person, giving the
background, identity, residence, and citizenship of
each such associate; and

(d) Information as to any contracts, arrangements,

or understanding with any person with respect to
any securities of the issuer including but not
limited to transfer, joint ventures, loan or option
arrangements, puts or calls, guarantees or division
of losses or profits, or proxies naming the persons
with whom such contracts, arrangements, or
understanding have been entered into, and giving
the details thereof.

18.2. If any change occurs in the facts set forth in

the statements, an amendment shall be
transmitted to the issuer, the Exchange and the
Commission.
 18.3. The Commission, may permit any person to
file in lieu of the statement required by Subsection
17.1 hereof, a notice stating the name of such
person, the shares of any equity securities subject
to Subsection 17.1 which are owned by him, the
date of their acquisition and such other
information as the Commission may specify, if it
appears to the Commission that such securities
were acquired by such person in the ordinary
course of his business and were not acquired for
the purpose of and do not have the effect of
changing or influencing the control of the issuer
nor in connection with any transaction having
such purpose or effect.
CHAPTER VI
Protection of Shareholder Interests

SEC. 19. Tender Offers. 19.1. (a) Any person or

group of persons acting in concert who intends to
acquire at least fifteen per cent (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 Fifty Million Pesos
(P50,000,000.00) and having two hundred (200) or
more stockholders with at least one hundred (100)
shares each or who intends to acquire at least
thirty per cent (30%) of such equity over a period
of twelve (12) months shall make a tender offer to
stockholders by filing with the Commission a
declaration to that effect; and furnish the issuer, a
statement containing such of the information
required in Section 17 of this Code as the
Commission may prescribe. Such person or group
 of persons shall publish all requests or invitations
for tender, or materials making a tender offer or
requesting or inviting letters of such a security.
Copies of any additional material soliciting or
requesting such tender offers subsequent to the
initial solicitation or request shall contain such
information as the Commission may prescribe, and
shall be filed with the Commission and sent to the
issuer not later than the time copies of such
materials are first published or sent or given to
security holders.

(b) Any solicitation or recommendation to the

holders of such a security to accept or reject a
tender offer or request or invitation for tenders
shall be made in accordance with such rules and
regulations as the Commission may prescribe.

(c) 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
any time after sixty (60) days from the date of the
original tender offer or request or invitation,
except as the Commission may otherwise
prescribe.chan robles virtual law library
 (d) Where the securities offered exceed that which
a person or group of persons is bound or willing to
take up and pay for, the securities that are subject
of the tender offer shall be taken up as nearly as
may be pro rata, disregarding fractions, according
to the number of securities deposited by each
depositor. The provisions of this subsection shall
also apply to securities deposited within ten (10)
days after notice of an increase in the
consideration offered to security holders, as
described in paragraph (e) of this subsection, is
first published or sent or given to security holders.

(e) Where any person varies the terms of a tender

offer or request or invitation for tenders before the
expiration thereof by increasing the consideration
offered to holders of such securities, such person
shall pay the increased consideration to each
security holder whose securities are 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.

19.2. It shall be unlawful for any person to make

any untrue statement of a material fact or omit to
state any material fact necessary in order to make
the statements made, in the light of the
circumstances under which they are made, not
misleading, or to engage in any fraudulent,
deceptive, or manipulative acts or practices, in
connection with any tender offer or request or
 invitation for tenders, or any solicitation of
security holders in opposition to or in favor of any
such offer, request, or invitation. The Commission
shall, for the purposes of this subsection, define
and prescribe means reasonably designed to
prevent, such acts and practices as are fraudulent,
deceptive, or manipulative.

SEC. 20. Proxy Solicitations. 20.1. Proxies must

be issued and proxy solicitation must be made in
accordance with rules and regulations to be issued
by the Commission;

20.2. Proxies must be in writing, signed by the

stockholder or his duly authorized representative
and filed 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 authorization, in respect of any
security carried for the account of a customer, to a
 person other than the customer, without the
express written authorization of such customer.

20.5. A broker or dealer who holds or acquires the

proxy for at least ten per centum (10%) or such
percentage as the Commission may prescribe of
the outstanding share of the issuer, shall submit a
report identifying the beneficial owner within ten
(10) days after such acquisition, for its own
account or customer, to the issuer of the security,
to the Exchange where the security is traded and
to the Commission.

SEC. 21. Fees for Tender Offers and Certain Proxy

Solicitations. - At the time of filing with the
Commission of any statement required under
Section 19 for any tender offer or Section 72.2 for
issuer repurchases, or Section 20 for proxy or
consent solicitation, the Commission may require
that the person making such filing pay a fee of not
more than one-tenth (1/10) of one percentum (1%)
of:
chanroblesvirtualawlibrary

21.1. The proposed aggregate purchase price in

the case of a transaction under Sections 20 or
72.2; or chan robles virtual law library
21.2. The proposed payment in cash, and the value
of any securities or property to be transferred in
the acquisition, merger or consolidation, or the
cash and value of any securities proposed to be
received upon the sale or disposition of such
assets in the case of a solicitation under Section
20. The Commission shall prescribe by rule
diminishing fees in inverse proportion to the value
of the aggregate price of the offering.

SEC. 22. Internal Record Keeping and Accounting

Controls. - Every issuer which has a class of
securities that satisfies the requirements of
Subsection 17.2 shall:chanroblesvirtualawlibrary

22.1. Make and keep books, records, and accounts

which, in reasonable detail accurately and fairly
reflect the transactions and dispositions of assets
of the issuer;

22.2. Devise and maintain a system of internal

accounting controls sufficient to provide
reasonable assurances that: (a) Transactions and
access to assets are pursuant to management
authorization; (b) Financial statements are
prepared in conformity with generally accepted
accounting principles that are adopted by the
Accounting Standards Council and the rules
promulgated by the Commission with regard to the
 preparation of financial statements; and (c)
Recorded assets are compared with existing assets
at reasonable intervals and differences are
reconciled.

SEC. 23. Transactions of Directors, Officers and

Principal Stockholders. - 23.1. Every person who
is directly or indirectly the beneficial owner of
more than ten per centum (10%) of any class of
any equity security which satisfies the
requirements of Subsection 17.2, or who is a
director or an officer of the issuer of such security,
shall file, at the time either such requirement is
first satisfied or within ten days after he becomes
such a beneficial owner, director, or officer, a
statement with the Commission and, if such
security is listed for trading on an Exchange, also
with the Exchange, of the amount of all equity
securities of such issuer of which he is the
beneficial owner, and within ten (10) days after the
close of each calendar month thereafter, if there
has been a change in such ownership during such
month, shall file with the Commission, and if such
security is listed for trading on an Exchange, shall
also file with the Exchange, a statement indicating
his ownership at the close of the calendar month
and such changes in his ownership as have
occurred during such calendar month.

23.2. For the purpose of preventing the unfair use

of information which may have been obtained by
 such beneficial owner, director, or officer 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 six (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, irrespective of any intention of holding
the security purchased or of not repurchasing the
security sold for a period exceeding six (6) months.
Suit to recover such profit may be instituted
before the Regional Trial Court by the issuer, or by
the owner of any security of the issuer in the
name and in behalf of the issuer if the issuer shall
fail or refuse to bring such suit within sixty (60)
days after request or shall fail diligently to
prosecute the same thereafter, but no such suit
shall be brought more than two (2) years after the
date such profit was realized. This subsection shall
not be construed to cover any transaction where
such beneficial owner was not such both at the
time of the purchase and sale, or the sale and
purchase, of the security involved, or any
transaction or transactions which the Commission
by rules and regulations may exempt as not
comprehended within the purpose of this
subsection.

23.3. It shall be unlawful for any such beneficial

owner, director, or officer, directly or indirectly, to
sell any equity security of such issuer if the person
selling the security or his principal: (a) Does not
own the security sold; or (b) If owning the security,
does not deliver it against such sale within twenty
(20) days thereafter, or does not within five (5)
days after such sale deposit it in the mails or other
usual channels of transportation; but no person
shall be deemed to have violated this subsection if
he proves that notwithstanding the exercise of
good faith he was unable to make such delivery or
deposit within such time, or that to do so would
cause undue inconvenience or expense.

23.4. The provisions of Subsection 23.2 shall not

apply to any purchase and sale, or sale and
purchase, and the provisions of Subsection 23.3
shall not apply to any sale, of an equity security
not then or thereafter held by him in an
investment account, by a dealer in the ordinary
course of his business and incident to the
establishment or maintenance by him of a primary
or secondary market, otherwise than on an
Exchange, for such security. The Commission
may, by such rules and regulations as it deems
necessary or appropriate in the public interest,
define and prescribe terms and conditions with
respect to securities held in an investment
account and transactions made in the ordinary
course of business and incident to the
establishment or maintenance of a primary or
secondary market.

CHAPTER VII
Prohibitions on Fraud, Manipulation and Insider Trading

SEC. 24. Manipulation of Security Prices; Devices

and Practices. - 24.1 It shall be unlawful for any
person acting for himself or through a dealer or
broker, directly or indirectly: chanroblesvirtualawlibrary

(a) To create a false or misleading appearance of

active trading in any listed security traded in an
Exchange or any other trading market (hereafter
referred to purposes of this Chapter as
Exchange):

(i) By effecting any transaction in such security

which involves no change in the beneficial
ownership thereof;

(ii) By entering an order or orders for the purchase

or sale of such security with the knowledge that a
simultaneous order or orders 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; or

(iii) By performing similar act where there is no

change in beneficial ownership.

(b) To effect, alone or with others, a series of

transactions in securities that:
(i) Raises their price to induce the purchase of a
security, whether of the same or a different class
of the same issuer or of a controlling, controlled,
or commonly controlled company by others;
(ii) Depresses their price to induce the sale of a
security, whether of the same or a different class,
of the same issuer or of a controlling, controlled,
or commonly controlled company by others; or
(iii) 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. chan robles virtual law library

(c) To circulate or disseminate information that

the price of any security listed in an Exchange will
or is 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.

(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, for the purpose of inducing the
purchase or sale of any security listed or traded in
an Exchange.

(e) To effect, either alone or others, any series of

transactions for the purchase and/or sale of any
security traded in an Exchange for the purpose of
pegging, fixing or stabilizing the price of such
security, unless otherwise allowed by this Code or
by rules of the Commission.

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 as necessary or
appropriate in the public interest or for the
protection of investors.

24.3. The foregoing provisions notwithstanding,

the Commission, having due regard to the public
interest and the protection of investors, may, by
rules and regulations, allow certain acts or
transactions that may otherwise be prohibited
under this Section.

SEC. 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 put, call, straddle, option, or
privilege shall not include any registered
warrant, right or convertible security.

SEC. 26. Fraudulent Transactions. - It shall be

unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any
securities to: chanroblesvirtualawlibrary

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 in
order to make the statements made, in the light of
the circumstances under which they were made,
not misleading; or

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.

SEC. 27. Insiders Duty to Disclose When

Trading. - 27.1. It shall be unlawful for an insider
to sell or buy a security of the issuer, while in
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 defined in Subsection 3.8, or such
insiders spouse or relatives by affinity or
consanguinity within the second degree,
legitimate or common-law, shall be presumed to
have been effected while in possession of material
non-public information if transacted after such
information came into existence but prior to
dissemination of such information to the public
and the lapse of a reasonable time for the market
to absorb such information: Provided, however,
That this presumption shall be rebutted upon a
showing by the purchaser or seller that he was not
aware of the material non-public information at
the time of the purchase or sale.

27.2. For purposes of this Section, information is

material non-public 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 non-public 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 while in
possession of such information.

27.4. (a) It shall be unlawful where a tender offer

has commenced or is about to commence for: chanroblesvirtualawlibrary

(i) Any person (other than the tender offeror) who

is in possession of material non-public 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
non-public 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 non-public
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).

(b) 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.

CHAPTER VIII
Regulation of Securities Market Professionals

SEC. 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 Philippines as a broker or
dealer, or act as a salesman, or an associated
person of any broker or dealer unless registered as
such with the Commission.

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.
 28.3. The Commission, by rule or order, may
conditionally or unconditionally exempt from
Subsections 28.1 and 28.2 any broker, dealer,
salesman, associated person of any broker or
dealer, or any class of the foregoing, as it deems
consistent with the public interest and the
protection of investors.

28.4. The Commission shall promulgate rules and

regulations prescribing the qualifications for
registration of each category of applicant, which
shall, among other things, require as a condition
for registration that: chanroblesvirtualawlibrary

(a) If a natural person, the applicant satisfactorily

pass a written examination as to his proficiency
and knowledge in the area of activity for which
registration is sought;
chan robles virtual law library

(b) In the case of a broker or dealer, the applicant

satisfy a minimum net capital as prescribed by the
Commission, and provide a bond or other security
as the Commission may prescribe to secure
compliance with the provisions of this Code; and

(c) If located outside of the Philippines, the

applicant files a written consent to service of
process upon the Commission pursuant to Section
65 hereof.
28.5. A broker or dealer may apply for registration
by filing with the Commission a written
application in such form and containing such
information and documents concerning such
broker or dealer as the Commission by rule shall
prescribe.

28.6. Registration of a salesman or of an

associated person of a registered broker or dealer
may be made upon written application filed with
the Commission by such salesman or associated
person. The application shall be separately signed
and certified by the registered broker or dealer to
which such salesman or associated person is to
become affiliated, or by the issuer in the case of a
salesman employed, appointed or authorized solely
by such issuer. The application shall be in such
form and contain such information and documents
concerning the salesman or associated person as
the Commission by rule shall prescribe. For
purposes of this Section, a salesman shall not
include any employee of an issuer whose
compensation is not determined directly or
indirectly on sales of securities of the issuer.

28.7. Applications filed pursuant to Subsections

28.5 and 28.6 shall be accompanied by a
registration fee in such reasonable amount
prescribed by the Commission.
28.8. Within thirty (30) days after the filing of any
application under this Section, the Commission
shall by order: (a) Grant registration if it
determines that the requirements of this Section
and the qualifications for registration set forth in
its rules and regulations have been satisfied; or (b)
Deny said registration.

28.9. The names and addresses of all persons

approved for registration as brokers, dealers,
associated persons or salesmen and all orders of
the Commission with respect thereto shall be
recorded in a Register of Securities Market
Professionals kept in the office of the Commission
which shall be open to public inspection.

28.10. Every person registered pursuant to this

Section shall file with the Commission, in such
form as the Commission shall prescribe,
information necessary to keep the application for
registration current and accurate, including in the
case of a broker or dealer changes in salesmen,
associated persons and owners thereof.

28.11. Every person registered pursuant to this

Section shall pay to the Commission an annual fee
at such time and in such reasonable amount as the
Commission shall prescribe. Upon notice by the
Commission that such annual fee has not been
paid as required, the registration of such person
shall be suspended until payment has been made.

28.12. The registration of a salesman or associated

person shall be automatically terminated upon the
cessation of his affiliation with said registered
broker or dealer, or with an issuer in the case of a
salesman employed, appointed or authorized by
such issuer. Promptly following any such cessation
of affiliation, the registered broker or dealer, or
issuer, as the case may be, shall file with the
Commission a notice of separation of such
salesman or associated person.

SEC. 29. Revocation, Refusal or Suspension of

Registration of Brokers, Dealers, Salesmen and
Associated Persons. 29.1. Registration under
Section 28 of this Code may be refused, or any
registration granted thereunder may be revoked,
suspended, or limitations placed thereon, by the
Commission if, after due notice and hearing, the
Commission determines the applicant or
registrant:chanroblesvirtualawlibrary

(a) Has willfully violated any provision of this

Code, any rule, regulation or order made
hereunder, or any other law administered by the
Commission, or in the case of a registered broker,
dealer or associated person has failed to supervise,
with a view to preventing such violation, another
person who commits such violation; chan robles virtual law library

(b) Has willfully made or caused to be made a

materially false or misleading statement in any
application for registration or report filed with the
Commission or a self-regulatory organization, or
has willfully omitted to state any material fact
that is required to be stated therein;

(c) Has failed to satisfy the qualifications or

requirements for registration prescribed under
Section 28 and the rules and regulations of the
Commission promulgated thereunder;

(d) Has been convicted, by a competent judicial or

administrative body of an offense involving moral
turpitude, fraud, embezzlement, counterfeiting,
theft, estafa, misappropriation, forgery, bribery,
false oath, or perjury, or of a violation of
securities, commodities, banking, real estate or
insurance laws;

(e) Is enjoined or restrained by a competent

judicial or administrative body from engaging in
securities, commodities, banking, real estate or
insurance activities or from willfully violating laws
governing such activities;
(f) Is subject to an order of a competent judicial or
administrative body refusing, revoking or
suspending any registration, license or other
permit under this Code, the rules and regulations
promulgated thereunder, any other law
administered by the Commission;

(g) Is subject to an order of a self-regulatory

organization suspending or expelling him from
membership or participation therein or from
association with a member or participant thereof;

(h) Has been found by a competent judicial or

administrative body to have willfully violated any
provisions of securities, commodities, banking,
real estate or insurance laws, or has willfully
aided, abetted, counseled, commanded, induced or
procured such violation; or

(i) Has been judicially declared insolvent.

For purposes of this subsection, the term
competent judicial or administrative body shall
include a foreign court of competent jurisdiction
and a foreign financial regulator.

29.2. (a) In cases of charges against a salesman or

associated person, notice thereof shall also be
given the broker, dealer or issuer employing such
salesman or associated person.
 (b) Pending the hearing, the Commission shall
have the power to order the suspension of such
brokers, dealers, associated persons or
salesmans registration: Provided, That such order
shall state the cause for such suspension. Until
the entry of a final order, the suspension of such
registration, though binding upon the persons
notified thereof, shall be deemed confidential, and
shall not be published, unless it shall appear that
the order of suspension has been violated after
notice.
chan robles virtual law library

29.3. The order of the Commission refusing,

revoking, suspending or placing limitations on a
registration as herein above provided, together
with its findings, shall be entered in the Register
of Securities Market Professionals. The
suspension or revocation of the registration of a
dealer or broker shall also automatically suspend
the registration of all salesmen and associated
persons affiliated with such broker or dealer.

29.4. It shall be sufficient cause for refusal,

revocation or suspension of a broker's or dealers
registration, if any associated person thereof or
any juridical entity controlled by such associated
person has committed any act or omission or is
subject to any disability enumerated in paragraphs
(a) through (i) of Subsection 29.1 hereof.

SEC. 30. Transactions and Responsibility of

Brokers and Dealers. - 30.1. No broker or dealer
shall deal in or otherwise buy or sell, for its own
account or for the account of customers,
securities listed on an Exchange issued by any
corporation where any stockholder, 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 time holding
office in said issuer corporation as a director,
president, vice-president, manager, treasurer,
comptroller, secretary or any office of trust and
responsibility, or is a controlling person of the
issuer.

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 with such rules and regulations as
the Commission shall prescribe to ensure fair and
honest dealings in securities and provide financial
safeguards and other standards for the operation
of brokers and dealers, including the
establishment of minimum net capital
requirements, the acceptance of custody and use
of securities of customers, and the carrying and
use of deposits and credit balances of customers.
 SEC. 31. Development of Securities Market
Professionals. - The Commission, in joint
undertaking with self regulatory organizations,
organizations and associations of finance
professionals as well as private educational and
research institutions shall undertake or facilitate/
organize continuing training, conferences/
seminars, updating programs, research and
development as well as technology transfer at the
latest and advanced trends in issuance and trading
of securities, derivatives, commodity trades and
other financial instruments, as well as securities
markets of other countries.

CHAPTER IX
Exchanges and Other Securities Trading Markets

SEC. 32. Prohibition on Use of Unregistered

Exchange; Regulation of Over-the-Counter
Markets. 32.1. No broker, dealer, salesman,
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 as such under Section 33 of this Code.

32.2. (a) 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, for the buying and selling of
any security, except in accordance with rules and
regulations the Commission may prescribe.

(b) 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 and may require such market to be
administered by a self-regulatory organization
determined by the Commission as capable of
insuring the protection of investors comparable to
that provided in the case of a registered
Exchange. Such self-regulatory organization must
provide a centralized marketplace for trading and
must satisfy requirements comparable to those
prescribed for registration of Exchanges in Section
33 of this Code.

SEC. 33. Registration of Exchanges. - 33.1. Any

Exchange may be registered as such with the
Commission under the terms and conditions
hereinafter provided in this Section and Section
40 hereof, by filing an application for registration
in such form and containing such information and
supporting documents as the Commission by rule
shall prescribe, including the following:
chanroblesvirtualawlibrary
(a) An undertaking to comply and enforce
compliance by its members with the provisions of
this Code, its implementing rules or regulations
and the rules of the Exchange;

(b) The organizational charts of the Exchange,

rules of procedure, and a list of its officers and
members;

(c) Copies of the rules of the Exchange; and

(d) An undertaking that in the event a member

firm becomes insolvent or when the Exchange
shall have found that the financial condition of its
member firm has so deteriorated that it cannot
readily meet the demands of its customers for the
delivery of securities and/or payment of sales
proceeds, the Exchange shall, upon order of the
Commission, take over the operation of the
insolvent member firm and immediately proceed
to settle the member firms liabilities to its
customers.

33.2. Registration of an Exchange shall be granted

upon compliance with the following provisions: chanroblesvirtualawlibrary

(a) That the applicant is organized as a stock

corporation: Provided, That any registered
Exchange existing prior to the effectivity of this
Code shall within one (1) year reorganize as a
stock corporation pursuant to a demutualization
plan approved by the Commission;

(b) That the applicant is engaged solely in the

business of operating an exchange: Provided,
however, That the Commission may adopt rules,
regulations or issue an order, upon application,
exempting an Exchange organized as a stock
corporation and owned and controlled by another
juridical person from this restriction;
c) Where the Exchange is organized as a stock
corporation, that no person may beneficially own
or control, directly or indirectly, more than five
percent (5%) of the voting rights of the Exchange
and no industry or business group may beneficially
own or control, directly or indirectly, more than
twenty percent (20%) of the voting rights of the
Exchange: Provided, however, That the
Commission may adopt rules, regulations or issue
an order, upon application, exempting an
applicant from this prohibition where it finds that
such ownership or control will not negatively
impact on the exchanges ability to effectively
operate in the public interest;

(d) The expulsion, suspension, or disciplining of a

member and persons associated with a member for
conduct or proceeding inconsistent with just and
equitable principles of fair trade, and for violations
of provisions of this Code, or any other Act
administered by the Commission, the rules,
regulations and orders thereunder, or the rules of
the Exchange;
(e) A fair procedure for the disciplining of members
and persons associated with members, the denial
of membership to any person seeking to be a
member, the barring of any person from
association with a member, and the prohibition or
limitation of any person from access to services
offered by the Exchange;

(f) That the brokers in the board of the Exchange

shall comprise of not more than forty-nine percent
(49%) of such board and shall proportionately
represent the Exchange membership in terms of
volume/value of trade and paid up capital, and
that any natural person associated with a juridical
entity that is a member shall himself be deemed to
be a member for this purpose: Provided, That any
registered Exchange existing prior to the
effectivity of this Code shall immediately comply
with this requirement;

(g) For the board of the Exchange to include in its

composition (i) the president of the Exchange, and
(ii) no less than fifty one percent (51%) of the
remaining members of the board to be comprised
of three (3) independent directors and persons who
represent the interests of issuers, investors, and
other market participants, who are not associated
with any broker or dealer or member of the
Exchange for a period of two (2) years prior to his/
her appointment. No officer or employee of a
member, its subsidiaries or affiliates or related
interests shall become an independent director:
Provided, however, That the Commission may by
rule, regulation, or order upon application, permit
the exchange organized as a stock corporation to
use a different governance structure: Provided,
further, That the Commission is satisfied that the
Exchange is acting in the public interest and is
able to effectively operate as a self-regulatory
organization under this Code: Provided, finally,
That any registered exchange existing prior to the
effectivity of this Code shall immediately comply
with this requirement.

(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:
Provided, That the Exchange may only appoint,
and a person may only serve, as an officer of the
exchange if such person has not been a member or
affiliated with any broker, dealer, or member of
the Exchange 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 and other persons using any facility or
system which the Exchange operates or controls;
(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.

33.3. If the Commission finds that the applicant

Exchange is capable of complying and enforcing
compliance by its members, and persons
associated with such members, with the provisions
of this Code, its rules and regulations, and the
rules of the Exchange, and that the rules of the
Exchange are fair, just and adequate, the
Commission shall cause such Exchange to be
registered. If, after notice due and hearing, the
Commission finds otherwise, the application shall
be denied.

33.4. Within ninety (90) days after the filing of the

application the Commission may issue an order
either granting or denying registration as an
Exchange, unless the Exchange applying for
registration shall withdraw its application or shall
consent to the Commissions deferring action on
its application for a stated longer period after the
date of filing. The filing with the Commission of an
 application for registration by an Exchange shall
be deemed to have taken place upon the receipt
thereof. Amendments to an application may be
made upon such terms as the Commission may
prescribe.

33.5. Upon the registration of an Exchange, it

shall pay a fee in such amount and within such
period as the Commission may fix.

33.6. Upon appropriate application in accordance

with the rules and regulations of the Commission
and upon such terms as the Commission may
deem necessary for the protection of investors, an
Exchange may withdraw its registration or
suspend its operations or resume the same.

SEC. 34. Segregation and Limitation of Functions

of Members, Brokers 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 respect to which it or an
associated person thereof exercises investment
discretion: Provided, however, That this section
shall not make unlawful -
(a) Any transaction by a member-broker acting in
the capacity of a market maker;

(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 as

may be defined by the Commission.

34.2. In all instances where the member-broker

effects a transaction on an Exchange for its own
account or the account of an associated person or
an account with respect to which it exercises
investment discretion, it shall disclose to such
customer at or before the completion of the
transaction it is acting for its own account:
Provided, further, That this fact shall be reflected
in the order ticket and the confirmation slip.

34.3. Any member-broker who violates the

provisions of this Section shall be subject to the
administrative sanctions provided in Section 54 of
this Code.
 SEC. 35. Additional Fees of Exchanges. - In
addition to the registration fee prescribed in
Section 33 of this Code, every Exchange shall pay
to the Commission, on a semestral basis on or
before the tenth day of the end of every semester
of the calendar year, a fee in such an amount as
the Commission shall prescribe, but not more than
one-hundredth of one per centum (1%) of the
aggregate amount of the sales of securities
transacted on such Exchange during the preceding
calendar year, for the privilege of doing business,
during the preceding calendar year or any part
thereof.

SEC. 36. Powers with Respect to Exchanges and

Other Trading Market. - 36.1. The Commission is
authorized, if in its opinion such action is
necessary or appropriate for the protection of
investors and the public interest so requires,
summarily to suspend trading in any listed
security on any Exchange or other trading market
for a period not exceeding thirty (30) days or, with
the approval of the President of the Philippines,
summarily to suspend all trading on any securities
Exchange or other trading market for a period of
more than thirty (30) but not exceeding ninety
(90) days: Provided, however, That the
Commission, promptly following the issuance of
the order of suspension, shall notify the affected
issuer of the reasons for such suspension and
provide such issuer with an opportunity for
hearing to determine whether the suspension
should be lifted.
chan robles virtual law library
36.2. Wherever two or more Exchanges or other
trading markets exist, the Commission may
require and enforce uniformity of trading
regulations in and/or between or among said
Exchanges or other trading markets.

36.3. In addition to the existing Philippine Stock

Exchange, the Commission shall have the
authority to determine the number, size and
location of stock Exchanges, other trading
markets and commodity Exchanges and other
similar organizations in the light of national or
regional requirements for such activities with the
view to promote, enhance, protect, conserve or
rationalize investment.

36.4. The Commission, having due regard to the

public interest, the protection of investors, the
safeguarding of securities and funds, and
maintenance of fair competition among brokers,
dealers, clearing agencies, and transfer agents,
shall promulgate rules and regulations for the
prompt and accurate clearance and settlement of
securities transactions.
 36.5. (a) The Commission may establish or
facilitate the establishment of trust funds which
shall be contributed by Exchanges, brokers,
dealers, underwriters, transfer agents, salesmen
and other persons transacting in securities, as the
Commission may require, for the purpose of
compensating investors for the extraordinary
losses or damage they may suffer due to business
failure or fraud or mismanagement of the persons
with whom they transact, under such rules and
regulations as the Commission may from time to
time prescribe or approve in the public interest.

(b) The Commission may, having due regard to the

public interest or the protection of investors,
regulate, supervise, examine, suspend or otherwise
discontinue such and other similar funds under
such rules and regulations which the Commission
may promulgate, and which may include taking
custody and management of the fund itself as well
as investments in and disbursements from the
funds under such forms of control and supervision
by the Commission as it may from time to time
require. The authority granted to the Commission
under this subsection shall also apply to all funds
established for the protection of investors,
whether established by the Commission or
otherwise.
chan robles virtual law library

SEC. 37. Registration of Innovative and Other

Trading Markets. - The Commission, having due
 regard for national economic development, shall
encourage competitiveness in the market by
promulgating within six (6) months upon the
enactment of this Code, rules for the registration
and licensing of innovative and other trading
markets or Exchanges covering, but not limited to,
the issuance and trading of innovative securities,
securities of small, medium, growth and venture
enterprises, and technology-based ventures
pursuant to Section 33 of this Code.

SEC. 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 judgment in carrying out
the responsibilities of a director.
CHAPTER X
Registration, Responsibilities and
Oversight of Self-Regulatory Organizations

SEC. 39. Associations of Securities Brokers, and

Dealers, and Other Securities Related
Organizations. -39.1. The Commission shall have
the power to register as a self-regulatory
organization, or otherwise grant licenses, and to
regulate, supervise, examine, suspend or otherwise
discontinue, as a condition for the operation of
organizations whose operations are related to or
connected with the securities market such as but
not limited to associations of brokers and dealers,
transfer agents, custodians, fiscal and paying
agents, computer services, news disseminating
services, proxy solicitors, statistical agencies,
securities rating agencies, and securities
information processors which are engaged in the
business of: (a) Collecting, processing, or preparing
for distribution or publication, or assisting,
participating in, or coordinating the distribution
or publication of, information with respect to
transactions in or quotations for any security; or
(b) Distributing or publishing, whether by means of
a ticker tape, a communications network, a
terminal display device, or otherwise, on a current
and continuing basis, information with respect to
such transactions or quotations. The Commission
may prescribe rules and regulations which are
necessary or appropriate in the public interest or
for the protection of investors to govern self-
regulatory organizations and other organizations
licensed or regulated pursuant to the authority
 granted in Subsection 39.1 including the
requirement of cooperation within and among, and
electronic integration of the records of, all
participants in the securities market to ensure
transparency and facilitate exchange of
information.

39.2. An association of brokers and dealers may be

registered as a securities association pursuant to
Subsection 39.3 by filing with the Commission an
application for registration in such form as the
Commission, by rule, may prescribe containing the
rules of the association and such other
information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in
the public interest or for the protection of
investors.

39.3. An association of brokers and dealers shall

not be registered as a securities association unless
the Commission determines that: chanroblesvirtualawlibrary

(a) The association is so organized and has the

capacity to be able to carry 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 provisions of this
Code, the rules and regulations thereunder, and
the rules of the association.
(b) The rules of the association, notwithstanding
anything in the Corporation Code to the contrary,
provide that:chanroblesvirtualawlibrary

(i) Any registered broker or dealer may become a

member of the association;

(ii) There exist a fair representation of its members

to serve on the Board of Directors of the
association and in the administration of its affairs,
and that any natural person associated with a
juridical entity that is a member shall himself be
deemed to be a member for this purpose;

(iii) The Board of Directors of the association

includes in its composition: (a) The president of
the association and (b) Persons who represent the
interests of issuers and public investors and are
not associated with any broker or dealer or
member of the association; that the president and
other management of the association not be a
member or associated with any broker, dealer or
member of the association;

(iv) For the equitable allocation of reasonable dues,

fees, and other charges among members and
issuers and other persons using any facility or
system which the association operates or controls;

(v) For the prevention of fraudulent and

manipulative acts and practices, the promotion of
just and equitable principles of trade, and, in
general, the protection of investors and the public
interest;
(vi) That its members and persons associated with
its members shall be appropriately disciplined for
violation of any provision of this Code, the rules or
regulations thereunder, or the rules of the
association;

(vii) That a fair procedure for the disciplining of

members and persons associated with members,
the denial of membership to any person seeking
membership therein, the barring of any person
from becoming associated with a member thereof,
and the prohibition or limitation by the
association of any person with respect to access to
services offered by the association or a member
thereof.
39.4. (a) A registered securities association shall
deny membership to any person who is not a
registered broker or dealer.

(b) A registered securities association may deny

membership to, or condition the membership of, a
registered broker or dealer if such broker or
dealer:chanroblesvirtualawlibrary

(i) Does not meet the standards of financial

responsibility, operational capability, training,
experience, or competence that are prescribed by
the rules of the association; or

(ii) Has engaged, and there is a reasonable

likelihood it will again engage, in acts or practices
inconsistent with just and equitable principles of
fair trade.
 (c) A registered securities association may deny
membership to a registered broker or dealer not
engaged in a type of business in which the rules of
the association require members to be engaged:
Provided, however, That no registered securities
association may deny membership to a registered
broker or dealer by reason of the amount of
business done by the broker or dealer.

A registered securities association may examine

and verify the qualifications of an applicant to
become a member in accordance with procedures
established by the rules of the association.

(d) A registered securities association may bar a

salesman or person associated with a broker or
dealer from being employed by a member or set
conditions for the employment of a salesman or
associated if such person:chanroblesvirtualawlibrary

(i) Does not meet the standards of training,

experience, or competence that are prescribed by
the rules of the association; or

(ii) Has engaged, and there is a reasonable

likelihood he will again engage, in acts or practices
inconsistent with just and equitable principles of
fair trade.
A registered securities association may examine
and verify the qualifications of an applicant to
become a salesman or associated person employed
 by a member in accordance with procedures
established by the rules of the association. A
registered association also may require a salesman
or associated person employed by a member to be
registered with the association in accordance with
procedures prescribed in the rules of the
association.

39.5. In any proceeding by a registered securities

association to determine whether a person shall be
denied membership, or barred from association
with a member, the association shall provide
notice to the person under review of the specific
grounds being considered for denial, afford him an
opportunity to defend against the allegations, and
keep a record of the proceedings. A determination
by the association to deny membership shall be
supported by a statement setting forth the specific
grounds on which the denial is based.

SEC. 40. Powers with Respect to Self-Regulatory

Organizations. - 40.1. Upon the filing of an
application for registration as an Exchange under
Section 33, a registered securities association
under Section 39, a registered clearing agency
under Section 42, or other self-regulatory
organization under this Section, the Commission
shall have ninety (90) days within which to either
grant registration or institute a proceeding to
determine whether registration should be denied.
In the event proceedings are instituted, the
Commission shall have two hundred seventy (270)
days within which to conclude such proceedings at
which time it shall, by order, grant or deny such
registration.

40.2. Every self-regulatory organization shall

comply with the provisions of this Code, the rules
and regulations thereunder, and its own rules, and
enforce compliance therewith, notwithstanding
any provision of the Corporation Code to the
contrary, by its members, persons associated with
its members or its participants.

40.3. (a) Each self-regulatory organization shall

submit to the Commission for prior approval any
proposed rule or amendment thereto, together
with a concise statement of the reason and effect
of the proposed amendment.

(b) Within sixty (60) days after submission of a

proposed amendment, the Commission shall, by
order, approve the proposed amendment.
Otherwise, the same may be made effective by the
self-regulatory organization.

(c) In the event of an emergency requiring action

for the protection of investors, the maintenance of
 fair and orderly markets, or the safeguarding of
securities and funds, a self-regulatory organization
may put a proposed amendment into effect
summarily: Provided, however, That a copy of the
same shall be immediately submitted to the
Commission.

40.4. The Commission is further authorized, if

after making appropriate request in writing to a
self-regulatory organization that such organization
effect on its own behalf specified changes in its
rules and practices and, after due notice and
hearing it determines that such changes have not
been effected, and that such changes are
necessary, by 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:
chanroblesvirtualawlibrary

(a) Safeguards in respect of the financial

responsibility of members and adequate provision
against the evasion of financial responsibility
through the use of corporate forms or special
partnerships;

(b) The supervision of trading practices;

(c) The listing or striking from listing of any

security;

(d) Hours of trading;

(e) The manner, method, and place of soliciting
business;

(f) Fictitious accounts;

(g) The time and method of making settlements,

payments, and deliveries, and of closing accounts;

(h) The transparency of securities transactions and

prices;

(i) The fixing of reasonable rates of fees, interest,

listing and other charges, but not rates of
commission;

(j) Minimum units of trading;

(k) Odd-lot purchases and sales;

(l) Minimum deposits on margin accounts; and

(m) The supervision, auditing and disciplining of

members or participants.
40.5. The Commission, after due notice and
hearing, is authorized, in the public interest and
to protect investors:chanroblesvirtualawlibrary

(a) To suspend for a period not exceeding twelve

(12) months or to revoke the registration of a self-
regulatory organization, or to censure or impose
limitations on the activities, functions, and
operations of such self-regulatory organization, if
the Commission finds that such a self-regulatory
organization has willfully violated or is unable to
comply with any provision of this Code or of the
rules and regulations thereunder, or its own rules,
or has failed to enforce compliance therewith by a
member of, person associated with a member, or a
participant in such self-regulatory organization;

(b) To expel from a self-regulatory organization any

member thereof or any participant therein who is
subject to an order of the Commission under
Section 29 of this Code or is found to have
willfully violated any provision of this Code or
suspend for a period not exceeding twelve (12)
months for violation of any provision of this Code
or any other laws administered by the
Commission, or the rules and regulations
thereunder, or effected, directly or indirectly, any
transaction for any person who, such member or
participant had reason to believe, was violating in
respect of such transaction any of such provisions;
and

(c) To remove from office or censure any officer or

director of a self-regulatory organization if it finds
that such officer or director has violated any
provision 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, or without
reasonable justification or excuse has failed to
enforce compliance with any of such provisions. chan robles virtual law library

40.6. (a) A self-regulatory organization is

authorized to discipline a member of or
participant in such self-regulatory organization, or
any person associated with a member, including
the suspension or expulsion of such member or
 participant, and the suspension or bar from being
associated with a member, if such person has
engaged in acts or practices inconsistent with just
and equitable principles of fair trade or in willful
violation of any provision of the Code, any other
law administered by the Commission, the rules or
regulations thereunder, or the rules of the self-
regulatory organization. In 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 specific charges, provide
notice to the person charged, afford the person
charged with an opportunity to defend against the
charges, and keep a record of the proceedings. A
determination to impose a disciplinary sanction
shall be supported by a written statement of the
offense, a summary of the evidence presented and
a statement of the sanction imposed.

(b) A self-regulatory organization may summarily:

(i) Suspend a member, participant or person
associated with a member who has been or is
expelled or suspended from any other self-
regulatory organization; or (ii) Suspend a member
who the self-regulatory organization finds to be in
such financial or operating difficulty that the
member or participant cannot be permitted to
continue to do business as a member with safety
to investors, creditors, other members,
participants or the self-regulatory organization:
Provided, That the self-regulatory organization
immediately notifies the Commission of the action
taken. Any person aggrieved by a summary action
pursuant to this paragraph shall be promptly
afforded an opportunity for a hearing by the
association in accordance with the provisions of
paragraph (a) of this subsection. The Commission,
by order, may stay a summary action on its own
motion or upon application by any person
aggrieved thereby, if the Commission determines
summarily or after due notice and hearing (which
hearing may consist solely of the submission of
affidavits or presentation of oral arguments) that a
stay is consistent with the public interest and the
protection of investors.

40.7. A self-regulatory organization shall promptly

notify the Commission of any disciplinary
sanction on any member thereof or participant
therein, any denial of membership or participation
in such organization, or the imposition of any
disciplinary sanction on a person associated with a
member or a bar of such person from becoming so
associated. Within thirty (30) days after such
notice, any aggrieved person may appeal to the
Commission from, or the Commission on its own
motion within such period, may institute review
of, the decision of the self-regulatory organization,
at the conclusion of which, after due notice and
hearing (which may consist solely of review of the
record before the self-regulatory organization), the
Commission shall affirm, modify or set aside the
sanction. In such proceeding the Commission
shall determine whether the aggrieved person has
engaged or omitted to engage in the acts and
 practices as found by the self-regulatory
organization, whether such acts and practices
constitute willful violations of this Code, any other
law administered by the Commission, the rules or
regulations thereunder, or the rules of the self-
regulatory organization as specified by such
organization, whether such provisions were
applied in a manner consistent with the purposes
of this Code, and whether, with due regard for the
public interest and the protection of investors the
sanction is excessive or oppressive.

40.8. The powers of the Commission under this

section shall apply to organized exchanges and
registered clearing agencies.
CHAPTER XI
Acquisition and Transfer of Securities and
Settlement of Transactions in Securities

SEC. 41. Prohibition on Use of Unregistered

Clearing Agency. - It shall be unlawful for any
broker, dealer, salesman, associated person of a
broker or dealer, or clearing agency, directly or
indirectly, to make use of any facility of a clearing
agency in the Philippines to make deliveries in
connection with transactions in securities or to
reduce the number of settlements of securities
transactions or to allocate securities settlement
responsibilities or to provide for the central
handling of securities so that transfers, loans and
pledges and similar transactions can be made by
bookkeeping entry or otherwise to facilitate the
settlement of securities transactions without
physical delivery of securities certificates, 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.

SEC. 42. Registration of Clearing Agencies.

42.1. Any clearing agency may be registered as
such with the Commission under the terms and
conditions hereinafter provided in this Section, by
filing an application for registration in such form
and containing such information and supporting
documents as the Commission by rule shall
prescribe, including the following: chanroblesvirtualawlibrary

(a) An undertaking to comply and enforce

compliance by its participants with the provisions
of this Code, and any amendment thereto, and the
implementing rules or regulations made or to be
made thereunder, and the clearing agencys rules;

(b) The organizational charts of the Exchange, its

rules of procedure, and a list of its officers and
participants;

(c) Copies of the clearing agencys rules.

42.2. No registration of a clearing agency shall be
granted unless the rules of the clearing agency
include provision for:
chanroblesvirtualawlibrary
(a) The expulsion, suspension, or disciplining of a
participant for violations of this Code, or any
other Act administered by the Commission, the
rules, regulations, and orders thereunder, or the
clearing agencys rules;

(b) A fair procedure for the disciplining of

participants, the denial of participation rights to
any person seeking to be a participant, and the
prohibition or limitation of any person from access
to services offered by the clearing agency;

(c) The equitable allocation of reasonable dues,

fees, and other charges among participants;

(d) 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

(e) The transparent, prompt and accurate

clearance and settlement of transactions in
securities handled by the clearing agency.

(f) The establishment and oversight of a fund to

guarantee the prompt and accurate clearance and
settlement of transactions executed on an
exchange, including a requirement that members
each contribute an amount based on their volume
and a relevant percentage of the daily exposure of
the four (4) largest trading brokers which
adequately reflects trading risks undertaken or
pursuant to another formula set forth in
Commission rules or regulations or order, upon
application: Provided, however, That a clearing
agency engaged in the business of a securities
depository shall be exempt from this requirement.
virtual law library
chan robles

42.3. In the case of an application filed pursuant

to this Section, the Commission shall grant
registration if it finds that the requirements of
this Code and the rules and regulations thereunder
with respect to the applicant have been satisfied,
and shall deny registration if it does not make
such finding.

42.4. Upon appropriate application in accordance

with the rules and regulations of the Commission
and upon such terms as the Commission may
deem necessary for the protection of investors, a
clearing agency may withdraw its registration or
suspend its operation or resume the same.

42.5. Section 32 of this Code shall apply to every

registered clearing agency.

SEC. 43. Uncertificated Securities. -

Notwithstanding Section 63 of the Corporation
Code of the Philippines: chanroblesvirtualawlibrary

43.1. A corporation whose securities are registered

pursuant to this Code or listed on a securities
Exchange may: chanroblesvirtualawlibrary
 (a) If so resolved by its Board of Directors and
agreed by a shareholder, investor or securities
intermediary, issue shares to, or record the
transfer of some or all of its shares into the name
of said shareholders, investors or, securities
intermediary in the form of uncertificated
securities. The use of uncertificated 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. chan robles virtual law library

43.2. The Commission by rule may allow other

corporations to provide in their articles of
incorporation and by-laws for the use of
uncertificated securities.
 43.3. Transfers of securities, including an
uncertificated securities, may be validly made and
consummated by appropriate book-entries in the
securities accounts maintained by 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.

However, nothing in this Code shall preclude

compliance by banking and other institutions
under the supervision of the Bangko Sentral ng
Pilipinas and their stockholders with the
applicable ceilings on shareholdings prescribed
under pertinent banking laws and regulations.

SEC. 44. Evidentiary Value of Clearing Agency

Record. - The official records and book entries of a
clearing agency shall constitute the best evidence
of such transactions between clearing agency and
its participants and members, without prejudice to
the right of participants or members clients to
prove their rights, title and entitlement with
respect to the book-entry security holdings of the
participants or members held on behalf of the
clients. However, the corporation shall not be
bound by the foregoing transactions unless the
corporate secretary is duly notified in such
manner as the Commission may provide.

SEC. 45. Pledging a Security or Interest Therein. -

In addition to other methods recognized by law, a
pledge of, or release of a pledge of, a security,
including an uncertificated security, is properly
constituted and the instrument proving the right
pledged shall be considered delivered to the
creditor under Articles 2093 and 2095 of the Civil
Code if a securities intermediary indicates by
book-entry that such security has been credited to
a specially designated pledge account in favor of
the pledgee. A pledge 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 such security or right
pledged. In the case of a registered clearing
agency, the procedures by which, and the exact
time at which, such book-entries are created shall
be governed by the registered clearing agencys
rules. However, the corporation shall not be bound
by the foregoing transactions unless the corporate
secretary is duly notified in such manner as the
Commission may provide. chan robles virtual law library
SEC. 46. Issuers Responsibility for Wrongful
Transfer to Registered Clearing Agency. - The
registration of a transfer of a security into the
name of and by a registered clearing agency or its
nominee shall be final and conclusive unless the
clearing agency had notice of an adverse claim
before the registration was made. The above
provision shall be without prejudice to any rights
which the claimant may have against the issuer
for wrongful registration in such circumstances.
SEC. 47. Power of the Commission With Respect
to Securities Ownership. - The Commission is
authorized, having due regard to the public
interest and the protection of investors, to
promulgate rules and regulations which:
47.1. Validate the transfer of securities by book-
entries rather than the delivery of physical
certificates;
47.2. Establish when a person acquires a security
or an interest therein and when delivery of a
security to a purchaser occurs;

47.3.Establish which records constitute the best

evidence of a persons interests in a security and
the effect of any errors in electronic records of
ownership;

47.4. Codify the rights of investors who choose to

hold their securities indirectly through a
registered clearing agency and/or other securities
intermediaries;
47.5. Codify the duties of securities intermediaries
(including clearing agencies) who hold securities
on behalf of investors; and

47.6. Give first priority to any claims of a

registered clearing agency against a participant
arising from a failure by the participant to meet
its obligations under the clearing agencys rules in
respect of the clearing and settlement of
transactions in securities, in a dissolution of the
participant, and any such rules and regulations
shall bind the issuers of the securities, investors
in the securities, any third parties with interests
in the securities, and the creditors of a participant
of a registered clearing agency.

CHAPTER XII
Margin and Credit

SEC. 48. Margin Requirements. - 48.1. For the

purpose of preventing the excessive use of credit
for the purchase or carrying of securities, the
Commission, in accordance with the credit and
monetary policies that may be promulgated from
time to time by the Monetary Board of the Bangko
Sentral ng Pilipinas, shall prescribe rules and
regulations with respect to the amount of credit
that may be extended on any security. For the
extension of credit, such rules and regulations
shall be based upon the following standard: chanroblesvirtualawlibrary
 An amount not greater than 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.
However, the Monetary Board may increase or
decrease the above percentages, in order to
achieve the objectives of the Government with due
regard for promotion of the economy and
prevention of the use of excessive credit.

Such rules and regulations may make appropriate

provision with respect to the carrying of
undermargined accounts for limited periods and
under specified conditions; the withdrawal of
funds or securities; the transfer of accounts from
one lender to another; special or different margin
requirements for delayed deliveries, short sales,
arbitrage transactions, and securities to which
letter (b) of the second paragraph of this
subsection does not apply; the bases and the
methods to be used in calculating loans, and
 margins and market prices; and similar
administrative adjustments and details.

48.2. No member of an Exchange or broker or

dealer shall, directly or indirectly, extend or
maintain credit or arrange for the extension or
maintenance of credit to or for any customer: chan robles virtual law library

(a) On any security unless such credit is extended

and maintained in accordance with the rules and
regulations which the Commission shall prescribe
under this Section including rules setting credit in
relation to net capital of such member, broker or
dealer;

(b) Without collateral or on any collateral other

than securities, except (i) to maintain a credit
initially extended in conformity with the rules and
regulations of the Commission; and (ii) in cases
where the extension or maintenance of credit is
not for the purpose of purchasing or carrying
securities or of evading or circumventing the
provisions of paragraph (a) of this subsection.
48.3. Any person not subject to Subsection 48.2
hereof shall extend or maintain credit or arrange
for the extension or maintenance of credit for the
purpose of purchasing or carrying any security,
only in accordance with such rules and regulations
as the Commission shall prescribe to prevent the
excessive use of credit for the purchasing or
carrying of or trading in securities in
circumvention of the other provisions of this
Section. Such rules and regulations may impose
upon all loans made for the purpose of purchasing
or carrying securities limitations similar to those
imposed upon members, brokers, or dealers by
Subsection 48.2 and the rules and regulations
thereunder. This subsection and the rules and
regulations thereunder shall not apply: (a) To a
credit extension made by a person not in the
ordinary course of business; (b) To a loan to a
dealer to aid in the financing of the distribution of
securities to customers not through the medium
of an Exchange; or (c) To such other credit
extension as the Commission shall exempt from
the operation of this subsection and the rules and
regulations thereunder upon specified terms and
conditions or for stated period.

SEC. 49. Restrictions on Borrowings by Members,

Brokers, and Dealers. - It shall be unlawful for any
registered broker or dealer, or member of an
Exchange, directly or indirectly: chanroblesvirtualawlibrary

49.1. To permit in the ordinary course of business

as a broker or dealer his aggregate indebtedness
including customers credit balances, to exceed
such percentage of the net capital (exclusive of
fixed assets and value of Exchange membership)
employed in the business, but not exceeding in
any case two thousand per centum (2,000%), as
the Commission may by rules and regulations
prescribe as necessary or appropriate in the public
interest or for the protection of investors.
49.2. To pledge, mortgage, or otherwise encumber
or arrange for the pledge, mortgage or
encumbrance of any security carried for the
account of any customer under circumstances: (a)
That will permit the commingling of his securities,
without his written consent, with the securities of
any customer; (b) That will permit such securities
to be commingled 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 of such customers in
respect of such securities. However, the
Commission, having due regard to the protection
of investors, may, by rules and regulations, 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 or
in contravention of such rules and regulations as
the Commission shall prescribe.
SEC. 50. Enforcement of Margin Requirements
and Restrictions on Borrowing. - To prevent
indirect violations of the margin requirements
under Section 48, the broker or dealer shall
require the customer in non-margin transactions
to pay the price of the security purchased for his
account within such period as the Commission
may prescribe, which shall in no case exceed the
prescribed settlement date. Otherwise, the broker
shall sell the security purchased starting on the
next trading day but not beyond ten (10) trading
days following the last day for the customer to pay
such purchase price, unless such sale cannot be
effected within said period for justifiable reasons.
The sale shall be without prejudice to the right of
the broker or dealer to recover any deficiency from
the customer. To prevent indirect violation of the
restrictions on borrowings under Section 49, the
broker shall, unless otherwise directed by the
customer, pay the net sales price of the securities
sold for a customer within the same period as
above prescribed by the Commission: Provided,
That the customer shall be required to deliver the
instruments evidencing the securities as a
condition for such payment upon demand by the
broker.chan robles virtual law library

CHAPTER XIII
General Provisions

SEC. 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.

51.2. It shall be unlawful for any person, directly

or indirectly, to do any act or thing which it would
be unlawful for such person to do under the
provisions of this Code or any rule or regulation
thereunder. chan robles virtual law library

51.3. It shall be unlawful for any director or officer

of, or any owner of any securities issued by, any
issuer required to file any document, report or
other information under this Code or any rule or
regulation of the Commission thereunder, without
just cause, to hinder, delay or obstruct the making
or filing of any such document, report, or
information.

51.4. It shall be unlawful for any person to aid,

abet, counsel, command, induce or procure any
violation of this Code, or any rule, regulation or
order of the Commission thereunder.
 51.5. Every person who substantially assists the
act or omission of any person primarily liable
under Sections 57, 58, 59 and 60 of this Code,
with knowledge or in reckless disregard that such
act or omission is wrongful, shall be jointly and
severally liable as an aider and abettor for damages
resulting from the conduct of the person primarily
liable: Provided, however, That an aider and
abettor shall be liable only to the extent of his
relative contribution in causing such damages in
comparison to that of the person primarily liable,
or the extent to which the aider and abettor was
unjustly enriched thereby, whichever is greater.

SEC. 52. Accounts and Records, Reports,

Examination of Exchanges, Members, and Others.
- 52.1. Every registered Exchange, broker or
dealer, transfer agent, clearing agency, securities
association, and other self-regulatory organization,
and every other person required to register under
this Code, shall make, keep and preserve for such
periods, records, furnish such copies thereof, and
make such reports, as the Commission by its rules
and regulations may prescribe. Such accounts,
correspondence, memoranda, papers, books, and
other records shall be subject at any time to such
reasonable periodic, special or other examinations
by representatives of the Commission as the
Commission may deem necessary or appropriate in
the public interest or for the protection of
investors.
52.2. Any broker, dealer or other person extending
credit, who is subject to the rules and regulations
prescribed by the Commission pursuant to this
Code, shall make such reports to the Commission
as may be necessary or appropriate to enable it to
perform the functions conferred upon it by this
Code.

52.3. For purposes of this Section, the term

records refers to accounts, correspondence,
memoranda, tapes, discs, papers, books and other
documents or transcribed information of any type,
whether written or electronic in character.

SEC. 53. Investigations, Injunctions and

Prosecution of Offenses . - 53.1. The Commission
may, in its discretion, make such investigations as
it deems necessary to determine whether any
person has violated or is about to violate any
provision of this Code, any rule, regulation or
order thereunder, or any rule of an Exchange,
registered securities association, clearing agency,
other self-regulatory organization, and may require
or permit any person to file with it a statement in
writing, under oath or otherwise, as the
Commission shall determine, as to all facts and
circumstances concerning the matter to be
investigated. The Commission may publish
information concerning any such violations, and
to investigate any fact, condition, practice or
 matter which it may deem necessary or proper to
aid in the enforcement of the provisions of this
Code, in the prescribing of rules and regulations
thereunder, or in securing information to serve as
a basis for recommending further legislation
concerning the matters to which this Code relates:
Provided, however, That any person requested or
subpoenaed to produce documents or testify in
any investigation shall simultaneously be notified
in writing of the purpose of such investigation:
Provided, further, That all criminal complaints for
violations of this Code, and the implementing
rules and regulations enforced or administered by
the Commission shall be referred to the
Department of Justice for preliminary
investigation and prosecution before the proper
court: Provided, furthermore, That in instances
where the law allows independent civil or criminal
proceedings of violations arising from the same
act, the Commission shall take appropriate action
to implement the same: Provided, finally, That the
investigation, prosecution, and trial of such cases
shall be given priority.

53.2. For the purpose of any such investigation, or

any other proceeding under this Code, the
Commission or any officer designated by it is
empowered to administer oaths and affirmations,
subpoena witnesses, compel attendance, take
evidence, require the production of any book,
paper, correspondence, memorandum, or other
record which the Commission deems relevant or
material to the inquiry, and to perform such other
 acts necessary in the conduct of such
investigation or proceedings.

53.3. Whenever it shall appear to the Commission

that any person has engaged or is about to engage
in any act or practice constituting a violation of
any provision of this Code, any rule, regulation or
order thereunder, or any rule of an Exchange,
registered securities association, clearing agency
or other self-regulatory organization, it may issue
an order to such person to desist from committing
such act or practice: Provided, however, That the
Commission shall not charge any person with
violation of the rules of an Exchange or other self
regulatory organization unless it appears to the
Commission that such Exchange or other self-
regulatory organization is unable or unwilling to
take action against such person. After finding
that such person has engaged in any such act or
practice and that there is a reasonable likelihood
of continuing, further or future violations by such
person, the Commission may issue ex-parte a
cease and desist order for a maximum period of
ten (10) days, enjoining the violation and
compelling compliance with such provision. The
Commission may transmit such evidence as may
be available concerning any violation of any
provision of this Code, or any rule, regulation or
order thereunder, to the Department of Justice,
which may institute the appropriate criminal
proceedings under this Code.
 53.4. Any person who, within his power but
without cause, fails or refuses to comply with any
lawful order, decision or subpoena issued by the
Commission under Subsection 53.2 or Subsection
53.3 or Section 64 of this Code, shall after due
notice and hearing, be guilty of contempt of the
Commission. Such person shall be fined in such
reasonable amount as the Commission may
determine, or when such failure or refusal is a
clear and open defiance of the Commissions
order, decision or subpoena, shall be detained
under an arrest order issued by the Commission,
until such order, decision or subpoena is complied
with. chan robles virtual law library

SEC. 54. Administrative Sanctions. - 54.1. If, after

due notice and hearing, the Commission finds
that: (a) There is a violation of this Code, its rules,
or its orders; (b) Any registered broker or dealer,
associated person thereof has failed reasonably to
supervise, with a view to preventing violations,
another person subject to supervision who
commits any such violation; (c) Any registrant or
other person has, in a registration statement or in
other reports, applications, accounts, records or
documents required by law or rules to be filed with
the Commission, made any untrue statement of a
material fact, or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein not misleading; or, in the
case of an underwriter, has failed to conduct an
inquiry with reasonable diligence to insure that a
registration statement is accurate and complete in
all material respects; or (d) Any person has refused
to permit any lawful examinations into its affairs,
it shall, in its discretion, and subject only to the
limitations hereinafter prescribed, impose any or
all of the following sanctions as may be
appropriate in light of the facts and
circumstances:
chanroblesvirtualawlibrary

(i) Suspension, or revocation of any registration for

the offering of securities;

(ii) A fine of no less than Ten thousand pesos

(P10,000.00) nor more than One million pesos
(P1,000,000.00) plus not more than Two thousand
pesos (P2,000.00) for each day of continuing
violation;

(iii) In the case of a violation of Sections 19.2, 20,

24, 26 and 27, disqualification from being an
officer, member of the Board of Directors, or
person performing similar functions, of an issuer
required to file reports under Section 17 of this
Code or any other act, rule or regulation
administered by the Commission;

(iv) In the case of a violation of Section 34, a fine

of no more than three (3) times the profit gained
or loss avoided as a result of the purchase, sale or
communication proscribed by such Section; and

(v) Other penalties within the power of the

Commission to impose.
54.2. The imposition of the foregoing
administrative sanctions shall be without
prejudice to the filing of criminal charges against
the individuals responsible for the violation.

54.3. The Commission shall have the power to

issue writs of execution to enforce the provisions
of this Section and to enforce payment of the fees
and other dues collectible under this Code.

SEC. 55. Settlement Offers. 55.1. At any time,

during an investigation or proceeding under this
Code, parties being investigated and/or charged
may propose in writing an offer of settlement with
the Commission.

55.2. Upon receipt of such offer of settlement, the

Commission may consider the offer based on
timing, the nature of the investigation or
proceeding, and the public interest.

55.3. The Commission may only agree to a

settlement offer based on its findings that such
settlement is in the public interest. Any
agreement to settle shall have no legal effect until
publicly disclosed. Such decision may be made
without a determination of guilt on the part of the
person making the offer.
 55.4. The Commission shall adopt rules and
procedures governing the filing, review,
withdrawal, form of rejection and acceptance of
such offers.

SEC. 56. Civil Liabilities on Account of False

Registration Statement. - 56.1. Any person
acquiring a security, the registration statement of
which or any part thereof contains on its
effectivity an untrue statement of a material fact
or omits to state a material fact required to be
stated therein or necessary to make such
statements not misleading, and who suffers
damage, may sue and recover damages from the
following enumerated persons, unless it is proved
that at the time of such acquisition he knew of
such untrue statement or omission: chan robles virtual law library

(a) The issuer and every person who signed the

registration statement;
(b) Every person who was a director of, or any
other person performing similar functions, or a
partner in, the issuer at the time of the filing of
the registration statement or any part, supplement
or amendment thereof with respect to which his
liability is asserted;
(c) Every person who is named in the registration
statement as being or about to become a director
of, or a person performing similar functions, or a
partner in, the issuer and whose written consent
thereto is filed with the registration statement;
(d) Every auditor or auditing firm named as having
certified any financial statements used in
connection with the registration statement or
prospectus.
(e) Every person who, with his written consent,
which shall be filed with the registration
statement, has been named as having prepared or
certified any part of the registration statement, or
as having prepared or certified any report or
valuation which is used in connection with the
registration statement, with respect to the
statement, report, or valuation, which purports to
have been prepared or certified by him.
(f) Every selling shareholder who contributed to
and certified as to the accuracy of a portion of the
registration statement, with respect to that
portion of the registration statement which
purports to have been contributed by him.
(g) Every underwriter with respect to such
security.
56.2. If the person who acquired the security did
so after the issuer has made generally available to
its security holders an income statement covering
a period of at least twelve months beginning from
the effective date of the registration statement,
then the right of recovery under this subsection
shall be conditioned on proof that such person
acquired the security relying upon such untrue
statement in the registration statement or relying
upon the registration statement and not knowing
of such income statement, but such reliance may
be established without proof of the reading of the
registration statement by such person.

SEC. 57. Civil Liabilities Arising in Connection

With Prospectus, Communications and Reports. -
57.1. Any person who: chanroblesvirtualawlibrary

(a) Offers to sell or sells a security in violation of

Chapter III; or
(b) Offers to sell or sells a security, whether or not
exempted by the provisions of this Code, by the
use of any means or instruments of transportation
or communication, by means of a prospectus or
other written or oral communication, which
includes an untrue statement of a material fact or
omits to state a material fact necessary in order to
make the statements, in the light of the
circumstances under which they were made, not
misleading (the purchaser not knowing of such
untruth or omission), and who shall fail in the
burden of proof that he did not know, and in the
exercise of reasonable care could not have known,
of such untruth or omission, shall be liable to the
person purchasing such security from him, who
may sue to recover the consideration paid for such
security with interest thereon, less the amount of
any income received thereon, upon the tender of
such security, or for damages if he no longer owns
the security.
57.2. Any person who shall make or cause to be
made any statement in any report, or document
filed pursuant to this Code or any rule or
regulation thereunder, which statement was at the
 time and in the light of the circumstances under
which it was made false or misleading with respect
to any material fact, shall be liable to any person
who, not knowing that such statement was false or
misleading, and relying upon such statements
shall have purchased or sold a security at a price
which was affected by such statement, for
damages caused by such reliance, unless the
person sued shall prove that he acted in good faith
and had no knowledge that such statement was
false or misleading.chan robles virtual law library

SEC. 58. Civil Liability For Fraud in Connection

With Securities Transactions. - Any person who
engages in any act or transaction in violation of
Sections 19.2, 20 or 26, or any rule or regulation
of the Commission thereunder, shall be liable to
any other person who purchases or sells any
security, grants or refuses to grant any proxy,
consent or authorization, or accepts or declines an
invitation for tender of a security, as the case may
be, for the damages sustained by such other
person as a result of such act or transaction.
SEC. 59. Civil Liability For Manipulation of
Security Prices. - Any person who willfully
participates in any act or transaction in violation
of Section 24 shall be liable to any person who
shall purchase or sell any security at a price which
was affected by such act or transaction, and the
person so injured may sue to recover the damages
sustained as a result of such act or transaction.
 SEC. 60. Civil Liability With Respect to
Commodity Futures Contracts and Pre-need Plans.
- 60.1. Any person who engages in any act or
transaction in willful violation of any rule or
regulation promulgated by the Commission under
Section 11 or 16, which the Commission
denominates at the time of issuance as intended
to prohibit fraud in the offer and sale of pre-need
plans or to prohibit fraud, manipulation, fictitious
transactions, undue speculation, or other unfair or
abusive practices with respect to commodity
future contracts, shall be liable to any other
person sustaining damage as a result of such act or
transaction.

60.2. As to each such rule or regulation so

denominated, the Commission by rule shall
prescribe the elements of proof required for
recovery and any limitations on the amount of
damages that may be imposed.
SEC. 61. Civil Liability on Account of Insider
Trading. - 61.1. Any insider who violates
Subsection 27.1 and any person in the case of a
tender offer who violates Subsection 27.4 (a)(i), or
any rule or regulation thereunder, by purchasing
or selling a security while in possession of material
information not generally available to the public,
shall be liable in a suit brought by any investor
who, contemporaneously with the purchase or sale
of securities that is the subject of the violation,
purchased or sold securities of the same class
unless such insider, or such person in the case of a
tender offer, proves that such investor knew the
information or would have purchased or sold at
the same price regardless of disclosure of the
information to him.

61.2. An insider who violates Subsection 27.3 or

any person in the case of a tender offer who
violates Subsection 27.4 (a), or any rule or
regulation thereunder, by communicating material
non-public information, shall be jointly and
severally liable under Subsection 61.1 with, and to
the same extent as, the insider, or person in the
case of a tender offer, to whom the
communication was directed and who is liable
under Subsection 61.1 by reason of his purchase
or sale of a security.

SEC. 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) years after
the violation upon which it is based. In no event
shall any 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 (b) more than five (5) years after
the sale.
62.2. No action shall be maintained to enforce any
liability created under any other provision of this
Code unless brought within two (2) years after the
discovery of the facts constituting the cause of
action and within five (5) years after such cause of
action accrued.

SEC. 63. Amount of Damages to be Awarded. -

63.1. All suits to recover damages pursuant to
Sections 56, 57, 58, 59, 60 and 61 shall be brought
before the Regional Trial Court, which shall have
exclusive jurisdiction to hear and decide such
suits. The Court is hereby authorized to award
damages in an amount not exceeding triple the
amount of the transaction plus actual damages.

Exemplary damages may also be awarded in cases

of bad faith, fraud, malevolence or wantonness in
the violation of this Code or the rules and
regulations promulgated thereunder.

The Court is also authorized to award attorneys

fees not exceeding thirty percentum (30%) of the
award.
63.2. The persons specified in Sections 56, 57, 58,
59, 60 and 61 hereof shall be jointly and severally
liable for the payment of damages. However, any
person who becomes liable for the payment of
such damages may recover contribution from any
other person who, if sued separately, would have
been liable to make the same payment, unless the
former was guilty of fraudulent representation and
the latter was not.

63.3. Notwithstanding any provision of law to the

contrary, all persons, including the issuer, held
liable under the provisions of Sections 56, 57, 58,
59, 60 and 61 shall contribute equally to the total
liability adjudged herein. In no case shall the
principal stockholders, directors and other officers
of the issuer or persons occupying similar
positions therein, recover their contribution to the
liability from the issuer. However, the right of the
issuer to recover from the guilty parties the
amount it has contributed under this Section shall
not be prejudiced.

SEC. 64. Cease and Desist Order. 64.1. The

Commission, after proper investigation or
verification, motu proprio, or upon verified
complaint by any aggrieved party, may issue a
cease and desist order without the necessity of a
prior hearing if in its judgment the act or practice,
unless restrained, will operate as a fraud on
investors or is otherwise likely to cause grave or
 irreparable injury or prejudice to the investing
public.

64.2. Until the Commission issues a cease and

desist order, the fact that an investigation has
been initiated or that a complaint has been filed,
including the contents of the complaint, shall be
confidential. Upon issuance of a cease and desist
order, the Commission shall make public such
order and a copy thereof shall be immediately
furnished to each person subject to the order.

64.3. Any person against whom a cease and desist

order was issued may, within five (5) days from
receipt of the order, file a formal request for a
lifting thereof. Said request shall be set for
hearing by the Commission not later than fifteen
(15) days from its filing and the resolution thereof
shall be made not later than ten (10) days from the
termination of the hearing. If the Commission fails
to resolve the request within the time herein
prescribed, the cease and desist order shall
automatically be lifted.

SEC. 65. Substituted Service Upon the

Commission. - Service of summons or other
process shall be made upon the Commission in
actions or legal proceedings against an issuer or
any person liable under this Code who is not
domiciled in the Philippines. Upon receipt by the
Commission of such summons, the Commission
shall within ten (10) days thereafter, transmit by
registered mail a copy of such summons and the
complaint or other legal process to such issuer or
person at his last known address or principal
office. The sending thereof by the Commission,
the expenses for which shall be advanced by the
party at whose instance it is made, shall complete
such service.

SEC. 66. Revelation of Information Filed with the

Commission. 66.1. All information filed with the
Commission in compliance with the requirements
of this Code shall be made available to any
member of the general public, upon request, in the
premises and during regular office hours of the
Commission, except as set forth in this Section.

66.2. Nothing in this Code shall be construed to

require, or to authorize the Commission to
require, the revealing of trade secrets or processes
in any application, report, or document filed with
the Commission.

66.3. Any person filing any such application,

report or document may make written objection to
the public disclosure of information contained
therein, stating the grounds for such objection,
 and the Commission may hear objections as it
deems necessary. The Commission may, in such
cases, make available to the public the
information contained in any such application,
report, or document only when a disclosure of
such information is required in the public interest
or for the protection of investors; and copies of
information so made available may be furnished to
any person having a legitimate interest therein at
such reasonable charge and under such reasonable
limitations as the Commission may prescribe.

66.4. It shall be unlawful for any member, officer,

or employee of the Commission to disclose to any
person other than a member, officer or employee
of the Commission or to use for personal benefit,
any information contained in any application,
report, or document filed with the Commission
which is not made available to the public pursuant
to Subsection 66.3.

66.5. Notwithstanding anything in Subsection 66.4

to the contrary, on request from a foreign
enforcement authority of any country whose laws
grant reciprocal assistance as herein provided, the
Commission may provide assistance in accordance
with this subsection, including the disclosure of
any information filed with or transmitted to the
Commission, if the requesting authority states
that it is conducting an investigation which it
deems necessary to determine whether any person
has violated, is violating, or is about to violate any
laws relating to securities or commodities matters
that the requesting authority administers or
enforces. Such assistance may be provided without
regard to whether the facts stated in the request
would also constitute a violation of law of the
Philippines.

SEC. 67. Effect of Action of Commission and

Unlawful Representations with Respect Thereto. -
67.1. No action or failure to act by the
Commission in the administration of this Code
shall be construed to mean that the Commission
has in any way passed upon the merits of or given
approval to any security or any transaction or
transactions therein, nor shall such action or
failure to act with regard to any statement or
report filed with or examined by the Commission
pursuant to this Code or the rules and regulations
thereunder to be deemed a finding by the
Commission that such statements or report is true
and accurate on its face or that it is not false or
misleading. It shall be unlawful to make, or cause
to be made, to any prospective purchaser or seller
of a security any representation that any such
action or failure to act by the Commission is to be
so construed or has such effect.

67.2. Nothing contained in Subsection 67.1 shall,

however, be construed as an exemption from
liability of an employee or officer of the
Commission for any nonfeasance, misfeasance or
malfeasance in the discharge of his official duties.

SEC. 68. Special Accounting Rules. The

Commission shall have the authority to make,
amend, and rescind such accounting rules and
regulations as may be necessary to carry out the
provisions of this Code, including rules and
regulations governing registration statements and
prospectuses for various classes of securities and
issuers, and defining accounting, technical and
trade terms used in this Code. Among other
things, the Commission may prescribe the form or
forms in which required information shall be set
forth, the items or details to be shown in the
balance sheet and income statement, and the
methods to be followed in the preparation of
accounts, appraisal or valuation of assets and
liabilities, determination of depreciation and
depletion, differentiation of recurring and non-
recurring income, differentiation of investment
and operating income, and in the preparation,
where the Commission deems it necessary or
desirable, of consolidated balance sheets or
income accounts of any person directly or
indirectly controlling or controlled by the issuer,
or any person under direct or indirect common
control with, the issuer.
SEC. 69. Effect on Existing Law. - The rights and
remedies provided by this Code shall be in
addition to any and all other rights and remedies
that may now exist. However, except as provided
in Sections 56 and 63 hereof, no person permitted
to maintain a suit for damages under the
provisions of this Code shall recover, through
satisfaction of judgment in one or more actions, a
total amount in excess of his actual damages on
account of the act complained of: Provided, That
exemplary damages may be awarded in cases of
bad faith, fraud, malevolence or wantonness in the
violation of this Code or the rules and regulations
promulgated thereunder.

SEC. 70. Judicial Review of Commission Orders. -

Any person aggrieved by an order of the
Commission may appeal the order to the Court of
Appeals by petition for review in accordance with
the pertinent provisions of the Rules of Court.
SEC. 71. Validity of Contracts. - 71.1. Any
condition, stipulation, provision binding any
person to waive compliance with any provision of
this Code or of any rule or regulation thereunder,
or of any rule of an Exchange required thereby, as
well as the waiver itself, shall be void.
71.2. Every contract made in violation of any
provision of this Code or of any rule or regulation
thereunder, and every contract, including any
contract for listing a security on an Exchange
heretofore or hereafter made, the performance of
which involves the violation of, or the continuance
of any relationship or practice in violation of, any
provision of this Code, or any rule or regulation
thereunder, shall be void:

(a) As regards the rights of any person who, in

violation of any such provision, rule or regulation,
shall have made or engaged in the performance of
any such contract; and

(b) As regards the rights of any person who, not

being a party to such contract, shall have acquired
any right thereunder with actual knowledge of the
facts by reason of which the making or
performance of such contract was in violation of
any such provision, rule or regulation.
71.3. Nothing in this Code shall be construed: chanroblesvirtualawlibrary

(a) To affect the validity of any loan or extension

of credit made or of any lien created prior or
subsequent to the effectivity of this Code, unless
at the time of the making of such loan or
extension of credit or the creating of such lien, the
person making such loan or extension of credit or
acquiring such lien shall have actual knowledge of
the facts by reason of which the making of such
loan or extension of credit or the acquisition of
such lien is a violation of the provisions of this
Code or any rules or regulations thereunder; or

(b) To afford a defense to the collection of any

debt, obligation or the enforcement of any lien by
any person who shall have acquired such debt,
obligation or lien in good faith, for value and
without actual knowledge of the violation of any
provision of this Code or any rule or regulation
thereunder affecting the legality of such debt,
obligation or lien.
SEC. 72. Rules and Regulations; Effectivity. -
72.1. This Code shall be self-executory. To effect
the provisions and purposes of this Code, the
Commission may issue, amend, and rescind such
 rules and regulations and orders necessary or
appropriate, including rules and regulations
defining accounting, technical, and trade terms
used in this Code, and prescribing the form or
forms in which information required in
registration statements, applications, and reports
to the Commission shall be set forth. For purposes
of its rules or regulations, the Commission may
classify persons, securities, and other matters
within its jurisdiction, prescribe different
requirements for different classes of persons,
securities, or matters, and by rule or order,
conditionally or unconditionally exempt any
person, security, or transaction, or class or classes
of persons, securities or transactions, from any or
all provisions of this Code.

Failure on the part of the Commission to issue

rules and regulations shall not in any manner
affect the self-executory nature of this Code.

72.2. The Commission shall promulgate rules and

regulations providing for reporting, disclosure and
the prevention of fraudulent, deceptive or
manipulative practices in connection with the
purchase by an issuer, by tender offer or
otherwise, of and equity security of a class issued
by it that satisfies the requirements of Subsection
17.2. Such rules and regulations may require such
issuer to provide holders of equity securities of
such dates with such information relating to the
reasons for such purchase, the source of funds, the
number of shares to be purchased, the price to be
paid for such securities, the method of purchase
and such additional information as the
Commission deems necessary or appropriate in the
public interest or for the protection of investors,
or which the Commission deems to be material to
a determination by holders whether such security
should be sold.

72.3. For the purpose of Subsection 72.2, a

purchase by or for the issuer or any person
controlling, controlled by, or under common
control with the issuer, or a purchase subject to
the control of the issuer or any such person, shall
be deemed to be a purchased by the issuer. The
Commission shall have the power to make rules
and regulations implementing this subsection,
including exemptive rules and regulations covering
situations in which the Commission deems it
unnecessary or inappropriate that a purchase of
the type described in this subsection shall be
deemed to be a purchase by the issuer for the
purpose of some or all of the provisions of
Subsection 72.2.

72.4. The rules and regulations promulgated by

the Commission shall be published in two (2)
newspapers of general circulation in the
Philippines, and unless otherwise prescribed by
the Commission, the same shall be effective
 fifteen (15) days after the date of the last
publication.

SEC. 73. Penalties. - Any person who violates any

of the provisions of this Code, or the rules and
regulations promulgated by the Commission under
authority thereof, or any person who, in a
registration statement filed under this Code,
makes any untrue statement of a material fact or
omits to state any material fact required to be
stated therein or necessary to make the
statements therein not misleading, shall, upon
conviction, suffer a fine of not less than Fifty
thousand pesos (P50,000.00) nor more than Five
million pesos (P5,000,000.00) or imprisonment of
not less than seven (7) years nor more than
twenty- one (21) years, or both in the discretion of
the court. If the offender is a corporation,
partnership or association or other juridical entity,
the penalty may in the discretion of the court be
imposed upon such juridical entity and upon the
officer or officers of the corporation, partnership,
association or entity responsible for the violation,
and if such officer is an alien, he shall in addition
to the penalties prescribed, be deported without
further proceedings after service of sentence.

SEC. 74. Transitory Provisions. - The Commission,

as organized under existing laws, shall continue to
exist and exercise its powers, functions and duties
under such laws and this Code: Provided, That
until otherwise mandated by a subsequent law, the
Commission shall continue to regulate and
supervise commodity futures contracts as
provided in Section 11 and pre-need plans and the
pre-need industry as provided in Section 16 of this
Code.

All further requirements herein shall be complied

with upon approval of this Code: Provided,
however, That compliance may be deferred for
such reasonable time as the Commission may
determine but not to exceed one (1) year from
approval of this Code: Provided, further, That
securities which are being offered at the time of
effectivity of this Code pursuant to an effective
registration and permit, may continue to be
offered and sold in accordance with the provisions
of the Revised Securities Act in effect immediately
prior to approval of this Code.

All unexpended funds for the calendar year,

properties, equipment and records of the
Securities and Exchange Commission are hereby
retained by the Commission as reorganized under
this Code and the amount of Two hundred million
(P200,000,000.00) or such amount necessary to
carry out the reorganization provided in this Code
is hereby appropriated.
All employees of the Commission who voluntarily
retire or are separated from the service with the
Commission and whose retirement or separation
has been approved by the Commission, shall be
paid retirement or separation benefits and other
entitlements granted under existing laws.

SEC. 75. Partial Use Of Income. - To carry out the

purposes of this Code, the Commission is hereby
authorized, in addition to its annual budget, to
retain and utilize an amount equal to one hundred
million pesos (P100,000,000.00) from its income.

The use of such additional amount shall be subject

to the auditing requirements, standards and
procedures under existing laws.

SEC. 76. Repealing Clause. - TheRevised

Securities Act (Batas Pambansa Blg. 178), as
amended, in its entirety, and Sections 2, 4 and 8
of Presidential Decree 902-A as amended, are
hereby repealed. All other laws, orders, rules and
regulations, or parts thereof, inconsistent with any
provision of this Code are hereby repealed or
modified accordingly.

SEC. 77. Separability Clause. - If any portion or

provision of this Code is declared unconstitutional
or invalid, the other portions or provisions hereof,
which are not affected thereby shall continue in
full force and effect.

SEC. 78. Effectivity. - This Code shall take effect

fifteen (15) days after its publication in the
Official Gazette or in two (2) newspapers of
general circulation.

Approved: July 19, 2000

JOSEPH E. ESTRADA
President of the Philippines