SPECIAL COMMERCIAL LAWS

Course Outline I. Securities Regulation Securities Regulation Code 2004 Implementing Rules and Regulations of the Securities Regulation Code

A. Securities Regulation Code and the Securities and Exchange Commission (SEC) Sections 1, 2, 4, 5, 53 and 64 of the Securities Regulation Code SRC Rule 1, 2, 4, 5.1, 7.2 and 40.5 Interim Rules on Intra-Corporate Controversies, A.M. No. 01-2-04 SC dated March 13, 2001 Sections 5 and 6, P.D. 902-A Getting to know the SEC: Organizational Chart of the SEC Cases: PSE vs. Court of Appeals, 281 SCRA 232 Speed Distributing Corp vs. Court of Appeals, 425 SCRA 691 (2004) Morato et. Al vs. Court of Appeals, 436 SCRA 438 (2004) Orendain vs. BF Homes, Inc. 506 SCRA 348 (2006) Yujuico vs. Quiambao, 513 SCRA 243 (2007) Cemco Holdings, Inc. vs. National Life Insurance Company of the Philippines, Inc. 529 SCRA 355 (2007) GSIS vs. Court of Appeals, G.R. No. 183905, dated April 16, 2009

B. Definition of Securities Section 3 and 11, Securities Regulation Code SRC Rule 3, 11 Section 6, 8, 9 and 41 Corporation Code

Reading Assignment: Section 3, Securities Regulation Code SRC Rule 3 Section 6, Corporation Code Rules Governing Redeemable and Treasury Shares Amended Rules for the Registration of Long Term Commercial Paper Amended Rules for the Registration of Short Term Commercial Paper Cases: Gabionza vs. Court of Appeals, G.R. No. 161057, 12 September 2008 Power Homes Unlimited Corp. vs. SEC, et. Al, G.R. No. 164182, February 26, 2008 Onapal Philippines Commodities, Inc. vs. Court of Appeals, G.R. No. 90707, February 1, 1993.

U.S. Jurisprudence: SEC v. W.J. Howey Co., Supreme Court of the United States, 1946, 328 U.S. 293 United Housing Foundation, Inc. v. Forman, Supreme Court of the United States, 1975, 421 U.S. 837 International Brotherhood of Teamsters v. Daniel, Supreme Court of the United States, 1979, 429 U.S. 551 SEC v. Koscot Interplanetary, Inc., United States Court of Appeals, Fifth Circuit, 1974, 497 F. 2d 473 SEC v. Life Partners, Incorporated, United States Court of Appeals, D.C. Circuit, 1996, 102 F. 3d 587 United States v. Jones, United States Court of Appeals, Fifth Circuit, 1971, 450 F. 2d 523 In re Tucker Corp, Securities and Exchange Commission, 1947, 26 S.E.C. 249 Procter & Gamble Company v. Bankers Trust Company and BT Securities Corporation, United States District Court, S.D. Ohio, Western Division, 1996, 925 F. Supp. 1270 Landreth Timber Co. v. Landreth, Supreme Court of the United States, 1985, 471 U.S. 681 Reves v. Ernst & Young, Supreme Court of the United States, 1990, 494 U.S. 56

C. Registration of Securities Section 8 Requirements of Registration of Securities, SRC Rule 8.1, SRC Rule 8.3

Cases: Luis Tirso Revilla et al vs. Intermediate Appellate Court, et. al. Nestle Philippines, Inc. vs. Court Appeals and Securities and Exchange Commission, G.R. No. 86738 dated 13 November 1991. SEC vs. Court of Appeals, G.R. No. 10643132 dated 21 July 1995 Pp vs. Petralba, G.R. No. 137512 dated 27 September 2004 Standard Chartered Bank vs. Senate Committee on Banks, Financial Institutions and Currencies, G.R. No. 167173, 27 December 2007 Gabionza vs. Court of Appeals, G.R. No. 161057, 12 September 2008 Timeshare Realty Corporation vs. Cesar Lao and Cynthia V. Cortez, G.R. No. 158941 dated 11 February 2008 Section 9 Exempt Securities, SRC Rule 9.2 Union Bank of the Philippines vs. SEC, 358 SCRA 479 DOJ Opinion No. 144 s. 1993 Section 10 Exempt Transactions, SRC Rule 10.1, SEC Memorandum Circular No. 3, s. 2008 (Rules Governing Registrars of Qualified Buyers), SEC Memorandum Circular No. 6, series of 2007 (Definition of Qualified Buyers under Section 10 of the Securities)

Section 12 Procedure for Registration of Securities, SRC Rule 12. 1, 12.2, 12.5 Section 13 Rejection and Revocation of Registration of Securities Section 14 Amendments to the Registration Statement, SRC Rule 14 Section 15 Suspension of Registration

Section 51 Liabilities of Controlling Persons, Aider and Abettor and Other Secondary Liability Section 56 Civil Liabilities on Account of False Registration Statement Section 57 Civil Liabilities Arising in Connection with Prospectus, Communications and Reports Section 62 Limitation of Actions Section 63 Amount of Damages to be awarded Section 71 Validity of Contracts SEC Form 10-1 and SEC Form 12-1; sample registration statement; sample prospectus

D. Regulation of Pre-Need Plans Section 16 Pre-Need Plans Rules 1, 3, 16, 20, 21 and 22 of the 2001 New Rules on the Registration and Sale of Pre-Need Plans Sections 3, 4, 6, 7 and 9 of SEC Memo Circular No. 4, Series of 2007

E. Reportorial Requirements Section 17 Periodic and Other Reports of Issuers, SRC Rule 17.1 SEC Form 17-A and 17-C Section 18 Reports by Five Per Centum (5%) Holders of Equity Securities, SRC Rule 18.1 Section 23 Transactions of Directors, Officers and Principal Stockholders, SRC Rule 23 Cases: Union Bank of the Philippines vs. Securities and Exchange Commission, G.R. No. 138949 dated 06 June 2001 Basic, Inc. v. Levinson, 485 U.S. 224 (1988) SEC vs. Intreport Resources, G.R. No. 135808, October 6, 2008 GSIS vs. Court of Appeals, G.R. No. 183905, dated April 16, 2009

F. Protection of Shareholder Interests Sections 19 Tender Offers Sections 72.2 and 72.3, Rules and Regulations; Effectivity of SRC SRC Rule 19 Case: Cemco Holdings, Inc. vs. National Life Insurance Company of the Philippines, Inc., G.R. No. 171815, dated 7 August 2007 Sections 55, 58 and 59 of the Corporation Code Section 20 Proxy Solicitations, SRC Rule 20 SEC Form 20-IS Section 21 Fees for Tender Offers and Certain Proxy Solicitations Section 22 Internal Record Keeping and Accounting Controls

G. Prohibitions on Fraud, Manipulation and Insider Trading Section 23, SRC Section 24 Manipulation of Security Prices; Devices and Practices SRC Rule 24.1(b) 1 SRC Rule 24.1(d) SRC Rule 24.2-2 PSE New Rules on Short Selling dated 26 October 2007 Section 25 Regulation of Option Trading SRC Rule 25.1 Section 26 Fraudulent Transactions SRC Rule 26.3 Section 27 Insiders Duty to Disclose When Trading Read concurring opinion of Justice Tinga in SEC vs. Intreport, G.R. No. 135808, October 6, 2008 Section 58 Civil Liability for Fraud in Connection with Securities Transactions Section 59 Civil Liability for Manipulation of Security Prices Section 60 Civil Liability with Respect to Commodity Futures Contracts and Pre-Need Plans Section 61 Civil Liability on Account of Insider Trading Section 62 Limitation of Actions Section 63 Amount of Damages to be awarded Section 71 Validity of Contracts

H. Regulation of Securities Market Professionals Section 28 Registration of Brokers, Dealers Salesmen and Associated Persons SRC Rule 28.1 SRC Rule 28.2 Section 29 Revocation, Refusal or Suspension of Registration of Brokers, Dealers, Salesmen and Associated Persons SRC Rule 29 Section 30 Transactions and Responsibility of Brokers and Dealers SRC Rule 30.1 SRC Rule 30.2 SEC Memorandum Circular No. 16, series of 2004, Adoption of Risk Based Capital Adequacy Requirement/Ratio for Brokers/Dealers SEC Memorandum Circular No. 12, series of 2001 (Broker-Director Rule) Nicolas vs. Court of Appeals, G.R. No. 122857, dated 27 March 1998 (unlicensed brokers/fees) I. Exchanges and Other Securities Trading Markets Section 32 Prohibition on Use of Unregistered Exchange; Regulation of Over-the-Counter Markets SEC Memorandum Circular No. 14, series of 2006, Rules on Over the Counter Markets SRC Rule 32.1 SRC Rule 32.2 Section 33 Registration of Exchanges SRC Rule 33.1 SRC Rule 33.2 (c)

SRC Rule 33.2(d) Section 34 Segregation and Limitation of Functions of Members, Brokers and Dealers SRC Rule 34.1 SEC Memorandum Circular No. 13, series of 2004 Section 35 Additional Fees of Exchanges Section 36 Powers with Respect to Exchanges and Other Trading Markets SRC Rule 36.4 SRC Rule 36.5 SEC Memorandum Circular No. 14, series of 2006 Rules Governing the Over the Counter Market Section 37 Registration of Innovative and Other Trading Markets Rules and Regulations on Alternative Trading System dated 4 March 2004 Section 38 Independent Directors SRC Rule 38 SEC Memorandum Circular No. 9, series of 2009 SEC Memorandum Circular No. 13, series of 2004 SEC Memorandum Circular No. 16, series of 2002 Revised Code of Corporate Governance, SEC Memorandum Circular No. 6, series of 2009 J. Acquisition and Transfer of Securities and Settlement of Transactions in Securities
Margin and Credit

Sections 41 50 of the SRC SRC Rule 42 SRC Rule 48.1 SRC Rule 49.1 SRC Rule 49.2 SRC Rule 49.3 SCR Rule 50 Listing Rules of the Philippine Stock Exchange (2004) Revised Rules on Listing by Introduction dated 23 March 2009 Rules on Backdoor Listing dated 21 September 2006 Delisting Rules dated 22 September 2004 SEC Memorandum Circular No. 9, series of 2008 Guidelines on the Registration of All Outstanding Shares Prior to Listing PSE Disclosure Rules (2003) Introduce Fixed Income Exchange Introduce WESM

Investment House Law and the Omnibus Rules and Regulations for Investment Houses and Universal Banks Registered as Underwriters of Securities (2002) Republic Act No. 2629 (Investment Companies Act) and ICA Rule 35-1 (Investment Company Rule) Republic Act No. 9182, as amended (SPAV Law) and Implementing Rules and Regulations Republic Act No. 9267 (Securitization Act) and Implementing Rules and Regulations

II. Warehouse Receipts Law A. General Concepts Act No. 2137, Sec. 1 to 7 B. Obligations and Rights of a Warehouseman 1. Obligation to Deliver Act No. 2137, Sec. 8 to 19, Sec. 36, Sec. 58 2. Liability for Goods Sections 20 to 26 3. Warehousemans Lien Sections 31 to 36 C. Negotiation and Transfer Sections 37 to Sec. 49 D. Criminal Liability Sections 50 to Sec. 55 E. General Bonded Warehouses Act No. 3893, as amended Case: Philippine National Bank v. Se et al., G.R. No. 119231. April 18, 1996, 256 SCRA 380

III. Letters of Credit A. Definition/concept B. Governing laws C. Nature of letter of credit D. Parties to a letter of credit 1. Rights and obligations of parties E. Basic principles of letter of credit 1. Doctrine of independence 2. Fraud exception principle 3. Doctrine of strict compliance Cases: Metropolitan Waterworks and Sewerage System v. Hon. Reynaldo B. Daway and Maynilad Water Services, Inc., G.R. No. 160732, June 21, 2004 Mico Metals Corp. v. Court of Appeals and Philippine Bank of Communications, G.R. No. 117914, Feb. 1, 2002 Transfield Philippines, Inc. v. Luzon Hydro Corporation, Australia and New Zealand Banking Group Limited and Security Bank Corporation, G.R. NO. 146717, Nov. 22, 2004

IV. Trust Receipts Law (Pres. Decree No. 115) A. Purpose of the Law Trust Receipts, Definition Trust Receipt Transaction, Definition B. Parties to a Trust Receipt C. Importance of Trust Receipts D. Difference of Trust Receipts and Letters Of Credit E. Definition/concept of a trust receipt transaction 1. Loan/security feature 2. Ownership of the goods, documents and instruments under a trust receipt F. Rights of the entruster Validity of the security interest as against the creditors of the entrustee/innocent purchasers for value G. Obligations and liability of the entrustee 1. Payment/delivery of proceeds of sale or disposition of goods, documents or instruments 2. Return of goods, documents or instruments in case of sale 3. Liability for loss of goods, documents or instruments 4. Penal sanction if offender is a corporation D. Remedies available Cases: Development Bank of the Philippines v. Prudential Bank, G.R. No. 143772, Nov. 22, 2005 Landl & Company (Phil.) Inc., et al v. Metropolitan Bank, G.R. No. 159622, July 30, 2004 Anthony L. Ng v. People of the Philippines, G.R. NO. 173905, April 23, 2010

V. Anti-Money Laundering Law (R.A. 9160 as amended by R.A. 9194) A. Policy of the law B. Covered institutions C. Obligations of covered institutions D. Covered transactions E. Suspicious transactions F. When is money laundering committed G. Unlawful activities or predicate crimes H. Anti-money laundering council

I. Functions J. Freezing of monetary instrument or property K. Authority to inquire into bank deposits L. Revised IRR of R.A. 9160 as amended by R.A. 9194 dated 06 August 2003 in relation to BSP Circular No. 706 M. A.M. No. 05-11-04-SC 2005-11-15 No. Republic of the Philippines v. Glasgow Credit and Collection Services, et al, G.R. 170281, January 18, 2008

VI. Foreign Investments Act (R.A. 7042) A. Policy of the law B. Definition of terms a) Foreign investment b) Doing business in the Philippines c) Export enterprise d) Domestic market enterprise C. Registration of investments of non-Philippine nationals D. Foreign investments in export enterprises E. Foreign investments in domestic market enterprises F. Foreign investment negative list

VII. Truth in Lending Act (R.A. 3765) A. Purpose B. Obligation of creditors to person to whom credit is extended C. Covered and excluded transactions D. Consequences of non-compliance with obligation