Int'l Secuiities Regulations Page 1 of 21

Securities and Exchange Commission

Composition of SEC:
Chairperson and 4 Commissioners
Appointed by the President for a term of 7 years each

Qualifications of a Commissioner/Chairperson
a. Natural-born citizens of the Philippines
b. At least 40 years of age for the Chairperson
c. At least 35 years of age for the Commissioners
d. Of good moral character, unquestionable integrity, known probity and
patriotism
e. With recognized competence in social and economic disciplines
f. Majority of Commissioners, including the Chairperson, shall be members
of the Philippine Bar

Powers of the Commission:
a. 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
b. 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
c. Formulate policies and recommendations on issues concerning the
securities market
d. Approve, reject, suspend, revoke or require amendments to registration
statements, and registration and licensing applications
e. Regulate, investigate or supervise the activities of persons to ensure
compliance
f. Supervise, monitor, suspend or take over the activities of exchanges,
clearing agencies and other SROs;
g. Impose sanctions for the violations
h. Prepare, approve, amend or repeal rules, regulations and orders
i. Issue opinions and provide guidance on and supervise compliance with
such rules, regulations and orders
j. Issue cease and desist orders to prevent fraud or injury to the investing
public
k. Punish for contempt of the Commission
l. Compel the officers of any registered corporation or association to call
meetings of stockholders or members thereof under its supervision;
m. 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;
n. 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
o. 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.

Grounds for Liability of the Commissioners, Officers and Employees
a. Willfully violating this Code
b. Guilty of negligence
c. Abuse or acts of malfeasance
d. Fail to exercise extraordinary diligence in the performance of their
duties
e. Disclosing 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
f. Use of such information for personal gain or to the detriment of the
government, the Commission or third

Registration of Securities
What are Securities?
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 in corporations
g. Other instruments as may in the future be determined by the
Commission
Int'l Secuiities Regulations Page 2 of 21
Requirement of Registration of Securities
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

Securities EXEMPT from the Registration Requirement
1. Any security issued or guaranteed by the
a. Government of the Philippines
b. Any political subdivision or agency thereof
c. Any person controlled or supervised by and acting as an
instrumentality of said Government
2. Any security issued or guaranteed by the
a. Government of any country with which the Philippines maintains
diplomatic relations,
b. Any state, province or political subdivision thereof on the basis of
reciprocity
3. Certificates issued by a receiver or by a trustee in bankruptcy duly
approved by the proper adjudicatory body
4. 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.
5. Any security issued by a bank except its own shares of stock

Transactions EXEMPT from the Registration Requirement
1. Any judicial sale, or sale by an executor, administrator, guardian or
receiver or trustee in insolvency or bankruptcy
2. By or for the account of a pledge holder, or mortgagee or any other
similar lien holder selling or offering for sale or delivery in the ordinary
course of business to liquidate a bona fide debt, a security pledged in
good faith as security for such debt
3. An isolated transaction not being made in the course of repeated and
successive transactions of a like character by such owner
4. The distribution by a corporation of securities to its stockholders or other
security holders as a stock dividend or other distribution out of surplus
5. 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
6. 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
7. The issue and delivery of any security in exchange for any other security
of the same issuer pursuant to a right of conversion entitling the holder
of the security surrendered in exchange to make such conversion
8. Brokers transactions, executed upon customers orders, on any
registered Exchange or other trading market
9. Subscriptions for shares of the capital stock of a corporation
a. Prior to the incorporation thereof
b. In pursuance of an increase in its authorized capital stock
o 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
10. 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
11. The sale of securities by an issuer to fewer than twenty (20) persons in
the Philippines during any twelve-month period
12. The sale of securities to any number of the following qualified buyers:
a. Bank
b. Registered investment house
c. Insurance company
d. Pension fund or retirement plan maintained by the Government or
managed by a bank or other persons authorized by the Bangko
Sentral to engage in trust functions
e. Investment company
f. Such other person as the Commission may by rule determine as
qualified buyers
13. Other transactions that the Commission may exempt 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
For an exemption under this Section, application shall be filed with the
Commission with 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
No notice of exemption or fee shall be required for any transaction
covered by Exempt Transactions except those under (11) and (12)


Int'l Secuiities Regulations Page S of 21
Procedure for Registration:
a. 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
b. The registration statement shall include any prospectus required or
permitted to be delivered
c. 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
d. The registration statement shall be signed by the issuers executive
officer by a duly verified resolution of the board of directors of the issuer
corporation
e. Payment of a fee, upon filing, 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
f. 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

Grounds for Rejection and Revocation of Registration of Securities
1. Finding that the issuer
a. Has been judicially declared insolvent
b. Has violated any of the provisions of this Code
c. Has been or is engaged or is about to engage in fraudulent
transactions
d. Has made any false or misleading representation of material facts in
any prospectus concerning the issuer or its securities
e. Has failed to comply with any requirement that the Commission may
impose as a condition for registration
2. 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
3. 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
4. A registration statement may be withdrawn by the issuer only with the
consent of the Commission

Amendments to the Registration Statement
Grounds:
o If a registration statement is on its face incomplete or inaccurate in
any material respect
Procedure:
a. The Commission shall issue an order directing the amendment of
the registration statement
b. 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
o An amendment filed after the effective date of the registration
statement shall become effective only upon such date as
determined by the Commission.

Suspension of Registration
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

Disclosure Requirements

To whom Reportorial Requirements shall apply?
1. An issuer which has sold a class of its securities pursuant to a registration
requirement
2. 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
3. An issuer with a class of securities listed for trading on an Exchange
4. An issuer with assets of at least Fifty million pesos and having Two
hundred (200) or more holders each holding at least One hundred (100)
shares of a class of its equity securities

What shall be reported?
1. Annual Report within 135 days, after the end of the issuers fiscal year
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
Int'l Secuiities Regulations Page 4 of 21
2. Quarterly Report within 45 days after the end of each of the 1
st
three
quarters of each fiscal year
3. 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

Reports filed by 5% beneficial Owner:
Within five (5) business days after such acquisition, submit to the Issuer,
the Exchange where the security is traded, and to the Commission a
sworn statement containing the information required by SEC Form 18-A

Proxy Solicitation

Characteristics of a Proxy Solicitation:
a. Proxies must be issued and proxy solicitation must be made in
accordance with rules and regulations to be issued by the Commission
b. In writing, signed by the stockholder or his duly authorized
representative and filed before the scheduled meeting with the
corporate secretary
c. It shall be valid only for the meeting for which it is intended
d. No proxy shall be valid and effective for a period longer than five (5)
years at one time

Requirements for Brokers:
a. 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
b. A broker or dealer who holds or acquires the proxy for at least 10% of
the outstanding share of the issuer, shall submit a report identifying the
beneficial owner within 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

Tender Offers

What is Tender Offer?
Publicly announced offer by a person acting alone or in concert with
others to buy the shares of a PUBLIC company at the terms specified in
the offer
What are Tender Offer Materials?
a. Offerors formal offer, including all the material terms and conditions of
the tender offer and all their amendments
b. Related transmittal letter and all their amendments
c. Press releases, advertisements, letters and other documents published
by the offeror or sent or given by the offeror to security holders which,
directly or indirectly, solicit, invite or request tenders of the equity
securities being sought in the tender offer

To whom Tender Offers apply?
Any person or group of persons acting in concert who intends to
acquire
1. At least 35% of any class of any security of a
i. Listed corporation (Publicly Listed Corporation)
ii. Corporation with assets of at least Fifty Million Pesos and having
200 or more stockholders with at least 100 shares each (Public
Corporation)
2. At 35% of such equity over a period of 12 months
3. An acquisition of less than 35% but that will result in ownership of more
than 50% of the total outstanding equity securities such corporations

Exempt from the Mandatory Tender Offer Requirement
a. Any purchase of shares from the unissued capital stock provided the
acquisition will not result to a fifty percent (50%) or more ownership of
shares by the purchaser
b. Any purchase of shares from an increase in authorized capital stock
c. Purchase in connection with foreclosure proceedings involving a duly
constituted pledge or security arrangement where the acquisition is
made by the debtor or creditor
d. Purchases in connection with a privatization undertaken by the
government of the Philippines
e. Purchases in connection with corporate rehabilitation under court
supervision
f. Purchases at the open market at the prevailing market price; and
g. Merger or consolidation

Requirements for Exempt transactions from Mandatory Tender Offer?
1. Must not be intended to circumvent or defeat the objectives of the
tender offer rules
2. Purchasers of shares in the foregoing transactions shall, however,
comply with the disclosure and other obligations requirements
Int'l Secuiities Regulations Page S of 21
Disclosure Requirements in Tender Offers
The offeror shall publish, send or give to security holders a report
containing the following information:
a. The identity of the offeror including his or its present principal
occupation
b. The identity of the target company
c. The amount of class of securities being sought and the type and
amount of consideration being offered
d. The scheduled expiration date of the tender offer
e. The exact dates when security holders who deposit their securities
shall have the right to withdraw their securities and the manner by
which shares will be accepted for payment and which withdrawal
may be effected
f. If the tender offer is for less than all of the securities of the class and
the offeror is not obligated to purchase all securities tendered, the
exact date of the period during which securities will be accepted
on a pro rata basis under this Rule and the present intention or plan
of the offeror with respect to the tender offer in the event of an
oversubscription by security holders
g. The confirmation by the offerors financial adviser or another
appropriate third party that the resources available to the offeror
are sufficient to satisfy full acceptance of the offer
h. The information required in SECForm19-1
If any material change occurs in the information previously disclosed to
security holders, the offeror shall disclose promptly such change in the
manner prescribed by this Rule

Period and Manner of Making Tender Offers
Tender offer shall, unless withdrawn, remain open until the expiration of:
a. At least 20 business days from its commencement
b. An offer should be completed within 60 business days from the date
the intention to make such offer is publicly announced
c. At least 10 business days from the date the notice of a change in
the percentage of the class of securities being sought or in the
consideration offered is first published, sent or given to security
holders

Withdrawal of Securities Tendered
a. At any time during the period such tender offer remains open
b. If not yet accepted for payment, after the expiration of 60 business days
from the commencement of tender offer
Transactions Based on Material, Non-Public Information
If a person shall become aware of a potential tender offer before the
tender offer has been publicly announced
o Such person shall not buy or sell, directly or indirectly, the securities
of the target company until the tender offer shall have been
publicly announced.
o Such buying or selling shall constitute insider trading

Unlawful Actions in relation to Tender Offers:
A. To employ any device, scheme or artifice to defraud any person
B. Making of any untrue statement of a material fact
C. Omitting to state any material fact necessary in order to make the
statements made but is not misleading
D. Engage in any fraudulent, deceptive or manipulative acts or practices

Manipulative and Fraudulent Practices

Manipulation of Security Prices
1. To create a false or misleading appearance of active trading
a. By effecting any transaction in such security which involves no
change in the beneficial ownership thereof (Wash Sale)
b. 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 (Matched Orders)
c. By performing similar act where there is no change in beneficial
ownership
2. To effect, alone or with others, a series of transactions in securities that:
a. Raises their price to induce the purchase of a security
b. Depresses their price to induce the sale of a security
c. Creates active trading to induce such a purchase or sale through
manipulative devices such as
i. Marking the close buying and selling of securities at the
close of the market in an effort to alter the closing price
ii. Painting the tape series of transactions reported publicly to
give the impression of activity or price movement in a security
iii. Squeezing the float taking advantage of a shortage of
securities by controlling the demand side and exploiting
market congestion
Int'l Secuiities Regulations Page 6 of 21
iv. Hype and dump buying activity at increasingly higher prices
and then selling it in the market at higher prices
v. Boiler room operations activities out of low-rent offices
involving misrepresentations concerning the securities being
sold
3. 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
4. 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
5. 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

Other Prohibitive Acts:
1. Short Sale contract for sale of shares of stock which the seller does not
own, or certificates which are not within his control, so as to be
available for delivery at the time when delivery must be made
2. Stop-Loss Order instruction by a customer to his broker that if
commodity reaches the price named, the broker shall close the trade
at the best available price thus minimizing his losses
3. Option Trading contracts giving holders the right to buy or sell a stated
number of shares of a particular security issuer at a fixed price within a
pre-determined time period

Fraudulent Transactions
1. Employ any device, scheme, or artifice to defraud
o Scienter is required (Sec. 17a of 1933 Act)
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
3. Engage in any act, transaction, practice or course of business which
operates or would operate as a fraud or deceit upon any person
Applicable to all kinds of corporations


Insider Trading
Prohibited Act
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

Exceptions:
1. The insider proves that the information was not gained from such
relationship
2. If the other party selling to or buying from the insider (or his agent) is
identified, the insider proves:
a. That he disclosed the information to the other party
b. That he had reason to believe that the other party otherwise is also
in possession of the information

Who are Insider Traders?
1. Insider
a. Issuer
b. A director or officer 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
i. Spouse
ii. Relatives by affinity or consanguinity within the 2
nd
degree,
legitimate or common-law
o 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
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
e. A person who learns such information by a communication from
any of the foregoing insiders

What is Material Non-Public Information?
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
Int'l Secuiities Regulations Page 7 of 21
B. That which would have be considered by a reasonable person
important under the circumstances in determining his course of action
whether to buy, sell or hold a security

Short Swing
Persons obligated to File a Report:
1. Every person who is a beneficial owner of more than 10%, directly or
indirectly, of any class of any equity security
2. Director or an officer of the issuer of such security

Procedure for Filing the Report:
a. File a report within 10 days after he becomes such (beneficial owner,
director or officer) stating
i. Such status
ii. If such security is listed for trading on an Exchange
iii. The amount of all equity securities of such issuer
b. File a report within 10 days after the close of each calendar month if
there has been a change in such ownership

Prohibition:
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
o Any profit realized by him from any purchase and sale, or any sale
and purchase, of any equity security of such issuer within any period
of less than 6 months shall inure to and be recoverable by the issuer
Use of information is presumed
o What is important is the concurrence of purchase and sale
transactions within a period of 6 months

Exception:
Such security is acquired in good faith in connection with a debt
previously contracted

Suit to Recover such Profit:
a. Instituted before the RTC
b. Instituted by the
i. Issuer
ii. 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 60 days
after request or shall fail diligently to prosecute the same thereafter

Special Requirement for Prohibition to Apply to a 10% Beneficial Owner
This shall not cover any transaction where such beneficial owner was
not such both at the time of the purchase and sale of the security
involved

Non-applicability of this Rule:
Any purchase and sale of an equity security not then or thereafter held
by him in an
a. Investment account
b. 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

PSE Disclosure Rules

Disclosure of Material Information
Issuers are required to disclose once they become aware of any
material information or corporate act or development or event
When must it be disclosed?
o Within 10 minutes from receipt of such information or the happening
or occurrence of such development or event
To whom must it be disclosed?
o To the Exchange prior its release to the news media
Procedure:
a. Original copy of the Disclosure must be delivered to the Exchange
within 24 hours from the time of initial disclosure
b. Any Disclosure must be addressed to the attention of the Disclosure
Department of the Exchange
Trading halt when applicable:
o When the act, development or event occurs during trading hours
a. Issuer must request a halt in order to ensure that the investing
public would have equal access to the information
b. Trading halt shall be lifted 1 hour after the information has been
disseminated
Int'l Secuiities Regulations Page 8 of 21
c. If the information is disseminated 1 hour or less prior to the close
of the market, the trading halt shall be lifted on the subsequent
trading day
Exceptions to the Material Information Disclosure Rule
1. When the activity or development is still considered as soft
information
2. Disclosure would be in contravention to any existing laws of the
land

Selective Disclosure of Material Information
This is prohibited unless the issuer is ready to simultaneously disclose the
material non-public information to the Exchange
Non-application of this Rule:
a. Person who is bound by duty to maintain trust and confidence to
the Issuer
b. Person who agrees in writing to maintain in strict confidence the
disclosed material information and will not take advantage of it for
his personal gain

Duty of the Issuer to Clarify Non-Public Material Information
Upon the Exchanges receipt of any material non-public information, it
shall request the Issuer concerned to confirm or deny the veracity of
said information
Trading halt is imposed if the Issuer fails to confirm or deny the
information
a. The halt shall be lifted at 10AM even in the absence of any reply
b. The Exchange must receive the Issuers reply not later than 11AM of
the same trading day
o If no reply is still given, the Issuer shall be fined P30,000 and an
additional amount of P10,000 for every 30 minutes of delay

Standard and Test in Determining Whether Disclosure is Necessary
1. The information is necessary to enable the Issuer and the public to
appraise their position or standing
2. The information is necessary to avoid the creation of a false market for
its securities
3. The information may reasonably be expected to materially affect
market activity and the price of its securities

Events Mandating Prompt Disclosure
1. A change in control of the Issuer
2. The filing of any legal proceeding by or against the Issuer and/or its
subsidiaries, involving a claim amounting to 10% or more of the Issuers
total current assets or any legal proceeding against its President and/or
any member of its Board of Directors in their capacity as such
3. Changes in the Issuers corporate purpose and any material alterations
in the Issuers activities or operations or the initiation of new ones
4. Resignation or removal of directors, officers or senior management and
their replacements and the reasons for such
5. Any decision taken to carry out extraordinary investments or the
entering into financial or commercial transactions that might have a
material impact on the Issuers situation
6. Losses or potential losses, the aggregate of which amounts to at least
ten percent (10%) of the consolidated total assets of the Issuer
7. Occurrence of any event of dissolution with details in respect thereto
8. Acts and facts of any nature that might seriously obstruct the
development of corporate activities, specifying its implications on the
Issuers business
9. Any licensing or franchising agreement or its cancellation which may
materially affect the Issuers operations
10. Any delay in the payment of debentures, negotiable obligations, bonds
or any other publicly traded security
11. Creation of mortgages or pledges on assets exceeding ten percent
(10%) or more of the Issuers total assets
12. Any purchase or sale of stock or convertible debt securities of other
companies when the amount is ten percent (10%) or more of the Issuers
total assets
13. Contracts of any nature that might limit the distribution of profits with
copies thereof
14. Facts of any nature that materially affect or might materially affect the
economic, financial or equity situation of those companies controlling,
or controlled by the Issuer including the sale of or the constitution of
sureties/pledges on a substantial part of its assets;
15. Authorization, suspension, retirement or cancellation of the listing of the
Issuers securities on an exchange or electronic marketplace
domestically or abroad
16. Fines of more than P50,000.00 and/or other penalties on the Issuer or on
its subsidiaries by regulatory authorities and the reasons therefor
17. Merger, consolidation or spin-off of the Issuer
18. Any modification in the rights of the holders of any class of securities
issued by the Issuer and the corresponding effect of such modification
upon the rights of the holders
19. Any declaration of cash dividend, stock dividend and pre-emptive
rights by the Board of Directors
Int'l Secuiities Regulations Page 9 of 21
20. Any change in the Issuers fiscal year and the reason(s)therefor
21. All resolutions, approving material acts or transactions, taken up in
meetings of the Board of Directors and Stockholders of the Issuer
22. A joint venture, consolidation, acquisition, tender offer, take-over or
reverse take-over and a merger
23. Capitalization issues, options, directors/officers/employee stock option
plans, warrants, stock splits and reverse splits
24. All calls to be made on unpaid subscriptions to the capital stock of the
Issuer
25. Any change of address and contact numbers of the registered office of
the Issuer
26. Any change in the auditors of the Issuer and the corresponding reason
for such change
27. Any proposed amendment to the Articles of Incorporation and By- Laws
and its subsequent approval by the Commission
28. Any action filed in court, or any application filed with the Commission,
to dissolve or wind-up the Issuer or any of its subsidiaries, or any
amendment to the Articles of Incorporation shortening its corporate
term
29. The appointment of a receiver or liquidator for the Issuer or any of its
subsidiaries
30. Any acquisition of shares of another corporation or any transaction
resulting in such corporation becoming a subsidiary of the Issuer
31. Any acquisition by the Issuer of shares resulting in its holding 10% or more
of the issued and outstanding shares of another listed company or
where the total value of its holdings exceed 5% of the net assets of an
unlisted corporation
32. Any sale made by the Issuer of its shareholdings in another listed or
unlisted corporation: (1) resulting in such corporation ceasing to be its
subsidiary; (2) resulting in its shareholding falling below 10% of the issued
capital stock
33. Firm evidence of significant improvement or deterioration in near- term
earnings prospects
34. The purchase or sale of significant assets amounting to ten percent
(10%) or more of the Issuers total assets otherwise than in the ordinary
course of business
35. A new product or discovery
36. The public or private sale of additional securities
37. A call for redemption of securities
38. The borrowing of a significant amount of funds not in the ordinary
course of business
39. Default of financing or sale agreements
40. Deviation from capital investment funds equivalent to twenty percent
(20%) of the original amount appropriated
41. Disputes with subcontractors, customers or suppliers or with any other
parties
42. An increase or decrease by 10% in the monthly, quarterly and annual
revenues on a year-on-year basis
So, it is safe to assume that all transactions need prompt disclosure !

Disclosure For Substantial Acquisitions & Reverse Takeovers
When required:
a. Issuer or its subsidiary has merged or consolidated with an unlisted
company
b. Issuer or its subsidiary acquires a direct or indirect interest in an
unlisted company, person or group, and said interest is 10% or more
of the total book value of the listed company
Effects:
o Trading of the securities of the listed company shall be suspended
until
a. Terms and conditions of the transaction, and the details
pertaining to the business or project acquired are actually
disclosed
b. Latest audited financial statements of the unlisted company,
are submitted to the Exchange, if applicable

Unusual Trading Activity
Whenever there is unusual trading activity in an Issuers securities, the
Issuer must respond promptly to any inquiry made by the Exchange
concerning the unusual trading activity. In this connection:
a. If the unusual trading activity results from the leak of material
information, the information in question must be announced
promptly
b. If the listed Issuer is unable to determine the cause of the unusual
trading activity, it must make a disclosure to the Exchange to the
effect that there are no undisclosed recent developments affecting
the Issuer that would account for the unusual trading activity

Liabilities

Liabilities of Controlling Persons, Aider and Abettor and Other Secondary
Liability
1. Every person who controls any person liable under this Code or the rules
or regulations of the Commission shall also be liable jointly and severally
Int'l Secuiities Regulations Page 1u of 21
o Defense: Unless the controlling person proves that, despite 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
2. Unlawful for any person, directly or indirectly, to do any act or thing in
violation of the provisions of this Code or any rule or regulation
thereunder
3. Unlawful for any director or officer of, or any owner of any securities
issued by, any issuer required to file any document, without just cause,
to hinder, delay or obstruct the making or filing of any such document,
report or information
4. 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
5. Every person who substantially assists the act or omission of any person
primarily liable under 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 therefrom
5. An aider or abettor shall be liable only to the extent of his relative
contribution or to the extent to which he was unjustly enriched,
whichever is greater

Civil Liabilities Arising in Connection with Prospectus, Communications and
Reports
1. Any person who offers to sell or sells a security in violation of the
registration requirements
2. Any person who offers to sell or sells a security by use of any means or
instruments which includes an untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
not misleading
3. Any person who shall make or cause to be made any statement in any
report or document, which at the time was made false or misleading
with respect to any material fact, liable to any person who, not knowing
that such statement was false or misleading, and relying upon such
statement shall have purchased or sold a security at a price which was
affected by such statement
o Defense: Acting in good faith and without knowledge that such
statement was misleading or false

Civil Liability of Fraud in Connection with Securities Transactions
Any person who engages in any act or omission in violation of Tender
Offer Rule, Requirements on Proxy Solicitations, or Insider Trading

Civil Liability for Manipulation of Security Prices
Any person who willfully participates in any act or transaction in
violation of the Prohibition on Fraud and Manipulation of Security Prices

Civil Liability on Account of Insider Trading
Any person purchasing or selling a security while in possession of
material information not generally available to the public
a. Liable to an investor who purchased or sold securities of the same
class that is subject of the violation
b. Defense: The insider or such person in case of 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

Regulations of Securities Market Professionals
Definitions
a. Broker a person who buys or sells securities for the account of others
b. Dealer a person who buys or sells securities for their own account
c. Salesman natural person hired to buy and sell securities on a salary or
commission basis or any employee of an issuer company whose
compensation is determined directly or indirectly on sales of the issuers
securities
d. Associated Person any person employed full time by the Broker Dealer
whose responsibilities include internal control supervision
o He cannot perform other duties without SEC approval and subject
to the condition that Broker Dealer will maintain the appropriate
Chinese Wall
e. Member of an Exchange any Broker Dealer who has the right to trade
in that Exchange
f. Participant a person who has been approved to use the self-
regulatory organizations services and facilities but is not a member
therein
g. Trading Participant a person that is registered to sell or buy securities
within a registered Exchange
h. Self-Regulatory organization an organized Exchange
i. Registered Clearing Agency any person who acts as intermediary in
making deliveries upon payment to effect settlement in securities
transactions
o Clear trades and prepare instructions for automated settlement of
those trades and often act as intermediaries in making those
settlements
Int'l Secuiities Regulations Page 11 of 21
o It instructs depositories to make securities deliveries that result from
settlement of securities transaction

Registration
GR: Registration is mandatory
a. No person shall engage in the business of buying or selling securities
in the Philippines as broker or dealer, or act as salesman, or an
associated person of any broker or dealer unless registered as such
with SEC
b. Salesman or any associated person can only be employed if they
have been registered as such with SEC
Exception:
o SEC may, by rule or order, conditionally or unconditionally exempt
registration as it deems consistent with public interest and
protection of investors

Conditions for Registration
a. Natural person
b. Applicant must satisfactorily pass a written exam
c. Applicant must satisfy a minimum net capital and provide a bond or
other security " for Broker or Dealer
1. Unimpaired paid-up capital of P100M for
a. First time registrants who will be participating in a registered
clearing agency
b. Those acquiring business of existing Broker Dealer companies
o SEC may authorize a lower capitalization for applicants not
participating in a registered clearing agency
2. Unimpaired paid-up capital of P30M plus surety bond of P100M for
a. Existing Broker Dealer applicants not meeting the P100M
capitalization, and
b. Not seeking authorization for market making transactions
3. Unimpaired paid-up capital of P2.5M for applicants dealing purely
in proprietary shares and who are not holding securities for their
clients
d. File an application form with the SEC
e. Pay the corresponding registration fee
f. 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
g. Within 30 days after filing the application, SEC may either
1. Grant registration
o All names and addresses shall be recorded in a Register of
Securities Market Professions kept in the office of SEC and is
open to public inspection
2. Deny registration

Conditions imposed upon Registered persons
a. File current and accurate information
b. Pay annual fee
o Failure to do so shall be a cause for the suspension of registration
c. Registration of salesman or associated person shall automatically
terminate upon cessation of affiliation with the registered broker, dealer
or issuer who has employed him

Market making transactions
Transactions in a particular security
a. By a Broker Dealer which complies with the Commission and
Exchange rules regarding its duty as a market maker
b. To ensure two way quotes, provide liquidity, and maintain a fair and
orderly trading market therein

Revocation, Refusal or Suspension of Registration
Grounds
a. Willfully violated any provision of the Code
b. Failed to prevent another person who commits such violation " for
registered broker, dealer or associated person
c. Willfully made or caused to be made a false or misleading statement in
the application
d. Willfully omitted to state any material fact required to be stated therein
e. Failed to satisfy qualifications or requirements for registration
f. Convicted of an offense involving moral turpitude or of a violation of
securities, commodities, banking, real estate or insurance laws
g. Enjoined or restrained from engaging in securities activities
h. Judicially declared insolvent

Transactions and Responsibility of Brokers and Dealers
Prohibitions
Deal or buy or sell for its own account or for the account of customers
where any of the stockholder, director, associated person or salesman,
or authorized clerk of said Broker or Dealer and all relatives of such
Int'l Secuiities Regulations Page 12 of 21
within the 4
th
civil degree of consanguinity or affinity is at the time
holding office in the issuer corporation as director, president, vice-
president, manager, treasurer, comptroller, secretary or any office of
trust and responsibility, or is a controlling person of the issuer

Transactions and Responsibilities of Brokers and Dealers
Ethical Standards
1. Honesty and Fairness
o When registered person advises or acts on behalf of a client, he
shall ensure at all times that any representations or other
communications made and information provided to the client are
accurate and not misleading
2. Diligence
o Ensure to promptly execute client orders in conformity with the
instruction of the client and on the best available terms
3. Information about Clients
o Establish true and full identity of each of his clients, their financial
situation, investment experience and investment objectives
4. Information for Clients
o Make adequate disclosure of material information in his dealings
with his clients
5. Conflicts of Interest
o Avoid conflicts of interest and if it cannot be avoided, should ensure
that his clients are fairly treated and properly informed of such
conflict
a. Client Priority
# Orders of clients or transactions to be undertaken on behalf of
clients, shall have in all cases priority over orders for the
account of the registered person
# Registered person shall not deal in any securities for himself or
for any account in which he has an interest based upon
advance knowledge he possesses of pending transactions for
or with clients or any other non public information, the
disclosure of which would be expected to affect the price of
such securities and violate insider trading prohibition
b. Conflicts of interest
# Registered person has a material interest in a transaction with
or for a client, or a relationship which gives rise to an actual or
potential conflict of interest in relation to such transaction, he
shall neither advise nor deal in such transaction unless he has
disclosed that material interest or conflict to the client and has
taken all reasonable steps to ensure fair treatment of client
c. Client assets
# Client transactions and assets should be accounted for
properly and promptly, and adequately safeguarded
6. Compliance
o Registered person shall have a policy on whether employees are
permitted to deal for their own accounts in securities
7. Confirmation of Customer Orders
o Employee or salesman of a Broker Dealer shall not be authorized to
accept a confirmation for or on behalf of a customer
8. Client Agreement
o Written agreement is entered into with a client before any service
is provided for that client
9. Suitability Rule
o In recommending to a customer the purchase, sale or exchange
of any security, that recommendation must be suitable for such
customer upon the basis of the facts disclosed by such customer
as to his other security holdings and as to his financial situation and
needs
10. Commission and Charges for Services Performed by a Broker Dealer
o All Broker Dealers shall file a schedule of their minimum commission
rates with SEC
o No discounts and/or rebates shall be permitted from the minimum
rates
11. Block Sale
o A matched trade that does not go through the automated order
matching system of an Exchange but has been pre-arranged by
and among Broker Dealers clients and is then entered as a done
deal into the trading system
o Requisites:
a. Transaction complies with Exchange rules
b. Exchange notifies the SEC in writing not later than 1 business
day after the date such transaction has been executed of the
price and volume or in such form and manner that the SEC
may prescribe

Segregation of Broker and Dealer Transactions, Affiliations and Practices
Exchange Trading Participant shall not effect any transaction on such
Exchange for its own account, the account of an Associated Person,
salesmen, or any other person associated with the Trading Participant,
including its affiliates, or an account with respect to which an
associated person exercises investment discretion, unless it complies
with the Customer First Policy
Int'l Secuiities Regulations Page 1S of 21
Trader or salesman shall use and maintain only 1 dealing account, and
only with his employing broker, which shall be registered under his name
or jointly with members of his family within the first degree of
consanguinity and shall be treated as the Trading Participants
proprietary account only for the purpose of complying with the
Customer First Policy

Customer First Policy
1. Trader or salesman of an Exchange Trading Participant shall execute a
customer order in the Exchange trading terminal immediately upon the
receipt thereof
2. Time the customer order was received shall be recorded either
manually or electronically
3. All orders whether customer or proprietary shall be executed in their
assigned trading terminals and by the designated trader
4. Orders of stockholders, officers, directors, Associated Persons and
salesmen, or any other person associated with the Exchange Trading
Participant, including affiliated persons, traded within the Trading
Participant shall be treated as the proprietary account of the Trading
Participants account, in which case, the Customer First Policy shall
apply

Segregation of Functions (Chinese Walls)
To whom applicable?
a. Any Broker Dealer that assumes more than one function whether as
a dealer, adviser
b. Any Broker Dealer who engages in market making transactions
What shall be done?
a. Maintain proper segregation of those functions within the company
to prevent the flow of information between the different units of the
company that performs functions that may have potential conflict
of interest
b. Broker Dealer shall at all times ensure that its trading functions and
back-office settlement functions and physical setup are properly
segregated and shall establish written procedures to ensure
compliance with this rule
For purposes of this rule, information means matter:
a. Of a specific nature which has not been made public;
b. Relating to one or more public companies or securities of a public
company; and
c. Which, if it were made public, would likely affect the market price
of the securities.
Trading Limited to Listed Securities and Exchanges Registered
Prohibition
No Broker Dealer or any registered person shall effect any transaction
unless such Exchange or any other trading market and the securities listed
or allowed to be traded are registered or exempt from registration

Registration of Exchanges

Concept of an Exchange
One that neither buys, sells nor sets prices but only acts as a market
place for such transactions

Requirements for Registration
a. Applicant is organized as a stock corporation
o No person may beneficially own or control, directly or indirectly,
more than 5% of the voting rights of the Exchange
o No industry or business group may beneficially own or control,
directly or indirectly, more than 20% of the voting rights of the
Exchange
o SEC may exempt an applicant from the above prohibitions if it finds
that such ownership or control will not negatively impact on the
exchanges ability to effectively operate in the public interest
b. Applicant is engaged solely in the business of operating an exchange
c. Brokers in the board of the Exchange shall comprise of not more than
49% of such board and shall proportionately represent the Exchange
membership in terms of volume/value of trade and paid-up capital
d. No officer or employee of a member of the Exchange, its subsidiaries or
affiliates or related interests shall become an independent director
e. President and other management of the Exchange shall consist only of
persons who are not members and are not associated in any capacity
with any broker or dealer or member or listed company of the
Exchange
f. Transparency of transactions on the Exchange
g. Within 90 days after filing the application, SEC my issue an order either
1. Granting registration
i. Pay a registration fee
ii. May withdraw its registration or suspend its operations or
resume the same
2. Denying registration

Int'l Secuiities Regulations Page 14 of 21
Prohibitions on Member-Broker of an Exchange
Effect any transaction on such Exchange for its own account, that of an
associated person exercising investment discretion
Transactions under this prohibition that are not unlawful:
1. Transaction by a member-broker acting in the capacity of a market
maker
2. Transaction reasonably necessary to carry on an odd-lot
transactions
3. Transaction to offset a transaction made in error
4. Other transaction of a similar nature as may be defined by SEC
When member-broker effects a prohibited transaction, it shall disclose
to such customer at or before the completion of the transaction that it is
acting for its own account and this shall be reflected in the order ticket
and confirmation slip

Suspension of any Listed Security on any Exchange
Suspension for a period not exceeding 30 days or if with approval of the
President of the Philippines, for a period of more than 30 days but not
exceeding 90 days
Grounds:
a. SEC is of the opinion that it is necessary or appropriate for the
protection of investors
b. Public interest so requires
Promptly following the issuance of order of suspension, SEC shall notify
the affected issuer and provide such issuer with an opportunity for
hearing to determine whether suspension should be lifted

Trust Funds
Establishment of trust fund for the purpose of compensating investors for
extraordinary losses or damage they may suffer due to business failure
or fraud or mismanagement of the persons with whom they transact

Independent Directors
A person who would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director
o The independent director shall not be
a. An officer or employee of the corporation, its parent or
subsidiaries,
b. Any individual having a relationship with the corporation
c. Does not own more than 5% of the outstanding shares of the
covered company and its subsidiaries
For Public Corporations, it shall have at least 2 independent directors
constituting at least 20% of the members of such board
o Service as such shall not exceed 5 continuous years
Applicable to:
a. Public corporations
b. Listed corporations
c. Grantees of secondary licenses

Over-the-Counter Transactions
One not made at the stock exchange but directly between the broker
and customer

Over-the-Counter Market
Market created other than a registered stock exchange for both the
purchase and sale of any security

Restrictions on Use of Over-the-Counter-Markets
1. No broker, dealer, salesman, associated person of a broker or dealer, or
Exchange, directly or indirectly make use of any facility unless such is
registered under the requirements of the SRC
2. No broker, dealer, salesman, associated person of a broker or dealer,
singly or in concert with any other person make, create or operate, or
enable another to do such, for the buying and selling of any security on
any trading market otherwise than on a registered Exchange

Registration of Self-Regulatory Organizations

Requirements for registration
c. Association is organized and has capacity to be able to carry out the
purposes of this Code and to comply with and enforce compliance by
its members with the provisions of this Code, RR and the rules of
association
d. The rules of the Association provide that
1. Any registered broker or dealer may become a member of the
Association
2. There exist fair representation of its members to serve on the BOD of
the association
3. BOD is composed of
Int'l Secuiities Regulations Page 1S of 21
i. President of the Association who is not a member or
associated with any broker, dealer or member of the
association
ii. Persons who represent the interests of issuers and public
investors and are not associated with any broker or dealer or
member of the association
4. Equitable allocation of reasonable dues, fees, and other charges
among members and issuers and other persons using any facility or
system of the association
5. Prevention of fraudulent and manipulative acts and practices
6. Appropriately discipline for violation of this SRC, RR or the rules of the
association its members and persons associated with its members
including suspension or expulsion of such member or participant
7. Fair procedure for disciplining, denial of membership, barring of any
person from becoming associated with a member, and prohibition
or limitation by association of any person with respect to access to
services offered by the association or member thereof

Margin and Credit
Purpose
To allow a broker to advance for the customer part of the purchase
price of a security and to keep it as collateral for such advance

Margin Requirements
Amount of credit that may be extended on any security shall not be
greater than
a. 50% of the current market value of the security at the time of
transaction
b. In no case shall it be less than P50,000

Restriction on Borrowing
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 may be prescribed
o Failure will result in the obligation upon the broker to sell the security
purchased starting within 10 trading days from the last day for the
customer to pay such purchase price
Sale will be without prejudice to recover deficiency amount



Philippine Stock Exchange
Composition of Board of Directors
1. Director-Chairman 3. 13 Directors
2. Director-President-CEO 4. Secretary

Committees
1. Nominations and Elections Committee 3. Audit Committee
2. Corporate Governance Committee 4. Market Integrity Board

Management Officers
1. Office of the President
2. Office of the Chief Operating Officer
3. Office of the General Counsel
4. Corporate Governance Office
5. Controllership and Treasury Division
6. Technology Division
7. Corporate Planning & Investors Relations Division
8. Human Resources & Administration Division
9. Issuer Regulation Division
10. Capital Markets Development Division
11. Market Operations Division
12. Internal Audit Group

PSEs Organizational Structure
1. Listings & Disclosure Group
2. Compliance & Surveillance Group
3. Operations/Automated Trading Group
4. Finance and Investment Group
5. Business Development & Information Group
a. Office of the General Counsel
b. Membership Department
c. Human Resources Management Department

Management of PSE
One of the non-broker members heads the Exchange, appointed by
the Board as the President and CEO
Int'l Secuiities Regulations Page 16 of 21
President, along with the professional management of the PSE, executes
the policy determinations of the Board and ensures that the Exchange is
operating efficiently
o Additionally, it sets the rules and regulations of the Exchange,
monitors its implementation and ensures that the investing public is
given protection in the transaction of their investments
Business Hours of PSE
Trading hours in the Philippine Stock Exchange shall be in one
continuous session with the following daily schedule:
Playing of the National Anthem 8:45 a.m.
Pre-open Period 9:00 a.m. ~ 9:30 a.m.
Calculation of Open Price/Market Open 9:30 a.m.
Regular Trading Period 9:30 a.m. ~ 12:00 noon
Closing Time 12:00 noon
A ten (10) minute extension from closing time shall be allowed to
execute orders at closing prices
When there are no trading:
o Saturdays, Sundays, legal holidays and days when the BSP Clearing
Office is closed

LIABILITIES AND REMEDIES

SEC. 51. Liabilities of Controlling Persons, Aider and Abettor and Other
Secondary Liability
Who are liable?
o Every person who controls any person liable under this Code or the
IRR is also liable jointly and severally with, and to the same extent as,
such controlled persons
o Such control shall be by or through
a. Stock ownership, agency, or otherwise, or
b. Connection with an agreement or understanding with one or
more other persons
Defense:
o 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
Unlawful Acts:
1. Any person, directly or indirectly, do any act or thing which it
would be unlawful for such person to do under this Code or any
rule or regulation
2. Any director or officer of, or any owner of any securities issued by
of an issuer who hinders, delays or obstructs the making or filing of
any required document, report, or information
3. Any person who aids, abets, counsels, commands, induces or
procures any violation of this Code, or any rule, regulation or order
of the Commission
Aider or abettor:
o Every person who substantially assists the act or omission of any
person primarily liable under Sections 57, 58, 59 and 60, with
knowledge or in reckless disregard that such act or omission is
wrongful
o Such person shall be jointly and severally liable for damages
resulting from the conduct of the person primarily liable
Extent of liability of an Aider or Abettor:
o The aider or abettor is liable only, whichever is greater
a. Extent of his relative contribution in causing such damages in
comparison to that of the person primarily liable
b. 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
To whom duties are imposed?
a. Registered Exchange
b. Broker or dealer
c. Transfer agent
d. Clearing agency
e. Securities association
f. Other self-regulatory organization
g. Every other person required to register under this Code
What are the duties?
a. Make, keep and preserve records for such periods that may be
prescribed
b. Furnish copies of such records
c. Make such reports
What are subject to periodic examinations?
a. Accounts
b. Correspondence
c. Memoranda
d. Papers
e. Books
f. Other records
Who and when examinations shall be conducted?
o Conducted by representatives of the Commission
o Conducted when the Commission deems it necessary or
appropriate for the public interest or for the protection of investors
Records means:
o Accounts, correspondence, memoranda, tapes, discs, papers,
Int'l Secuiities Regulations Page 17 of 21
books and other documents or transcribed information of any type,
whether written or electronic in character

SEC. 53. Investigations, Injunctions and Prosecution of Offenses
Discretionary and other powers of the Commission:
1. Make investigations as it deems necessary to determine whether
any person has violated or is about to violate any provision of this
Code, IRR or order, or any rule of an Exchange, registered
securities association, clearing agency, other self-regulatory
organization
2. Require or permit any person to file with it a statement in writing,
under oath or otherwise, as to all facts and circumstances
concerning the matter to be investigated
3. Publish information concerning any such violations
4. 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 IRR, or in securing
information to serve as a basis for recommending further
legislation concerning the matters to which this Code relates
5. 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
Notification:
o 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
Criminal complaints under this section:
a. Referred to the DOJ for preliminary investigation and prosecution
before the proper court
b. 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
c. Investigation, prosecution, and trial of such cases shall be given
priority
When can the Commission issue an order to desist from committing an
act or practice?
o 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, IRR or order, or any rule of
an Exchange, registered securities association, clearing agency or
other self-regulatory organization
When can the Commission charge any person with the violation of the
rules of an Exchange or other self regulatory organization?
o When it appears to the Commission that such Exchange or other
self-regulatory organization is unable or unwilling to take action
against such person
Issuance of ex-parte cease and desist order
o 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
o Period of the ex-parte cease and desist order
# Maximum period of 10 days enjoining the violation and
compelling compliance with such provision
When is there Contempt?
o After due notice and hearing, 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
o Penalties:
a. Fine in such reasonable amount as the Commission may
determine
b. Detain under an arrest order issued by the Commission when
such failure or refusal is a clear and open defiance of the
Commissions order, decision or subpoena
# Period of detainment is until such order, decision or
subpoena is complied with

SEC. 54. Administrative Sanctions
What are the violations subject to an administrative sanction?
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
1. Made any untrue statement of a material fact, or
2. Omitted to state any material fact required to be stated therein
or necessary to make the statements therein not misleading
3. 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
4. Any person has refused to permit any lawful examinations into
its affairs
When can administrative sanctions be imposed?
a. After due notice and hearing
b. Commission finds any of the violations mentioned above
What are the administrative sanctions?
1. Suspension, or revocation of any registration for the offering of
Int'l Secuiities Regulations Page 18 of 21
securities
2. A fine of no less than P10,000 nor more than P1,000,000 plus not
more than P2,000.00 for each day of continuing violation
3. Disqualification from being an officer, member of the Board of
Directors, or person performing similar functions, of an issuer required
to file reports under this Code or any other act, rule or regulation
administered by the Commission
4. In the case of a violation of Section 34, a fine of no more than thrice
the profit gained or loss avoided as a result of the purchase, sale or
communication proscribed by such Section
5. Other penalties within the power of the Commission to impose
Imposition of the foregoing administrative sanctions shall be without
prejudice to the filing of criminal charges against the individuals
responsible for the violation
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
When a written proposal of an offer of settlement can be made?
o At any time during an investigation or proceeding under this Code
Grounds to grant the offer:
o 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
Effects of the settlement offer:
o Any agreement to settle shall have no legal effect until publicly
disclosed
o Such decision may be made without a determination of guilt on the
part of the person making the offer
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
Who can sue and recover damages?
o Any person acquiring a security and who suffers damage thereto
by virtue that the registration statement of such security contains
a. Untrue statement of a material fact
b. Omits to state a material fact required to be stated therein or
necessary to make such statements not misleading
When such person is precluded from filing?
o It is proved that at the time of such acquisition, he knew of such
untrue statement or omission
Who are liable?
a. 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
Proof of reliance when relevant:
o 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 12 months beginning from
the effective date of the registration statement, the right of
recovery 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
# 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
1. Any person who:
a. Offers to sell or sells a security in violation of Chapter III (Registration
of Securities)
b. Offers to sell or sells a security 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
Int'l Secuiities Regulations Page 19 of 21
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
o To whom liable?
# Any person purchasing such security from him, 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
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
o To whom liable?
# 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

SEC. 58. Civil Liability For Fraud in Connection With Securities Transactions
Who is liable?
o Any person who engages in any act or transaction in violation of
Sections 19.2 (Tender Offers), 20 (Proxy Solicitation) or 26 (Fraudulent
Transactions), or any rule or regulation of the Commission
To whom liable?
Any person who, as a result of such act or transaction
a. Purchases or sells any security
b. Grants or refuses to grant any proxy, consent or authorization
c. Accepts or declines an invitation for tender of a security

SEC. 59. Civil Liability For Manipulation of Security Prices
Who is liable?
o Any person who willfully participates in any act or transaction in
violation of Section 24 (Manipulation of Security Prices)
To whom liable?
o Any person who shall purchase or sell any security at a price which
was affected by such act or transaction

SEC. 60. Civil Liability With Respect to Commodity Futures Contracts and Pre-
need Plans
Who is liable?
o Any person who engages in any act or transaction in willful violation
of any rule or regulation promulgated by the Commission, 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
To whom liable?
o Any person sustaining damage as a result of such act or transaction
Commission 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
Who are liable?
a. Any insider who purchases or sells a security while in possession of
material information not generally available to the public
o To whom liable?
# 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
o Defense:
# 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
b. An insider who communicates material non-public information

SEC. 62. Limitation of Actions
a. Any liability created under Section 56 or 57 " within 2 years after
the discovery of the untrue statement or the omission but not more
than 5 years after the security was bona fide offered to the public
b. Any liability created under Subsection 57.1(a) " within 2 years after
the violation upon which it is based but not more than 5 years after
the security was bona fide offered to the public
c. Any liability created under Subsection 57.1(b) " not more than 5
years after the sale
d. Any liability created under any other provision of this Code "
brought within 2 years after the discovery of the facts constituting
the cause of action and within 5 years after such cause of action
accrued

SEC. 63. Amount of Damages to be Awarded
Exclusive jurisdiction of the RTC
a. All suits to recover damages pursuant to Sections 56, 57, 58, 59, 60
and 61
b. Award of damages shall be in an amount not exceeding triple the
triple damage suit
Int'l Secuiities Regulations Page 2u of 21
amount of the transaction plus actual damages
c. Exemplary damages may also be awarded in cases of bad faith,
fraud, malevolence or wantonness in violation of this Code or IRR
d. Award attorneys fees not exceeding 30% of the award
Solidary liability:
o Persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be
jointly and severally liable for the payment of damages
# 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
Equal contribution to the total liability:
o All persons, including the issuer, held liable under the provisions of
Sections 56, 57, 58, 59, 60 and 61
o 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, right of issuer to recover from guilty parties the
amount it has contributed under this Section shall not be
prejudiced

SEC. 64. Cease and Desist Order
Procedure for issuing a cease and desist order:
a. Upon motu propio or by a verified complaint of an aggrieved party
b. After proper investigation
When no prior hearing is required?
o 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
Confidentiality of the investigation or complaint:
o Fact of an initiated investigation or a filed complaint shall be
confidential until the Commission issues a cease and desist order
o Upon issuance thereof, Commission shall make public such order
and a copy thereof shall be immediately furnished to each person
subject to the order
Filing of a Formal Request to Lift said Order:
o Filed by any person against whom a cease and desist order was
issued
o Filed within 5 days from receipt of the order
o Said request shall be set for hearing by the Commission not later
than 15 days from its filing
o Resolution thereof shall be made not later than 10 days from the
termination of the hearing
o If the Commission fails to resolve the request within the time
prescribed, the cease and desist order shall automatically be lifted
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
Void contracts:
a. Any condition, stipulation, provision binding any person to waive
compliance with any provision of this Code or of IRR, or of any rule of
an Exchange required thereby, as well as the waiver itself
b. 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:
1. 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
2. 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
Nothing in this Code shall be construed to:
a. 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, the person making such
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
b. Afford a defense to the collection of any debt, obligation or the
enforcement of any lien by any person who shall have acquired
such 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
This Code shall be self-executory
Rules and Regulations:
Int'l Secuiities Regulations Page 21 of 21
o To effect the provisions and purposes of this Code, the Commission
may issue, amend, and rescind such rules and regulations and
orders
o 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
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
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
Deemed to be a purchase by the issuer:
o 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
The rules and regulations promulgated by the Commission shall be
published in 2 newspapers of general circulation in the Philippines, and
unless otherwise prescribed by the Commission, the same shall be
effective 15 days after the date of the last publication