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1. Paragraph six (6) of the Complaint is denied insofar as it alleges that the defendant
owes the plaintiff a sum of money and fails to pay the same, the truth being those
alleged in the special and affirmative defenses part hereinbelow;

6. EXCHANGE an organized market place or facility that brings together

buyers and sellers and executes trades of securities and/ or commodities.
Unlike the usual over-the-counter market, an exchange has a physical facility.
(Sec. 3.7)

7. INSIDER an insider may be:

(i) The issuer;
(ii) A director or office (or a person performing similar functions) of, or a
person controlling the issuer;
(iii) 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;
(iv) a government employee, or director, or office of an exchange,
clearing agency and/ or self-regulatory organization who has access
to a material information about an issuer or a security that is not
generally available to the public; or
(v) A person who learn such information by a communication from any
of the foregoing insiders. (Sec. 3.8)
One is not prohibited form being an insider. It is not a crime. It is a
status. An insider starts to get into trouble when he acts upon the
material nonpublic information he has and busy or sells shares or,
under Section 27.3, communicates such information to another
knowing or having reason to believe that such person will likely buy or
sell a security.

8. PRE-NEED PLANS these are contracts which provide for the information
of future services or the payment of future monetary considerations at the
time of actual need, for which plan holders pay in cash or installment at
stated prices, with or without interest or insurance coverage and includes
life, pension, education, interments and other plans which the commission
may from time to time approve. (Sec. 3.9)

9. PROMOTER a person who, acting alone or with others, takes initiative in

founding and organizing the business or enterprise of the issuer and receives
consideration thereof. (Sec. 3.10)

10. PROSPECTUS it is the document made by or on behalf of an issuer,

underwriter or dealer to sell or offer securities for sale to the public through a
registration statement filed with the SEC. it is a selling document that
contains most of the information set out in the registration statement. If a
potential investor wants information about a new issue, his broker will hand
him a prospectus of the issue, not the registration statement of the particular
security. (Sec. 3.11)

11. REGISTRATION STATEMENT it is the application for the registration of

securities required or be filed with the SEC. the protection of the investing
public starts with an examination and review by the SEC of an issuers
registration statement. (Sec. 3.12)

12. UNCERTIFICATED SECURITY it is a security evidenced by electronic or

similar records. The increased difficulty in the issuance and cancellation of
shares after every transaction in the exchange, brought about by increase in
the volume of transactions, has led to the development and adoption of the
concept of uncertificated securities. (Sec. 3.13)

13. UNDERWRITER a person who guarantees on a firm commitment and/

or declared beat efforts basis the distribution and sale of securities of any
kind by another company. The firm underwriter takes to buy the unsold
portion of the issue it handles and gets paid a higher- fee for its effort than
the best efforts underwriter who does no make the same commitment. (Sec.
3.14)

REGISTRATION OF SECURITIES
- Gen rule:
A registration statement duly filed and approved by the Sec is necessary
before securities may be sold and offered for sale or distribution within
the Philippines. Prior to any sale, information on the securities, in such
form and substance prescribed by the SEC, shall be made available to
each prospective purchaser. (Sec. 8)
- Exceptions:
1. Exempt securities; and
2. Exempt transactions.

EXEMPT SECURITIES (Sec. 9)

1. Any security issued or guaranteed by the government of the Philippines,
or by any political subdivision or agency thereof, or by any person
controlled or supervised by, and acting as instrumentality of said
government;
2. Any security issued or guaranteed by the government of any country of
which the Philippines maintains diplomatic relations, or by any state,
province or political subdivision thereof on the basis of reciprocity;
provided, that the commission may require compliance with the form and
content of disclosures the Commission may prescribed;
3. Certificates issued by the receiver or by the trustee in bankruptcy duly
approved by the proper adjudicatory body;
4. Any security or its derivates the sale or transfer of which, by law, is under
the supervision and regulation of the office of the Insurance Commission,
Housing and Land Used Regulatory Board, or the Bureau of Internal
Revenue;
5. Any security issued by the bank except its own shares of stock.

EXEMPT TRANSACTIONS (Sec. 10)

1. Judicial sale, or sale by an executor, administrator, guardian or receiver or
trustee in insolvency or bankruptcy;
2. Sale of pledged or foreclosed property to liquidate debts;
3. Sale on isolated transactions by owner or by his representative for the
owners account;
4. Distribution by a corporation, actively engaged in the business authorized
by its articles of incorporation, of securities to its stockholders or other
security holders as a stock dividend or other distribution out of surplus;
5. 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 ( e.g. the
additional issuance of shares by a corporation out of its authorized but
unissued capital stock);
6. Issuance of bonds or notes secured by mortgage upon real state 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. Issuance and delivery of any security in exchange for any other security of
the same issuer pursuant to a right of conversion (Provided, that the
security so surrendered has been registered under the SRC or was, when
sold, exempt from the provisions of the SRC, and that the security issued
and delivered in exchange, if sold at the conversion price, would at the
time of such conversion fall within the class of securities entitled to
registration under the SRC. Upon such conversion, the par value of the
security surrendered in such and delivered in such exchanged and sold);
8. Brokers transactions, executed upon consumers orders, on any
registered exchange or other trading market;
9. Pre-incorporation subscriptions and subscription to an increase in its
authorized capital stock under the Corporation Code;
10. Exchange of securities by the issuer with its existing security holders
exclusively;
11. Sale of securities by an issuer to fewer than 20 persons in the
Philippines during any 12 month period;
12. Sale of securities to any number of the following qualified buyers:
(i) bank
(ii) registered investment house;
(iii) insurance company;
 (iv) pension fund or retirement plan maintained by the government
of the Philippines or any political subdivision thereof or manage
by a bank or other persons authorized by the BankoSentral to
engage in trust functions;
(v) investment company; or
(vi) such other person as the commission may by rule determine as
qualified buyers, on the basis of such factors as financial
sophistication, net worth, knowledge, or amount of assets
under management.

Initial procedure for the registration of securities (Sec. 12)

- All securities required to be registered under section 8.1 of the SRC shall
be registered through the filing by the issuer in the main office of the SEC
of the sworn registration statement with respect to such securities. Unlike
the Revised Securities Act, the SRC does not specify in great detail the
information which must be provided and the documents which must be
submitted by the applicant issuer, leaving such matters, including the
form of the application, for the SEC to prescribe.
Who are required to sign the registration statement? (Sec. 12.4)
- The registration statement shall be signed by the issuers principal
executive officer, its principal operating officer, its principal financial
officer, its comptroller, its principal accounting officer, its corporate
secretary or persons performing similar functions accompanied by a duly
verified resolution of the board of directors of the issuer corporation.
What action may the SEC take on a registration statement? (Sec. 12.6)
- Within 45 days after the date of filing of the registration statement, or by
such later date to which the issuer has consented, the SEC shall declare
the registration statement effective or rejected, unless the applicant is
allowed to amend the registration statement as provided in Section 14 of
the SRC. The SEC shall enter an order declaring the registration statement
to be effective if it finds that the registration statement together with all
the other papers and documents attached thereto is on its face complete
and that the requirements have been complied with. The SEC may impose
such terms and conditions as may be necessary or appropriate for the
protection of the investors. Note that the SEC does not approve the
registration statement (although Secs. 8.1 and 8.2 refer to the registration
statement being approved by the SEC) but simply declares it
effective. The non-use of he word approve is more probably designed
to avoid any suggestion that the SEC is endorsing the particular issue.

Grounds for Rejecting a Registration Statement (Sec. 13.1)

- The SEC may reject a registration statement and refuse registration of the
security thereunder, or revoke the affectivity of a registration statement
and the registration of the security thereunder, after due notice and
hearing, by issuing an order to such effect, setting forth its findings in
respect thereto, if it finds that:
(a) the issuer-
(i) has been judicially declared insolvent;
(ii) has violated any of the provisions of this code; the rules
promulgated pursuant thereto, or any order of the commission of
which the issuer has notice in connection with the offering for which
the registration statement has been filed;
(iii) has been or is engaged or is about to engage in fraudulent
transactions;
(iv) has made any false or misleading representation of material facts in
any prospectus concerning the issuer or its securities;
(v) has failed to comply with any requirement that the commission may
impose as a condition for the registration of the security for which
the registration has been filed.
(b) the registration statement is on its face incomplete or inaccurate in
any material respect or includes any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or,
(c) the issuer, any officer, director or controlling person of the issuer, or
person performing similar functions, or any underwriter has been
convicted, by a competent judicial or administrative body, upon plea of
guilty, or otherwise, of an offense involving moral turpitude and/or
fraud or is enjoined or restrained by the commission or other
competent judicial or administrative body for violations of securities,
commodities, and other related laws.

TENDER OFFER
- A tender offer is a publicly announced intention by a person acting alone
or in concert with other persons to acquire equity securities of a public
company (Sec. 19). It has also been described as an imprecise term
widely used in securities law, generally referring to a quick, enticing
proposal to the shareholders of a corporation that they tender their shares
for purchase by the offeror at a specified price. Tender offer is an upside-
down term; I make the offer, you make the tender. It is usually, not
always, part of an attempt by the offeror to buy enough stock to control
the corporation, i.e., a takeover (also spelled take-over and take over).
Accordingly, tender offer is sometimes called takeover offer or takeover
bid. (Mellinkoffs Dictionary of American Legal Usage, p. 64)
- Tender offers are regulated to prevent he stockholders of the target
company from being misled by the offeror or the targets management.
Thus, a principal requirement of the SEC rules on tender offer is the
disclosure by the offeror of certain information about the offer, with a
copy of such information being given or sent to the stockholders (Rule
19.1, par. 7).

Circumstances where tender offer is mandatory

- Except when relief from the mandatory tender offer requirement is
granted under SRC Rule 19.1, paragraph 3, a person is required under the
following circumstances to make a tender offer for equity shares of a
public company in an amount equal to the number of shares that the
person intends to acquire:
(a) where the person intends to acquire 15% or more of the equity
shares of a public company pursuant to an agreement made between
or among the person or one or more sellers;
(b) where the person intends to acquire 30% or more of the equity
shares of a public company within a period of 12 months; and,
(c) where the person intends to acquire shares that would result in the
ownership of more than 50% of the equity shares of a public
company.

When would a person be presumed to be making a voluntary tender offer?

(SRC Rule 19.1, par. 4)
- A person may make a voluntary tender offer. He will be presumed to be
doing so when some or all of the following factors are present:
(a) there is active and widespread solicitation of public shareholders fort
he shares of a public company;
(b)the solicitation is made for a substantial percentage of the issuers
stock;
(c) the offer to purchase is made at a premium over the prevailing market
price, at firm rather than negotiable terms;
(d)the offer is contingent on the tender of a fixed number of shares; and
(e) the offer is only open for a limited period of time.

The foregoing list of factors reflects the so-called weight-factor Wellman

Vs. Dickinson Test enunciated in an American Case of the same name
(475F. Supp. 783, 823-824 [S>D>N>Y>, 1979] involving the coordinated
private solicitations of 30 institutions and 9 individuals, with a premium
price offered and no individualized negotiations (Fundamentals of
Securities Regulation by Louis Loss and Joel Seligman, Little Brown and
Company, 3rd edition, 1995).

What is a proxy and why is its solicitation regulated? (Sec. 20; SRC Rule 20)
- A proxy is a formal authorization from a stockholder that empowers
someone to vote in his or her behalf; the term also refers to the person
who is sop authorized to vote on behalf of a stockholder
- The SRC regulates the issuance and solicitation of proxies. Indeed, it
expressly requires that proxies must be issued and proxy solicitation must
be made in accordance with SEC rules (Sec. 20.1). thus, proxies must be
in writing, signed by the stockholder or his duly authorized representative
and filed with the corporate secretary before the scheduled meeting (Sec.
20.2); unless otherwise provided in the proxy, it shall be valid only for the
 meeting for which it is intended; no proxy shall be valid and effective for a
period longer than 5 years at one time (Sec. 20.3); and a broker or dealer
can not give a proxy in respect of any security it carries fort he account of
a customer without the express written authorization of such
customer(Sec. 20.4).
- The issuance and solicitation of proxies are regulated to minimize, if not
avoid, the abuse and misuse of the proxy device that may lead to the self-
perpetuation and irresponsibility of management. Management has innate
advantages in the solicitation of proxies; it has the stockholders list; it
benefits from the usual inertia of stockholders; and it has access to
corporate funds for the normally substantial costs of solicitation.

The terms solicit and solicitation means

(a) any request for a proxy whether or not accompanied by or included in a
form of proxy;
(b)any request to execute or not to execute, or to revoke a, a proxy; or
(c) the furnishing of a form of proxy or other communication to security
holders under circumstance reasonably calculated to result in the
procurement, withholding or revocation of a proxy.

The approach of the SEC Rules on proxy solicitation follows the traditional
three-way approach which
(i) calls for a brief description of the matters to be considered,
together with the action proposed to be taken by the holder of
the proxy (SRC Rule 20, pars. 3 and 4);
(ii) requires the registrant (i.e. the insurer of the securities in respect
of which proxies are to be solicited), as a condition of its own
solicitation, to mail to record owners the proxy material of any
stockholder upon his or her request at his or her expense (SRC
Rule 2o, par. 6); and
(iii) adopts a general fraud rule prohibiting the making of any
materially false or misleading statements (SRC Rule 20, par. 7).

RECOVERY OF PROFITS

When could the profits made by a stockholder, director or officer in a

purchase and sale, or a sale and purchase, of any equity security be
recovered? (Sec. 23.2)
- For the purpose of preventing the unfair use of information which may
have been obtained by a beneficial owner of equity securities, director or
officer, or officer of the issuer by reason of his relationship top the issuer,
any profit realized by him from any purchase and sale, o any sale and
purchase, of any equity security of such issuer with in any period of less
than 6 months, unless such security was acquired in good faith in
 connection with a debt previously contracted, shall inure to and be
recoverable by the issuer, irrespective of any intention of holding the
security purchased or of not purchasing the security sold for a period
exceeding 6 months. A suit to recover such profit may be instituted before
the regional trial court by the issuer, or by the owner of any security of
the issuer in the name and I behalf of the issuer if the issuer shall fail or
refuse to bring such suit within 60 days after request or shall be brought
more than 2 years after the date such profit was realized.

MANIPULATION OF SECURITY PRICES

What are the various ways by which security prices may be

manipulated? (Sec. 24; SRC Rule 24.1(b)-1, par. 5)
- The following are some examples of the ways by which security prices
may be manipulated:
(a) Painting the tape- engaging in a series of transactions in securities
that are reported publicly to give the impression of activity or price
movement in a security;
(b) Marking the close- buying and selling securities at the close of the
market in an effort to alter the closing price of the security;
(c) Improper matched orders- engaging in the transaction where both
the buy and sell orders are entered at the same time with the same
price and quantity by different but colluding parties;
(d) Hype and dump- engaging in buying activity at increasingly higher
prices and then selling securities in the market at higher prices;
(e) Wash sales- engaging in transactions in which there is no genuine
change in actual ownership of a security;
(f) Squeezing the float- taking advantage of a shortage of securities in
the market by controlling the demand side and exploiting market
congestion during such shortages in a way as to create artificial
prices ;
(g) Boiler room sales- the use of high-pressure sales tactics to promote
purchases and sales of securities;
(h) Daisy chain- a series of purchases and sales of the same at
successively higher (or lower) prices, by the same group of people with
the purpose of manipulating prices and drawing unsuspecting investors
into the market, leaving them defrauded of their money or securities.

THE INSIDER

Prohibited acts of an insider: (Secs. 3.8 and 27)

- While to be an insider in not prohibited, it shall, however, be unlawful for
an insider to sell or buy a security of the issuer while in possession of
material nonpublic information with respect to the issuer or the security
unless-
(a) the insider is able to prove that the information was not gained from
such relationship, or
(b) if the other party selling to or buying from the insider (or his agent) is
identified, the insider is able to prove (i) the he disclosed the nonpublic
information to the other party, or (ii) that he had reason to believe that
the other party otherwise is also in possession of the nonpublic
information.

The duty of the insider when trading is to disclose the material nonpublic
information to the other party.

Could an insider be liable even if he does not trade? (Sec. 27. 3)

Yes. It shall be unlawful for any insider to communicate material
nonpublic information about the issuer or security to any person who, by
virtue of the communication, becomes an insider as defined in Section 3.8 of
the SRC, where the insider communicating the information knows or has
reason to believe that such person will likely buy or sell a security of the
issuer while in possession of such information.

Is there a presumption of insider trading? (Sec. 27.1)

Yes. A purchase or sale of a security of the issuer made by an insider or
such insiders spouse or relatives by affinity or consanguinity within the
second degree, legitimate or common-law, shall be presumed to have been
effected while in possession of material nonpublic information if transacted
after such information came into existence but prior to dissemination of such
information to the public and the lapse of a reasonable time fort he market to
absorb such information; provided, however, that this presumption shall be
rebutted upon a showing by the purchaser or seller that he was no aware of
the material nonpublic information at the time of the purchase or sale.

MATERIAL NONPUBLIC INFORMATION (Sec. 27. 2)

Material nonpublic information is information that
1. has not being generally disclosed to the public and would
likely affect the market price of the security after being disseminated to
the public and the lapse of a reasonable time for the market to absorb the
information, or
2. would be considered by a reasonable person important under
the circumstances in determining his course of action whether to buy, sell
or hold a security.

REGISTRATION OF MARKET PROFESSIONALS AND ENTITIES

Who are the market professionals and entities required to register

with SEC?
(a) Brokers, dealers, salesman and associated person (Sec. 28.1)
no person shall engage in the business of buying or selling securities in
the Philippines as a broker or dealer, or act as a salesman, or an
associated person of any broker or dealer unless registered as such
with the SEC.
(b) Exchanges (Secs. 3.7 and 33.2) the applicant fort he registration
must be organized as a stock corporation and engaged solely in the
business of operating an exchange. No person may beneficially own or
control, directly or indirectly, more than 5% of the voting rights of the
exchange. Industry and business group are similarly limited to not
more than 29% of the voting rights of the exchange. Brokers shall
constitute no more than 49% of the Board of Directors of the exchange,
while the remaining 51% shall be composed of three independent
directors and person who represent the interests of issuers, investors
and other market participants who are not associated with any broker
or dealer or member of the exchange for period of 2 years prior to his
appointment.
(c) Other securities trading markets the SEC is authorized to
determine the number, size and location of stock exchanges, other
trading markets and commodity exchanges, and other similar
organizations in the light of national or regional requirements for such
activities with the view to promote, enhance, protect, conserve or
rationalize investment (Sec. 36.3). The Sec is also authorized to
register and license innovative and other trading markets or exchanges
covering the issuance of innovative securities, securities of small,
medium, growth and venture enterprises, and technology-based
ventures.
(d) Self-regulatory organizations (Sec. 39) a self-regulatory
organization is any securities exchange, clearing or depository agency
or other securities-related organization or association which is
organized and has the capacity to be able to carry out he purposes of
the SRC and to comply with, and to enforce compliance by its
members, with the provisions of the SRC, the rules and regulations
thereunder, and the rules of the association (Sec. 39.3[a]). Those
entities which the SEC may register as self=regulatory organizations
include associations of brokers and dealers, transfer agents,
custodians, fiscal and paying agents, computer services, news
disseminating services, proxy solicitors, statistical agencies, security
rating agencies, and securities information processors.
(e) Clearing agencies (Secs. 3.6 and 42)
INDEPENDENT DIRECTOR
- An independent director is a person other than an officer or employee of
the corporation, its parent or subsidiaries, or any other individual having a
relationship with the corporation, which would interfere in the exercise of
independent judgment in carrying out the responsibilities of a director
(Sec. 38).
- More expansively, SRC rule 38.1 defines an independent director as a
person who, apart from his fees and shareholdings, is independent of
management and free from any business or other relationship which
could, or could reasonably be perceived to, materially interfere with his
exercise of independent judgment in carrying out his responsibilities as a
director in the corporation. For example, a person may not qualify as an
independent director under SRC rule 38.1 if
(a) he is a substantial shareholder (i.e. a beneficial owner, directly or
indirectly, of more than 10% of any class of equity security) of the
corporation or of its related companies (i.e., its holding company, its
subsidiary, or subsidiary of its holding company) or any of its
substantial shareholders; or
(b) he is a relative (i.e., the spouse, parent, child, brother and sister of
such person, and the spouse of such child, brother or sister) of any
director, officer or substantial shareholder of the corporation, any of
its related companies or any of its substantial shareholders; or
(c) he has been employed in any executive capacity by the public
company, any of its related companies or by any of its substantial
shareholders within the last 5 years; or
(d) he is retained as professional adviser by the public company, any of
its related companies or by any of its substantial shareholders, either
personally or through his firm.

Who are required to have independent directors? (Sec. 38)

Apart from exchange, any corporation with a class of equity securities
listed for trading in an exchange, or with assets in excess of P50 million and
having 200 or more holders, at least 200 of which are holding at least 100
shares of a class of its equity securities or which has sold a class of equity
securities to the public pursuant to an effective registration statement in
compliance with Section 12 of the SRC, shall have at least 2 independent
directors or such independent directors shall constitute at least 20% of the
members of such board, whichever is the lesser.

PROHIBITED TRANSACTIONS OF BROKERS AND DEALERS (Sec. 30.1)

- No broker or dealer shall deal in or otherwise buy or sell, for its own
account or for the account of customers, securities listed on an exchange
issued by any corporation where any stockholder, director, associated
person or salesman, or authorized clerk of said broker or dealer and all
 the relatives of the foregoing within the fourth civil degree of
consanguinity or affinity, is at the time holding office in said issuer
corporation as a director, president, vice president, manager, treasurer,
comptroller, secretary or any office of trust and responsibility, or is
controlling person oft eh issuer.

SUITABILITY RULE (SRC Rule 30.2-4)

- The suitability rule states that, in recommending to a customer the
purchase, sale or exchange of any security, a broker, dealer or an
associated person or salesman of a broker or dealer shall have reasonable
grounds for believing that the recommendation is suitable for such
customer upon the basis of the facts disclosed by such customer as to his
security holdings and as to his financial situation and needs.

SUSPENSION OF TRADINGS
Can the SEC suspend trading in a security or all trading on any
securities exchange? (Sec. 36.1)
Yes. The SEC is authorize, if in its opinion such action is necessary or
appropriate for the protection of investors and the public interest so requires,
summarily to suspend trading in any listed security on any exchange or other
trading market for a period not exceeding 30 days or, with the approval of
the President of the Philippines, summarily to suspend all trading on any
securities exchange or other trading market for a period of more than 30 but
not exceeding 90 days; provided, however, that the SEC, promptly following
the issuance of the order of suspension, shall notify the affected issuer of the
reasons for such suspension and provides such issuer with an opportunity for
hearing to determine whether the suspension should be lifted.

MARGIN TRADING (Secs. 48, et seq.)

Margin trading refers to the purchase of securities by an investor using
the credit of the broker to pay for part of the said securities. It is regulated
for the purpose of the excessive use of credit or carrying of securities. The
margin is the amount of money or securities that an investor must deposit
with a broker to secure a loan with from the broker. When a broker makes a
demand on the investor to deposit money or securities with a broker when
the purchase is made or when the investors equity in a margin account
declines below a minimum standard set by the exchange or broker, the
broker is said to have made a margin call.

VIOLATONS OF THE SRC, PENALTIES AND SANCTIONS

What administrative sanctions may the SEC impose? (Sec. 4)
If there is violation of the SRC, the SCR rules or the orders of the SEC,
the SEC shall, in its discretion and after due notice and hearing, impose any
or all the following sanctions as may be appropriate in light of the facts and
circumstances:
(a) suspension, or revocation of any registration for the offering of
securities;
(b) a fine of no less than P10,000 nor more than P1,000,000 plus not
more than P2,000 for each day of continuing violation;
(c) in the case of violations of Sections 19.2(the making of untrue
statement, etc. in connection with a tender offer), 20 (proxy
solicitations), 24 (manipulation of security prices, etc.), 26 (fraudulent
transactions) and 27 (insider trading), disqualification from being an
officer, member of the board of directors, or person performing similar
functions, of an issuer required to file reports under Section 17 of the
SRC or any other act, rule or regulation administered by the SEC;
(d) in the case of f\violation of Section 34 (re segregation and limitation of
functions of members, brokers, dealers), a fine of no more than 3 times
the profit gained or loss avoided as a result of the purchase, sale or
communication proscribed by such section; and
(e) other penalties within the power of the SEC to impose.

SETTLEMENT OFFER (Sec. 55)

A settlement offer is a written proposal made to the SEC by a party
being investigated or charged, during an investigation or proceeding under
the SRC, in order that such investigation or proceeding against the said party
could be terminated or dismissed. Upon receipt of such offer of settlement,
the SEC may consider the offer based on timing, the nature of the
investigation or proceeding, and the public interest. The SEC may only agree
to settlement offer based on its findings that such settlement is in the public
interest. Any agreement to settle shall have no legal effect until publicly
disclosed. Such decision may be made with out a determination of guilt on
the part of the person making the offer.

FALSE REGISTRATION STATEMENT

Who may sue on account of a false registration statement? (Sec.
56.1)
Any person (i) acquiring a security, the registration statement of which
or any part thereof contains on its effectivity an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make such statement not misleading, (ii) who suffers damage,
and (iii) who did not know of such untrue statement or omission at the time
of such acquisition, may sue and recover damages.
Who may be sued on account of a false registration statement?
( Sec. 56.1)
(a) the issuer and every person who signed the registration statement;
(b) every person who was a director of, or any other person performing
similar functions, or a partner in, the issuer at the time of the filing of
the registration statement or any part, supplement or amendment
thereof with respect to which his liability is asserted;
(c) every person who is named in the registration statement as being or
about to become a director of, or 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, 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 evaluation, which
purports to have been prepared or certified, by him;
(f) Every selling shareholder who contributed to and certified as to the
accuracy of the portion of the registration statement, with respect to
that portion of the registration statement which purports to have been
contributed by him; and
(g) Every underwriter with respect to such security.

What is the prescriptive period for the enforcement of actions under

Sections 56 (re civil liabilities on account of false registration
statement) and 57 (Re civil liabilities arising in connection with
prospectus, communications and reports)? Sec. 62)
No action shall be maintained to enforce any liability created under
Sections 56 or 57 of the SRC unless brought within 2 years after the
discovery of the untrue statement or the omission, or, if the action is to
enforce a liability created under Section 57.1(a) (re offering to sell or selling
an unregistered security), unless brought within 2 years after the violation
upon which it is based. In no event shall any such action be brought to
enforce liability crated under Section 56 or 57.1(a) more than 5 years after
the security was bona fide offered to the public, or under Section 57.1 (b) ( re
offering to sell or selling a security by means of a prospectus, etc. containing
an untrue statement, etc.) more than 5 years after the sale.

What are the damages that may be awarded in suits to recover

damages under Sections 56-60? (Sec. 63)
(a) actual damages;
(b) treble damages, i.e., damages in an amount not exceeding triple the
amount of the transaction;
(c) exemplary damages in cases of bad faith, fraud, malevolence or
wantonness in the violation of the SRC or the SRC rules;
(d) Attorneys fees not exceeding 30% of the award.

May compliance with any provision of the SRC be waived and would
such waiver be valid? (Sec. 71.1)
Any condition, stipulation, or provision binding any person to waive
compliance with any provision of the SRC or of any rule or regulation
thereunder, or of any rule of an Exchange required thereby, as well as the
waiver itself, shall be void.