SECURITIES REGULATION CODE OF THE PHILIPPINES (R.A.

8799)
Purpose:
1. To establish a socially conscious, free market that regulates itself
2. To encourage the widest participation of ownership in enterprises
3. To enhance the democratization of wealth
4. To promote the development of the capital market
5. To protect investors
6. To ensure full and fair disclosure about securities
7. To minimize if not totally eliminate insider trading and other fraudulent or
manipulative devices and practices which create distortions in the free market.

SECURITIES AND EXCHANGE COMMISSION

These rules shall be implemented by the Commission as a collegial body
composed of a Chairperson and 4 Commissioners.
 It has 5 principal departments, each headed by a director.
 Its core function of capital market regulation shall be performed by the Market
Regulation Department. Corporate Finance Department, and Non-Traditional
Securities and Instruments Department.
 Its company registration and enforcement functions shall be performed by the
Company Registration and Monitoring Department and Compliance and
Enforcement Department, respectively.

1. Market Regulation Department- develops the criteria for all market participants
and supervises to ensure compliance with registration requirements and endorses
infractions of the Code and rules and regulations to the Compliance and
Enforcement Department.
2. Corporation Finance Department- registers securities before they are offered for
sale or sold to the public and ensures that the information needed about the
securities are adequate.
3. Non-Traditional Securities and Instruments Department- registers and licenses
non-traditional securities and instrument including, but not limited to, pre-need
plans, commodity future contracts, proprietary or non-proprietary membership
certificates and other similar instruments.
4. Company Registration and Monitoring Department- registers domestic
corporations, partnerships and associations, including representative offices and
foreign corporations intending to do business in the Philippines.
5. Compliance and Enforcement Department- ensures compliance by all market
participants, issuers and individuals and takes appropriate enforcement action
against them for legal infraction of the Code and other relevant laws, rules and
regulations implemented by the Commission.

Section 4: Administrative Agency

- Shall be administered by the SEC
- Composed of Chairperson and 4 Commissioners- appointed by the
President of the Philippines for a term of 7 years
Chairperson
- at least 40 years of age
- Chief Executive officer of the Commission
- Shall execute and administer the policies, decisions, orders and resolutions
approved by the Commission and shall have the General Executive
direction and supervision of the work and operation by the commission and
its members, bodies, boards, offices, personnel and all its admin business.
4 Commissioners
- Natural born citizen of the Philippines
- At least 35 years of age
- Of good moral character or unquestionable integrity
- Of known probity and patriotism
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 - With recognized competence in social and economic disciplines
- If appointed to fill a vacancy occurring prior to the expiration of the term for
which his/her predecessor was appointed, shall serve only for the unexpired
portion of their terms (P.D. 902-A)

 Provided, the majority of the Commissioners, including the Chairperson

shall be members of the Philippine Bar.
 Salary must be fixed by the President of the Philippines based on
objective classification system.

Commission
- Shall hold meetings at least once a week for the conduct of business or as
often as may be necessary upon the call of the Chairperson or upon the
request of (3) commissioners.
- Notice of meeting shall be given to all commissioners and the presence of 3
commissioners shall constitute a quorum.
- In the absence of the Chairperson, the Senior Commissioner shall act as
presiding officer of the meeting.
- May delegate any of its functions to any department for purposes of
efficiency.

A. Powers and Functions of the Securities and Exchange Commission:

Section 5 of RA 8799 states that: “The commission shall act with transparency and
shall have the powers and functions provided by this code, Presidential Decree No.
902-A, the Corporation Code, the Investment Houses law, the Financing Company Act
and other existing laws. Pursuant thereto the Commission shall have, among others,
the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnership or associations
who are the grantees of primary franchises and/or a license or a permit issued by the
Government;
(b) Formulate policies and recommendations on issues concerning the securities
market, advise Congress and other government agencies on all aspect of the
securities market and propose legislation and amendments thereto;
(c) Approve, reject, suspend, revoke or require amendments to registration statements,
and registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing
agencies and other SROs;
(f) Impose sanctions for the violation of laws and rules, regulations and orders, and
issued pursuant thereto;
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulation and orders;
(h) Enlist the aid and support of and/or deputized any and all enforcement agencies of
the Government, civil or military as well as any private institution, corporation, firm,
association or person in the implementation of its powers and function under its Code;
(i) Issue cease and desist orders to prevent fraud or injury to the investing public;
(j) Punish for the contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court;
(k) Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision;
(l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings
of the Commission and in appropriate cases, order the examination, search and
seizure of all documents, papers, files and records, tax returns and books of accounts
of any entity or person under investigation as may be necessary for the proper
disposition of the cases before it, subject to the provisions of existing laws;

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 (m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnership or associations, upon any of the grounds
provided by law; and
(n) Exercise such other powers as may be provided by law as well as those which may
be implied from, or which are necessary or incidental to the carrying out of, the express
powers granted the Commission to achieve the objectives and purposes of these laws.

The law protects the public who wishes to invest in securities as follows:
a. The law requires full disclosure of information to the public regarding the securities that
are being offered and the issuers, including the filing of and approval of the registration
statement and the approval of the prospectus.
b. A continuing duty to regularly submit material information to the SEC.
c. Close monitoring of the securities and other circumstances that may affect the same as
well as the persons involved including brokers, issuers, the exchange itself, etc. in
order to ensure compliance with pertinent laws and regulations.
d. Prohibiting and penalizing different fraudulent practices and transactions.
e. Providing the SEC with powers and functions.

Definition of terms:
a. Securities – are share, participation or interests in a corporation or in a commercial
enterprise or profit-making venture and evidenced by a certificate, contract, instrument,
whether written or electronic in character. It includes: a. shares of stocks, 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; and other instruments as may in the future be determined by the
Commission.
b. Issuer – is the originator, maker, obligor, or creator of the security.
c. Broker – is a person engaged in the business of buying and selling securities for the
account of others.
d. Dealer – means any person who buys and sells securities for his/her own account in
the ordinary course of business.
e. Clearing Agency – is any person who acts as intermediary in making deliveries upon
payment to effect settlement in securities transactions.
f. Exchange – is an organized marketplace or facility that brings together buyers and
sellers and executes trades of securities and/or commodities.
g. Pre-Need Plans – are contracts which provide for the performance of future services
or the payment of future monetary considerations at the time of actual need, for which
planholders pay in cash or installment at stated prices, with or without interest or
insurance coverage and includes life, pension, education, interment, and other plans
which the Commission may from time to time approve.
h. Promoter – is a person who, acting alone or with others, takes initiative in founding
and organizing the business or enterprise of the issuer and receives consideration
therefore.
i. Prospectus – is the document made by or on behalf of an issuer, underwriter or dealer
to sell or offer securities for sale to the public through a registration statement filed with
the Commission.
j. Registration statement – is the application for the registration of securities required to
be filed with the Commission.
k. Uncertificated security – is a security evidenced by electronic or similar records.
l. Underwriter – is a person who guarantees on a firm commitment and/or declared best
effort basis the distribution and sale of securities of any kind by another company.
m. Investment contracts – a contract, transaction or scheme (collectively “contract”)
whereby a person invests his money in a common enterprise and is led to expect
profits primarily from the efforts of others.
n. Derivatives – financial investment, including options and warrants whose value
depends on the interest in or performance of an underlying security, but which does not
require any investment of principal in the underlying security.
o. Options – are contracts that give the buyer the right, but not the obligation, to buy or
sell an underlying security at a predetermined price, called the exercise or strike price,
on or before a predetermined date, called the expiry date, which can only be extended
in accordance with Exchange rules.
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 p. Call options – are rights to buy.
q. Put options – are rights to sell.
r. Warrants – are rights to subscribe or purchase new shares or existing shares in a
company, on or before a predetermined date, called the expiry date, which can only be
extended in accordance with Exchange rules. Warrants generally have a longer
exercise period than options.
s. Commodity futures contract – means a contract providing for the making or taking
delivery at a prescribed time in the future of a specific quantity and quality of a
commodity or the cash value thereof, which is customarily offset prior to the delivery
date, and includes standardized contracts having the indicia of commodities futures,
commodity options and commodity leverage, or margin contracts.
t. Commodity – means any goods, articles, services, rights and interests, including any
group or index of any of the foregoing, in which commodity interests contracts are
presently or in the future dealt in.
u. Put – is a transferable option or offer to deliver a given number of shares of stock at a
stated price at any given time during a stated period.
v. Call – is transferable option to buy a specified number of shares at a stated price.
w. Straddle – is a combination put and call.
x. Insider – means (a) the issuer; (b) a director or officer (or person performing similar
functions) of, or a person controlling the issuer; (c) a person whose relationship or
former relationship to the issuer gives or gave him access to material information about
the issuer or the security that is not generally available to the public; (d) a government
employee, or director, or officer of an exchange, clearing agency and/or self-regulatory
organization who has access to material information about an issuer or a security that
is not generally available to the public; or (e) a person who learns such information by
a communication from any of the foregoing insiders.
y. Material non-public information – An information is “material non-public” if: (a) it has
not been generally disclosed to the public and would likely affect the market price of
the security after being disseminated to the public and the lapse of a reasonable time
for the market to absorb the information; or (b) would be considered by a reasonable
person important under the circumstances in determining his course of action whether
to buy, sell or hold a security.

BASIC RULES REGARDING THE REGISTRATION OF SECURITIES

General Rule: Securities shall not be sold or offered for sale or for distribution within the PH
without a registration statement duly filed with and approved by the Commission. Information
regarding the securities must be available to public or prospective purchaser.

 The SEC may conditionally approve the Registration Statement under such terms as it
may deem necessary.
 A record of the Registration of Securities shall be kept in Register Securities and it
must be available to the public for inspection.
 SEC may audit financial statement, assets and other information of firm for registration
of its securities to attract investors.

EXEMPT SECURITIES

1. Government issued securities

2. Issuances by foreign governments with which the PH maintains diplomatic relations.
3. Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the
proper adjudicatory body.
4. Any securities 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 Rule Regulatory Board, or the BIR.
5. Securities issued by bank except its own shares of stock.

Sec. 9.2 of the Securities Regulation Code provides that: “The Commission may, by
rule or regulation after public hearing, add to the foregoing any class of securities if it
finds that the enforcement of this Code with respect to such securities is not necessary
in the public interest and for the protection of investors.”
*Reason: The issuer is a trusted and regulated officer.

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EXEMPT TRANSACTIONS

1. Judicial Sale of Securities

2. Sale of foreclosed securities
3. Isolated transactions
4. Issuances out of surplus such as Stock Dividend
5. Sales of shares to stockholders not underwritten
6. Issuance of bonds to a single purchaser
7. Transaction pursuant to right of conversion
8. Broker’s Transactions
9. Pre-incorporation subscriptions or subscription to a capital increase
10. Exchange of securities with existing security holders
11. Private placements
12. The 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 Bangko Sentral to engage in trust functions;
(v) Investment company or;
(vi) Such other person as the Commission may rule by determine as qualified buyers,
on the basis of such factors as financial sophistication, net worth, knowledge, and
experience in financial and business matters, or number of assets under
management.”

*Reasons: 1. Limited character of offering;

2. Mandated by law;
3. Stock dividends declared;
4. Transaction is such that registration of the securities is unwarranted.

Sec. 10.2 of the Securities Regulation Code provides that: “The Commission may exempt
other transactions, if it finds that the requirements of registration under this Code is not
necessary in the public interest or for the protection of the investors such as by the reason of
the small amount involved or the limited character of the public offering.”

Sec. 10.3 of the Securities Regulation Code provides that: “Any person applying for an
exemption under this Section, shall file with the Commission a notice identifying the exemption
relied upon on such form and at such time as the Commission by the rule may prescribe and
with such notice shall pay to the Commission fee equivalent to one-tenth (1/10) of one percent
(1%) of the maximum value aggregate price or issued value of the securities.”

Procedure of Registration of Securities

1. Issuer must file a Registration Statement in the main office of the SEC, containing the
necessary information and supporting documents as well as prospectus required or
permitted to be delivered.
2. Written information from an expert, depending on the necessity thereof or their
applicability to the class of securities sought to be registered.
3. Information must include the effect of the securities issue on ownership, on the mix of
ownership, especially foreign and local ownership.
4. Shall be signed by the issuer’s executive officer, its principal accounting officer, its
principal operating officer and other persons with similar functions accompanied by a
duly verified resolution of the board of directors of the issuer of the corporation, the
written consent of the expert named as having certified any part of the RS or any
document used, and a written certification by such selling shareholders as to the
accuracy of any part of the RS contributed to by such selling shareholders shall be
filed.
5. Fees- shall pay to the SEC a fee of not more than one-tenth (1/10) of 1% of the
maximum aggregate price at which such securities are proposed to be offered.
6. Notice and Publication of the RS by the issuer, at his own expense, in 2 newspapers of
general circulation in the PH, once a week for 2 consecutive weeks, reciting that a RS
for the sale of such securities has been filed and the info about the RS are open for
public inspection at reasonable hours of business, and a copy, photostatic or otherwise
shall be furnished to interested parties.
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 7. The SEC may compel the production of all the books and papers of such issuer, and
may administer oaths to and examine the officers of such the issuer or any other
person connected.

 Within 45 days after filing the RS, the SEC shall declare the RS effective or rejected
unless applicant is allowed to amend the objectionable portions of the RS.
 Shall declare effective if it finds that the RS with all the docs necessary are complete
and requirements have been complied with.
 SEC may impose such terms and conditions as may be necessary or appropriate for
the protection of the investors.
 Upon effectivity, issuer shall state in every prospectus that all Registration
Requirements have been met and that all info are true and correct.
 Aby untrue statement or omission of material fact shall constitute a fraud.

GROUNDS FOR REJECTION AND REVOCATION

Sec. 13.1 of the Securities Regulation Code

After due notice and hearing, they found out that:
1. The issuer:
(i) Has been judicially declared insolvent;
(ii) Has violated any of the provision of this Code
(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 requirements that the Commission may impose as a
condition for registration of the security for which the registration statement has been
filed; or
2. The registration statement is on its face incomplete or inaccurate in any material respect or
includes any untrue statements of a material fact required to be stated therein or necessary to
make the statement therein not misleading; or
3. The issuer, any officer, director or controlling person performing similar functions, or any
under writer 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 or administrative body for violations of
securities, commodities, and other related laws.”

REPORTORIAL REQUIREMENTS
1. Periodic and other reports of the issuer
Every issuer who:
 Has sold any class of its securities pursuant to a registration
 Has a class of securities listed for trading on an exchange
 With assets of at least Php 50M and having 200 or more holders each holding
at least 100 share each of a class of security
SHALL FILE
o Annual and periodic reports to the SEC
o Shall also file with the Exchange where securities are listed a copy of reports
filed with SEC
o Shall and furnish each holder of such equity security the annual report.

REPORTS BY 5% HOLDERS OF EQUITY SECURITY

- Within 10 days after such acquisition shall submit a sworn statement containing
the following information:
o Personal background, identity, residence, citizenship and nature of such
beneficial ownership by such person as well as business of the
beneficial owner.
o Plans and proposals that will affect a major change in its business or
corporate structure if the purpose is to acquire control in the business.
o Number of shares acquired
o Info as to contracts, arrangements or understanding with any person
with respect to any securities of the issuer including but not limited to,
transfer, joint ventures, loan etc. naming the persons with whom such
contracts, arrangements, or understanding have been entered into, and
giving the details thereof.

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Tender Offer

Obligations for tender offers

Any person, or group of persons acting in concert, who intends to:

a. Acquire at least 15% of;

b. Acquire at least 30% over a period of 12 months of;
i. Any class of equity securities of a listed corporation
ii. Any class of equity securities of a corporation with assets of at least Php 50M
and having 200 or more stockholders with at least 100 shares each.

Are obliged to do the following:

a. Make tender offer to stockholders by filing with SEC a declaration to that effect and
furnish issuer a statement containing such of the info required of issues as SEC may
prescribe
b. Publish all requests or invitations for tender
c. File with SEC and send to the issuer copies of any additional material soliciting or
requesting such tender offers subsequent to the initial solicitation or request.
d. Pay one-tenth of 1% of the propose aggregate purchase price.

Q: When is tender offer mandatory?

A: It is mandatory when:
1. A person is required 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 in the
following circumstances:
a. Any person or a group of persons acting in concert, intends to acquire 35% or more
of equity shares of a public company pursuant to an agreement made between or
among the person and one or more sellers;
b. The person or a group of persons acting in concert, intends to acquire 35% or more
of the equity shares of a public company within a period of 12 months;
c. If any acquisition of even less than 35% would result in ownership of over 51% of
the total outstanding equity securities of a public company, the acquirer shall be
required to make a tender offer for all the outstanding equity securities to all
remaining stockholder.
2. In all cases when the rules provide for mandatory tender offer, the following rules on
sales be complied with:
a. If there is mandatory tender offer, the sale of the shares pursuant to the private
transaction shall not be completed prior to the closing and completion of the tender
offer.
b. Transactions with any of the seller/s of significant blocks of shares with whom the
acquirers may have been in private negotiations shall close at the same time and
upon the same terms as the tender offer made to the public.
c. For paragraph (b) above where the 35% is within a period of 12 months, the last
sale meeting the threshold shall not be consummated until the closing and
completion of the tender offer.

Q: When may the SEC exempt a person from the mandatory tender offer requirement?
A: Upon written application, the SEC may exempt from the requirement to make a mandatory
tender offer the following proposed purchases of equity shares of a public company:
a. The purchase of newly issued shares from unissued capital stock
b. In connection with foreclosure proceeding involving a duly constituted pledge or
security arrangement where the acquisition is made by the debtor or creditor
c. Purchases in connection with privatization undertaken by the government of the
Philippines
d. Purchases in connection with corporate rehabilitation under court supervision.

Q: When is a person presumed to be making voluntary tender offer?

A: A person will be presumed to be making a voluntary tender offer where some or all of the
following factors are present:
a. Active and widespread solicitation of public shareholders for the shares of a public
company
b. Solicitation made for a substantial percentage of the issuer’s stock
c. Offer to purchase is made at a premium over the prevailing market price, at firm rather
than negotiable terms
d. An offer is contingent on the tender of a fixed number of shares; and/or
e. Offer is only open for a limited period of time.
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Any person making a tender offer shall make a public announcement of his intention, prior to
the commencement of the offer; Provided, however, such announcement shall not be made
until the bidder has the resources to implement the offer in full.

TRANSACTIONS OF DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS

Reportorial Requirements
Every person who is,
i. Directly or indirectly the beneficial owner of more than 10% of any class of equity
securities
ii. A director or an officer of the issuer of such security

SHALL FILE:
a. Within 10 days after he becomes a beneficial owner, a statement containing the
amount of all equity securities of such issuer of which he is the beneficial owner to the
SEC and the exchange where it may be listed.
b. Within 10 days after the close of each calendar month thereafter, a statement
indicating his ownership at the close of the calendar month as have occurred during
such calendar month.

PROHIBITIONS AND FRAUD, MANIPULATION AND INSIDER TRADING

1. Manipulation of security prices and practices

It shall be unlawful for any person acting for himself or through a dealer or broker,
directly or indirectly:
a. To create a false or misleading appearance of active trading in any listed security
traded in an exchange of any other trading market.
i. Wash Sale- as one that occurs when an individual sell or trades a security
at a loss, and within 30 days before or after this sale, buys a “substantially
identical” stock or security, or acquires a contract or option to do so.
ii. Improper Matched Order-both the buy and sell orders are entered at the
same time with the same price and qnty by different parties.
iii. Any similar things or act

b. 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.
Squeezing the float- taking advantage of a shortage of securities in the market by
controlling the demand side and exploring market congestion during such
shortages in a way as to create artificial prices.
Hype and Dump- buying of increasingly higher prices and selling in the market at
the higher prices and vice versa.

c. Circulating unverified rumor-based market information

d. To make a misleading statement to induce the purchase or sell.
e. 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 the security.

Acts that are considered unlawful with respect to the purchase and sale of securities:

Sec. 26 of the Securities Regulation Code states that: “It shall be unlawful for any person,
directly or indirectly, in connection with the purchase or sale of any securities to:

1. Employ any device, scheme, or artifice to defraud;

2. Obtain money or property by means of any untrue statement of a material fact of any
omission to state a material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; or
3. Engage in any act, transaction, practice or course of business which operates or would
operate as a fraud or deceit upon any person.”

INSIDER TRADING
“INSIDER” means,
1. The issuer
2. Director/officer/person controlling the issuer
3. A person whose relationship or former relationship to the issuer gives or gave him
access to nonpublic info about the issuer and he security.
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 4. Gov’t employee/director/officer of an exchange, clearing agency and/or self-regulating
organization who has access to material nonpublic info about the issuer an the
security.
5. A person who learns such info by a communication from any of the foregoing insiders.

INSIDER’S DUTY TO DISCLOSE WHEN TRADING

Sec. 27.1 of the Securities Regulation Code states that: “It shall be unlawful for an insider to
sell or buy a security of the issuer, while in possession of material information with respect to
the issuer or the security that is not generally available to the public, unless:

a. The insider proves that the information was not gained from such relationship.
b. If the other party selling to or buying from the insider (or his agent) is identified the
insider proves;
c. That he discloses the info to the other party
d. That he need reason to believe that the other party otherwise is also in possession of
the information.

Provided, however, That this presumption shall be rebutted upon a showing by the purchaser
or seller that he was aware of the material non-public information at the time of the purchase
or sale.”

Q: What is the prohibition imposed on insiders regarding material non-public information?

A: Sec. 27.3 of the Securities Regulation Code states that: “It shall be unlawful for any
insider to communicate material non-public information about the issuer or the security to any
person who, by virtue of the communication, becomes an insider as defined in Subsection 3.8,
where the insider communicating the information knows or has reason to believe that such
person will likely buy or sell a security of the issuer whole in possession of such information.”

SECURITIES MARKET PROFESSIONALS

i. Broker iii. Associated person of a broker
ii. Dealer or dealer
iv. Salesman
Mandatory registration of SMP with SEC
- No person shall engage in buying or selling of securities in the PH if not
registered.
- Salesman, associated person cannot be employed if not registered.
- SEC may conditionally or unconditionally exempt from the requirements any
broker, dealer, salesman, associated person of any broker or dealer, as it may
deem consistent with the public interest and the protection of investors.

QUALIFICATIONS FOR REGISTRATION

a. If natural person- pass written examination (proficiency/knowledge)
b. If broker or dealer- minimum net capital, provide bond/security
c. If located outside the PH- written consent to service of process upon SEC

REQUIREMENTS, PROHIBITIONS AND OBLIGATIONS OF SMP

- Broker/dealer- may register by filing a written application containing the info and
docs concerning the dealer or broker.
- Salesman/associated person- written application signed separately by the
broker or dealer or issuer, containing info about the salesman/associated
person as the commission by rule shall prescribe.
- Salesman shall not include employees of an issuer whose compensation
cannot be directly or indirectly be determined on sale of securities of the issuer.
- Fees- in such reasonable amount prescribed by the SEC.
- Within 30 days, SEC shall grant/deny the application.
- Names and address of all persons shall be recorded in Register of Securities
Market Professionals, kept in the office of the SEC, and shall be open for public
inspection.
- Every person registered shall file or submit regularly info necessary to keep the
application for registration current and accurate
- Registration of salesman/associated person will automatically terminate upon
the cessation of his affiliation with said registered broker or dealer or with an
issuer in case of a salesman employed, appointed or authorized by such issuer.
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REVOCATION, REFUSAL OR SUSPENSION OF REGISTRATION OF BROKERS,
DEALERS, SALESMAN AND ASSOCIATED PERSON

- After due notice and hearing, the SEC determines the applicant or registrant.
a. Has willfully violated any provision of this code.
b. Has willfully made or caused to be made a materiality false or misleading
statement.
c. Has failed to satisfy the qualifications or requirements for registration.
d. Has been convicted, by a competent judicial or administrative body of an
offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft,
estafa, misappropriation.
e. Is enjoined or restrained by a competent judicial or administrative body from
engaging in securities, commodities etc. or from willfully violating laws
governing such activities.
f. Subject to an order of a competent judicial or administrative body refusing,
revoking or suspending any registration etc.
g. Subject to an order of suspension of a self-regulatory organization expelling
him from membership.
h. Willfully violated any provision of securities commodities etc.
i. Judicially declared insolvent.

- Not allowed to buy/sell securities if broker/dealer and all the relatives of the
foregoing within the 4th civil degree of consanguinity or affinity, is at the same
time holding office in said issuer corporation as a director, president, vice
president, manager, comptroller, secretary, etc.
- No broker or dealer shall effect any transaction in securities to ensure fair and
honest dealings.

REGISTRATION OF EXCHANGES

Exchange- is an organized market place or facility that brings together buyers and
sellers and executes trade of securities and/or commodities.

- Not allowed to use any facility of an Exchange in the PH if not registered.

- No broker or dealer, salesman/associated person to create/operate any trading
market, otherwise than on a registered Exchange.
- SEC may promulgate rules and regulations governing transactions by brokers,
dealers, salesman, associated person over any security/facility of such trading
market and require such market to be administered by such self-regulatory
organization determined by the SEC.

REGISTRATION

- Filing an application for registration containing info and supporting docs as the
commission by rule shall prescribe, including:
o Undertaking to comply and enforce by its members with the provisions
of this Code, its IRR and the rules of an Exchange.
o Organizational chart of the Exchange, rules and procedure and a list of
its officers and members.
o Copies of the rules of the Exchange
o Undertaking that in the event of a member firm becomes insolvent that it
cannot readily meet the demands of its customers for the delivery of
securities and/or payment of sales proceeds, commission, take over the
operation of the insolvent member firm and immediately proceed to
settle the member firms liabilities to its customers.

- Exchange is registered, of the SEC finds that the applicant Exchange is

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

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 - Within 90 days, the SEC may issue an order either granting or denying
registration unless Exchange shall withdraw its registration.

CLEARING AGENCY
- a person or company that facilitates the clearing and settlement of trades

It shall be unlawful for any broker, director/salesman/associated person or clearing

agency, directly or indirectly to make use of any facility of clearing agency in the PH:
- to make deliveries of securities
- reduce the number of settlements of securities transactions
- allocate securities settlement responsibilities if not registered.

REGISTRATION OF CLEARING AGENCY

- filing an application of registration, containing such info and supporting docs as
the Commission by rule shall prescribe:
o An undertaking to comply and enforce compliance by its participants
with the provisions of this code.
o Organizational chart of the Exchange, its rules of procedure and list of
its officers and participants.
o Copies of rules of the Clearing Agency.
Registration shall be granted if the rules of the Clearing Agency include provision for:
- Expulsion, suspension and disciplining of a participant for violations of this
Code.
- Fair procedure of the disciplining of participants
- Equitable allocation reasonable dues, fees and other charges
- Prevention of fraudulent ang manipulative acts
- Transparent, prompt and accurate clearance and settlement of trades.

ADMINISTRATIVE SANCTIONS
1. Suspension and revocation of any registration for the offering of securities
2. Fine of not less than 10,000 pesos nor more than 1,000,000 pesos plus not more
than 2,000 pesos for each day of continuing violation.
3. Violations of Sec.19.2(Tender offers), 24 (manipulative acts), 26 (Fraudulent
transactions), 27 (Insider’s duty to disclose when trading), disqualification from
being an officer, member of Board of Directors or others with similar functions,
failed to submit reportorial requirements etc.
4. Violation of Sec. 24, fine of not more than three times the profit gained or loss
avoided as result of the purchase, sale or communication prescribed by such
section.
5. Other penalties that the SEC may prescribe.

PENALTIES
1. Fine of not less than 50,000 pesos nor more than 5,000,000 pesos or
imprisonment of not less than 7 years nor more than 21 years or both in the
discretion of the court.
2. If the offender is a corporation, partnership or association or other judicial entity, the
penalty may in the discretion of the court be imposed upon such juridical entity and
upon the officer or officers of the corporation, partnership, association or entity
responsible for the violation, and if such officer is an alien, he shall in addition to
the penalties prescribed, be deported without further proceedings after service of
sentence.

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