*AMDG*

Commercial Law: Security Regulations
Security Regulations Code (RA 8799)

I.
Powers of the SEC
-jurisdiction and supervision over all corps, partnerships or association who
are grantees of primary franchises and or licensed by the govt
-formulate policies and recommendations on issues concerning securities
market
-approve, reject, suspend, revoke or require amendments to registration
statements and registration and licensing applications
-regulate the activities of persons to ensure compliance
-supervise, suspend or take over the activities of exchanges
-impose sanctions for violations
-prepare, approve, amend and repeal rules, regulations and issue opinions.
-issue cease and desist orders to prevent fraud
-punish for contempt
-compel the officers of any corp to call meetings of stockholders or
members
-issue sub poena duces tecum and summon witnesses
-suspend, revoke after proper notice and hearing a franchise, license, or
cert.

II.
Jurisdiction
The jurisdiction has been transferred to the courts of general jurisdiction or
the appropriate RTC:
a. fraudulent devices and schemes employed by dir detrimental
to the public interest and to other firms;
b. intra-corporate dispute with the state in relation to their
franchise and right to exist as such;
c. controversies in election, appointment of directors or
trustees;
d. petition to be declared in state of suspension of payments;
and

e.

appointment of Rehabilitation receiver or Mgmt Committee.

III.
Definition of Securities
Securities are shares, participation or interests in a corporation or in a
commercial enterprise evidenced by a certificate, contract, instrument,
which includes:
a. Shares of stocks, bonds, debentures, notes, evidences of
indebtedness,

asset-backed securities;
b. Investment contracts, certificate of interest or participation in
a profit sharing agreement, cert of deposits for a future
subscription;
c. Fractional undivided interests in oil, gas or other mineral
rights;
d. Derivatives like option and warrants
e. Cert of assignments, trust cert
f. Proprietary or non-prop membership in corps
IV.
How does the Security Regulations Commission protect the
public who wishes to invest in securities?
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 registration statement and the approval
of the prospectus plus the continuing duty to regularly submit
material infor to the SEC
b. close monitoring of the securities as well as persons involved
c. prohibiting and penalizing diff fraudulent practices and
transactions
d. providing the SEC with powers and functions

V.
Registration of Securities
SRC Sec. 81 provides that securities shall not be sold or offered for sale or
distribution within the Philippines, without a registration statement duly

Feliciano Ma. Priscilla Olivia C. Feliciano 1

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Truth, Honor and Excellence

*AMDG*

Commercial Law: Security Regulations
filed with and approved by the Commission. Before the sale, information
shall be made available to each prospective purchaser. In approving of the
registration of the securities, SEC is not only concerned with the
requirement of the full disclosure to the public but also regarding the merit
of the securities themselves and the issuer.
1. Commission may conditionally approve the registration
statement under such terms as it may deem necessary
2. It may specify the terms and conditions under which any
written communication, including any summary prospectus,
shall be deemed not to constitute an offer for sale.
3. A record of the registration shall be kept and shall be open to
the public.
4. It may also audit the financial statements of firms applying
VI. Securities exempt from the requirement of registration
a. Securities guaranteed by the Government of the Philippines, or by
any political subdivision, agency or instrumentality thereof.
b. Any securities issued or guaranteed by a foreign government to
whom the Philippines has diplomatic relations.
c. Certificates issued by a receiver or a by trustee in bankruptcy
d. Security or its derivatives under the supervision of the Office of
the Insurance Comm, HLURB or the BIR.
e. Any security issued by a bank except its own shares of stock.
VII.
Exempt transactions exempt from the registration
a. judicial sale, or sale by an executor, admin, guardian or receiver or
trustee in insolvency or bankruptcy
b. pledge holder, or mortgagee or any other similar lien holder
selling or offering to liquidate a bona fide debt, a security pledged
in good faith as a security for such debt.
c. Isolated transactions in which any security is sold, offered for sale
d. Distribution by a corp authorized by its articles of securities to its
stockholders or other security holders

e.

Sale of capital stock of a corp to its own stockholders where no

commission or renumeration is paid or given
f. Issuance of bonds or notes secured by mortagage upon real estate
or tangible personal prop where they are sold to a single
purchaser at a single sale.
g. Issue and delivery of a security in exchange for another security of
the same issuer provided that the security so surrendered has
been registered.
h. Brokers transaction on any registered exchange, executed upon
customers order.
i. Subscription of shares of a Corp prior to its incorporation
j. Exchange of security by the issuer with its holders
k. Sale of securities by an issuer to less than 20 persons in the
th
Philippines during any 12 month period.
l. Sale of securities to any number of the qualified buyers:

-Bank, Registered investment house, insurance company, pension
fund maintained by the govt, and such other person as the commission
mau by rule determine as qualified buyers
*Commission may require 1/10 of 1% of the aggregate price of the
securities upon application of the notice of the exemption.
VIII. Grounds for revocation and or rejection of the registration of
securities:
a. The issuer has been judicially declared insolvent; violated any
of the provisions; engaged in fraudulent transactions; made
any false or misleading representation of material facts in any
prospectus; or failed to comply with any requirement
b. Registration statement on its face is incomplete or
inaccurate;
c. Issuer, officer, director or controlling person has been
convicted of moral turpitude or fraud
IX.
Devices/Practices on Manipulation of security prices

Feliciano Ma. Priscilla Olivia C. Feliciano 2

2014


Truth, Honor and Excellence

*AMDG*

Commercial Law: Security Regulations
a.

Creating a false or misleading appearance of active trading in

any listed security in an Exchange or any other trading
market.

Wash Sale- by effecting any transaction in such security,
which involves no change in the beneficial ownership thereof


Matched orders- entering an order for the purchase or sale of
such security with the knowledge that a simultaneous order will be
entered by or for the same or diff parties.


Market rigging- by performing similar act where there is no
change in beneficial ownership.

b. To effect alone or with others, a series of transactions in
securities that:

1. raises the price to induce purchase of a security
2. depresses the price to induce sale
3. creates active trading to induce such a purchase

c. circulate information that the price of any security listed in an
Exchange will rise or fall because of manipulative market
operations for the purpose of inducing the purchase of sale of
such security.
d. False or misleading statement with respect to any material
fact for the purpose of inducing sale
e. To effect any series of transaction for the purpose of pegging
the price of such security
f. Any manipulative or deceptive device or contrivance.
X.
Put, Call and Straddle

SRC prohibits members of an Exchange from directly or indirectly indorsing

or guaranteeing the performance of a put, call, straddle. Put is a
transferable option to deliver a number of shares of stock at a stated price
at any given time during a stated period while Call is transferable option to
buy a specified number of shares at a stated price. Straddle is a
combination of both.

XI.
Acts that are unlawful with respect to purchase and sale of
securities
-devices to defraud
-obtain money or prop by means of any untrue statement
-acts, transactions, practice or course of business which operates or would
operate as a fraud or deceit upon any person.

XII.
Who is an insider?

-issuer, director or officer, govt ee of an exchange or clearing agency,
person who learns information by communication from any of the
foregoing insiders.

XIII.
Duties of an insider when he is trading securities?

It shall be unlawful for an insider to sell or buy a security of the issuer,
while in possession of material info with respect to the issuer or the
security that is not generally available to the public, unless:

-insider proves the info was not gained from such relationship or if
the other party selling or buying from the insider is identified then the
insider can prove that he disclosed the info to the other party and that he
had reason to believe that the other party otherwise is also in possession
of the info.

Feliciano Ma. Priscilla Olivia C. Feliciano 3

2014


Truth, Honor and Excellence

*AMDG*

Commercial Law: Security Regulations

Presumption: spouse, relatives by affinity or consaguanity within
the second degree (leg or common law) of an insider who sold the security
to them shall be presumed to have been made while in possession of
material non-public info. However, it can be rebutted if shown that the
purchaser or seller was not aware of such material non-public info at time
of purchase.

XIV.
Protection of Investors
a. Tender Offers

-publicly announced intention to acquire equity securities of a
public company. Mandatory when anyone shall acquire 35% or more of the
shares in public company.
- a public company is corporation listed in an exchange and having an
assert of 50,000,000PHP and having 200 or more stockholders holding at
least 100 shares each.
-purpose of the tender offer is to protect the minority shareholders against
any scheme that dilutes the share value of their investments. It gives
minority the chance to exit the corp and giving them opportunity to sell at
the same price.

Feliciano Ma. Priscilla Olivia C. Feliciano 4

2014


Truth, Honor and Excellence