PE' 1

• URITIE RE N DE

(f) Proprietary or nonproprietary membership certificates

incorporations; and
(g) Other instruments as may in the future be determined by
APPENDIX A the Commission.

SECURITIES REGULATION CODE 3.2. "Issuer" is the originator, maker, obligor, or creator of the
security.
[Republic Act No. 8799]
3.3. "Broke-I' is a person engaged in the business of buying and
selling securities for the account of others.
CHAPTER I
3.4 "Dealer" means any person who buys and sells securities for his/
Title and Definitions her own account in the ordinary course of business.

SECTION 1. Title. - This shall be known as "The Securities 3.5. "Associated person of a broker or dealer" is an employee thereof
Regulation Code." who, directly exercises control of supervisory authority, but does not include
a salesman, or an agent or a person whose functions are solely clerical or
SEC. 2. Declaration of State Policy. - The State shall establish a ministerial.
socially conscious, free market that regulates itself, encourage the widest
participation of ownership in enterprises, enhance the democratization of 3.6. "Clearing Agency" is any person who acts as intermediary
wealth, promote the development of the capital market, protect investors, in making deliveries upon payment to effect settlement in securities
ensure full and fair disclosure about securities, minimize if not totally transactions.
eliminate insider trading and other fraudulent or manipulative devices and 3.7. "Exchange" is an organized marketplace or facility that brings
practices which create distortions in the free market. together buyers and sellers and executes trades of securities and/or
To achieve these ends, this Securities Regulation Code is �ereby commodities.
enacted. 3.8. "Insider" means: (a) the issuer; (b) a director or officer (or person
SEC. 3. Definition of Terms. - performing similar functions) of, or a person controlling the issuer; (c) a
person whose relationship or former relationship to the issuer gives or
3.1. "Securities" are shares, participation or interests in a corporation gave him access to material information about the issuer or the security
or in a commercial enterprise or profit-making venture and evidenced by a that is not generally available to the public; (d) a government employee, or
certificate, contract, instrument, whether written or electronic in character. director, or officer of an exchange, clearing agency and/or self-regulatory
It includes: 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
(a) Shares of stock, bonds, debentures, notes, evidences of learns such information by a communication from afiy of the foregoing
indebtedness, asset-backed securities; insiders.
(b) Investment contracts, certificates of interest or 3.9. "Pre-Need Plans" are contracts which provide for the performance
participation in a profit sharing agreement, certificates of deposit for of future services or the payment of future monetary considerations at the
a future subscription; time of actual need, for which planholders pay in cash or installment at
(c) Fractional undivided interests in oil, gas or other mineral stated prices, with or without interest or insurance coverage and includes
rights; life, pension, education, interment, and other plans which the Commission
may from time to time approve.
(d) Derivatives like option and warrants;
3.10. "Promoter" is a person who, acting alone or with others, takes
(e) Certificates of assignments, certificates of participation, initiative in founding and organizing the business or enterprise of the issuer
trust certificates, voting trust certificates or similar instruments; and receives consideration therefor.
3.11. "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
980 a registration statement filed with the Commission.
 982 COMMENTARIES AND JURISPRUDEN E ON
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3.12. "Registration statement" is the application for the registration of 4.5. The Commission shall hold meetings at least once a week for
securities required to be filed with the Commission. the conduct of business or as often as may be necessary upon call of the
Chairperson or upon the request of three (3) Commissioners. The notice
3.13. "Salesman" is a natural person, employed as such or as an
of the meeting shall be given to all Commissioners and the presence of
agent, by a dealer, issuer or broker to buy and sell securities.
three (3) Commissioners shall constitute a quorum. In the absence of the
3.14. "Uncertificated security" is a security evidenced by electronic or Chairperson, the most senior Commissioner shall act as presiding officer of
similar records. the meeting.
3.15. "Underwriter" is a person who guarantees on a firm commitment 4.6. The Commission may, for purposes of efficiency, delegate any of
and/or declared best effort basis the distribution and sale of securities of its functions to any department or office of the Commission, an individual
any kind by another company. Commissioner or staff member of the Commission except its review or
appellate authority and its power to adopt, alter and supplement any rule
CHAPTER II or regulation.

Securities and Exchange Commission The Commission may review upon its own initiative or upon the
petition of any interested party any action of any department or office,
SEC. 4. Administrative Agency. - individual Commissioner, or staff member of the Commission.
4.1. This Code shall be administered by the Securities and Exchange SEC. 5. Powers and Functions of the Commission. -
Commission (hereafter the "Commission') as a collegial body, composed of
5.1. The Commission shall act with transparency and shall have the
a Chairperson and four (4) Commissioners, appointed by the President
powers and functions provided by this Code, Presidential Decree No. 902-A,
for a term of seven (7) years each and who shall serve as such until their
the Corporation Code, the Investment Houses Law, the Financing Company
successor shall have been appointed and qualified. A Commissioner
Act and other existing laws. Pursuant thereto the Commission shall have,
appointed to fill a vacancy occurring prior to the expiration of the term for
among others, the following powers and functions:
which his/her predecessor was appointed, shall serve only for the unexpired
portion of such term. The incumbent Chairperson and Commissioners (a) Have jurisdiction and supervision over all corporations,
at the effectivity of this Code, shall serve the unexpired portion of their partnerships or associations who are the grantees of primary
terms under Presidential Decree No. 902-A. Unless the context indicates franchises and/or a license or permit issued by the Government;
otherwise, the term "Commissioner" includes the Chairperson.
(b) Formulate policies and recommendations on issues
4.2. The Commissioners must be natural-born citizens of the concerning the securities market, advise Congress and other
Philippines, at least forty (40) years of age for the Chairperson and at least government agencies on all aspects of the securities market and
thirty-five (35) years of age for the Commissioners, of good moral character, propose legislation and amendments thereto;
of unquestionable integrity, of known probity and patriotism, and with (c) Approve, reject, suspend, revoke or require amendments to
recognized competence in social and economic disciplines: Provided, registration statements, and registration and licensing applications;
That the majority of Commissioners, including the Chairperson, shall be
members of the Philippine Bar. (d) Regulate, investigate or supervise the activities of persons
to ensure compliance;
4.3. The Chairperson is the chief executive officer of the Commission.
The Chairperson shall execute and administer the policies, decisions, orders (e) Supervise, monitor, suspend or take over the activities of
and resolutions approved by the Commission and shall have the general exchanges, clearing agencies and other SROs;
executive direction and supervision of the work and operation of the (f) Impose sanctions for the violation of laws and the rules,
Commission and of its members, bodies, boards, offices, personnel and all regulations and orders issued pursuant thereto;
its administrative business.
(g) Prepare, approve, amend or repeal rules, regulations and
4.4. The salary of the Chairperson and the Commissioners shall be orders, and issue opinions and provide guidance on and supervise
fixed by the President of the Philippines based on an objective classification compliance with such rules, regulations and orders;
system, at a sum comparable to the members of the Monetary Board and
commensurate to the importance and responsibilities attached to the (h) Enlist the aid and support of and/or deputize any and all
position. enforcement agencies of the Government, civil or military as well as
 984 P. 1NJJ
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In th v nt f ttl m nt or compromis , indemnificati n shall be
any private institution, corporation, firm, association or person in the
provid d only in connection with such matters covered by the settlement as
implementation of its powers and functions under this Code;
to which the Commission is advised by external counsel that the persons to
(i) Issue cease and desist orders to prevent fraud or injury to be indemnified did not commit any gross negligence or misconduct.
the investing public;
The costs and expenses incurred in defending the aforementioned
G) Punish for contempt of the Commission, both direct and action, suit or proceeding may be paid by the Commission in advance of
indirect, in accordance with the pertinent provisions of and penalties the final disposition of such action, suit or proceeding upon receipt of an
prescribed by the Rules of Court; undertaking by or on behalf of the Commissioner, officer or employee to
repay the amount advanced should it ultimately be determined by the
(k) Compel the officers of any registered corporation or
association to call meetings of stockholders or members thereof under Commission that he/she is not entitled to be indemnified as provided in this
its supervision; subsection.

(1) Issue subpoena duces tecum and summon witnesses to 6.2. The Commissioners, officers and employees of the Commission
appear in any proceedings of the Commission and in appropriate who willfully violate this Code or who are guilty of negligence, abuse or acts
cases, order the examination, search and seizure of all documents, of malfeasance or fail to exercise extraordinary diligence in the performance
papers, files and records, tax returns, and books of accounts of any of their duties shall be held liable for any loss or injury suffered by the
entity or person under investigation as may be necessary for the Commission or other institutions as a result of such violation, negligence,
proper disposition of the cases before it, subject to the provisions of abuse, malfeasance, or failure to exercise extraordinary diligence. Similar
existing laws; responsibility shall apply to the Commissioners, officers and employees
of the Commission for (1) the disclosure of any information, discussion
(m) Suspend, or revoke, after proper notice and hearing the or resolution of the Commission of a confidential nature, or about the
franchise or certificate of registration of corporations, partnerships or confidential operations of the Commission, unless the disclosure is in
associations, upon any of the grounds provided by law; and connection with the performance of official functions with the Commission
(n) Exercise such other powers as may be provided by law or with prior authorization of the Commissioners; or (2) the use of such
as well as those which may be implied from, or which are necessary information for personal gain or to the detriment of the government,
or incidental to the carrying out of, the express powers granted the the Commission or third parties: Provided, however, That any data or
Commission to achieve the objectives and purposes of these laws. information required to be submitted to the President and/or Congress or
its appropriate committee, or to be published under the provisions of this
5.2. The Commission's jurisdiction over all cases enumerated under Code shall not be considered confidential.
Section 5 of Presidential Decree No. 902-A is hereby transferred to the
Courts of general jurisdiction or the appropriate Regional Trial Court: SEC. 7. Reorganization. -
Provided, That the Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall exercise jurisdiction 7.1. To achieve the goals of this Code, consistent with Civil Service
over these cases. The Commission shall retain jurisdiction over pending laws, the Commission is hereby authorized to provide f6r its reorganization,
cases involving intra-corporate disputes submitted for final resolution which to streamline its structure and operations, upgrade its human resource
should be resolved within one (1) year from the enactment of this Code. The component and enable it to more efficiently and effectively perform its
Commission shall retain jurisdictio_n over pending suspension of payments/ functions and exercise its powers under this Code.
rehabilitation cases filed as of 30 June 2000 until finally disposed. 7.2. All positions of the Commission shall be governed by a
SEC. 6. Indemnification and Responsibilities of Commissioners. - compensation and position classification systems and qualification standards
approved by the Commission based on a comprehensive job analysis and
6.1. The Commission shall indemnify each Commissioner and other audit of actual duties and responsibilities. The compensation plan shall be
officials of the Commission, including personnel performing supervision comparable with the prevailing compensation plan in the Bangko Sentral ng
and examination functions for all costs and expenses reasonably incurred Pilipinas and other government financial institutions and shall be subject
by such persons in connection with any civil or criminal actions, suits to periodic review by the Commission no more than once every two (2) years
or proceedings to which they may be or made a party by reason of the without prejudice to yearly merit reviews or increases based on productivity
performance of their functions or duties, unless they are finally adjudged in and efficiency. The Commission shall, therefore, be exempt from laws, rules,
such actions or proceedings to be liable for gross negligence or misconduct.
 0 7
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(c) Certificates is ued by a receiver or by a trustee in
and regulations on compensation, position classification and qualification
bankruptcy duly approved by the proper adjudicatory body.
standards. The Commission shall, however, endeavor to make its system
conform �s closely _ as p�ssible with the principles under the Compensation (d) Any security or its derivatives the sale or transfer of
_
and Pos1t10n Class1ficat10n Act of 1989 (Republic Act No. 6758, as amended). which, by law, is under the supervision and regulation of the Office of
the Insurance Commission, Housing and Land Use Regulatory Board,
CHAPTERIII or the Bureau of Internal Revenue.
Registration of Securities (e) Any security issued by a bank except its own shares of
stock.
SEC. 8. Requirement of Registration of Securities. -
9.2. The Commission may, by rule or regulation after public hearing,
8.1. Securities shall not be sold �r offered for sale or distribution add to the foregoing any class of securities if it finds that the enforcement
. .
w1thm the Philippines, without a registration statement duly filed with of this Code with respect to such securities is not necessary in the public
and �ppro
_ �ed by the Commission. Prior to such sale, information on the interest and for the protection of investors.
securi�ies, m such form and_ with such substance as the Commission may
SEC. 10. Exempt Transactions. -
prescribe, shall be made available to each prospective purchaser.
10.1. The requirement of registration under Subsection 8.1. shall not
8.2. The Commission may conditionally approve the registration apply to the sale of any security in any of the following transactions:
statement under such terms as it may deem necessary.
(a) At any judicial sale, or sale by an executor, administrator,
8.3. The Commission may specify the terms and conditions under guardian or receiver or trustee in insolvency or bankruptcy.
which any written commu�ication, including any summary prospectus,
shall be deemed not to constitute an offer for sale under this Section. (b) 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
8.4. A record of the registration of securities shall be kept in a the ordinary course of business and not for the purpose of avoiding
.
Regist�r ?f Se_curities in which shall be recorded orders entered by the the provisions of this Code, to liquidate a bona fide debt, a security
Co�missioi_i with respect to such securities. Such register and all documents pledged in good faith as security for such debt.
or mfor_m�t10n w�th respect to the securities registered therein shall b� open
to pubhc mspect10n at reasonable hours on business days. (c) An isolated transaction in which any security is sold,
offered for sale, subscription or delivery by the owner thereof, or by
8.5. The Commission may audit the financial statements assets his representative for the owner's account, such sale or offer for sale,
and other information of a firm applying for registration of its s:curities subscription or delivery not being made in the course of repeated and
whe_never it deems _ the same necessary to insure full disclosure or to protect successive transactions of a like character by such owner, or on his
the mterest of the mvestors and the public in general. account by such representative and such owner or representative not
SEC. 9. Exempt Securities. - being the underwriter of such security.

9.1. The requirement of registration under Subsection 8.1 shall not (d) The distribution by a corporation, actively engaged in the
as a general rule apply to any of the following classes of securities: business authorized by its articles of incorporation, of securities to
its stockholders or other security holders as a stock dividend or other
(a) Any security issued or guaranteed by the Government distribution out of surplus.
of the Philippines, or by any political subdivision or agency thereof,
(e) The sale of capital stock of a corporation to its own stock­
?r by any person controlled or supervised by, and acting as an holders exclusively, where no commission or other remuneration is
mstrumentality of said Government.
paid or given directly or indirectly in connection with the sale of such
(b) Any security issued or guaranteed by the government capital stock.
of a�y country with which the Philippines maintains diplomatic
(f) The issuance of bonds or notes secured by mortgage upon
relat10ns, or by any state, province or political subdivision thereof on
real estate or tangible personal property, where the entire mortgage
the b�sis of r�ciprocity: Provided, That the Commission may require
together with all the bonds or notes secured thereby are sold to a
compliance with the form and content of disclosures the Commission
single purchaser at a single sale.
may prescribe.
98 OMM • N'J'ARI • AND JU.RI RUDEN E N !-,I 9
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(g) The issue and delivery of any security in exchange for any .finan ial ophi ticati n, n t worth, knowledge, and experience
other security of the same issuer pursuant to a right of conversion in financial and bu in matters, or amount of assets under
entitling the holder of the security surrendered in exchange to make management.
such conversion: Provided, That the security so surrendered has
been registered under this Code or was, when sold, exempt from the 10.2. The Commission may exempt other transactions, if it finds that
provisions of this Code, and that the security issued and delivered in the requirements of registration under this Code is not necessary in the
exchange, if sold at the conversion price, would at the time of such public interest or for the protection of the investors such as by reason of the
conversion fall within the class of securities entitled to registration small amount involved or the limited character of the public offering.
under this Code. Upon such conversion the par value of the security 10.3. Any person applying for an exemption under this Section, shall
surrendered in such exchange shall be deemed the price at which the file with the Commission a notice identifying the exemption relied upon on
securities issued and delivered in such exchange are sold. such form and at such time as the Commission by rule may prescribe and
(h) Broker's transactions, executed u'pon customer's orders, with such notice shall pay to the Commission a fee equivalent to one-tenth
on any registered Exchange or other trading market. (1/10) of one percent (1%) of the maximum aggregate price or issued value
of the securities.
(i) Subscriptions for shares of the capital stock of a corporation
prior to the incorporation thereof or in pursuance of an increase in SEC. 11. Commodity Futures Contracts. - No person shall offer,
its authorized capital stock under the Corporation Code, when no sell or enter into commodity futures contracts except in accordance with
expense is incurred, or no commission, compensation or remuneration rules, regulations and orders the Commission may prescribe in the public
is paid or given in connection with the sale or disposition of such interest. The Commission shall promulgate rules and regulations involving
securities, and only when the purpose for soliciting, giving or taking commodity futures contracts to protect investors to ensure the development
of such subscriptions is to comply with the requirements of such law of a fair and transparent commodities market.
as to the percentage of the capital stock of a corporation which should SEC. 12. Procedure for Registration of Securities. -
be subscribed before it can be registered and duly incorporated, or its
authorized capital increased. 12.1. All securities required to be registered under Subsection 8.1
shall be registered through the filing by the issuer in the main office of
(j) The exchange of securities by the issuer with its the Commission, of a sworn registration statement with respect to such
existing security holders exclusively, where no commission or other securities, in such form and containing such information and documents as
remuneration is paid or given directly or indirectly for soliciting such the Commission shall prescribe. The registration statement shall include
exchange. any prospectus required or permitted to be delivered under Subsections 8.2,
(k) The sale of securities by an issuer to fewer than twenty 8.3 and 8.4.
(20) persons in the Philippines during any twelve-month period. 12.2. In promulgating rules governing the content of any registration
(1) The sale of securities to any number of the following statement (including any prospectus made a part thereof or annexed
qualified buyers: thereto), the Commission may require the registration statement to
contain such information or documents as it may, by rule, prescribe. It may
(i) Bank; dispense with any such requirement, or may require additional information
or documents, including written information from an expert, depending on
(ii) Registered investment house;
the necessity thereof or their applicability to the class of securities sought
(iii) Insurance company; to be registered.
(iv) Pension fund or retirement plan maintained by 12.3. The information required for the registration of any kind, and all
the Government of the Philippines or any political subdivision securities, shall include, among others, the effect of the securities issue on
thereof or managed by a bank or other persons authorized by ownership, on the mix of ownership, especially foreign and local ownership.
the Bangko Sentral ng Pilipinas to engage in trust functions;
12.4. The registration statement shall be signed by the issuer's
(v) Investment company; or executive officer, its principal operating officer, its principal financial
officer, its comptroller, principal accounting officer, its corporate secretary
(vi) Such other person as the Commission may by rule or persons performing similar functions accompanied by a duly verified
determine as qualified buyers, on the basis of such factors as resolution of the board of directors of the issuer corporation. The written
990 MME '.PARI.i AN 01
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consent of the expert named as having certified any part of the registration (a)
statement or any document used in connection therewith shall also be filed.
Where the registration statement includes shares to be sold by selling (i) Has been judicially decla1·ed insolvent;
shareholders, a written certification by such selling shareholders as to the (ii) Has violated any of the provisions of this Code, the rules
accuracy of any part of the registration statement contributed to by such promulgated pursuant thereto, or any order of the Commission of
selling shareholders shall also be filed. which the issuer has notice in connection with the offering for which a
12.5. (a) Upon filing of the registration statement, the issuer shall pay registration statement has been filed;
to the Commission a fee of not more than one-tenth (1/10) of one per centum (iii) Has been or is engaged or is about to engage in fraudulent
(1%) of the maximum aggregate price at which such securities are proposed transactions;
to be offered. The Commission shall prescribe by rule diminishing fees in
(iv) Has made any false or misleading representation of
inverse proportion to the value of the aggregate price of the offering.
material facts in any prospectus concerning the issuer or its securities;
(b) Notice of the filing of the registrati�n statement shall be (v) Has failed to comply with any requirement that the
immediately published by the issuer, at its own expense, in two (2) Commission may impose as a condition for registration of the security
newspapers of general circulation in the Philippines, once a week for two (2)
for which the registration statement has been filed; or
consecutive weeks, or in such other manner as the Commission by rule shall
prescribe, reciting that a registration statement for the sale of such security (b) The registration statement is on its face incomplete or inaccurate
has been filed, and that the aforesaid registration statement, as well as in any material respect or includes any untrue statement of a material fact
the papers attached thereto are open to inspection at the Commission or omits to state a material fact required to be stated therein or necessary
during business hours, and copies thereof, photostatic or otherwise, shall be to make the statements therein not misleading; or
furnished to interested parties at such reasonable charge as the Commission (c) The issuer, any officer, director or controlling person of the
may prescribe. issuer, or person performing similar functions, or any underwriter has
12.6. Within forty-five (45) days after the date of filing of the been convicted, by a competent judicial or administrative body, upon plea
registration statement, or by such later date to which the issuer has of guilty, or otherwise, of an offense involving moral turpitude and/or fraud
consented, the Commission shall declare the registration statement effective or is enjoined or restrained by the Commission or other competent judicial
or rejected, unless the applicant is allowed to amend the registration or administrative body for violations of securities, commodities, and other
statement as provided in Section 14 hereof. The Commission shall enter an related laws.
order declaring the registration statement to be effective if it finds that the For purposes of this subsection, the term "competent judicial or
registration statement together with all the other papers and documents administrative body" shall include a foreign court of competent jurisdiction
attached thereto, is on its face complete and that the requirements have as provided for under the Rules of Court.
been complied with. The Commission may impose such terms and conditions
as may be necessary or appropriate for the protection of the investors. 13.2. The Commission may compel the production of all the books
and papers of such issuer, and may administer oaths t_o, and examine the
12.7. Upon effectivity of the registration statement, the issuer shall officers of such issuer or any other person connected therewith as to its
state under oath in every prospectus that all registration requirements have business and affairs.
been met and that all information are true and correct as represented by
the issuer or the one making the statement. Any untrue statement of fact or 13.3. If any issuer shall refuse to permit an examination to be made
omission to state a material fact required to be stated therein or necessary by the Commission, its refusal shall be ground for the refusal or revocation
to make the statement therein not misleading shall constitute fraud. of the registration of its securities.
13.4. If the Commission deems it necessary, it may issue an order
SEC. 13. Rejection and Revocation of Registration of Securities. -
suspending the offer and sale of the securities pending any investigation.
13.1. The Commission may reject a registration statement and The order shall state the grounds for taking such action, but such order
refuse registration of the security thereunder, or revoke the effectivity of a of suspension although binding upon the persons notified thereof, shall be
registration statement and the registration of the security thereunder after deemed confidential, and shall not be published. Upon the issuance of the
due notice and hearing by issuing an order to such effect, setting forth its suspension order, no further offer or sale of such security shall be made
findings in respect thereto, if it finds that: until the same is lifted or set aside by the Commission. Otherwise, such sale
shall be void.
992 MM • N'fARI J I PR .1£N 093
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13.5. Notice of issuance of such order shall be given to the issuer an ord r p cifying th ground for uch action, and by notifyin the issuer,
and every dealer and broker who shall have notified the Commission of an underwriter, dealer or broker known as participating in such offering.
intention to sell such security. 15.2. The refusal to furnish information required by the Commission
13.6. A registration statement may be withdrawn by the issuer only may be a ground for the issuance of an order of suspension pursuant to
with the consent of the Commission. Subsection 15.1. Upon the issuance of any such order and notification to
the issuer, underwriter, dealer or broker known as participating in such
SEC. 14. Amendments to the Registration Statement. - offering, no further offer or sale of any such security shall be made until the
14.1. If a registration statement is on its face incomplete or inaccurate same is lifted or set aside by the Commission. Otherwise, such sale shall be
in any material respect, the Commission shall issue an order directing the void.
amendment of the registration statement. Upon compliance with such order, 15.3. Upon issuance of an order of suspension, the Commission shall
the amended registration statement shall become effective in accordance conduct a hearing. If the Commission determines that the sale of any
with the procedure mentioned in Subsection 12.6 liereof. security should be revoked, it shall issue an order prohibiting sale of such
security.
14.2. An amendment filed prior to the effective date of the registration
statement shall recommence the forty-five (45)-day period within which the Until the issuance of a final order, the suspension of the right to
Commission shall act on a registration statement. An amendment filed sell, though binding upon the persons notified thereof, shall be deemed
after the effective date of the registration statement shall become effective confidential, and shall not be· published, unless it shall appear that the order
only upon such date as determined by the Commission. of suspension has been violated after notice. If, however, the Commission
finds that the sale of the security will neither be fraudulent nor result in
14.3. If any change occurs in the facts set forth in a registration fraud, it shall forthwith issue an order revoking the order of suspension,
statement, the issuer shall file an amendment thereto setting forth the and such security shall be restored to its status as a registered security as
change. of the date of such order of suspension.
14.4. If, at any time, the Commission finds that a registration
statement contains any false statement or omits to state any fact required CHAPTER IV
to be stated therein or necessary to make the statements therein not
Regulation of Pre-Need Plans
misleading, the Commission may conduct an examination, and, after
due notice and hearing, issue an Order suspending the effectivity of the SEC. 16. Pre-Need Plans. - No person shall sell or offer for sale to the
registration statement. If the statement is duly amended, the suspension public any pre-need plan except in accordance with rules and regulations
order may be lifted. which the Commission shall prescribe. Such rules shall regulate the sale
14.5. In making such examination the Commission or any officer or of pre-need plans by, among other things, requiring the registration of
officers designated by it may administer oaths and affirmations and shall pre-need plans, licensing persons involved in the sale of pre-need plans,
have access to, and may demand the production of, any books, records or requiring disclosures to prospective plan holders, prescribing advertising
documents relevant to the examination. Failure of the issuer, underwriter, guidelines, providing for uniform accounting system; reports and record
or any other person to cooperate, or his obstruction or refusal to undergo an keeping with respect to such plans, imposing capital, bonding and other
examination, shall be a ground for the issuance of a suspension order. financial responsibility, and establishing trust funds for the payment of
benefits under such plans.
SEC. 15. Suspension of Registration. -
15.1. If, at any time, the information contained in the registration CHAPTERV
statement filed is or has become misleading, incorrect, inadequate or Reportorial Requirements
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, the SEC. 17. Periodic and Other Reports of Issuers. -
Commission may require from the issuer such further information as
may in its judgment be necessary to enable the Commission to ascertain 17.1. Every issuer satisfying the requirements in Subsection 17.2
whether the registration of such security should be revoked on any ground hereof shall file with the Commission:
specified in this Code. The Commission may also suspend the right to sell (a) Within one hundred thirty-five (135) days, after the end
and offer for sale such security pending further investigation, by entering of the issuer's fiscal year, or such other time as the Commission may
 994 MMENTARIE AND JURI R EN E N AJ l'lilNDI /\
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OF THE PHILIPPINES
prescribe, an annual report which shall include, among others, a 17.6. Within uch p riod a the Commis ion may prescribe preceding
balance sheet, profit and loss statement and statement of cash flows the annual meeting of the holders of any equity security of a class entitled
for such last fiscal year, certified by an independent certified publi� to vote at such meeting, the issuer shall transmit to such holders an annual
accountant, and a management discussion and analysis of results of report in conformity with Subsection 17.5.
operations; and SEC. 18. Reports by Five per centum (5%) Holders of Equity Securities. -
(b) Such other periodical reports for interim fiscal periods 18.1. In every case in which an issuer satisfies the requirements of
and current reports on significant developments of the issuer as the Subsection 17.2 hereof, any person who acquires directly or indirectly the
Commission may prescribe as necessary to keep current information beneficial ownership of more than five per centum (5%) of such class or in
on the operation of the business and financial condition of the issuer. excess of such lesser per centum as the Commission by rule may prescribe,
17.2. The reportorial requirements · of Subsection 17.1 shall apply to shall, within ten (10) days after such acquisition or such reasonable time
the following: . as fixed by the Commission, submit to the issuer of the security, to the
Exchange where the security is traded, and to the Commission a sworn
(a) An issuer which has sold a class of its securities pursuant statement containing the following information and such other information
to a registration under Section 12 hereof: Provided, however, That the as the Commission may require in the public interest or for the protection
obligation of such issuer to file reports shall be suspended for any of investors:
fiscal year after the year such registration became effective if such
issuer, as of the first day of any such fiscal year, has less than one (a) The personal background, identity, residence, and
hundred (100) holders of such class of securities or such other number citizenship of, and the nature of such beneficial ownership by, such
as the Commission shall prescribe and it notifies the Commission of person and all other persons by whom or on whose behalf the purchases
such; are effected; in the event the beneficial owner is a juridical person, the
lines of business of the beneficial owner shall also be reported;
(b) An issuer with a class of securities listed for trading on an
Exchange; and (b) If the purpose of the purchases or prospective purchases
is to acquire control of the business of the issuer of the securities, any
(c) An issuer with assets of at least Fifty million pesos plans or proposals which such persons may have that will effect a
(P50, 000,000.00) or such other amount as the Commission •'shall major change in its business or corporate structure;
prescribe, and having Two hundred (200) or more holders each
holding at least One hundred (100) shares of a class of its equity (c) The number of shares of such security which are
securities: Provided, however, That the obligation of such issuer to file beneficially owned, and the number of shares concerning which there
reports shall be terminated ninety (90) days after notification to the is a right to acquire, directly or indirectly, by: (i) such person, and
Commission by the issuer that the number of its holders holding at (ii) each associate of such person, giving the background, identity,
least one hundred (100) shares is reduced to less than One hundred residence, and citizenship of each such associate; and
(100). (d) Information as to any contracts, arrangements, or
17.3. Every issuer of a security listed for trading on an Exchange understanding with any person with respect to any securities of the
_ issuer including but not limited to transfer, joint ventures, loan or
shall file with the Exchange a copy of any report filed with the Commission
under Subsection 17 .1 hereof. option arrangements, puts or calls, guarantees or division of losses
or profits, or proxies naming the persons with whom such contracts,
17.4. All reports (including financial statements) required to be filed arrangements, or understanding have been entered into, and giving
with the Commission pursuant to Subsection 17.1 hereof shall be in such the details thereof.
form, contain such information and be filed at such times as the Commission
shall �rescribe, and shall be in lieu of any periodical or current reports or 18.2. If any change occurs in the facts set forth in the statements,
financial statements otherwise required to be filed under the Corporation an amendment shall be transmitted to the issuer, the Exchange and the
Code. Commission.
17.5. Every issuer which has a class of equity securities satisfying 18.3. The Commission, may permit any person to file in lieu of the
any of the requirements in Subsection 17.2 shall furnish to each holder of statement required by Subsection 17.1 hereof, a notice stating the name
�uch eq�ity security an annual report in such form and containing such of such person, the shares of any equity securities subject to Subsection
mformation as the Commission shall prescribe. 17.1 which are owned by him, the date of their acquisition and such other
996 MMENTARIE JURI PRUDEN • N 9!)
THE REVISED CORPORATION CODE E
OF THE PHILIPPINES
f
information as the Commission may specify, if it appears to the Commission (10) day aft r n ti of n incr as in the consideration ofered to
that such securities were acquired by such person in the ordinary course of curity hold r , as de crib d in paragraph (e) of this subsection, is
his business and were not acquired for the purpose of and do not have the first publish d or sent or given to security holders.
effect of changing or influencing the control of the issuer nor in connection
(e) Where any person varies the terms of a tender offer or
with any transaction having such purpose or effect.
request or invitation for tenders before the expiration thereof by
increasing the consideration offered to holders of such securities,
CHAPTER VI such person shall pay the increased consideration to each security
Protection of Shareholder Interests holder whose securities are taken up and paid for whether or not such
securities have been taken up by such person before the variation of
SEC. 19. Tender Offers. - the tender offer or request or invitation.
19.1. (a) Any person or group of persons acting in concert who intends 19.2. It shall be unlawful for any person to make any untrue statement
to acquire at least fifteen percent (15%) of any class of any equity security of a material fact or omit to state any material fact necessary in order to
of a listed corporation or of any class of any equity security of a corporation make the statements made, in the light of the circumstances under which
with assets of at least Fifty Million Pesos (P50,000,000.00) and having two they are made, not misleading, or to engage in any fraudulent, deceptive, or
hundred (200) or more stockholders with at least one hundred (100) shares manipulative acts or practices, in connection with any tender offer or request
each or who intends to acquire at least thirty percent (30%) of such equity or invitation for tenders, or any solicitation of security holders in opposition
over a period of twelve (12) months shall make a tender offer to stockholders to or in favor of any such offer, request, or invitation. The Commission shall,
by filing with the Commission a declaration to that effect; and furnish the for the purposes of this subsection, define and prescribe means reasonably
issuer, a statement containing such of the information required in Section designed to prevent, such acts and practices as are fraudulent, deceptive, or
17 of this Code as the Commission may prescribe. Such person or group of manipulative.
persons shall publish all requests or invitations for tender, or materials
making a tender offer or requesting or inviting letters of such a security. SEC. 20. Proxy Solicitations. -
Copies of any additional material soliciting or requesting such tender 20.1. Proxies must be issued and proxy solicitation must be made in
offers subsequent to the initial solicitation or request shall contain such accordance with rules and regulations to be issued by the Commission;
information as the Commission may prescribe, and shall be filed wi"th the
Commission and sent to the issuer not later than the time copies of such 20.2. Proxies must be in writing, signed by the stockholder or his duly
materials are first published or sent or given to security holders. authorized representative and filed before the scheduled meeting with the
corporate secretary.
(b) Any solicitation or recommendation to the holders of such
a security to accept or reject a tender offer or request or invitation for 20.3. Unless otherwise provided in the proxy, it shall be valid only for
tenders shall be made in accordance with such rules and regulations the meeting for which it is intended. No proxy shall be valid and effective
as the Commission may prescribe. for a period longer than five (5) years at one time.

(c) Securities deposited pursuant to a tender offer or request 20.4. No broker or dealer shall give any proxy, consent or authorization,
or invitation for tenders may be withdrawn by or on behalf of the in respect of any security carried for the account of a customer, to a person
depositor at any time throughout the period that the tender offer _other than the customer, without the express written authorization of such
remains open and if the securities deposited have not been previously customer.
accepted for payment, and at any time after sixty (60) days from the 20.5. A broker or dealer who holds or acquires the proxy for at least
date of the original tender offer or request or invitation, except as the ten per centum (10%) or such percentage as the Commission may prescribe
Commission may otherwise prescribe. of the outstanding share of the issuer, shall submit a report identifying
(d) Where the securities offered exceed that which a person the beneficial owner within ten (10) days after such acquisition, for its own
or group of persons is bound or willing to take up and pay for, the account or customer, to the issuer of the security, to the Exchange where the
securities that are subject of the tender offer shall be taken up as security is traded and to the Commission.
nearly as may be pro rata, disregarding fractions, according to the SEC. 21. Fees for Tender Offers and Certain Proxy Solicitations. -At
number of securities deposited by each depositor. The provisions of the time of filing with the Commission of any statement required under
this subsection shall also apply to securities deposited within ten Section 19 for any tender offer or Section 72.2 for issuer repurchases, or
99 MMENTARIE A JURI PR DEN • 9 9
THE REVISED ORP RATION ODE E E
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Section 20 for proxy or consent solicitation, the Commission may require by reason of his r lation hip to th issuer, any profit r alized by him from
that the person making such filing pay a fee of not more than one-tenth any purchase and sale, or any sale and purchase, of any equity security
(1/10) of one per centum (1%) of: of such issuer within any period of less than six (6) months, unless such
21.1. The proposed aggregate purchase price in the case of a security was acquired in good faith in connection with a debt previously
transaction under Sections 20 or 72.2; contracted, shall inure to and be recoverable by the issuer, irrespective of
any intention of holding the security purchased or of not repurchasing the
21.2. The proposed payment in cash, and the value of any securities security sold for a period exceeding six (6) months. Suit to recover such
or property to be transferred in the acquisition, merger or consolidation, or profit may be instituted before the Regional Trial Court by the issuer, or
the cash and value of any securities proposed to be received upon the sale or by the owner of any security of the issuer in the name and in behalf of the
disposition of such assets in the case of a solicitation under Section 20. The issuer if the issuer shall fail or refuse to bring such suit within sixty (60)
Commission shall prescribe by rule diminishing fees in inverse proportion days after request or shall fail diligently to prosecute the same thereafter,
to the value of the aggregate price of the offering. but no such suit shall be brought more than two (2) years after the date
such profit was realized. This subsection shall not be construed to cover any
SEC. 22. Internal Record Keeping and Accounting Controls. - Every
issuer which has a class of securities that satisfies the requirements of transaction where such beneficial owner was not such both at the time of the
purchase and sale, or the sale and purchase, of the security involved, or any
Subsection 17.2 shall:
transaction or transactions which the Commission by rules and regulations
22.1. Make and keep books, records, and accounts which, in reasonable may exempt as not comprehended within the purpose of this subsection.
detail accurately and fairly reflect the transactions and dispositions of
assets of the issuer; 23.3. It shall be unlawful for any such beneficial owner, director, or
officer, directly or indirectly, to sell any equity security of such issuer if the
22.2. Devise and maintain a system of internal accounting controls person selling the security or his principal: (a) Does not own the security
sufficient to provide reasonable assurances that: (a) Transactions and sold; or (b) If owning the security, does not deliver it against such sale
access to assets are pursuant to management authorization; (b) Financial within twenty (20) days thereafter, or does not within five (5) days after
statements are prepared in conformity with generally accepted accounting such sale deposit it in the mails or other usual channels of transportation;
principles that are adopted by the Accounting Standards Council and the but no person shall be deemed to have violated this subsection if he proves
rules promulgated by the Commission with regard to the preparation of that notwithstanding the exercise of good faith he was unable to make such
financial statements; and (c) Recorded assets are compared with existing delivery or deposit within such time, or that to do so would cause undue
assets at reasonable intervals and differences are reconciled. inconvenience or expense.
SEC. 23. Transactions of Directors, Officers and Principal 23.4. The provisions of Subsection 23.2 shall not apply to any
Stockholders. - purchase and sale, or sale and purchase, and the provisions of Subsection
23.3 shall not apply to any sale, of an equity security not then or thereafter
23.1. Every person who is directly or indirectly the beneficial owner
held by him in an investment account, by a dealer in the ordinary course
of more than ten per centum (10%) of any class of any equity security which of his business and incident to the establishment or maintenance by him of
satisfies the requirements of Subsection 17.2, or who is a director or an officer a primary or secondary market, otherwise than on an Exchange, for such
of the issuer of such security, shall file, at the time either such requirement security. The Commission may, by such rules and regulations as it deems
is first satisfied or within ten days after he becomes such a beneficial owner, necessary or appropriate in the public interest, define and prescribe terms
director, or officer, a statement with the Commission and, if such security is and conditions with respect to securities held in an investment account and
listed for trading on an Exchange; also with the Exchange, of the amount of transactions made in the ordinary course of business and incident to the
all equity securities of such issuer of which he is the beneficial owner, and establishment or maintenance of a primary or secondary market.
within ten (10) days after the close of each calendar month thereafter, if
there has been a change in such ownership during such month, shall file with
CHAPTER VII
the Commission, and if such security is listed for trading on an Exchange,
shall also file with the Exchange, a statement indicating his ownership at Prohibitions on Fraud, Manipulation, and Insider Trading
the close of the calendar month and such changes in his ownership as have
occurred during such calendar month. SEC. 24. Manipulation of Security Prices; Devices and Practices. -
24.1 It shall be unlawful for any person acting for himself or through a
23.2. For the purpose of preventing the unfair use of information dealer or broker, directly or indirectly:
which may have been obtained by such beneficial owner, director, or officer
1000 OMMENTARIE AND JURI RU EN E N
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(a) To create a false or misleading appearance of active
trading in any listed security traded in an Exchange or any other 24.2. Nop rson shall use or employ, in connection with the purchase
trading market (hereafter referred to purposes of this Chapter as or sale of any security any manipulative or deceptive device or contrivance.
Neither shall any short sale be effected nor any stop-loss order be executed
"Exchange"):
in connection with the purchase or sale of any security except in accordance
(i) By effecting any transaction in such security which with such rules and regulations as the Commission may prescribe as
involves no change in the beneficial ownership thereof; necessary or appropriate in the public interest or for the protection of
investors.
(ii) By entering an order or orders for the purchase or
sale of such security with the knowledge that a simultaneous 24.3. The foregoing provisions notwithstanding, the Commission,
order or orders of substantially the same size, time and price, for having due regard to the public interest and the protection of investors,
the sale or purchase of any &uch security, has or will be entered may, by rules and regulations, allow certain acts or transactions that may
by or for the same or different parties; 0r otherwise be prohibited under this Section.
(iii) By performing similar act where there is no change SEC. 25. Regulation of Option Trading. - No member of an Exchange
in beneficial ownership. shall, directly or indirectly endorse or guarantee the performance of any
put, call, straddle, option or privilege in relation to any security registered
(b) To effect, alone or with others, a series of transactions in on a securities exchange.
securities that:
The terms "put," "call," "straddle," ''option," or ''privilege" shall not
(i) Raises their price to induce the purchase of a include any registered warrant, right or convertible security.
security, whether of the same or a different class of the same
issuer or of a controlling, controlled, or commonly controlled SEC. 26. Fraudulent Transactions. - It shall be unlawful for any
company by others; person, directly or indirectly, in connection with the purchase or sale of any
securities to:
(ii) Depresses their price to induce the sale of a security,
whether of the same or a different class, of the same issuer or 26.1. Employ any device, scheme, or artifice to defraud;
of a controlling, controlled, or commonly controlled company by 26.2. Obtain money or property by means of any untrue statement of
others; or a material fact of any omission to state a material fact necessary in order to
(iii) Creates active trading to induce such a purchase or make the statements made, in the light of the circumstances under which
they were made, not misleading; or
sale through manipulative devices such as marking the close,
painting the tape, squeezing the float, hype and dump, boiler 26.3. Engage in any act, transaction, practice or course of business
room operations and such other similar devices. which operates or would operate as a fraud or deceit upon any person.
(c) To circulate or disseminate information that the price SEC. 27. Insider's Duty to Disclose When Trading. -
of any security listed in an Exchange will or is likely to rise or fall
27.1. It shall be unlawful for an insider to sell or buy a security of the
because of manipulative market operations of any one or more issuer, while in possession of material information with respect to the issuer
persons conducted for the purpose of raising or depressing the price of or the security that is not generally available to the public, unless: (a) The
the security for the purpose of inducing the purchase or sale of such insider proves that the information was not gained from such relationship;
security. or (b) If the other party selling to or buying from the insider (or his agent)
(d) To make false or misleading statement with respect to any is identified, the insider proves: (i) that he disclosed the information to
material fact, which he knew or had reasonable ground to believe was the other party, or (ii) that he had reason to believe that the other party
so false or misleading, for the purpose of inducing the purchase or sale otherwise is also in possession of the information. A purchase or sale of a
of any security listed or traded in an Exchange. security of the issuer made by an insider defined in Subsection 3.8, or such
insider's spouse or relatives by affinity or consanguinity within the second
(e) To effect, either alone or others, any series of transactions degree, legitimate or common-law, shall be presumed to have been effected
for the purchase and/or sale of any security traded in an Exchange for while in possession of material non-public information if transacted after
the purpose of pegging, fixing or stabilizing the price of such security, such information came into existence but prior to dissemination of such
unless otherwise allowed by this Code or by rules of the Commission. information to the public and the lapse of a reasonable time for the market
to absorb such information: Provided, however, That this presumption shall
 1002 COMMENTARIE AND JURI PRUDEN E ON
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OF THE PHILIPPINES
be rebutted upon a showing by the purchaser or seller that he was not aware
an ass ciat d person of any broker or dealer unless registered as such with
of the material non-public information at the time of the purchase or sale.
the Commission.
27.2. For purposes of this Section, information is "material non­ 28.2. No registered broker or dealer shall employ any salesman or
P_Ublic" if: (a) It has not been generally disclosed to the public and would any associated person, and no issuer shall employ any salesman, who is not
hkely a�ect the market price of the security after being disseminated to registered as such with the Commission.
the pubhc and the lapse of a reasonable time for the market to absorb the
I
informatio�; or (b) would be considered by a reasonable person important 28.3. The Commission, by rule or order, may conditionally or
under the circumstances in determining his course of action whether to buy unconditionally exempt from Subsections 28.1 and 28.2 any broker, dealer,
sell or hold a security. salesman, associated person of any broker or dealer, or any class of the
foregoing, as it deems consistent with the public interest and the protection
27.3. It shall be unlawful for any. insider to communicate material of investors. .,
I
non-public information about the issuer or the security to any person who
_ 28.4. The Commission shall promulgate rules and regulations
by virtue of the communication, becomes an insider as defined in Subsectio�
3.8, where the insider communicating the information knows or has reason prescribing the qualifications for registration of each category of applicant,
to �el�eve that �uch person will likely buy or sell a security of the issuer which shall, among other things, require as a condition for registration that:
while m possession of such information. (a) If a natural person, the applicant satisfactorily pass a
27.4. (a) It shall be unlawful where a tender offer has commenced or written examination as to his proficiency and knowledge in the area
is about to commence for: of activity for which registration is sought;

(i) Any person (other than the tender offeror) who is in (b) In the case of a broker or dealer, the applicant satisfy a
possession of material non-public information relating to such minimum net capital as prescribed by the Commission, and provide
tender offer, to buy or sell the securities of the issuer that are a bond or other security as the Commission may prescribe to secure
sought or to be sought by such tender offer if such person knows compliance with the provisions of this Code; and
or has reason to believe that the information is non-public and (c) If located outside of the Philippines, the applicant files a
has been acquired directly or indirectly from the tender offeror written consent to service of process upon the Commission pursuant
those acting on its behalf, the issuer of the securities sought 0� to Section 65 hereof.
to be sought by such tender offer, or any insider of such issuer;
and 28.5. A broker or dealer may apply for registration by filing with
the Commission a written application in such form and containing such
(ii) Any tender offeror, those acting on its behalf, the information and documents concerning such broker or dealer as the
.
issuer of the securities sought or to be sought by such tender Commission by rule shall prescribe.
offer, and any insider of such issuer to communicate material
non-public information relating to the tender offer to any 28.6. Registration of a salesman or of an associated person of a
other person where such communication is likely to result in a registered broker or dealer may be made upon written application filed with
violation of Subsection 27.4 (a)(i). the Commission by such salesman or associated person. The application
shall be separately signed and certified by the registered broker or dealer to
(b) For purposes of this subsection the term "securities of the which such salesman or associated person is to become affiliated, or by the
.
issue� �ought or t � be sought by such tender offer" shall include any issuer in the case of a salesman employed, appointed or authorized solely
securities convertible or exchangeable into such securities or any by such issuer. The application shall be in such form and contain such
options or rights in any of the foregoing securities. information and documents concerning the salesman or associated person
as the Commission by rule shall prescribe. For purposes of this Section, a
CHAPTER VIII salesman shall not include any employee of an issuer whose compensation
is not determined directly or indirectly on sales of securities of the issuer.
Regulation of Securities Market. Professionals
28.7. Applications filed pursuant to Subsections 28.5 and 28.6 shall
SEC. 28. Registration of Brokers, Dealers, Salesmen and Associated be accompanied by a registration fee in such reasonable amount prescribed
Persons. - by the Commission.
2 .1. No pers?? s?all engage in the business of buying or selling
II
_ � - 28.8. Within thirty (30) days after the filing of any application under
securities m the Phihppmes as a broker or dealer, or act as a salesman, or this Section, the Commission shall by order: (a) Grant registration if it

I
 1004 COMMENTARIES AND JURI PRUDENCE ON l 0
THE REVISED CORPORATION CODE
OF THE PHILIPPINES
determines that the requirements of this Section and the qualifications for (c) Has failed to sati fy the qualifications or requirements for
registration set forth in its rules and regulations have been satisfied; or (b) r gi tration prescribed under Section 28 and the rules and regulations
Deny said registration. of the Commission promulgated thereunder;

28.9. The names and addresses of all persons approved for registration (d) Has been convicted, by a competent judicial or adminis­
as brokers, dealers, associated persons or salesmen and all orders of the trative body of an offense involving moral turpitude, fraud, embezzle­
Commission with respect thereto shall be recorded in a Register of Securities ment, counterfeiting, theft, estafa, misappropriation, forgery, bribery,
Market Professionals kept in the office of the Commission which shall be false oath, or perjury, or of a violation of securities, commodities,
open to public inspection. banking, real estate or insurance laws;

28.10. Every person registered pursuant to this Section shall file (e) Is enjoined or restrained by a competent judicial or
administrative body from engaging in securities, commodities,
:"'ith the Commission, in such form as· the Commission shall prescribe,
_ banking, real estate or insurance activities or from willfully violating
mformat1on necessary to keep the application for registration current and
laws governing such activities;
accurate, including in the case of a broker or dealer changes in salesmen
'
associated persons and owners thereof. (f) Is subject to an order of a competent judicial or adminis-
trative body refusing, revoking or suspending any registration, license
28.l�. �very person registered pursuant to this Section shall pay to or other permit under this Code, the rules and regulations promul­
the Comm1ss10n an annual fee at such time and in such reasonable amount gated thereunder, any other law administered by the Commission;
as the Commission shall prescribe. Upon notice by the Commission that
such annual fee has not been paid as required, the registration of such (g) Is subject to an order of a self-regulatory organization
person shall be suspended until payment has been made. suspending or expelling him from membership or participation
therein or from association with a member or participant thereof;
28.12. The registration of a salesman or associated person shall be
automatically terminated upon the cessation of his affiliation with said (h) Has been found by a competent judicial or administrative
registered broker or dealer, or with an issuer in the case of a salesman body to have willfully violated any provisions of securities, commodities,
employed, appointed or authorized by such issuer. Promptly following any banking, real estate or insurance laws, or has willfully aided, abetted,
such cessation of affiliation, the registered broker or dealer, or issuer, as the counseled, commanded, induced or procured such violation; or
case may be, shall file with the Commission a notice of separation of such (i) Has been judicially declared insolvent.
salesman or associated person.
For purposes of this subsection, the term "competent judicial or
SEC. 29. Revocation, Refusal, or Suspension of Registration of Brokers, administrative body" shall include a foreign court of competent jurisdiction
Dealers, Salesmen and Associated Persons. - and a foreign financial regulator.
29.1. Registration under Section 28 of this Code may be refused, or any 29.2. (a) In cases of charges against a salesman or.. associated person,
. _
registrat10n granted thereunder may be revoked, suspended, or limitations notice thereof shall also be given the broker, dealer or issuer employing
placed thereon, by the Commission if, after due notice and hearing, the such salesman or associated person.
. _
Comm1ss10n determines the applicant or registrant:
(b) Pending the hearing, the Commission shall have the
(a) Has willfully violated any provision of this Code, any rule, power to order the suspension of such broker's, dealer's, associated
regulation or order made hereunder, or any other law administered person's or salesman's registration: Provided, That such order
by the Commission, or in the case of a registered broker dealer or shall state the cause for such suspension. Until the entry of a final
associated person has failed to supervise, with a view to �reventing order, the suspension of such registration, though binding upon the
such violation, another person who commits such violation; persons notified thereof, shall be deemed confidential, and shall not
be published, unless it shall appear that the order of suspension has
(b) Has willfully made or caused to be made a materially been violated after notice.
false or misleading statement in any application for registration or
report filed with the Commission or a self-regulatory organization or 29.3. The order of the Commission refusing, revoking, suspending
has willfully omitted to state any material fact that is required t� be or placing limitations on a registration as herein above provided, together
with its findings, shall be entered in the Register of Securities Market
stated therein;
Professionals. The suspension or revocation of the registration of a dealer or
 1 7
1006 COMMENTARIES AND JURISPRUDEN EON E
THE REVISED CORPORATION CODE
OF THE PHILIPPINES
2.2. (a) No broker, d. al r, salesman or associated person of a broker
broker shall also automatically suspend the registration of all salesmen and
or dealer, singly or in concert with any other person, shall ma�e, create or
associated persons affiliated with such broker or dealer.
operate, or enable another to make, create or operate, any tradmg market,
29.4. It shall be sufficient cause for refusal, revocation or suspension otherwise than on a registered Exchange, for the buying and selling of any
of a broker's or dealer's registration, if any associated person thereof or any security, except in accordance with rules and regulations the Commission
juridical entity controlled by such associated person has committed any act may prescribe.
or omission or is subject to any disability enumerated in paragraphs (a)
(b) The Commission may promulgate rules and regulations
through (i) of Subsection 29.1 hereof.
governing transactions by brokers, dealers, salesmen or associated
SEC. 30. Transactions and Responsibility of Brokers and Dealers. - persons of a broker or dealer, over any facilities of such trading market
and may require such market to be administered by a self-regulatory
30.1. No broker or dealer shall deal in or otherwise buy or sell, for its organization determined by the Commission as capable of insuring
own account or for the account of customers, securities listed on an Exchange the protection of investors comparable to that provided in the case of a
issued by any corporation where any stockholder, director, associated registered Exchange. Such self-regulatory organization must provide
person or salesman, or authorized clerk of said broker or dealer and all the a centralized marketplace for trading and must satisfy requirements
relatives of the foregoing within the fourth civil degree of consanguinity or comparable to those prescribed for registration of Exchanges in
affinity, is at the time holding office in said issuer corporation as a director, Section 33 of this Code.
president, vice-president, manager, treasurer, comptroller, secretary or any
office of trust and responsibility, or is a controlling person of the issuer. SEC. 33. Registration of Exchanges. -
30.2. No broker or dealer shall effect any transaction in securities 33.1. Any Exchange may be registered as such with the Commission
or induce or attempt to induce the purchase or sale of any security except under the terms and conditions hereinafter provided in this Section and
in compliance with such rules and regulations as the Commission shall Section 40 hereof, by filing an application for registration in such form and
prescribe to ensure fair and honest dealings in securities and provide containing such information and supporting documents as the Commission
financial safeguards and other standards for the operation of brokers and by rule shall prescribe, including the following:
dealers, including the establishment of minimum net capital requirements,
(a) An undertaking to comply and enforce compliance by its
the acceptance of custody and use of securities of customers, aiid the
members with the provisions of this Code, its implementing rules or
carrying and use of deposits and credit balances of customers.
regulations and the rules of the Exchange;
SEC. 31. Development of Securities Market Professionals. - The
(b) The organizational charts of the Exchange, rules of
Commission, in joint undertaking with self-regulatory organizations,
procedure, and a list of its officers and members;
organizations and associations of finance professionals as well as private
educational and research institutions shall undertake or facilitate/organize (c) Copies of the rules of the Exchange; and
continuing training, conferences/seminars, updating programs, research
and development as well as technology transfer at the latest and advanced (d) An undertaking that in the event a member firm becomes
trends in issuance and trading of securities, derivatives, commodity trades insolvent or when the Exchange shall have found that the financial
and other financial instruments, as well as securities markets of other condition of its member firm has so deteriorated that it cannot readily
countries. meet the demands of its customers for the delivery of securities and/
or payment of sales proceeds, the Exchange shall, upon order of the
CHAPTER IX Commission, take over the operation of the insolvent member firm
and immediately proceed to settle the member firm's liabilities to its
Exchanges and Other Securities Trading Markets
customers.
SEC. 32. Prohibition on Use of Unregistered Exchange; Regulation of 33.2. Registration of an Exchange shall be granted upon compliance
Over-the-Counter Markets. - with the following provisions:
32.1. No broker, dealer, salesman, associated person of a broker or (a) That the applicant is organized as a stock corporation:
dealer, or Exchange, directly or indirectly, shall make use of any facility of Provided, That any registered Exchange existing prior to the effectivity
an Exchange in the Philippines to effect any transaction in a security, or to of this Code shall within one (1) year reorganize as a stock corporation
report such transaction, unless such Exchange is registered as such under pursuant to a demutualization plan approved by the Commission;
Section 33 of this Code.
1008 COMMENTARIES AND JURISPRUDENCE ON 1 9
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(b) That the applicant is engaged solely in the business of p rmit th exchange organized as a stock corporation to use a different
operating an exchange: Provided, however, That the Commission governanc structur : Provided, further, That the Commission is
may adopt rules, regulations or issue an order, upon application, satisfied that the Exchange is acting in the public interest and is
exempting an Exchange organized as a stock corporation and owned able to effectively operate as a self-regulatory organization under
and controlled by another juridical person from this restriction; this Code: Provided, finally, That any registered exchange existing
prior to the effectivity of this Code shall immediately comply with this
(c) Where the Exchange is organized as a stock corporation, requirement.
that no person may beneficially own or control, directly or indirectly,
more than five percent (5%) of the voting rights of the Exchange and (h) The president and other management of the Exchange to
no industry or business group may beneficially own or control, directly consist only of persons who are not members and are not associated
or indirectly, more than twenty percent (20%) of the voting rights of in any capacity, directly or indirectly with any broker or dealer or
the Exchange: Provided, however, That the.Commission may adopt member or listed company of the Exchange: Provided, That the
rules, regulations or issue an order, upon application, exempting an Exchange may only appoint, and a person may only serve, as an officer
applicant from this prohibition where it finds that such ownership of the exchange if such person has not been a member or affiliated
or control will not negatively impact on the exchange's ability to with any broker, dealer, or member of the Exchange for a period of at
effectively operate in the public interest; least two (2) years prior to such appointment;

(d) The expulsion, suspension, or disciplining of a member (i) The transparency of transactions on the Exchange;
and persons associated with a member for conduct or proceeding (j) The equitable allocation of reasonable dues, fees, and
inconsistent with just and equitable principles of fair trade, and for other charges among members and issuers and other persons using
violations of provisions of this Code, or any other Act administered by any facility or system which the Exchange operates or controls;
the Commission, the rules, regulations and orders thereunder, or the
rules of the Exchange; (k) Prevention of fraudulent and manipulative acts and
practices, promotion of just and equitable principles of trade, and, in
(e) A fair procedure for the disciplining of members and general, protection of investors and the public interest; and
persons associated with members, the denial of membership to any
person seeking to be a member, the barring of any pers�n from (1) The transparent, prompt and accurate clearance and
association with a member, and the prohibition or limitation of any settlement of transactions effected on the Exchange.
person from access to services offered by the Exchange; 33.3. If the Commission finds that the applicant Exchange is capable
(f) That the brokers in the board of the Exchange shall of complying and enforcing compliance by its members, and persons
comprise of not more than forty-nine percent (49%) of such board and associated with such members, with the provisions of this Code, its rules
shall proportionately represent the Exchange membership in terms and regulations, and the rules of the Exchange, and that the rules of the
of volume/value of trade and paid up capital, and that any natural Exchange are fair, just and adequate, the Commission shall cause such
person associated with a juridical entity that is a member shall Exchange to be registered. If, after notice due and hearing, the Commission
himself be deemed to be a member for this purpose: Provided, That finds otherwise, the application shall be denied.
any registered Exchange existing prior to the effectivity of this Code 33.4. Within ninety (90) days after the filing of the application the
shall immediately comply with this requirement; Commission may issue an order either granting or denying registration as
(g) For the board of the Exchange to include in its composition an Exchange, unless the Exchange applying for registration shall withdraw
(i) the president of the Exchange, and (ii) no less than fifty-one percent its application or shall consent to the Commission's deferring action on its
(51 %) of the remaining members of the board to be comprised of three application for a stated longer period after the date of filing. The filing
(3) independent directors and persons who represent the interests with the Commission of an application for registration by an Exchange
of issuers, investors, and other market participants, who are not shall be deemed to have taken place upon the receipt thereof. Amendments
associated with any broker or dealer or member of the Exchange for to an application may be made upon such terms as the Commission may
a period of two (2) years prior to his/her appointment. No officer or prescribe.
employee of a member, its subsidiaries or. affiliates or related interests 33.5. Upon the registration of an Exchange, it shall pay a fee in such
shall become an independent director: Provided, however, That the amount and within such period as the Commission may fix.
Commission may by rule, regulation, or order upon application,
 1 11
1010 COMMENTARIE AND JURISPRUDEN E ON
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OF THE PHILIPPINES
days or, with th appr val of th Pr sident of the Philippines, summarily
33.6. Upon appropriate application in accordance with the rules and
to su p nd all trading on any securities Exchange or other trading market
regulations of the Commission and upon such terms as the Commission may
for a period of more than thirty (30) but not exceeding ninety (90) days:
deem necessary for the protection of investors, an Exchange may withdraw
Provided, however, That the Commission, promptly following the issuance
its registration or suspend its operations or resume the same.
of the order of suspension, shall notify the affected issuer of the reasons for
SEC. 34. Segregation and Limitation of Functions of Members, Brokers such suspension and provide such issuer with an opportunity for hearing to
and Dealers. - determine whether the suspension should be lifted.
34.1. It shall be unlawful for any member-broker of an Exchange to 36.2. Wherever two or more Exchanges or other trading markets exist,
effect any transaction on such Exchange for its own account, the account of the Commission may require and enforce uniformity of trading regulations
an associated person, or an account with respect to which it or an associated in and/or between or among said Exchanges or other trading markets.
person thereof exercises investment discretion: Provided, however, That
36.3. In addition to the existing Philippine Stock Exchange, the
this section shall not make unlawful-
Commission shall have the authority to determine the number, size
(a) Any transaction by a member-broker acting in the capacity and location of stock Exchanges, other trading markets and commodity
of a market maker; Exchanges and other similar organizations in the light of national or
regional requirements for such activities with the view to promote, enhance,
(b) Any transaction reasonably necessary to carry on an odd­ protect, conserve or rationalize investment.
lot transactions;
36.4. The Commission, having due regard to the public interest,
(c) Any transaction to offset a transaction made in error; and the protection of investors, the safeguarding of securities and funds, and
(d) Any other transaction of a similar nature as may be maintenance of fair competition among brokers, dealers, clearing agencies,
defined by the Commission. and transfer agents, shall promulgate rules and regulations for the prompt
and accurate clearance and settlement of securities transactions.
34.2. In all instances where the member-broker effects a transaction
on an Exchange for its own account or the account of an associated person or 36.5. (a) The Commission may establish or facilitate the establishment
an account with respect to which it exercises investment discretion,.it shall of trust funds which shall be contributed by Exchanges, brokers, dealers,
disclose to such customer at or before the completion of the transaction it is underwriters, transfer agents, salesmen and other persons transacting in
acting for its own account: Provided, further, That this fact shall be reflected securities, as the Commission may require, for the purpose of compensating
in the order ticket and the confirmation slip. investors for the extraordinary losses or damage they may suffer due to
business failure or fraud or mismanagement of the persons with whom they
34.3. Any member-broker who violates the provisions of this Section transact, under such rules and regulations as the Commission may from
shall be subject to the administrative sanctions provided in Section 54 of time to time prescribe or approve in the public interest.
this Code.
(b) The Commission may, having due regard to the public
SEC. 35. Additional Fees of Exchanges. - In addition to the interest or the protection of investors, regulate, supervise, examine,
registration fee prescribed in Section 33 of this Code, every Exchange shall suspend or otherwise discontinue such and other similar funds under
pay to the Commission, on a semestral basis on or before the tenth day of such rules and regulations which the Commission may promulgate,
the end of every semester of the calendar year, a fee in such an amount as and which may include taking custody and management of the fund
the Commission shall prescribe, but not more than one-hundredth of one per itself as well as investments in and disbursements from the funds
centum (1 %) of the aggregate amount of the sales of securities transacted under such forms of control and supervision by the Commission
on such Exchange during the preceding calendar year, for the privilege of as it may from time to time require. The authority granted to the
doing business, during the preceding calendar year or any part thereof. Commission under this subsection shall also apply to all funds
SEC. 36. Powers with Respect to Exchanges and Other Trading established for the protection of investors, whether established by the
Market. - Commission or otherwise.
SEC. 37. Registration of Innovative and Other Trading Markets. -
36.1. The Commission is authorized, if in its opm10n such action i
is necessary or appropriate for the protection of investors and the public
interest so requires, summarily to suspend trading in any listed security on
The Commission, having due regard for national economic development,
shall encourage competitiveness in the market by promulgating within six
(6) months upon the enactment of this Code, rules for the registration and
I
any Exchange or other trading market for a period not exceeding thirty (30)
1012 COMMEN'l'ARIE AND JURI PRUDEN E N 1013
THE REVISED CORPORATION CODE E
OF THE PHILIPPINES
licensing of innovative and other trading markets or Exchanges covering, but . . An o iati n of br k rs and dealers may be registered as
not limited to, the issuance and trading of innovative securities, securities a cunt1 as ociation pursuant to Subsection 39.3 by filing with the
of small, medium, growth and venture enterprises, and technology-based Commission an application for registration in such form as the Commission,
ventures pursuant to Section 33 of this Code. by rule, may prescribe containing the rules of the association and such other
SEC. 38. Independent Directors. - Any corporation with a class of information and documents as the Commission, by rule, may prescribe
equity securities listed for trading on an Exchange or with assets in excess as necessary or appropriate in the public interest or for the protection of
of Fifty million pesos (P50,000,000.00) and having two hundred (200) or investors.
more holders, at least of two hundred (200) of which are holding at least one 39.3. An association of brokers and dealers shall not be registered as
hundred (100) shares of a class of its equity securities or which has sold a a securities association unless the Commission determines that:
class of equity securities to the public pursuant to an effective registration
statement in compliance with Section 1:2 hereof shall have at least two (2) (a) The association is so organized and has the capacity to be
independent directors or such independent directors shall constitute at least able to carry out the purposes of this Code and to comply with, and
twenty percent (20%) of the members of such board, whichever is the lesser. to enforce compliance by its members and persons associated with its
For this purpose, an "independent director" shall mean a person other than members, with the provisions of this Code, the rules and regulations
an officer or employee of the corporation, its parent or subsidiaries, or any thereunder, and the rules of the association.
other individual having a relationship with the corporation, which would (b) The rules of the association, notwithstanding anything in
interfere with the exercise of independent judgment in carrying out the the Corporation Code to the contrary, provide that:
responsibilities of a director.
(i) Any registered broker or dealer may become a
CHAPTERX member of the association;

Registration, Responsibilities, and (ii) There exist a fair representation of its members
Oversight of Self-Regulatory Organizations to serve on the Board of Directors of the association and in
the administration of its affairs, and that any natural person
SEC. 39. Associations of Securities Brokers, and Dealers, and Other associated with a juridical entity that is a member shall himself
Securities Related Organizations. - be deemed to be a member for this purpose;
39.1. The Commission shall have the power to register as a self­ (iii) The Board of Directors of the association includes
regulatory organization, or otherwise grant licenses, and to regulate, in its composition: (a) The president of the association and
supervise, examine, suspend or otherwise discontinue, as a condition for (b) Persons who represent the interests of issuers and public
the operation of organizations whose operations are related to or connected investors and are not associated with any broker or dealer
with the securities market such as but not limited to associations of brokers or member of the association; that the president and other
and dealers, transfer agents, custodians, fiscal and paying agents, computer management of the association not be a member or associated
services, news disseminating services, proxy solicitors, statistical agencies, with any broker, dealer or member of the association;
securities rating agencies, and securities information processors which
(iv) For the equitable allocation of reasonable dues,
are engaged in the business of: (a) Collecting, processing, or preparing for
fees, and other charges among members and issuers and other
distribution or publication, or assisting, participating in, or coordinating the persons using any facility or system which the association
distribution or publication of, information with respect to transactions in or operates or controls;
quotations for any security; or (b) Distributing or publishing, whether by
means of a ticker tape, a communications network, a terminal display device, (v) For the prevention of fraudulent and manipulative
or otherwise, on a current and continuing basis, information with respect to acts and practices, the promotion of just and equitable principles
such transactions or quotations. The Commission may prescribe rules and of trade, and, in general, the protection of investors and the
regulations which are necessary or appropriate in the public interest or for public interest;
the protection of investors to govern self-regulatory organizations and other
(vi) That its members and persons associated with its
organizations licensed or regulated pursuant to the authority granted in
Subsection 39.1 including the requirement of cooperation within and among, members shall be appropriately disciplined for violation of any
provision of this Code, the rules or regulations thereunder, or
and electronic integration of the records of, all participants in the securities
the rules of the association;
market to ensure transparency and facilitate exchange of information.
1014 OMMENTARIE AND JURI PRUDEN EON ·PllJ DI 101
THE REVISED CORPORATION CODE RE LATI E
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(vii) That a fair procedure for the disciplining of members al may r quir a salesman or associated person employed by a
and persons associated with members, the denial of membership m mb r to be registered with the association in accordance with
to any person seeking membership therein, the barring of any procedures prescribed in the rules of the association.
person from becoming associated with a member thereof, and
the prohibition or limitation by the association of any person 39.5. In any proceeding by a registered securities association to
with respect to access to services offered by the association or a determine whether a person shall be denied membership, or barred from
member thereof. association with a member, the association shall provide notice to the person
under review of the specific grounds being considered for denial, afford him
39.4. (a) A registered securities association shall deny membership an opportunity to defend against the allegations, and keep a record of the
to any person who is not a registered broker or dealer. proceedings. A determination by the association to deny membership shall
(b) A registered securities _association may deny membership be supported by a statement setting forth the specific grounds on which the
to, or condition the membership of, a registered broker or dealer if denial is based.
such broker or dealer: SEC. 40. Powers with Respect to Self-Regulatory Organizations. -
(i) Does not meet the standards of financial 40.1. Upon the filing of an application for registration as an Exchange
responsibility, operational capability, training, experience, or under Section 33, a registered securities association under Section 39, a
competence that are prescribed by the rules of the association; registered clearing agency under Section 42, or other self-regulatory
or organization under this Section, the Commission shall have ninety (90)
(ii) Has engaged, and there is a reasonable likelihood it days within which to either grant registration or institute a proceeding to
will again engage, in acts or practices inconsistent with just and determine whether registration should be denied. In the event proceedings
equitable principles of fair trade. are instituted, the Commission shall have two hundred seventy (270) days
within which to conclude such proceedings at which time it shall, by order,
(c) A registered securities association may deny membership grant or deny such registration.
to a registered broker or dealer not engaged in a type of business in
which the rules of the association require members to be engaged: 40.2. Every self-regulatory organization shall comply with the
Provided, however, That no registered securities association may deny provisions of this Code, the rules and regulations thereunder, and its own
membership to a registered broker or dealer by reason of the amount rules, and enforce compliance therewith, notwithstanding any provision of
of business done by the broker or dealer. the Corporation Code to the contrary, by its members, persons associated
with its members or its participants.
A registered securities association may examine and verify the
qualifications of an applicant to become a member in accordance with 40.3. (a) Each self-regulatory organization shall submit to the
procedures established by the rules of the association. Commission for prior approval any proposed rule or amendment thereto,
together with a concise statement of the reason and effect of the proposed
(d) A registered securities association may bar a salesman amendment.
or person associated with a broker or dealer from being employed
by a member or set conditions for the employment of a salesman or (b) Within sixty (60) days after submission of a proposed
associated if such person: amendment, the Commission shall, by order, approve the proposed
amendment. Otherwise, the same may be made effective by the self­
(i) Does not meet the standards of training, experience, regulatory organization.
or competence that are prescribed by the rules of the association;
or (c) In the event of an emergency requiring action for the
protection of investors, the maintenance of fair and orderly markets,
(ii) Has engaged, and there is a reasonable likelihood he or the safeguarding of securities and funds, a self-regulatory
will again engage, in acts or practices inconsistent with just and organization may put a proposed amendment into effect summarily:
equitable principles of fair trade. Provided, however, That a copy of the same shall be immediately
A registered securities association may examine and verify the submitted to the Commission.
qualifications of an applicant to become a salesman or associated 40.4. The Commission is further authorized, if after making
person employed by a member in accordance with procedures appropriate request in writing to a self-regulatory organization that such
established by the rules of the association. A registered association organization effect on its own behalf specified changes in its rules and
 1016 OMMENTARIE AND J I PRUD • N • N 1017
THE REVISED CORPORATION ODE E RI'I'I E
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practices and, after due notice and hearing it determines that such changes willfully violated any provision of this Code or suspend for a period
have not been effected, and that such changes are necessary, by rule or not exceeding twelve (12) months for violation of any provision of
regulation or by order, may alter, abrogate or supplement the rules of such this Code or any other laws administered by the Commission, or the
self-regulatory organization in so far as necessary or appropriate to effect rules and regulations thereunder, or effected, directly or indirectly,
such changes in respect of such matters as: any transaction for any person who, such member or participant had
reason to believe, was violating in respect of such transaction any of
(a) Safeguards in respect of the financial responsibility of
such provisions; and
members and adequate provision against the evasion of financial
responsibility through the use of corporate forms or special (c) To remove from office or censure any officer or director of
partnerships; a self-regulatory organization if it finds that such officer or director
has violated any provision of this Code, any other law administered
(b) The supervision of trading practices;
by the Commission, the rules or regulations thereunder, or the rules
(c) The listing or striking from listing of any security; of such self-regulatory organization, abused his authority, or without
reasonable justification or excuse has failed to enforce compliance
(d) Hours of trading; with any of such provisions.
(e) The manner, method, and place of soliciting business; 40.6. (a) A self-regulatory organization is authorized to discipline
(f) Fictitious accounts; a member of or participant in such self-regulatory organization, or any
person associated with a member, including the suspension or expulsion
(g) The time and method of making settlements, payments, of such member or participant,' and the suspension or bar from being
and deliveries, and of closing accounts; associated with a member, if such person has engaged in acts or practices
(h) The transparency of securities transactions and prices; inconsistent with just and equitable principles of fair trade or in willful
violation of any provision of the Code, any other law administered by the
(i) The fixing of reasonable rates of fees, interest, listing and Commission, the rules or regulations thereunder, or the rules of the self­
other charges, but not rates of commission; regulatory organization. In any disciplinary proceeding by a self-regulatory
Minimum units of trading; organization (other than a summary proceeding pursuant to paragraph
(j)
(b) of this subsection) the self-regulatory organization shall bring specific
(k) Odd-lot purchases and sales; charges, provide notice to the person charged, afford the person charged
with an opportunity to defend against the charges, and keep a record of
(1) Minimum deposits on margin accounts; and
the proceedings. A determination to impose a disciplinary sanction shall be
(m) The supervision, auditing and disciplining of members or supported by a written statement of the offense, a summary of the evidence
participants. presented and a statement of the sanction imposed.
40.5. The Commission, after due notice and hearing, is authorized, in (b) A self-regulatory organization may summarily: (i) Suspend
the public interest and to protect investors: a member, participant or person associated with a member who
has been or is expelled or suspended from any other self-regulatory
(a) To suspend for a period not exceeding twelve (12) months
organization; or (ii) Suspend a member who the self-regulatory
or to revoke the registration of a self-regulatory organization, or
to censure or impose limitations on the activities, functions, and organization finds to be in such financial or operating difficulty that the
operations of such self-regulatory organization, if the Commission member or participant cannot be permitted to continue to do business
finds that such a self-regulatory organization has willfully violated as a member with safety to investors, creditors, other members,
participants or the self-regulatory organization: Provided, That the
or is unable to comply with any provision of this Code or of the rules
self-regulatory organization immediately notifies the Commission
and regulations thereunder, or its own rules, or has failed to enforce
of the action taken. Any person aggrieved by a summary action
compliance therewith by a member of, person associated with a
pursuant to this paragraph shall be promptly afforded an opportunity
member, or a participant in such self-regulatory organization;
for a hearing by the association in accordance with the provisions
(b) To expel from a self-regulatory organization any member of paragraph (a) of this subsection. The Commission, by order, may
thereof or any participant therein who is subject to an order of stay a summary action on its own motion or upon application by any
the Commission under Section 29 of this Code or is found to have person aggrieved thereby, if the Commission determines summarily
1018 OMMEN'rARIE AND JURI PRUDEN E N 101
THE REVISED CORPORATION CODE B RlTlE N DE
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or after due notice and hearing (which hearing may consist solely of pra ticabl a.nd not n c ary or appropriate in the public interest or for the
the submission of affidavits or presentation of oral arguments) that prot ction of investors to require uch registration.
a stay is consistent with the public interest and the protection of
investors. SEC. 42. Registration of Clearing Agencies. -

40.7. A self-regulatory organization shall promptly notify the 42.1. Any clearing agency may be registered as such with the
Commission of any disciplinary sanction on any member thereof or participant Commission under the terms and conditions hereinafter provided in this
therein, any denial of membership or participation in such organization, Section, by filing an application for registration in such form and containing
or the imposition of any disciplinary sanction on a person associated with such information and supporting documents as the Commission by rule
a member or a bar of such person from becoming so associated. Within shall prescribe, including the following:
thirty (30) days after such notice, any aggrieved person may appeal to the (a) An undertaking to comply and enforce compliance by its
Commission from, or the Commission on its own motion within such period, participants with the provisions of this Code, and any amendment
may institute review .of, the decision of the self-regulatory organization, at thereto, and the implementing rules or regulations made or to be
the conclusion of which, after due notice and hearing (which may consist made thereunder, and the clearing agency's rules;
solely of review of the record before the self-regulatory organization), the
Commission shall affirm, modify or set aside the sanction. In such proceeding (b) The organizational charts of the Exchange, its rules of
the Commission shall determine whether the aggrieved person has engaged procedure, and a list of its officers and participants;
or omitted to engage in the acts and practices as found by the self-regulatory (c) Copies of the clearing agency's rules.
organization, whether such acts and practices constitute willful violations
of this Code, any other law administered by the Commission, the rules or 42.2. No registration of a clearing agency shall be granted unless
regulations thereunder, or the rules of the self-regulatory organization as the rules of the clearing agency include provision for:
specified by such organization, whether such provisions were applied in a (a) The expulsion, suspension, or disciplining of a participant
manner consistent with the purposes of this Code, and whether, with due for violations of this Code, or any other Act administered by the
regard for the public interest and the protection of investors the sanction is Commission, the rules, regulations, and orders thereunder, or the
excessive or oppressive. clearing agency's rules;
40.8. The powers of the Commission under this section shall apply to (b) A fair procedure for the disciplining of participants, the
organized exchanges and registered clearing agencies. denial of participation rights to any person seeking to be a particip�nt,
and the prohibition or limitation of any person from access to services
CHAPTER XI offered by the clearing agency;
Acquisition and Transfer of Securities and (c) The equitable allocation of reasonable dues, fees, and
Settlement of Transactions in Securities other charges among participants;
SEC. 41. Prohibition on Use of Unregistered Clearing Agency. - It (d) Prevention of fraudulent and manipulative acts and
shall be unlawful for any broker, dealer, salesman, associated person of practices, promotion of just and equitable principles of trade, and, in
a broker or dealer, or clearing agency, directly or indirectly, to make use general, protection of investors and the public interest; and
of any facility of a clearing agency in the Philippines to make deliveries
(e) The transparent, prompt and accurate clearance �nd
in connection with transactions in securities or to reduce the number of
settlement of transactions in securities handled by the clearmg
settlements of securities transactions or to allocate securities settlement
agency.
responsibilities or to provide for the central handling of securities so that
transfers, loans and pledges and similar transactions can be made by (f) The establishment and oversight of a fund to guarantee
bookkeeping entry or otherwise to facilitate the settlement of securities the prompt and accurate clearance and settlement of transactions
transactions without physical delivery of securities certificates, unless executed on an exchange, including a requirement that members
such clearing agency is registered as such under Section 42 of this Code each contribute an amount based on their volume and a relevant
or is exempted from such registration upon application by the clearing percentage of the daily exposure of the four (4) largest trading brokers
agency because, in the opinion of the Commission, by reason of the limited which adequately reflects trading risks undertaken or pursuant to
volume of transactions which are settled using the clearing agency, it is not another formula set forth in Commission rules or regulations or order,
 10 0 MM •NTARIE AN JURI PR DK E N 10 1
THE REVISED CORPORATION ODE
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upon application: Provided, however, That a clearing agency engaged that curity by r a on of uch d livery. However, transfer of uncertificated
in the business of a securities depository shall be exempt from this share hall only b valid, so far as the corporation is concerned, when a
requirement. transfer i recorded in the books of the corporation so as to show the names
42.3. In the case of an application filed pursuant to this Section, the of the parties to the transfer and the number of shares transferred.
Commission shall grant registration if it finds that the requirements of this However, nothing in this Code shall preclude compliance by banking
Code and the rules and regulations thereunder with respect to the applicant and other institutions under the supervision of the Bangko Sentral ng
have been satisfied, and shall deny registration if it does not make such Pilipinas and their stockholders with the applicable ceilings on shareholdings
finding. prescribed under pertinent banking laws and regulations.
42.4. Upon appropriate application in accordance with the rules and SEC. 44. Euidentiary Value of Clearing Agency Record. - The official
regulations of the Commission and up,:m such terms as the Commission
✓ records and book entries of a clearing agency shall constitute the best
may deem necessary for the protection of investors, a clearing agency may evidence of such transactions between clearing agency and its participants
withdraw its registration or suspend its operation or resume the same. and members, without prejudice to the right of participants' or members'
clients to prove their rights, title and entitlement with respect to the book­
42.5. Section 32 of this Code shall apply to every registered clearing entry security holdings of the participants or members held on behalf of
agency. the clients. However, the corporation shall not be bound by the foregoing
SEC. 43. Uncertificated Securities. - Notwithstanding Section 63 of transactions unless the corporate secretary is duly notified in such manner
the Corporation Code of the Philippines: as the Commission may provide.
43.1. A corporation whose securities are registered pursuant to this SEC. 45. Pledging a Security or Interest Therein. - In addition to
Code or listed on a Securities Exchange may: other methods recognized by law, a pledge of, or release of a pledge of, a
security, including an uncertificated security, is properly constituted and
(a) If so resolved by its Board of Directors and agreed by a the instrument proving the right pledged shall be considered delivered to
shareholder, investor or securities intermediary, issue shares to, the creditor under Articles 2093 and 2095 of the Civil Code if a securities
or record the transfer of some or all of its shares into the name of intermediary indicates by book-entry that such security has been credited
said shareholders, investors or, securities intermediary in the form to a specially designated pledge account in favor of the pledgee. A pledge
of uncertificated securities. The use of uncertificated securities in under this subsection has the effect of the delivery of a security in bearer
these circumstances shall be without prejudice to the rights of the form or duly indorsed in blank representing the quantity or amount of such
securities intermediary subsequently to require the corporation to security or right pledged. In the case of a registered clearing agency, the
issue a certificate in respect of any shares recorded in its name; and procedures by which, and the exact time at which, such book-entries are
created shall be governed by the registered clearing agency's rules. However,
(b) If so provided in its articles of incorporation and by-laws, the corporation shall not be bound by the foregoing transactions unless the
issue all of the shares of a particular class in the form of uncertificated corporate secretary is duly notified in such manner as the Commission may
securities and subject to a condition that investors may not require provide.
the corporation to issue a certificate in respect of any shares recorded
in their name. SEC. 46. Issuer's Responsibility for Wrongful Transfer to Registered
Clearing Agency. - The registration of a transfer of a security into the
43.2. The Commission by rule may allow other corporations to provide name of and by a registered clearing agency or its nominee shall be final and
in their articles of incorporation and by-laws for the use of uncertificated conclusive unless the clearing agency had notice of an adverse claim before
securities. the registration was made. The above provision shall be without prejudice
43.3. Transfers of securities, including an uncertificated securities, to any rights which the claimant may have against the issuer for wrongful
may be validly made and consummated by appropriate book-entries in the registration in such circumstances.
securities accounts maintained by securities intermediaries, or in the stock SEC. 47. Power of the Commission With Respect to Securities
and transfer book held by the corporation or the stock transfer agent and Ownership. - The Commission is authorized, having due regard to the
such bookkeeping entries shall be binding on the parties to the transfer. A public interest and the protection of investors, to promulgate rules and
transfer under this subsection has the effect of the delivery of a security in regulations which:
bearer form or duly indorsed in blank representing the quantity or amount
of security or right transferred, including the unrestricted negotiability of 47.1. Validate the transfer of securities by book-entries rather than
the delivery of physical certificates;
 1022 COMMENTARIE AND JURI PRUDEN E N JO 3
THE REVISED CORPORATION CODE N E
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· 47.2. Establish when a person acquires a security or an interest and und r p cifi d condition ; th withdrawal of funds or securities; the
therein and when delivery of a security to a purchaser occurs; tran £ r of accounts from one 1 nder to another; special or different margin
requirements for delayed deliveries, short sales, arbitrage transactions, and
47.3_. Establish which records constitute the best evidence of a person's securities to which letter (b) of the second paragraph of this subsection does
.
mterests m a security and the effect of any errors in electronic records of not apply; the bases and the methods to be used in calculating loans, and
ownership; margins and market prices; and similar administrative adjustments and
47.4. Codify the rights of investors who choose to hold their securities details.
indirectly through a registered clearing agency and/or other securities 48.2. No member of an Exchange or broker or dealer shall, directly
intermediaries; or indirectly, extend or maintain credit or arrange for the extension or
�7.5. Codify the du�i�s of securitie� intermediaries (including clearing maintenance of credit to or for any customer:
agencies) who hold securities on behalf of investors;. and (a) On any security unless such credit is extended and
4 7.6. Gi e first pri_o�ity to any claims of a registered clearing agency maintained in accordance with the rules and regulations which the
. ". . Commission shall prescribe under this Section including rules setting
ag�ms� a participant ansmg from a failure by the participant to meet its
obhgat10ns under the clearing agency's rules in respect of the clearing and credit in relation to net capital of such member, broker or dealer;
settlement of transactions in securities, in a dissolution of the participant, (b) Without collateral or on any collateral other than securities,
and any such rules and regulations shall bind the issuers of the securities except (i) to maintain a credit initially extended in conformity with the
'
investors in the securities, any third parties with interests in the securities rules and regulations of the Commission; and (ii) in cases where the
and the creditors of a participant of a registered clearing agency. extension or maintenance of credit is not for the purpose of purchasing
or carrying securities or of evading or circumventing the provisions of
CHAPTER XII paragraph (a) of this subsection.
Margin and Credit 48.3. Any person not subject to Subsection 48.2 hereof shall extend
or maintain credit or arrange for the extension or maintenance of credit for
SEC. 48. Margin Requirements. -
the purpose of purchasing or carrying any security, only in accordance with
48.1. For the purpose of preventing the excessive use of credit for the such rules and regulations as the Commission shall prescribe to prevent
purc_hase or carrying of securities, the Commission, in accordance with the the excessive use of credit for the purchasing or carrying of or trading in
credit and monetary policies that may be promulgated from time to time by securities in circumvention of the other provisions of this Section. Such
the Monetary Board of the Bangko Sentral ng Pilipinas, shall prescribe rules rules and regulations may impose upon all loans made for the purpose
and regulations with respect to the amount of credit that may be extended of purchasing or carrying securities limitations similar to those imposed
on any security. For the extension of credit, such rules and regulations shall upon members, brokers, or dealers by Subsection 48.2 and the rules and
be based upon the following standard: regulations thereunder. This subsection and the rules and regulations
thereunder shall not apply: (a) To a credit extension- made by a person
An amount not greater than whichever is the higher of-
not in the ordinary course of business; (b) To a loan to a dealer to aid in
(a) Sixty-five per centum (65%) of the current market price of the financing of the distribution of securities to customers not through
the security; or the medium of an Exchange; or (c) To such other credit extension as the
Commission shall exempt from the operation of this subsection and the
(b) One hundred per centum (100%) of the lowest market price rules and regulations thereunder upon specified terms and conditions or for
of the security during the preceding thirty-six (36) calendar months, stated period.
but not more than seventy-five per centum (75%) of the current market
price. SEC. 49. Restrictions on Borrowings by Members, Brokers, and Dealers.
- It shall be unlawful for any registered broker or dealer, or member of an
However, the Monetary Board may increase or decrease the above Exchange, directly or indirectly:
percentages, in order to achieve the objectives of the Government with due
regard for promotion of the economy and prevention of the use of excessive 49.1. To permit in the ordinary course of business as a broker or
credit. dealer his aggregate indebtedness including customers' credit balances, to
exceed such percentage of the net capital (exclusive of fixed assets and value
Such rules and regulations may make appropriate provision with of Exchange membership) employed in the business, but not exceeding in
respect to the carrying of undermargined accounts for limited periods
 1.02
1024 COMMENTAl IE AND JURI PRUDEN E N
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OF THE PHILIPPINES
any case two thousand per centum (2,000%), as the Commission may by mor th r p -r ons, ontrol any p rson liable under this Code. or th� 1:ules
rules and regulations prescribe as necessary or appropriate in the public or r gulations of th Commis ion thereunder, shall also be hable Jomtly
interest or for the protection of investors. and severally with and to the same extent as such controlled persons to
_
any person to whom such controlled person is li��le, unless �he controllmg
49.2. To pledge, mortgage, or otherwise encumber or arrange for the
pledge, mortgage or encumbrance of any security carried for the account of
person proves that, despite the exercise of due diligence o? his pa� t,?�
has
no knowledge of the existence of the facts by reason of which the habihty of
any customer under circumstances: (a) That will permit the commingling the controlled person is alleged to exist.
of his securities, without his written consent, with the securities of any
customer; (b) That will permit such securities to be commingled with the 51.2. It shall be unlawful for any person, directly or indirectly, to do
securities of any person other than a bona fide customer; or (c) That will any act or thing which it would be unlawful for such person to do under the
permit such securities to be pledged, mortgaged or encumbered, or subjected provisions of this Code or any rule or regulation thereunder.
to any lien or claim of the pledgee, for ·a sum in e.xcess of the aggregate 51.3. It shall be unlawful for any director or officer of, or any owner
indebtedness of such customers in respect of such securities. However, of any securities issued by, any issuer required to file any docum�nt, report
the Commission, having due regard to the protection of investors, may, by or other information under this Code or any rule or regulation of the
rules and regulations, allow certain transactions that may otherwise be Commission thereunder, without just cause, to hinder, delay or obstruct the
prohibited under this subsection. making or filing of any such document, report, or information.
49.3. To lend or arrange for the lending of any security carried for 51.4. It shall be unlawful for any person to aid, abet, counsel, command,
t4e account of any customer without the written consent of such customer induce or procure any violation of this Code, or any rule, regulation or order
or in contravention of such rules and regulations as the Commission shall of the Commission thereunder.
prescribe.
51.5. Every person who substantially assists the act or on:ission of any
SEC. 50. Enforcement of Margin Requirements and Restrictions on _
person primarily liable under Sections 57, 58, 59 and 60_ of _ thi� Code, with
Borrowing. - To prevent indirect violations of the margin requirements knowledge or in reckless disregard that such act or omission is wrongful,
under Section 48, the broker or dealer shall require the customer in non­ shall be jointly and severally liable as an aider and abettor for damages
margin transactions to pay the price of the security purchased for his resulting from the conduct of the person primarily liable: Provided: however,
account within such period as the Commission may prescribe, whicli shall _
That an aider and abettor shall be liable only to the extent of his relative
in no case exceed the prescribed settlement date. Otherwise, the broker contribution in causing such damages in comparison to that of the person
shall sell the security purchased starting on the next trading day but not primarily liable, or the extent to which the aider and abettor was unjustly
beyond ten (10) trading days following the last day for the customer to enriched thereby, whichever is greater.
pay such purchase price, unless such sale cannot be effected within said
period for justifiable reasons. The sale shall be without prejudice to the SEC. 52. Accounts and Records, Reports, Examination of Exchanges,
right of the broker or dealer to recover any deficiency from the customer. To Members, and Others. -
prevent indirect violation of the restrictions on borrowings under Section 52.1. Every registered Exchange, broker OP. dealer, transfer
49, the broker shall, unless otherwise directed by the customer, pay the net agent, clearing agency, securities association, and other self-re�ulatory
sales price of the securities sold for a customer within the same period as .
organization, and every other person required to register under t�is Code,
above prescribed by the Commission: Provided, That the customer shall be shall make, keep and preserve for such periods, records, furmsh such
required to deliver the instruments evidencing the securities as a condition copies thereof, and make such reports, as the Commission by its rules and
for such payment upon demand by"the broker. regulations may prescribe. Such accounts, correspondence, memoranda,
papers, books, and other records shall be subject at any tim� to such
CHAPTER XIII reasonable periodic, special or other examinations by representat_ives _of the
Commission as the Commission may deem necessary or appropriate m the
General Provisions public interest or for the protection of investors.
SEC. 51. Liabilities of Controlling Persons, Aider and Abettor and 52.2. Any broker, dealer or other person extending credit, who is
Other Secondary Liability. - subject to the rules and regulations prescribed by the Commission pursuant
51.1. Every person who, by or through stock ownership, agency, or to this Code shall make such reports to the Commission as may be necessary
otherwise, or in connection with an agreement or understanding with one or or appropri;te to enable it to perform the functions conferred upon it by this
Code.
1026 COMMENTARIE AND JURI PRUDEN EON PENDi A 1027
THE REVISED CORPORATION CODE R • ULA'l'I N DE
OF THE PHILIPPINES
52.3. For purposes of this Section, the term "records" refers to unabl or unwilling to take action against such person. After finding that
accounts, correspondence, memoranda, tapes, discs, papers, books and such person has engaged in any such act or practice and that there is a
other documents or transcribed information of any type, whether written or reasonable likelihood of continuing, further or future violations by such
electronic in character. person, the Commission may issue ex parte a cease and desist order for a
SEC. 53. Investigations, Injunctions and Prosecution of Offenses. - maximum period of ten (10) days, enjoining the violation and compelling
compliance with such provision. The Commission may transmit such
53.1. The Commission may, in its discretion, make such investigations evidence as may be available concerning any violation of any provision of
as it deems necessary to determine whether any person has violated or is this Code, or any rule, regulation or order thereunder, to the Department
about to violate any provision of this Code, any rule, regulation or order of Justice, which may institute the appropriate criminal proceedings under
thereunder, or any rule of an Exchange, registered securities association, this Code.
clearing agency, other self-regulatory. organization, and may require
or permit any person to file with it a statement in writing, under oath 53.4. Any person who, within his power but without cause, fails or
or otherwise, as the Commission shall determine, as to all facts and refuses to comply with any lawful order, decision or subpoena issued by
circumstances concerning the matter to be investigated. The Commission the Commission under Subsection 53.2 or Subsection 53.3 or Section 64
may publish information concerning any such violations, and to investigate of this Code, shall after due notice and hearing, be guilty of contempt of
any fact, condition, practice or matter which it may deem necessary or proper the Commission. Such person shall be fined in such reasonable amount as
to aid in the enforcement of the provisions of this Code, in the prescribing the Commission may determine, or when such failure or refusal is a clear
of rules and regulations thereunder, or in securing information to serve and open defiance of the Commission's order, decision or subpoena, shall be
as a basis for recommending further legislation concerning the matters detained under an arrest order issued by the Commission, until such order,
to which this Code relates: Provided, however, That any person requested decision or subpoena is complied with.
or subpoenaed to produce documents or testify in any investigation shall SEC. 54. Administrative Sanctions. -
simultaneously be notified in writing of the purpose of such investigation:
Provided, further, That all criminal complaints for violations of this Code, 54.1. If, after due notice and hearing, the Commission finds that: (a)
and the implementing rules and regulations enforced or administered by the There is a violation of this Code, its rules, or its orders; (b) Any registered
Commission shall be referred to the Department of Justice for preliminary broker or dealer, associated person thereof has failed reasonably to
investigation and prosecution before the proper court: Provided, furthermore, supervise, with a view to preventing violations, another person subject to
That in instances where the law allows independent civil or criminal supervision who commits any such violation; (c) Any registrant or other
proceedings of violations arising from the same act, the Commission shall person has, in a registration statement or in other reports, applications,
take appropriate action to implement the same: Provided, finally, That the accounts, records or documents required by law or rules to be filed with the
investigation, prosecution, and trial of such cases shall be given priority. Commission, made any untrue statement of a material fact, or omitted to
state any material fact required to be stated therein or necessary to make
53.2. For the purpose of any such investigation, or any other the statements therein not misleading; or, in the case of an underwriter,
proceeding under this Code, the Commission or any officer designated by has failed to conduct an inquiry with reasonable diligence to insure that
it is empowered to administer oaths and affirmations, subpoena witnesses, a registration statement is accurate and complete in all material respects;
compel attendance, take evidence, require the production of any book, paper, or (d) Any person has refused to permit any lawful examinations into
correspondence, memorandum, or other record which the Commission its affairs, it shall, in its discretion, and subject only to the limitations
deems relevant or material to the inquiry, and to perform such other acts hereinafter prescribed, impose any or all of the following sanctions as may
necessary in the conduct of such investigation or proceedings. be appropriate in light of the facts and circumstances:
53.3. Whenever it shall appear to the Commission that any person has Suspension, or revocation of any registration for the
(i)
engaged or is about to engage in any act or practice constituting a violation
offering of securities;
of any provision of this Code, any rule, regulation or order thereunder, or
any rule of an Exchange, registered securities association, clearing agency (ii) A fine of no less than Ten thousand pesos (Pl0,000.00) nor
or other self-regulatory organization, it may issue an order to such person more than One million pesos (Pl,000,000.00) plus not more than Two
to desist from committing such act or practice: Provided, however, That thousand pesos (P2,000.00) for each day of continuing violation;
the Commission shall not charge any person with violation of the rules of
(iii) In the case of a violation of Sections 19.2, 20, 24, 26
an Exchange or other self regulatory organization unless it appears to the
and 27, disqualification from being an officer, member of the Board
Commission that such Exchange or other self-regulatory organization is
of Directors, or person performing similar functions, of an issuer
1028 OMMENTARI • JURI PR l 9
THE REVISED ORPORATI N
OF THE PHILIPPINE
required to file reports under Section 1 7 of this Code or any other act (c) 1
v ry p rson wl is named in the registration statement
rule or regulation administered by the Commission; as b ing r about to become a director of, or a person performing
imilar functions, or a partner in, the issuer and whose written
(_j_v) In the case of a violation of Section 34, a fine of no more consent thereto is filed with the registration statement;
than three (3) times the profit gained or loss avoided as a result of the
purchase, sale or communication proscribed by such Section; and (d) Every auditor or auditing firm named as having certified
any financial statements used in connection with the registration
(v) Other penalties within the power of the Commission to statement or prospectus.
impose.
(e) Every person who, with his written consent, which shall
54.2. The imposition of the foregoing administrative sanctions shall be filed with the registration statement, has been named as having
be without prejudice to the filing of criminal charges against the individuals prepared or certified any part of the registration statement, or as
responsible for the violation. having prepared or certified any report or valuation which is used
54.3. The Commission shall have the power to issue writs of execution in connection with the registration statement, with respect to the
to enforce the provisions of this Section and to enforce payment of the fees statement, report, or valuation, which purports to have been prepared
and other dues collectible under this Code. or certified by him.
SEC. 55. Settlement Offers. - (f) Every selling shareholder who contributed to and certified
as to the accuracy of a portion of the registration statement, with
55.1. At any time, during an investigation or proceeding under this respect to that portion of the registration statement which purports to
Code, parties being i�vestigated 1:1-nd/or charged may propose in writing an have been contributed by him.
offer of settlement with the Commission.
(g) Every underwriter with respect to such security.
55.2. Upon receipt of such offer of settlement, the Commission may
.
conside� the offer based on timing, the nature of the investigation or 56.2. If the person who acquired the security did so after the issuer
proceedmg, and the public interest. has made generally available to its security holders an income statement
covering a period of at least twelve months beginning from the effective
55.3. The Commission may only agree to a settlement offer based on
date of the registration statement, then the right of recovery under this
its findings that such settlement is in the public interest. Any agreement to
subsection shall be conditioned on pr-0of that such person acquired the
settle shal� have no legal effect until publicly disclosed. Such decision may
security relying upon such untrue statement in the registration statement
be made without a determination of guilt on the part of the person making
or relying upon the registration statement and not knowing of such income
the offer.
statement, but such reliance may be established without proof of the reading
55.�. The �ommission shall adopt rules and procedures governing the of the registration statement by such person.
.
fihng, review, withdrawal, form of rejection and acceptance of such offers.
SEC. 57. Civil Liabilities Arising in Connection With Prospectus,
SEC. 56. Civil Liabilities on Account of False Registration Statement. - Communications and Reports. -
56.1. Any person acquiring a security, the registration statement of 57.1. Any person who:
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 (a) Offers to sell or sells a security in violation of Chapter III;
or necessary to make such statements not misleading, and who suffers or
damage, may sue and recover damages from the following enumerated (b) Offers to sell or sells a security, whether or not exempted
persons, unless it is proved that at the time of such acquisition he knew of by the provisions of this Code, by the use of any means or instruments
such untrue statement or omission: of transportation or communication, by means of a prospectus or other
(a) The issuer and every person who signed the registration written or oral communication, which includes an untrue statement
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
(b) Every person who was a director of, or any other person which they were made, not misleading (the purchaser not knowing of
performing similar functions, or a partner in, the issuer at the time such untruth or omission), and who shall fail in the burden of proof
of the filing of the registration statement or any part, supplement or that he did not know, and in the exercise of reasonable care could
amendment thereof with respect to which his liability is asserted;
 1081
1030 COMMENTARIE AND JURI PRUDEN E N
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THE REVISED RPORATION DE
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or r gulation th reunder, by purchasing or selling a security while in
not have known, of such untruth or omission, shall be liable to the
posse sion of material information not generally available to the public,
person purchasing such security from him, who may sue to recover
shall b liable in a suit brought by any investor who, contemporaneously
the consideration paid for such security with interest thereon, less
with the purchase or sale of securities that is the subject of the violation,
the amount of any income received thereon, upon the tender of such
purchased or sold securities of the same class unless such insider, or such
security, or for damages if he no longer owns the security.
person in the case of a tender offer, proves that such investor knew the
57.2. Any person who shall make or cause to be made any statement information or would have purchased or sold at the same price regardless of
.
m any report, or document filed pursuant to this Code or any rule or disclosure of the information to him.
.
regu�at10n thereunder, which statement was at the time and in the light of
61.2. An insider who violates Subsection 27.3 or any person in the case
the circumstances under which it was made false or misleading with respect
_ of a tender offer who violates Subsection 27.4(a), or any rule or regulation
to any material fact, shall be liable to any person who, not knowing that
thereunder, by communicating material non-public information, shall be
such statement was false or misleading', and relyiqg upon such statements
jointly and severally liable under Subsection 61.1 with, and to the same
shall have purchased or sold a security at a price which was affected by
extent as, the insider, or person in the case of a tender offer, to whom the
such statement, for damages caused by such reliance, unless the person
communication was directed and who is liable under Subsection 61.1 by
sued shall prove that he acted in good faith and had no knowledge that such
reason of his purchase or sale of a security.
statement was false or misleading.
SEC. 58. Civil Liability for Fraud in Connection With Securities SEC. 62. Limitation of Actions. -
!7'a71:sact_ions. - Any person who engages in any act or transaction y created
62.1. No action shall be maintained to enforce any liabilit
m v10l ti?n of Sections 19.2, 20 or 26, or any rule or regulation of the brough t within two (2) years after
'.1 under Section 56 or 57 of this Code unless
Comm1ss10n thereunder, shall be liable to any other person who purchases statem ent or the omissi on, or, if the action is to
the discovery of the untrue
or sell� a�y security, grants or refuses to grant any proxy, consent or y created under Subsec tion 57.l(a) , unless brough t within
enforce a liabilit
authorizat10n, or accepts or declines an invitation for tender of a security, In no event shall
two (2) years after the violation upon which it is based.
as the case may be, for the damages sustained by such other person as a a liabilit y created under Section 56 or
any such action be brought to enforce
result of such act or transaction. more than five (5) years after the securit y was bona fide
Subsection 57.l(a)
than five (5) years
SEC. 59. Civil Liabi�i�y for Manipulation of Security Prices. :__ Any offered to the public, or under Subsection 57.l(b) more
. after the sale.
person who willfully participates in any act or transaction in violation
of Se�tion 24 s�all be liable to any person who shall purchase or sell any 62.2. No action shall be maintained to enforce any liability created
_
security at a price which was affected by such act or transaction and the under any other provision of this Code unless brought within two (2) years
person so injured may sue to recover the damages sustained as a' result of after the discovery of the facts constituting the cause of action and within
such act or transaction. five (5) years after such cause of action accrued.
SEC. 60. Civil Liability With Respect to Commodity Futures Contracts SEC. 63. Amount of Damages to be Awarded. -
and Pre-ne�d P_Zans. :----- 6?.L Any person who engages in any act or
_ 63.1. All suits to recover damages pursuant to Sections 56, 57, 58, 59,
transa?ti�n m willful v10lat10n of any rule or regulation promulgated by the
Comm1ss10n under Section 11 or 16, which the Commission denominates at 60 and 61 shall be brought before the Regional Trial Court, which shall have
the time of issuance as intended to prohibit fraud in the offer and sale of pre­ exclusive jurisdiction to hear and decide such suits. The Court is hereby
need plans or to prohibit fraud, manipulation, fictitious transactions, undue authorized to award damages in an amount not exceeding triple the amount
speculation, or other unfair or abusive practices with respect to commodity of the transaction plus actual damages.
future contracts, shall be liable to any other person sustaining damage as a Exemplary damages may also be awarded in cases of bad faith, fraud,
result of such act or transaction.
malevolence or wantonness in the violation of this Code or the rules and
60.2. As to each such rule or regulation so denominated, the Commission regulations promulgated thereunder.
�Y �ule_ shall prescribe the elements of proof required for recovery and any The Court is also authorized to award attorney's fees not exceeding
hm1tations on the amount of damages that may be imposed.
thirty percentum (30%) of the award.
SEC. 61. Civil Liability on Account of Insider Trading. -
63.2. The persons specified in Sections 56, 57, 58, 59, 60, and 61
61.1. Any insider who violates Subsection 27.1 and any person in hereof shall be jointly and severally liable for the payment of damages.
the case of a tender offer who violates Subsection 27.4(a)(i), or any rule
1032 MMENTARI I AND J RI PR DE
THE REVI ED RP RA'fl N
OF THE PHILIPPINE
However, any person who becomes liable for the payment of such damages 1 • 66. Rev lation of Information Filed with the Commission. -
may recover contribution from any other person who, if sued separately, 66. l. All information filed with the Commission in compliance with
would have been liable to make the same payment, unless the former was the requirements of this Code shall be made available to any member of
guilty of fraudulent representation and the latter was not. the general public, upon request, in the premises and during regular office
63.3. Notwithstanding any provision of law to the contrary, all hours of the Commission, except as set forth in this Section.
persons, including the issuer, held liable under the provisions of Sections 66.2. Nothing in this Code shall be construed to require, or to authorize
56, 57, 58, 59, 60 and 61 shall contribute equally to the total liability the Commission to require, the revealing of trade secrets or processes in any
adjudged herein. In no case shall the principal stockholders, directors and application, report, or document filed with the Commission.
other officers of the issuer or persons occupying similar positions therein,
recover their contribution to the liability_ from the issuer. However, the right 66.3. Any person filing any such application, report or document may
make written objection to the public disclosure of information contained
of the issuer to recover from the guilty parties the amount it has contributed
therein, stating the grounds for such objection, and the Commission may
under this Section shall not be prejudiced.
hear objections as it deems necessary. The Commission may, in such
SEC. 64. Cease and Desist Order. - cases, make available to the public the information contained in any such
application, report, or document only when a disclosure of such information
64.1. The Commission, after proper investigation or verification, is required in the public interest or for the protection of investors; and
motu proprio, or upon verified complaint by any aggrieved party, may issue copies of information so made available may be furnished to any person
a cease and desist order without the necessity of a prior hearing if in its having a legitimate interest therein at such reasonable charge and under
judgment the act or practice, unless restrained, will operate as a fraud such reasonable limitations as the Commission may prescribe.
on investors or is otherwise likely to cause grave or irreparable injury or
prejudice to the investing public. 66.4. It shall be unlawful for any member, officer, or employee of
the Commission to disclose to any person other than a member, officer or
64.2. Until the Commission issues a cease and desist order, the fact employee of the Commission or to use for personal benefit, any information
that an investigation has been initiated or that a complaint has been filed, contained in any application, report, or document filed with the Commission
including the contents of the complaint, shall be confidential. Upon i,ssuance which is not made available to the public pursuant to Subsection 66.3.
of a cease and desist order, the Commission shall make public such order
66.5. Notwithstanding anything in Subsection 66.4 to the contrary,
and a copy thereof shall be immediately furnished to each person subject to
on request from a foreign enforcement authority of any country whose laws
the order.
grant reciprocal assistance as herein provided, the Commission may provide
64.3. Any person against whom a cease and desist order was issued assistance in accordance with this subsection, including the disclosure
may, within five (5) days from receipt of the order, file a formal request for a of any information filed with or transmitted to the Commission, if the
lifting thereof. Said request shall be set for hearing by the Commission not requesting authority states that it is conducting an investigation which it
later than fifteen (15) days from its filing and the resolution thereof shall be deems necessary to determine whether any person has vjolated, is violating,
made not later than ten (10) days from the termination of the hearing. If the or is about to violate any laws relating to securities or commodities matters
that the requesting authority administers or enforces. Such assistance may
Commission fails to resolve the request within the time herein prescribed,
be provided without regard to whether the facts stated in the request would
the cease and desist order shall automatically be lifted.
also constitute a violation of law of the Philippines.
SEC. 65. Substituted Service Upon the Commission. - Service of SEC. 67. Effect of Action of Commission and Unlawful Representations
summons or other process shall be made upon the Commission in actions with Respect Thereto. -
or legal proceedings against an issuer or any person liable under this Code
who is not domiciled in the Philippines. Upon receipt by the Commission 67.1. No action or failure to act by the Commission in the
of such summons, the Commission shall within ten (10) days thereafter, administration of this Code shall be construed to mean that the Commission
transmit by registered mail a copy of such summons and the complaint or has in any way passed upon the merits of or given approval to any security
other legal process to such issuer or person at his last known address or or any transaction or transactions therein, nor shall such action or failure
principal office. The sending thereof by the Commission, the expenses for to act with regard to any statement or report filed with or examined by the
which shall be advanced by the party at whose instance it is made, shall Commission pursuant to this Code or the rules and regulations thereunder
complete such service. to be deemed a finding by the Commission that such statements or report
 AP.Pl� 10
COMMENTARIES AND JURISPRUDENCE ON
1034
THE REVISED CORPORATION CODE E m-rrn RE E
OF THE PHILIPPINES
c ntract for li ting a s curity n an Exchange h retofore or hereafter made,
is true and accurate on its face or that it is not false or misleading. It shall
the performance of which involves the violation of, or the continuance of any
be unlawful to make, or cause to be made, to any prospective purchaser or
seller of a security any representation that any such action or failure to act relationship or practice in violation of, any provision of this Code, or any
by the Commission is to be so construed or has such effect. rule or regulation thereunder, shall be void:

67.2. Nothing contained in Subsection 67.1 shall, however, be (a) As regards the rights of any person who, in violation of
construed as an exemption from liability of an employee or officer of the any such provision, rule or regulation, shall have made or engaged in
Commission for any nonfeasance, misfeasance or malfeasance in the the performance of any such contract; and
discharge of his official duties. (b) As regards the rights of any person who, not being a party
SEC. 68. Special Accounting Rules. - The Commission shall have to such contract, shall have acquired any right thereunder with actual
the au�hority to make, amend, and r_escind such accounting rules and knowledge of the facts by reason of which the making or performance
�egula�10ns as may be necessary to carry out the •provisions of this Code, of such contract was in violation of any such provision, rule or
mcludmg rules and regulations governing registration statements and regulation.
prospec�uses for �arious classes of securities and issuers, and defining
71.3. Nothing in this Code shall be construed:
ac�ountmg, techmcal and trade terms used in this Code. Among other
�hmgs, t�e Commission may prescribe the form or forms in which required (a) To affect the validity of any loan or extension of credit
mformation shall be set forth, the items or details to be shown in the made or of any lien created prior or subsequent to the effectivity of
balance sheet and income statement, and the methods to be followed in this Code, unless at the time of the making of such loan or extension
the preparation of accounts, appraisal or valuation of assets and liabilities of credit or the creating of such lien, the person making such loan or
determination �f depreciation and depletion, differentiation of recurrin� extension of credit or acquiring such lien shall have actual knowledge
_
�nd non-rec1;1rrmg mcome, differentiation of investment and operating of the facts by reason of which the making of such loan or extension of
mcom�, and m the p�eparation, where the Commission deems it necessary credit or the acquisition of such lien is a violation of the provisions of
o: desirabl�, of consohdated balance sheets or income accounts of any person this Code or any rules or regulations thereunder; or
_
directly _ or mdi�ect�y controlling or controlled by the issuer, or any person
under direct or mdirect common control with, the issuer. (b) To afford a defense to the collection of any debt, obligation
or the enforcement of any lien by any person who shall have acquired
SEC. 69. Effect on Existing Law. - The rights and remedies provided such debt, obligation or lien in good faith, for value and without actual
.
by this Code shall be in addition to any and all other rights and remedies that
knowledge of the violation of any provision of this Code or any rule or
may now exist. However, except as provided in Sections 56 and 63 hereof
regulation thereunder affecting the legality of such debt, obligation or
no p�rson permitted to maintain a suit for damages under the provision�
of this Code shall recover, through satisfaction of judgment in one or more lien.
_
act10ns, a total amount in excess of his actual damages on account of the act SEC. 72. Rules and Regulations; Effectivity. -
complained of: Provided, That exemplary damages may be awarded in cases
of bad faith, fraud, malevolence or wantonness in the violation of this Code 72.1. This Code shall be self-executory. To effect_the provisions and
or the rules and regulations promulgated thereunder. purposes of this Code, the Commission may issue, amend, and rescind such
rules and regulations and orders necessary or appropriate, including rules
SEC. 70. Judicial Review of Commission Orders. - Any person and regulations defining accounting, technical, and trade terms used in
.
aggrieved by an order of the Commission may appeal the order to the Court this Code, and prescribing the form or forms in which information required
of Appeals by petition for review in accordance with the pertinent provisions in registration statements, applications, and reports to the Commission
of the Rules of Court. shall be set forth. For purposes of its rules or regulations, the Commission
SEC. 71. Validity of Contracts. - may classify persons, securities, and other matters within its jurisdiction,
prescribe different requirements for different classes of persons, securities,
71.1. �y co�dition, stipulation, provision binding any person to or matters, and by rule or order, conditionally or unconditionally exempt
.
waive comphance with any provision of this Code or of any rule or regulation any person, security, or transaction, or class or classes of persons, securities
th�reu�der, or of any rule of an Exchange required thereby, as well as the
or transactions, from any or all provisions of this Code.
waiver itself, shall be void.
Failure on the part of the Commission to issue rules and regulations
71.2. Every contract made in violation of any provision of this Code
shall not in any manner affect the self-executory nature of this Code.
or of any rule or regulation thereunder, and every contract, including any
1036 OMMEN'rARIE AND J RI PR /\
THE REVISED ORP RATI N TT
OF THE PHILIPPINE
72.2. The Commission shall promulgate rules and regulations mandated by a subs qu nt law, the Commission shall continue to regulate
providing for reporting, disclosure and the prevention of fraudulent, deceptive and supervise commodity futures contracts as provided in Section 11 and
or manipulative practices in connection with the purchase by an issuer, by pre-need plans and the pre-need industry as provided in Section 16 of this
tender offer or otherwise, of and equity security of a class issued by it that Code.
satisfies the requirements of Subsection 17.2. Such rules and regulations All further requirements herein shall be complied with upon approval
may require such issuer to provide holders of equity securities of such dates of this Code: Provided, however, That compliance may be deferred for such
with such information relating to the reasons for such purchase, the source reasonable time as the Commission may determine but not to exceed one (1)
of funds, the number of shares to be purchased, the price to be paid for such year from approval of this Code: Provided, further, That securities which are
securities, the method of purchase and such additional information as the being offered at the time of effectivity of this Code pursuant to an effective
Commission deems necessary or appropriate in the public interest or for the registration and permit, may continue to be offered and sold in accordance
protection of investors, or which the Commission deems to be material to a with the provisions of the Revised Securities Act in effect immediately prior
determination by holders whether such security should be sold. to approval of this Code.
72.3. For the purpose of Subsection 72.2, a purchase by or for the All unexpended funds for the calendar year, properties, equipment
issuer or any person controlling, controlled by, or under common control and records of the Securities and Exchange Commission are hereby retained
with the issuer, or a purchase subject to the control of the issuer or any such by the Commission as reorganized under this Code and the amount of Two
person, shall be deemed to be a purchased by the issuer. The Commission hundred million (P200,000,000.00) or such amount necessary to carry out
shall have the power to make rules and regulations implementing this the reorganization provided in this Code is hereby appropriated.
subsection, including exemptive rules and regulations covering situations
All employees of the Commission who voluntarily retire or are
in which the Commission deems it unnecessary or inappropriate that a
separated from the service with the Commission and whose retirement or
purchase of the type described in this subsection shall be deemed to be a
separation has been approved by the Commission, shall be paid retirement
purchase by the issuer for the purpose of some or all of the provisions of or separation benefits and other entitlements granted under existing laws.
Subsection 72.2.
SEC. 75. Partial Use of Income. - To carry out the purposes of this
72.4. The rules and regulations promulgated by the Commission shall Code, the Commission is hereby authorized, in addition to its annual
be published in two (2) newspapers of general circulation in the Philippines, budget, to retain and utilize an amount equal to one hundred million pesos
and unless otherwise prescribed by the Commission, the same shall be (Pl00,000,000.00) from its income.
effective fifteen (15) days after the date of the last publication.
The use of such additional amount shall be subject to the auditing
SEC. 73. Penalties. - Any person who violates any of the provisions requirements, standards and procedures under existing laws.
of this Code, or the rules and regulations promulgated by the Commission
under authority thereof, or any person who, in a registration statement SEC. 76. Repealing Clause. - The Revised Securities Act (Batas
filed under this Code, makes any untrue statement of a material fact or Pambansa Blg. 178), as amended, in its entirety, and Sections 2, 4 and 8
omits to state any material fact required to be stated therein or necessary to of Presidential Decree 902-A as amended, are hereby repealed. All other
make the statements therein not misleading, shall, upon conviction, suffer laws, orders, rules and regulations, or parts thereof, inconsistent with any
a fine of not less than Fifty thousand pesos (P50,000.00) nor more than Five provision of this Code are hereby repealed or modified accordingly.
million pesos (P5,000,000.00) or imprisonment of not less than seven (7) SEC. 77. Separability Clause. - If any portion or provision of this
years nor more than twenty-one (21) years, or both in the discretion of the Code is declared unconstitutional or invalid, the other portions or provisions
1·
court. If the offender is a corporation, partnership or association or other hereof, which are not affected thereby shall continue in full force and effect.
juridical 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, SEC. 78. Effectivity. - This Code shall take effect fifteen (15) days I
partnership, association or entity responsible for the violation, and if after its publication in the Official Gazette or in two (2) newspapers of
such officer is an alien, he shall in addition to the penalties prescribed, be general circulation. I
I
deported without further proceedings after service of sentence. Approved: July 19, 2000
SEC. 74. Transitory Provisions. - The Commission, as organized I
under existing laws, shall continue to exist and exercise its powers, functions

II
and duties under such laws and this Code: Provided, That until otherwise

I
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