Securities Regulation Code (R.A.

8799) necessary for the proper disposition of the

cases before it, subject to the provisions of
A. Implementing Agency of Securities Regulation Code –
existing laws;
The law shall be implemented by Security and Exchange
13. Suspend, or revoke, after proper notice and
Commission which is a collegial body, composed of a
hearing the franchise or certificate of
chairperson and (4) Commissioners
registration of corporations, partnership or
i. Powers and Functions of the Securities and
associations, upon any of the grounds provided
Exchange Commission
by law; and
1. Have jurisdiction and supervision over all
14. Exercise such other powers as may be provided
corporations, partnership or associations who
by law as well as those which may be implied
are the grantees of primary franchises and/or a
from, or which are necessary or incidental to
license or a permit issued by the Government;
the carrying out of, the express powers granted
2. Formulate policies and recommendations on
the Commission to achieve the objectives and
issues concerning the securities market, advise
purposes of these laws
Congress and other government agencies on all
ii. Jurisdiction of Security and Exchange Commission to
aspect of the securities market and propose
Intra-Corporate Disputes
legislation and amendments thereto;
The Commission’s jurisdiction over all cases
3. Approve, reject, suspend, revoke or require
enumerated under section 5 of Presidential Decree
amendments to registration statements, and
No. 902-A is hereby transferred to the Courts of
registration and licensing applications;
general jurisdiction or the appropriate Regional Trial
4. Regulate, investigate or supervise the activities
Court: Provided, That the Supreme Court in the
of persons to ensure compliance;
exercise of its authority may designate the Regional
5. Supervise, monitor, suspend or take over the
Trial Court branches that shall exercise jurisdiction
activities of exchanges, clearing agencies and
over these cases a.k.a. Special Commercial Courts.
other SROs;
iii. Four Principal Departments of Securities and
6. Impose sanctions for the violation of laws and
Exchange Commission
rules, regulations and orders, and issued
1. The Markets and Securities Regulation
pursuant thereto;
Department develops the registration criteria for
7. Prepare, approve, amend or repeal rules,
all market participants and supervises them to
regulations and orders, and issue opinions and
ensure compliance with registration
provide guidance on and supervise compliance
requirements and endorses infractions of the
with such rules, regulation and orders;
Code and rules and regulations to the
8. Enlist the aid and support of and/or deputized
Enforcement and Investor Protection
any and all enforcement agencies of the
Department. It registers equity securities and
Government, civil or military as well as any
debt instruments, or recommends their
private institution, corporation, firm,
exemption from registration before they are
association or person in the implementation of
sold, offered for sale, or distributed to the public
its powers and function under its Code;
and ensures that full, timely and accurate
9. Issue cease and desist orders to prevent fraud
information is available about the said securities.
or injury to the investing public;
2. The Corporate Governance and Finance
10. Punish for the contempt of the Commission,
Department registers mutual funds, including
both direct and indirect, in accordance with the
exchange-traded funds, membership certificates,
pertinent provisions of and penalties
club shares, both proprietary and non-
prescribed by the Rules of Court;
proprietary, and time shares before they are
11. Compel the officers of any registered
offered for sale or sold to the public and ensures
corporation or association to call meetings of
that adequate information is available about the
stockholders or members thereof under its
said securities. It also ensures that investors have
supervision;
access to all material disclosures regarding the
12. Issue subpoena duces tecum and summon
said offering and the securities of public
witnesses to appear in any proceedings of the
companies. The department also monitors
Commission and in appropriate cases, order
compliance by the above issuers with the Code
the examination, search and seizure of all
and rules and regulations adopted thereunder
documents, papers, files and records, tax
and compliance of financing, lending companies
returns and books of accounts of any entity or
and foundations with existing laws, rules and
person under investigation as may be
regulations and endorse infractions thereof to
Page 1 of 11
 the Enforcement and Investor Protection
Department. It monitors covered companies’
compliance with the Revised Code of Corporate
Governance and other corporate governance
issuances of the Commission.
3. The Company Registration and Monitoring
Department registers domestic corporations,
partnerships and associations, including
representative offices and foreign corporations
intending to do business in the Philippines. It also
supervises and monitors such entities relative to
their compliance with law, rules and regulations
administered by the Commission.
4. The Enforcement and Investor Protection
Department ensures compliance by all market
participants, issuers and individuals, and takes
appropriate enforcement action against them for
legal infraction of the Code and other relevant
laws, rules and regulations administered by the
Commission.
B. Requirement for Registration of Securities Prior to
Disposal in Public
i. No securities shall be sold or offered for sale, or
distributed by any person or entity within the
Philippines unless such securities are duly registered
with the Securities and Exchange Commission
ii. No information relating to an offering of securities
shall be disseminated unless a registration statement
has been filed with the Securities and Exchange
Commission and the written communication
proposed to be released contains the required
information under SRC.
iii. No person shall offer, sell or enter into commodity
futures contracts except in accordance with the
rules, regulations and orders the SEC may prescribe
in the public interest. The SEC shall promulgate rules
and regulations involving commodity futures
contracts to protect investors to ensure the
development of a fair and transparent commodities
market.
iv. Requirements for Registration of Securities
1. All securities required to be registered under
Subsection 8. I shall be registered through the
filing by the issuer in the main office of the
Commission, of a sworn registration statement
with the respect to such securities, in such form
and containing such information and document
as the Commission prescribe. The registration
statement shall include any prospectus required.
2. The information required for the registration of
any kind, and all securities, shall include, among
others, the effect of the securities issue on
ownership, on the mix of ownership, especially
foreign and local ownership.
3. The registration statement shall be signed by the
issuer’s executive officer, its principal operating
officer, its principal financial officer, its
comptroller, its principal accounting officer, its
corporate secretary, or persons performing
similar functions accompanied by a duly verified
resolution of the board of directors of the issuer
corporation. The written consent of the expert
named as having certified any part of the
registration statement or any document used in
connection therewith shall also be filed. Where
the registration statement shares to be sold by
selling shareholders, a written certification by
such selling shareholders as to the accuracy of
any part of the registration statement
contributed to by such selling shareholders shall
be filed.
4. Upon filing of the registration statement, the
issuer shall pay to the Commission a fee of not
more than one-tenth (1/10) of one per centum
(1%) of the maximum aggregate price at which
such securities are proposed to be offered.
5. Within forty-five (45) days after the date of filing
of the registration statement, or by such later
date to which the issuer has consented, the
Commission shall declare the registration
statement effective or rejected, unless the
applicant is allowed to amend the registration
statement.
6. Upon affectivity of the registration statement,
the issuer shall state under oath in every
prospectus that all registration requirements
have 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 omission to state a material
fact required to be stated herein or necessary to
make the statement therein not misleading shall
constitute fraud.
7. If a registration statement is on its face
incomplete or inaccurate in any material respect,
the SEC shall issue an order directing the
amendment of the registration statement.
v. Grounds for Rejection or Revocation of Registration
of Securities
1. The issuer:
a. Has been judicially declared insolvent.
b. Has violated any of the provision of this
Code, the rules promulgate pursuant
thereto, or any order of the Commission of
which the issuer has notice in connection
with the offering for which a registration
statement has been filed
c. Has been or is engaged or is about to engage
in fraudulent transactions;
Page 2 of 11
 d. Has made any false or misleading
representation of material facts in any
prospectus concerning the issuer or its
securities;
e. Has failed to comply with any requirements
that the Commission may impose as a
condition for registration of the security for
which the registration statement has been
filed; or
2. The registration statement is on its face
incomplete or inaccurate in any material respect
or includes any untrue statements of a material
fact required to be stated therein or necessary to
make the statement therein not misleading; or
3. The issuer, any officer, director or controlling
person performing similar functions, or any under
writer has been convicted, by a competent judicial
or administrative body, upon plea of guilty, or
otherwise, of an offense involving moral turpitude
and /or fraud or is enjoined or restrained by the
Commission or other competent or administrative
body for violations of securities, commodities, and
other related laws.
vi. Grounds for Suspension of Registration of Securities
1. If at any time, the information contained in the
registration statement filed is or has become
misleading, incorrect, inadequate or incomplete
in any material respect, or the sale or offering for
sale of the security registered thereunder may
work or tend to work a fraud.
2. Refusal to furnish information required by the
SEC
vii. Entities required to submit Financial Statements
within the period prescribed by SEC
1. An issuer which has sold a class of its securities
which are required to be registered.
2. An issuer with a class of securities listed for
trading on an Exchange Market
3. An issuer with assets of at least Fifty million
pesos (50,000,000.00) or such other amount as
the Commission shall prescribe, and having two
hundred (200) or more holder each holding at
least one hundred (100) share of a class of its
equity securities: Provided, however, That the
obligation of such issuer to file report shall be
terminate ninety (90) days after notification to
the Commission by the issuer that the number of
its holders holding at least one hundred (100)
share reduced to less than one hundred (100).
In every case in which an issuer satisfies the
requirements for Financial Statements submission, any
person who acquires directly or indirectly the beneficial
ownership of more than five of per centum (5%) of such
class or in within ten (10) days after such acquisition or
such reasonable time as fixed by Commission, submit to
the issuer of the securities, to the Exchange where the
security is traded, and to the Commission a sworn
statement containing (1) personal information of
purchaser (2) purpose of purchase (3) Number of shares
beneficially owned and (4) other information.
C. Kinds of Securities under Securities Regulation Code
i. Definition of Securities - "Securities" are shares,
participation or interests in a corporation or in a
commercial enterprise or profit-making venture and
evidenced by a certificate, contract, instruments,
whether written or electronic in character.
1. Commodity futures contract means a contract
providing for the making or taking delivery at a
prescribed in the future of a specific quantity
and quality of a commodity or the cash value
thereof, which is customarily offset prior to the
delivery date, and includes standardized
contracts having the indicia of commodities
futures, commodity options and commodity
leverage, or margin contracts.
2. Commodity means any goods, articles,
agricultural and mineral products, services,
rights and interests, financial instruments,
foreign currencies, including any group or index
of any of the foregoing, in which commodity
interest contracts are presently or in the future
dealt in.
3. Forward means a contract interest between a
buyer and a seller whereby the buyer is
obligated to take delivery and the seller is
obliged to deliver a fixed amount of an
underlying commodity at a predetermined
price and date. Payment in full is due at the
time of delivery.
4. Warrant Certificate – means the certificate
representing the right to a Warrant, which may
or may not be detachable, that is issued by an
Issuer to a Warrant holder.
5. Warrant Instrument – means the written
document or deed containing the terms and
conditions of the issue and exercise of a
Warrant whose terms and conditions shall
include (i) the maximum underlying shares that
can be purchased upon exercise, (ii) the
exercise period, and (iii) such other terms and
conditions as the Commission may require.
6. Detachable Warrant – means a Warrant that
may be sold, transferred or assigned to any
person by the Warrant holder separate from,
and independent of, the corresponding
Beneficiary Securities.
7. Non-detachable Warrant – means a Warrant
that may not be sold, transferred or assigned to
any person by the Warrant holder separate
Page 3 of 11
 from, and independent of, the Beneficiary
Securities.
8. Beneficiary Securities – means the shares of
stock and other securities of the Issuer which
form the basis of entitlement in a Warrant.
9. Underlying Shares – means the unissued
shares of a corporation that may be purchased
by the Warrant holder upon the exercise of the
right granted under the Warrant.
10. Pre-need plans are contracts which provide for
the performance of future services of or the
payment of future monetary considerations at
the time actual need, for which plan holders
pay in cash or installment at stated prices, with
or without interest or insurance coverage and
includes life, pension, education, interment,
and other plans which the Commission may
from time to time approve.
ii. Securities Required to be Registered to SEC
1. Shares of stocks, bonds, debentures, notes
evidences of indebtedness, asset-backed
securities;
2. Investment contracts, certificates of interest or
participation in a profit sharing agreement,
certifies of deposit for a future subscription;
3. Fractional undivided interests in oil, gas or other
mineral rights;
4. Derivatives like option and warrants;
5. Certificates of assignments, certificates of
participation, trust certificates, voting trust
certificates or similar instruments
6. Proprietary or nonproprietary membership
certificates in corporations; and
7. Other instruments as may in the future be
determined by the Commission.
iii. Exempted Securities from Requirement of
Registration with SEC
1. Any security issued or guaranteed by the
Government of the Philippines, or by any political
subdivision or agency thereof, or by any person
controlled or supervised by, and acting as an
instrumentality of said Government.
2. Any security issued or guaranteed by the
government of any country with which the
Philippines maintains diplomatic relations, or by
any state, province or political subdivision
thereof on the basis of reciprocity: Provided,
That the Commission may require compliance
with the form and content for disclosures the
Commission may prescribe.
3. Certificates issued by a receiver or by a trustee in
bankruptcy duly approved by the proper
adjudicatory body.
4. Any security or its derivatives the sale or transfer
of which, by law, is under the supervision and
regulation of the Office of the Insurance
Commission, Housing and Land Use Rule
Regulatory Board, or the Bureau of Internal
Revenue.
5. Any security issued by a bank except its own
shares of stock.
iv. Exempted Transactions from Requirement of
Registration with SEC
1. At any judicial sale, or sale by an executor,
administrator, guardian or receiver or trustee
in insolvency or bankruptcy.
2. By or for the account of a pledge holder, or
mortgagee or any of a pledge lien holder selling
of offering for sale or delivery in the ordinary
course of business and not for the purpose of
avoiding the provision of this Code, to liquidate
a bonafide debt, a security pledged in good
faith as security for such debt.
3. An isolated transaction in which any security is
sold, offered for sale, subscription or delivery
by the owner therefore, or by his
representative for the owner’s account, such
sale or offer for sale or offer for sale,
subscription or delivery not being made in the
course of repeated and successive transaction
of a like character by such owner, or on his
account by such representative and such owner
or representative not being the underwriter of
such security.
4. The distribution by a corporation actively
engaged in the business authorized by its
articles of incorporation, of securities to its
stockholders or other security holders as a
stock dividend or other distribution out of
surplus.
5. The sale of capital stock of a corporation to its
own stockholders exclusively, where no
commission or other remuneration is paid or
given directly or indirectly in connection with
the sale of such capital stock.
6. The issuance of bonds or notes secured by
mortgage upon real estate or tangible personal
property, when the entire mortgage together
with all the bonds or notes secured thereby are
sold to a single purchaser at a single sale.
7. The issue and delivery of any security in
exchange for any other security of the same
issuer pursuant to a right of conversion
entitling the holder of the security surrendered
in exchange to make such conversion:
Provided, That the security so surrendered has
been registered under this Code or was, when
sold, exempt from the provision of this Code,
and that the security issued and delivered in
exchange, if sold at the conversion price, would
Page 4 of 11
 at the time of such conversion fall within the
class of securities entitled to registration under
this Code. Upon such conversion the par value
of the security surrendered in such exchange
shall be deemed the price at which the
securities issued and delivered in such
exchange are sold.
8. Broker’s transaction, executed upon customer’s
orders, on any registered Exchange or other
trading market.
9. Subscriptions for shares of the capitals stocks
of a corporation prior to the incorporation
thereof or in pursuance of an increase in its
authorized capital stocks under the Corporation
Code, when no expense is incurred, or no
commission, compensation or remuneration is
paid or given in connection with the sale or
disposition of such securities, and only when
the purpose for soliciting, giving or taking of
such subscription is to comply with the
requirements of such law as to the percentage
of the capital stock of a corporation which
should be subscribed before it can be
registered and duly incorporated, or its
authorized, capital increase.
10. The exchange of securities by the issuer with
the existing security holders exclusively, where
no commission or other remuneration is paid
or given directly or indirectly for soliciting such
exchange.
11. The sale of securities by an issuer to fewer than
twenty (20) persons in the Philippines during
any twelve-month period.
12. The sale of securities to any number of the
following qualified buyers: (i) Bank; (ii)
Registered investment house; (iii) Insurance
company; (iv) Pension fund or retirement plan
maintained by the Government of the
Philippines or any political subdivision thereof
or manage by a bank or other persons
authorized by the Bangko Sentral to engage in
trust functions; (v) Investment company or; (vi)
Such other person as the Commission may rule
by determine as qualified buyers, on the basis
of such factors as financial sophistication, net
worth, knowledge, and experience in financial
and business matters, or amount of assets
under management.
D. Protection of Shareholders Interest
i. Tender Offer – means a publicly announced
intention by a person acting alone in concert with
other persons (hereinafter referred to a “person”) to
acquire outstanding equity securities of a public
company as defined in SRC Rule 3, or outstanding
equity securities of an associate or related company
of such public company which controls the said
public company.
ii. Issuer Tender Offers – means a publicly announced
intention by an Issuer to reacquire any of its own
class of equity securities, or by an associate of such
Issuer to acquire such securities.
iii. “Tender offer materials” means: (i) the Offeror’s
formal offer, including all the material terms and
conditions of the tender offer and all their
amendments; (ii) the related transmittal letter
(whereby equity securities of the target company
that are sought in the tender offer may be
transmitted to the Offeror or its depository) and all
their amendments; and (iii) press releases,
advertisements, letters and other documents
published by the Offeror or sent or given by the
Offeror to security holders which, directly or
indirectly, solicit, invite or request tenders of the
equity securities being sought in the tender offer.
iv. Instances of Mandatory Tender Offers
1. Any person or group of persons acting in concert,
who intends to acquire fifteen percent (15 %) of
equity securities in a public company in one or
more transactions within a period of twelve (12)
months, shall file a declaration to that effect with
the SEC.
2. Any person or group of persons acting in concert,
who intends to acquire thirty five percent (35%)
of the outstanding voting shares or such
outstanding voting shares that is sufficient to
gain control of the board in a public company in
one or more transactions within a period of
twelve (12) months, shall disclose such intention
and contemporaneously make a tender offer for
the percentage sought to all holders of such
securities within the said period. If the tender
offer is oversubscribed, the aggregate amount of
securities to be acquired at the close of such
tender offer shall be proportionately distributed
across selling shareholders with whom the
acquirer may have been in private negotiations
and other shareholders. For purposes of SRC
Rule 19.2.2, the last sale that meets the
threshold shall not be consummated until the
closing and completion of the tender offer.
3. Any person or group of persons acting in concert,
who intends to acquire thirty five percent (35%)
of the outstanding voting shares or such
outstanding voting shares that is sufficient to
gain control of the board in a public company
through the Exchange trading system shall not be
required to make a tender offer even if such
person or group of persons acting in concert
acquire the remainder through a block sale if,
Page 5 of 11
 after acquisition through the Exchange trading
system, they fail to acquire their target of thirty
five percent (35%) or such outstanding voting
shares that is sufficient to gain control of the
board
4. Any person or group of persons acting in concert,
who intends to acquire thirty five percent (35%)
of the outstanding voting shares or such
outstanding voting shares that is sufficient to
gain control of the board in a public company
directly from one or more stockholders shall be
required to make a tender offer for all the
outstanding voting shares. The sale of shares
pursuant to the private transaction or block sale
shall not be completed prior to the closing and
completion of the tender offer.
5. If any acquisition that would result in ownership
of over fifty percent (50%) of the total
outstanding equity securities of a public
company, the acquirer shall be required to make
a tender offer under this Rule for all the
outstanding equity securities to all remaining
stockholders of the said company at a price
supported by a fairness opinion provided by an
independent financial advisor or equivalent third
party. The acquirer in such a tender offer shall be
required to accept all securities tendered.
v. Transactions Exempted from Mandatory Tender
Offers
1. Any purchase of securities from the unissued
capital stock; Provided, the acquisition will not
result to a fifty percent (50%) or more ownership
of securities by the purchaser or such percentage
that is sufficient to gain control of the board;
2. Any purchase of securities from an increase in
authorized capital stock;
3. Purchase in connection with foreclosure
proceedings involving a duly constituted pledge
or security arrangement where the acquisition is
made by the debtor or creditor;
4. Purchases in connection with a privatization
undertaken by the government of the
Philippines;
5. Purchases in connection with corporate
rehabilitation under court supervision;
6. Purchases in the open market at the prevailing
market price; and
7. Merger or consolidation.
vi. Tender offer by an Issuer or Buy Back - A
reacquisition or repurchase by an Issuer of its own
securities shall only be made if such Issuer has
unrestricted retained earnings in its books to cover
the amount of shares to be purchased, and is
undertaken for any of the following purposes:
1. To implement a stock option or stock purchase
plan;
2. To meet short-term obligations which can be
settled by the re-issuance of the repurchased
shares;
3. To pay dissenting or withdrawing stockholders
entitled to payment for their securities under the
Corporation Code; and
4. Such other legitimate corporate purposes.
vii. Dissemination Requirements of Tender Offer
1. An Offeror or Issuer shall publish the terms and
conditions of the tender offering in two (2)
national newspapers of general circulation in
the Philippines on the date of commencement
of the tender offer and for two (2) consecutive
days after compliance with SRC Rule 19.7.1.
2. If a material change occurs in the information
published, sent or given to security holders, the
Offeror shall disseminate promptly a disclosure
of such change in a manner reasonably
calculated to inform security holders of such
change.
viii. Period and Manner of Making Tender Offers
1. Expiration Period of Tender Offer - A tender
offer shall, unless withdrawn, remain open
until the expiration of:
a. At least twenty (20) business days from its
commencement; Provided, that an offer
should as much as possible be completed
within sixty (60) business days from the date
the intention to make such offer is publicly
announced; or
b. At least ten (10) business days from the date
the notice of a change in the percentage of
the class of securities being sought or in the
consideration offered is first published, sent
or given to security holders.
2. In a mandatory tender offer, the Offeror shall
be compelled to offer the highest price paid by
him for such securities during the preceding six
(6) months. If the offer involves payment by
transfer or allotment of securities, such
securities must be valued on an equitable basis.
3. In case of a tender offer other than by an
Issuer, the subject of the tender offer (“the
target company”) shall not engage in any of the
following transactions during the course of a
tender offer, or before its commencement if its
board has reason to believe that an offer might
be imminent, except if such transaction is
pursuant to a contract entered into earlier, or
with the approval of the shareholders in a
general meeting or, where special
circumstances exist, the Commission’s approval
has been obtained:
Page 6 of 11
 a. Issue any authorized but unissued shares;
b. Issue or grant options in respect to any
unissued shares;
c. Create or issue, or permit the creation or
issuance of, any securities carrying rights of
conversion into, or subscription to, shares;
d. Sell, dispose of or acquire, or agree to
acquire, any asset whose value amounts to
five percent (5 %) or more of the total value
of the assets prior to acquisition; or
e. Enter into contracts that are not in the
ordinary course of business.
4. The Offeror in a tender offer shall permit the
securities tendered to be withdrawn (i) at any
time during the period such tender offer
remains open; and(ii) if not yet accepted for
payment, after the expiration of sixty (60)
business days from the commencement of the
tender offer.
5. If the tender offer shall be for less than the
total outstanding securities of a class, but a
greater number of securities is tendered, the
Offeror shall be obliged to accept and pay the
securities on a pro rata basis, disregarding
fractions, according to the number of securities
tendered by each security holder during the
period the offer was open.
6. In the event the Offeror in a tender offer
increases the consideration offered after the
tender offer has commenced, the Offeror shall
pay such increased consideration to all security
holders whose tendered securities have been
accepted for payment by such Offeror, whether
or not the securities were tendered prior to the
variation of the tender offer’s terms.
7. The Offeror in a tender offer shall either pay
the consideration offered, or return the
tendered securities, not later than ten (10)
business days after the termination or the
withdrawal of the tender offer.
8. No tender offer shall be made unless:
9. Unless with the prior approval of the
Commission, if an offer has been announced
but has not become unconditional in all
respects and has been withdrawn or has
lapsed, neither the Offeror nor any person who
acted in concert with it in the course of the
offer may, within six (6) months from the date
on which such offer has been withdrawn or has
lapsed, announce an offer for the target
company nor acquire any securities of the
target company which would require such
person to make a mandatory tender offer
under this Rule and Section 19.1 of the Code.
10. Prohibited Acts in any Tender Offer
a. To employ any device, scheme or artifice to
defraud any person;
b. To make any untrue statement of a material
fact or to omit to state a material fact
necessary in order to make the statements
made, in the light of the circumstances
under which they were made, not
misleading; or
c. To engage in any act, practice or course of
business which operates or would operate
as a fraud or deceit upon any person.
d. If a person shall become aware of a potential
tender offer before the tender offer has
been publicly announced, such person shall
not buy or sell, directly or indirectly, the
securities of the target company until the
tender offer shall have been publicly
announced. Such buying or selling shall
constitute insider trading under Section 27.4
of the Code.
i. Manipulation of Security Prices, Devices and
Practices (Unlawful Acts Involving Manipulation of
Security Prices, Devices and Practices). It shall be
unlawful for any person acting for himself or through
a dealer or broker, directly or indirectly:
a. To create a false or misleading appearance of
active trading in any listed security traded in an
Exchange of any other trading market (hereafter
referred to purposes of this Chapter as
"Exchange"):
i. By effecting any transaction in such security
which involves no change in the beneficial
ownership thereof;
ii. By entering an order or orders for the
purchase or sale of such security with the
knowledge that a simultaneous order or orders
of substantially the same size, time and price,
for the sale or purchase of any such security,
has or will be entered by or for the same or
different parties; or
iii. By performing similar act where there is no
change in beneficial ownership.
b. To affect, alone or with others, a securities or
transactions in securities that: (I) Raises their
price to induce the purchase of a security,
whether of the same or a different class of the
same issuer or of controlling, controlled, or
commonly controlled company by others; or (iii)
Creates active trading to induce such a purchase
or sale through manipulative devices such as
marking the close, painting the tape, squeezing
the float, hype and dump, boiler room
operations and such other similar devices.
c. To circulate or disseminate information that the
price of any security listed in an Exchange will or
Page 7 of 11
 is likely to rise or fall because of manipulative
market operations of any one or more persons
conducted for the purpose of raising or
depressing the price of the security for the
purpose of inducing the purpose of sale of such
security.
d. To make false or misleading statement with
respect to any material fact, which he knew or
had reasonable ground to believe was so false
or misleading, for the purpose of inducing the
purchase or sale of any security listed or traded
in an Exchange.
e. To effect, either alone or others, any series of
transactions for the purchase and/or sale of any
security traded in an Exchange for the purpose
of pegging, fixing or stabilizing the price of such
security; unless otherwise allowed by this Code
or by rules of the Commission.
f. No person shall use or employ, in connection
with the purchase 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 in
connection with the purchase or sale of any
security except in accordance with such rules
and regulations as the Commission may
prescribe as necessary or appropriate in the
public interest for the protection of investors.
ii. Fraudulent Transactions - It shall be unlawful for any
person, directly or indirectly, in connection with the
purchase or sale of any securities to:
a. Employ any device, scheme, or artifice to
defraud;
b. Obtain money or property by means of any
untrue statement of a material fact of any
omission to state a material fact necessary in
order to make the statements made, in the light
of the circumstances under which they were
made, not misleading; or
c. Engage in any act, transaction, practice or
course of business which operates or would
operate as a fraud or deceit upon any person.
iii. Insider Trading - It shall be unlawful for an insider to
sell or buy a security of the issuer, while in
possession of material information with respect to
the issuer or the security that is not generally
available to the public, unless: (a) The insider proves
that the information was not gained from such
relationship; or (b) If the other party selling to or
buying from the insider (or his agent) is identified,
the insider proves: (I) that he disclosed the
information to the other party, or (ii) that he had
reason to believe that the other party otherwise is
also in possession of the information. A purchase or
sale of a 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 degree, legitimate or common-law, shall be
presumed to have been effected while in possession
of material nonpublic information if transacted after
such information came into existence but prior to
dissemination of such information to the public and
the lapse of a reasonable time for market to absorb
such information: Provided, however, That this
presumption shall be rebutted upon a showing by
the purchaser or seller that he was aware of the
material nonpublic information at the time of the
purchase or sale.
a. For purposes of this Section, information is
"material nonpublic" if: (a) It has not been
generally disclosed to the public and would
likely affect the market price of the security
after being disseminated to the public and the
lapse of a reasonable time for the market to
absorb the information; or (b) would be
considered by a reasonable person important
under the circumstances in determining his
course of action whether to buy, sell or hold a
security.
b. It shall be unlawful for any insider to
communicate material nonpublic information
about the issuer or the security to any person
who, by virtue of the communication, becomes
an insider as defined in Subsection 3.8, where
the insider communicating the information
knows or has reason to believe that such person
will likely buy or sell a security of the issuer
whole in possession of such information.
c. It shall be unlawful where a tender offer has
commenced or is about to commence for: (i)
Any person (other than the tender offeror) who
is in possession of material nonpublic
information relating to such tender offer, to buy
or sell the securities of the issuer that are
sought or to be sought by such tender offer if
such person knows or has reason to believe that
the information is nonpublic and has been
acquired directly or indirectly from the tender
offeror, those acting on its behalf, the issuer of
the securities sought or to be sought by such
tender offer, or any insider of such issuer; and
(ii) Any tender offeror, those acting on its
behalf, the issuer of the securities sought or to
be sought by such tender offer, and any insider
of such issuer to communicate material
nonpublic information relating to the tender
offer to any other person where such
communication is likely to result in a violation of
Subsection 27.4.
Page 8 of 11
E. Regulation of Pre-Need Plans
No person shall sell or offer for sale to the public any
pre-need plan except in accordance with rules and
regulations which the Commission shall prescribe. Such rules
shall regulate the sale of pre-need plans by, among other
things, requiring the registration of pre-need plans, licensing
persons involved in the sale of pre- need plans, requiring
disclosures to prospective plan holders, prescribing
advertising guidelines, providing for uniform accounting
system, reports and recording keeping with respect to such
plans, imposing capital, bonding and other financial
responsibility, and establishing trust funds for the payment
of benefits under such plans.
F. Code of Corporate Governance (Revised Code of
Corporate Governance)
i. Companies covered by the Revised Code of
Corporate Governance
1. Corporations that sell equity and/or debt
securities to the public that are required to be
registered with the Commission, or
2. Corporations that have assets in excess of Fifty
Million Pesos and at least two hundred (200)
stockholders who own at least one hundred (100)
shares each of equity securities, or
3. Corporations whose equity securities are listed on
an Exchange; or
4. Corporations that are grantees of secondary
licenses from the Commission.
ii. Corporation Governance refers to the framework of
rules, systems and processes in the corporation that
governs the performance by the Board of Directors
and Management of their respective duties and
responsibilities to the stockholders.
iii. Board of Directors refers to the governing body
elected by the stockholders that exercises the
corporate powers of a corporation, conducts all its
business and controls its properties;
iv. Composition of the Board of Directors of
Corporations covered by Revised Code of Corporate
Governance
1. The Board shall be composed of at least five (5),
but not more than fifteen (15), members who
are elected by the stockholders.
2. All companies covered by this Code shall have at
least two (2) independent directors or such
number of independent directors that
constitutes twenty percent (20%) of the
members of the Board, whichever is lesser, but in
no case less than two (2). All other companies
are encouraged to have independent directors in
their boards.
3. The membership of the Board may be a
combination of executive and non-executive
directors (which include independent directors)
in order that no director or small group of
directors can dominate the decision making
process.
4. The non-executive directors should possess such
qualifications and stature that would enable
them to effectively participate in the
deliberations of the Board.
v. Additional Qualifications of Directors of
Corporations covered by Revised Code of Corporate
Governance. In addition to the qualifications for
membership in the Board provided for in the
Corporation Code, Securities Regulation Code and
other relevant laws, the Board may provide for
additional qualifications which include, among
others, the following:
1. College education or equivalent academic degree;
2. Practical understanding of the business of the
corporation;
3. Membership in good standing in relevant industry,
business or professional organizations; and
4. Previous business experience.
vi. Grounds for Permanent Disqualifications of
Directors of Corporations covered by Revised Code
of Corporate Governance
1. Any person convicted by final judgment or order
by a competent judicial or administrative body of
any crime that (a) involves the purchase or sale
of securities, as defined in the Securities
Regulation Code; (b) arises out of the person’s
conduct as an underwriter, broker, dealer,
investment adviser, principal, distributor, mutual
fund dealer, futures commission merchant,
commodity trading advisor, or floor broker; or (c)
arises out of his fiduciary relationship with a
bank, quasi-bank, trust company, investment
house or as an affiliated person of any of them;
2. Any person who, by reason of misconduct, after
hearing, is permanently enjoined by a final
judgment or order of the Commission or any
court or administrative body of competent
jurisdiction from: (a) acting as underwriter,
broker, dealer, investment adviser, principal
distributor, mutual fund dealer, futures
commission merchant, commodity trading
advisor, or floor broker; (b) acting as director or
officer of a bank, quasi-bank, trust company,
investment house, or investment company; (c)
engaging in or continuing any conduct or practice
in any of the capacities mentioned in sub-
paragraphs (a) and (b) above, or willfully
violating the laws that govern securities and
banking activities.
3. The disqualification shall also apply if such
person is currently the subject of an order of the
Commission or any court or administrative body
Page 9 of 11
 denying, revoking or suspending any registration,
license or permit issued to him under the
Corporation Code, Securities Regulation Code or
any other law administered by the Commission
or Bangko Sentral ng Pilipinas (BSP), or under any
rule or regulation issued by the Commission or
BSP, or has otherwise been restrained to engage
in any activity involving securities and banking;
or such person is currently the subject of an
effective order of a self-regulatory organization
suspending or expelling him from membership,
participation or association with a member or
participant of the organization;
4. Any person convicted by final judgment or order
by a court or competent administrative body of
an offense involving moral turpitude, fraud,
embezzlement, theft, estafa, counterfeiting,
misappropriation, forgery, bribery, false
affirmation, perjury or other fraudulent acts;
5. Any person who has been adjudged by final
judgment or order of the Commission, court, or
competent administrative body to have willfully
violated, or willfully aided, abetted, counseled,
induced or procured the violation of any
provision of the Corporation Code, Securities
Regulation Code or any other law administered
by the Commission or BSP, or any of its rule,
regulation or order;
6. Any person earlier elected as independent
director who becomes an officer, employee or
consultant of the same corporation;
7. Any person judicially declared as insolvent;
8. Any person found guilty by final judgment or
order of a foreign court or equivalent financial
regulatory authority of acts, violations or
misconduct similar to any of the acts, violations
or misconduct enumerated in sub-paragraphs (i)
to (v) above;
9. Conviction by final judgment of an offense
punishable by imprisonment for more than six
(6) years, or a violation of the Corporation Code
committed within five (5) years prior to the date
of his election or appointment.
vii. Grounds for Temporary Disqualification of Directors
of Corporations covered by Revised Code of
Corporate Governance
1. Refusal to comply with the disclosure
requirements of the Securities Regulation Code
and its Implementing Rules and Regulations. The
disqualification shall be in effect as long as the
refusal persists.
2. Absence in more than fifty (50) percent of all
regular and special meetings of the Board during
his incumbency, or any twelve (12) month period
during the said incumbency, unless the absence
is due to illness, death in the immediate family or
serious accident. The disqualification shall apply
for purposes of the succeeding election.
3. Dismissal or termination for cause as director of
any corporation covered by this Code. The
disqualification shall be in effect until he has
cleared himself from any involvement in the
cause that gave rise to his dismissal or
termination.
4. If the beneficial equity ownership of an
independent director in the corporation or its
subsidiaries and affiliates exceeds two percent of
its subscribed capital stock. The disqualification
shall be lifted if the limit is later complied with.
5. If any of the judgments or orders cited in the
grounds for permanent disqualification has not
yet become final.
6. A temporarily disqualified director shall, within
sixty (60) business days from such
disqualification, take the appropriate action to
remedy or correct the disqualification. If he fails
or refuses to do so for unjustified reasons, the
disqualification shall become permanent.
viii. Specific Duties and Responsibilities of a Director - A
director’s office is one of trust and confidence. A
director should act in the best interest of the
corporation in a manner characterized by
transparency, accountability and fairness. He should
also exercise leadership, prudence and integrity in
directing the corporation towards sustained
progress.
1. Conduct fair business transactions with the
corporation, and ensure that his personal
interest does not conflict with the interests of
the corporation.
2. Devote the time and attention necessary to
properly and effectively perform his duties and
responsibilities.
3. Act judiciously.
4. Exercise independent judgment.
5. Have a working knowledge of the statutory and
regulatory requirements that affect the
corporation, including its articles of
incorporation and by-laws, the rules and
regulations of the Commission and, where
applicable, the requirements of relevant
regulatory agencies.
6. Observe confidentiality.
ix. Establishment of Audit Committee
1. Audit Committee shall assist the Board in the
performance of its oversight responsibility for
the financial reporting process, system of
internal control, audit process, and monitoring of
compliance with applicable laws, rules and
regulations
Page 10 of 11
 2. The Audit Committee shall consist of at least
three (3) directors, who shall preferably have
accounting and finance backgrounds, one of
whom shall be an independent director and
another with audit experience. The chair of the
Audit Committee should be an independent
director.
x. Appointment of Compliance Officer - The Board
shall appoint a Compliance Officer who shall report
directly to the Chair of the Board. He shall perform
the following duties:
1. Monitor compliance by the corporation with this
Code and the rules and regulations of regulatory
agencies and, if any violations are found, report
the matter to the Board and recommend the
imposition of appropriate disciplinary action on
the responsible parties and the adoption of
measures to prevent a repetition of the violation;
2. Appear before the Commission when summoned
in relation to compliance with this Code; and
3. Issue a certification every January 30th of the
year on the extent of the corporation’s
compliance with this Code for the completed
year and, if there are any deviations, explain the
reason for such deviation.

G. Period for Filing of Annual Financial Statements and

General Information Sheet (SEC Circular No. 2 Series of
2017)
i. Corporation whose fiscal year ends on a date other
than December 31, 2016 – The audited financial
statements shall be filed within 120 calendar days
from the end of fiscal year.
ii. Corporation whose fiscal year ends on December 31,
2016 – The SEC issues a specific schedule or specific
date depending on the license number of the
corporation for the submission of audited financial
statements. There are various date provided in the
circular.
iii. The audited financial statements shall have the
stamped “received by the BIR or its authorized
banks.”
iv. All corporations shall filed their General Information
Sheet within 30 calendar days from
1. Stock Corporation – date of actual annual
stockholder’s meeting
2. Non-stock Corporation – date of actual annual
member’s meeting
3. Foreign Corporation – Anniversary date of the
issuance of the SEC License.

Page 11 of 11