_RVIEWERON COMMERCIALLAW 1 — BUSINESS ORCANZAmION Py PART Secures Reglatons eae ONS 3s (GRE RA Now ond By shall include the examination ang 15) Supervise, monitor, sus fords regulation and Supervision gg ? tivities of exchanges eo SHE Over the srprrement of compliance, an clearing seo conan wih See other Sli Regulator Orazatns ros a se 6) pose sanctions forthe vison ofa and b)tvetigation. The SEC can investiga pe ries” eesations and orders ssued puruant wilionaf the RCCP and impose adi toa Senco. It can also transmit evident 7) Prepare, approve, amend or repeal ules, regula: Department of Justice for prelimien © be tions and orders, and issue Pinions and provide tigation or criminal prosecution (Seas guidance on and supervise compliance 158, RCCP). Tales, regulations and orders, pefimck SECURITIES REGULATIONS Cope 8), ali he ang Suppor of andlor depts any (SRC, R.A. No. 8799) Givl or military as well asany privet eee, AND RELATED LAWS corporation, tem, ‘naciton pen int a ° implementation of its powers. and 1 sun taponen ninco of i oT fenctions Secures and Exchange Commission (SEC) ie wih tua ad sal have the powers and es 9) Yasue cease and desist odes to prevent fraud o provided by the Securities Regulation Code, Presidental injury to the investing public; Deae No, 902-A, the Revised Corporation Code, the 10) Compel the officers of any registered co : compel the o re poration thr eng ne, The SECs powers are expan wt oF astociation to call metings of stockholders or the Revised Corporation Code. Additional powers of the SEC becubers thereat undae is eapereaeny ‘lat to secures under Section Sof the SRC include 1) Suspend, or svar proper nate ene 1) Have jurisdiction and supervision overall p> ing the franchise or certificate of registration of ‘aon parinerships or asocatons who are corporations, partnerships or association, upon trans of primary franchises and/or 4 Uo any ofthe grounds provided by lw. 1 {PimiisuedbytheGovemment’| || 1M TRANSFERRED JURISDICTION formulate policies and recommendations . ‘sus conning the ecunten market 9) Under Section 52 of he SRC the Commiso’s and other government agence & jurisdiction over all cases enumera alae of ‘be ner Severna epee Section 5 of PD. No, SOA bs Ben waste legislation and amendments thereto; ‘courts of general jurisdiction or Apis! Ga et appropriate Regional Trial Court. Thus, the ameneer et suspend, revoke Of TEs following are within the jurisdiction ofthe RTC i Ns to registration. statements (1983, 1994, 1996, and 2006 Bar): tionand licensing applications; 1994, 1996, 49) Regulate investigate or supervise the activit® 1) fraudulent devices and schemes employed Petson o ensure compliance; by directors detrimental tothe pul ° est and to other firms; Scanned with CamScanner_REVIEWERON COMMERCTALLAW 2) imra-conporate disp and wih )Rlaton to their franchise and vate ot assuct, troversies in election, 3) Gros or trustees,” “PPI ition tobe declared in state o O Fipayments and * Spey appointment of Rehabilitat 5) Remagement Committee, Pg +) Intra Corporate Controversy. ‘There ig corporate controversy if it arses out of corporate or partnership relations between an’ allof the parties and the corporation, partnenyy, or association of which they are tool? members, of associates; between any of 1 of them and the corporation, partnership, association of which they are members, or associates, respectively; and betwen such corporation, partnership, or association at the State insofar as it concerns ther individ franchises (Relationship Test) and that the dput among the parties be intrinsically comecl with the regulation of the corporation (Natur Controversy Test) (Concorde Condominium Con-* Bacuin, February 17,2016) (1994 and 2006 Bs 2. WHAT ARE SECURITIES? “Seewites" ae shares, participation or interes corporation oF in a commercial enterprise ot profitatit Venture and evidenced by a certificate, contract, instru ‘ether written or electronic in character (196 Ba). The 4) Shares of stock, bond: notes Is, debentures, TO dence of indebtedness, asset-backed secu" ») Investment contracts, certificates of © Partiipation in. a profit sharing #8, ‘Certificates of deposit for a future subs PAR — BUSES ORG Scie epes ONS sxc ta Noa se Fractional undivided int mineral rights; NETESS inl gas or other 4) _ Derivatives like option and warranty ¢) Cetin of asignnens, pation, trust ceria, vty ats Pati ‘or similar instruments; ang fetes eae Bescon naieanae Set Sim ne ae ener Define the following terms: a) lssuer;b) broker; c) dealer 4) dlearing agency; e) exchange; f)preneed plans; promoter; h) prospectus; 1) registration statement) Incertificated securities; k) underwriter; 1 associat; mm) registrant; n) securities depository; o} SeltRegultony Organization; p) Transfer Agent; q) Trading Participant, 1) Dealing in Securities; s) Solicitation; and {) Overshe- Counter Market (Rule 3.1.1, 2015 SRCARR). a) Issuer is the originator, maker, obligor or ceator of the security. It is any entity authorized by the ‘SEC to offer to sell, sell or promate the saleto the public ofits equity, bonds, instruments of indebt edness and other form of security (Rule 31.1 2015 SRC-IRR). b) Broker is a person engaged in the business of buying and selling securities for the account of others. ©) Dealer means any person wo bays and sls securities for his/her own accountin the ordinary course of business. : any ety that provides 8) Clearing, Ageney any ety at Fe facility for the perform ming activites (1) make deliveries of secures securities; (2) reduce the numberof stvenet Of securities transactions or alte ara Scanned with CamScanner“ reRON COMMERCIALLAW ibiltes i accordance with 5 ovide the means for the cent Gets otha tasters lang He Sarton an be’ made Bs entry af obenise falltate the sei they ‘Sut ansactons without pyc No ecuities certificates. gy «)_ Exchange i an organized marketplace tes trades of securities andlor ex plas forthe benefit ofthe planholges St provide fr the performance of fate seh Payment of monetary considerations crt ery of her benefits atthe time of acu or agreed maturity date as specified thant exchange for cash or installment amounts or without interest or insurance coverage na incude life, pension, education, itemet ag ‘other plans, instruments, contracts or desis a may be determined by the Insurance Connie sion (LC). Preneed plans are now being rege lated by the LC. under the Pre-need Code ott Philippines (Sec. 4(c], R.A. No. 9829), 8) Fromoter isa person who, acting alone ot wih others takes initiative in founding and orgxi- ing the business or enterprise of the issuer = ‘receives consideration therefore. 4) Prospectusis the document made by or onbebl of an issue underwriter or dealer to sell oro ‘Securities for sale to the public through a regi tion statement filed with the Commission. Registration Statement is the application {fBisation of securities required to be filed the ‘Commission, eo preetiatea Security is a security evidé™ "onic or similar records. i) d ®» m) n) ° ?) PART Il — BUSINESS ORGAN Secu Replston tang ONS 3 (RE RA NOES) and festa Underverlterisa person who gu ruta per ranteesona fi Sedat istribution and sale of secursae another company, #8 0f any kind by Associalesanenityicadinganuincrported Over whichtheinvestor and that is either a ina joint venture. Registrant is the issuer of seats with to which a registration satemen or neers issuer report has been or is tobe fled entity such as partnership, has significant influence Securities Depository holds secures account, provides central safekeeping and asset services Self-Regulatory Organization or SRO means an organized Exchange, registered clearing agenoy organization or association reystered with the SEC as SRO under Section 39 ofthe SRC which hhas been authorized by the SEC to (1) enforce compliance with the relevant provision ofthe SRC and rules and regulations adopted there- under; (2) promulgate and enforce its own rules ‘which have been approved by the SEC, by the members and/or participants; and (3) enforce fait, ethical and efficient practice inthe securities ‘and commodity futures industry inchuding secu- tities and commodities exchanges. fransfer an who performs on behalertenererbyie tora following activities: (1) Countersigns, when applicable, certificates of securities upon their issuance; (2) Monitors the issuance of securities to prevent ‘unauthorized issuances; @)_ Registers the transfer ofsuch securities; (4) Exchanges or converts such securities; Scanned with CamScannerevEWERON COMMERCTALLAW eee sestering ny aout ryan vein fom at opin at nc nba en cle iam th ens athe 9 elie ny pee OTL mages hom attempting to induce any Person to ent canes ome s) Solicitation is the act of seeking ot as ©) Meaning of Common Enterprise —» Seated hen two ora ei doomed resourcing cone if the promoter receives naling een broker's commission (Rule 263, 2015 SRCIRR). in ori bing by of providing information about a sevur oe investment product being offered forsale witht 1 _ X Conporation is engaged in a scheme whereby an invest eamuiteecnergemcdamee | * Lone cum casheesteyarmns cr binging ina sale or purchase of ence ‘pand signits application form. The Teme Condon nese investment product. The solicitor need nt te abe ack the aplication form indicate that he BCO shall nan signatory to any contract relative to such ofr ot the companys eer progam and wovalaeay eee sale of security (Rule 26.3, 2015 SRCARR) real property from any aceedted real esate deveopes nd 5 1) Overthe-Counter Market — purchase and se such he is entited to a refeeal bens /commison. argaphS of securities is done outside the stock exchan ofthe Sime Indicates that there exits no employer/ employee itis buying and selling of security on a bistal eae eats CD ante Pes Hones oid basis between parties outside the exchange (SEC His ewllment ents hin fet ho ives who shad son ann SHE NOH, Sere of 2006) (989 Bh or US enh and out of rama een What. vestment contra: In case the two referrals/enrollees would recruit a minimum of ar nesten contacts? four person each cating te fone wo Bee het 9) Definition. An investment contract means * ‘own down lines, the BCO will receive a total amount of USS147.20 contract, transaction or scheme (collective after deducting the amount of US$36.80 as property fund from the “contract”) whereby a person invests his 0% sss amount of USSISA, After recruiting 28 pesosina pet in a common enterprise and is Ied 10 &% Sight months foreach Left and Right sins ous 21k {rufis rimarty fom the efforts of ote fon ne toa UT ae SRCIRRY: a afer deducting the amount of USS#020 spore) et ‘A presumption that a contract # gross amount of USSI176, as now an acute investment contract arises whenever & Pe <1 US 7conating ss oper Fan Phen ee Soteue the money of ethers on the PO ‘und account with the Chinabank. Se al ‘°F US§2700 is used as parial/fall down payment fr OT Property chosen by the BCO from ay of [een] Scanned with CamScanner[REVIEWERON COMMERCIAL LAW lesen XCEL eg “ - aged in the busi ‘ aoe — © Leimert on ot sonby he SEC a vesinenconragt ne gt EEdimmeeoetelt Oscar ae cine pete pameiy fence Hi nn DO. aly cng ep cig money fom te sale af the pans One Pel Spee e ntneo oer gn inure one ih ee pti being respective purhasrsty qa SOR on ang Cher tt Eh Commi GR NT ay 6 soa) Caper his a busines plan under which yi * caps over he lis and conan seen ante see wil ena seh ‘Trsgent cnt wih Corporation ori a Srna eet to underake the sng of he se ae wile reine nd remted fo the sine snenne se! aggrpte Say se per yeu of te con oe Eres shee tote investment cnc Ace Oe tants ar investment contrac tht ae seca tole De SKC What is ivoved i a scheme whey Speen ‘net hs mney nthe common enterprise ancl Bee ofS primal trough the efor of ther, T Cnpons fee re than eel rights but alo the opp © SEER ey en osha in the profits of eg eel Smead centy owed by 1 Corporation SECO Oona eed Deer acy 302 Whatare derivatives? Derivativesare financial instruments whose val® anes in response to changes in a ‘specified interes rate inde” Pree, commodity price, foreign exw Index or oe OF ates, ere ating oot wt similar variable ‘underlying, factor 1 incade patil date Rule3.19, 2019 SRCIRR. 2) ntsnot limited to options and va ages a Gert that give the ies de obligation, to bu} 06 security at a predetermined Po b) TART — usm on E Sepa SATO = oncna nonmsfacica called the exer rari py predetermined dat called he exp 2 8 (0), *Call options” are righ Eh to buy and options” are rights tose, PUY *4 "put @) Stock option granted to offal who ar nat member aS ot is allowed or may be approved by hence fubject to a review ofthe schene one board and approval by the socilaS in order to widen the corporate bee distribute comporate profs more enable (Rule 12.3.2.42,2018 SRR) (8) Stock options may be granted to nontock holders if the board has been authorinad to grant that benefit by the (i) corporation's Articles of Incorporation, (i) By-laws, or (ii) by a Resolution of the stockholders ‘representing at least two-thirds (2/3) ofthe ‘outstanding voting and non-voting capital stock (Rule 12.3243, 2015 SRCIRN). (4) Stock options granted to decors and off cers must be approved in a meeting ofthe Stockholders representing at leat 2/3 ofthe outstanding voting and non-voting Stk Rae 273242 205 SRC, “Warrants” are rights to subscribe or purchase new shares or existing shares in a company, on ‘or before a predetermined date called the expiry date, Warrants generally have a longer exercise period than options. 7 (1) Detachable warrant means a warrant that > may be sold, transferred or eae any person by the holder separate and independent of the. comesponding beneficiary securities. Beneficiary seri is the shares of stock or other secures th form the basi of entitlement ina warrant. Scanned with CamScannerwhat ae commodity futures conta se modi? a) » a » cis What are Proprietary Share or Certificate and Now Proprietary Share or Certificate? -REVIEWERON COMMERCIAL Lavy Nondetachable warrant ©) Matenaynotbe sod range? 8 ny toany person by the warrant hoy,c" ign from, and independent of te ent securities. chit 5 Wag Commodity futures contract” re, providing for the making or taking Cg ata prescribed time in the future of, “ey Guan and quality ofa commen 200 Natu thereof which is custom cree tothe delivery date, and includes sane? contracts having, the indicia of commas futures, commodity options and commas leverge or margin tonacts iy Commodity means any goods, atic righ andinterests, including any greap ones of any ofthe foregoing, in which eomeis interests contracts are presently or in the futur dealin Proprietary share or certificate isan evidencet interest, participation or privilege in acorpoctin whch ves the older 6 the chre or cei the right to use the facilities covered by su cartfiate and to receive dividends or eis fom the corporation. Upon liquidation of ‘corporation, the holder shall havea proporionst ‘Ownership over its assets (Rule 3.1.15, 2015 SR IR NonFroprictary share or certificate SrcENE of interest, participation of pave ahe,,2 SPecific property of a corporation ‘lows the holder of the share or certiicl® er are or cert Seu propery under certain. 8 entijec"®: The holder, however, shall ® ‘tiled to dividends from the corporation °° HOW ae esceereuenons a oxciateesfaeer Ties uidation (Rule ina i (Rule 3.1.13,2015 sre. DOES THE SRC PROTECT THE WsHES TO INVESTIN SECURES? "UBLIC WHO ‘The law protects the public as fellows: att disclosure of information to the put ‘urties that are being offered and the ‘fe filing of and approval of the registra Oe approval of the prospectus. There uy to regularly submit materia infor Goce monitoring of the securities an that may affect the same as well as regi te oma isuct nce ton seme a bon aon oer creates the persons involved including brokers, issuers, the exchange itell, ete. in oni fo ensure compliance ©) prohibiting and penal fod transactions; and) providing te SEC wi fnctions (Philippine Stock Exchange. CA 281 SCRA9 [lane Pertinent laws and regulations; ing different fraudulent practices and Securities and Exchange Commission , CA, 246 SCRAT38[1995), 401, Objectives of the SRC and its IRR. (1) organize socially conscious and self-regulating markets @) encourage wide public ownership of business enterprises; (3) promote the development ofthe capital market; (4) protect the investors; (5) ensure full and timely disclosure of material information: and (6) ‘minimize, if not eliminate, fraudulent or manipulative devices and practices that create distortions in a free ‘market (Rule 2, 2015, SRC-IRR. STATE THE BASIC RULES REGARDING REGISTRATION OF SECURITIES So, : : c Registration requirement. Section 8.1 of the SR¢ requires the filing with and approval by the SEC ofa registration statement (2012 Ba isnot filed @) Prohibitions. If registration statement is not and approved the following are PROHIBITED: (1) Sale of securities in the Philippines: Scanned with CamScanner» ° a eve WERON COMMERCIAL LAW {@)_ Offer to sll oF distribute sec, ies the Philipines i Dissemination of information ©) Mfering of securities, Taig to Make Information Avail peat ea tet sae fash sbstance as the Sega ‘pe shall be made available Yo each"? tive purchaser. Prospes prospectus. The prospectus shall be tebe SEC as prt ofthe registration san The prospectus shall be widely disenan and sufcent copies are made availabe eet intersted parties porto the sae ofthe seat (Gules 813 1081.3.84, 2015 SRC-IRR), [Actions of the SEC. The SEC may take ty folowing actions upon the fling othe reise statement 1) TheCommission may conditionally spre the registration statement under such tess asitmay deem necessary. 2) The Commission may specify the tens and conditions under which any wot communication, including any sumay prospectus, shall be deemed not toons anoffer for sale under this Section. 3 record ofthe registration of secures be kept in a Register of Securities in wi? shall be recorded orders entered © Commission with respect to su Such register and all documents es tion with respect to the securities eS therein shall be open to public 5 reasonable hours on business days 4) The Commission may audit the statements, assets and other inform ee ewan otcnezarons > acinomae secrten wanes BEN of necessary to insure full disel Pa protect the interest ofthe inven, Publicin genera, Pt or and the "plone ” the securities, the SEC sna epee is given to the public. The SEC is slg mation the issuer (Philippine Stock Exchange ¢ Ca on SCRA 232 [1997]). amen erento ea nt ed etn a id ce ne Sarg am jeer Mei ional icin Sa aia ae et of tats te oe ale eon sapere! cartes eae ea Public offering (Rule 3.117 2015 SRC-IRR) It is any offering of securities to the public orto anyone, ‘Whether solicited or unsolicited. 2) Presumption. Any solicitation or presentation of securities for sale through any ofthe following modes shall be presumed tobe a public offering 1) Publication in any newspapet, magazine or Printed reodingmatera whichis dtbuted ‘within the Philippines; 2) Presentation in any public or commercial place; on radio, 3) Advertisement or announcement on radi felevision, telephone, electronic commun oe Scanned with CamScanner6. EXEMPT SECURITIES, Ee REVIEWER ON CONMERCIAL LAW ology oF any other forms op tomo “mm 4) Disibtion and/or making, Ayers brochures or any offen a pubic or commercial place pl parchasers through the pe Information communication ese, Sue othr mean formate When can the securities subject of S08 Sateen be sold? Theslefsharessubjectofregistrationsty, shallcommence within 10 business days from yon oftheeteivty ofthe registration statement a Contin unilthe end ofthe offering period an unt the sal terminated bythe Issuer Note ae reistation statement shall be canceled i he wit, not commenced within 10 business days (Rue gas’ 2015, SRCIRR). : the regs S01. Enumeration of Exempt Securities under the SRC (See. 91, SRC). The requirement of registration shal ‘ot, as a general rule, apply to any of the following ‘lasses of securities (1989 Bar): () Any security issued or guaranteed by Goverment of the Philippines, or by aty Political subdivision or agency thereof, or by Person controlled or supervised by, and acting ninstrumentality of said Government. ®) Any security issued or guaranteed by 8 goverment of any country with oa grilppines maintains diplomatic relations & P any state, province or political subdivision the Cont te basis of reciprocity: Provide Te commission may require compliance with and content of disclosures the Cé MY Prescribe, eer Mtns ncuezanens (SHCA No. PN and a ayy (@)_ Certificates ised bya receiver or bankruptcy duly approved by den catory body. os (8) Any security oF its derivatives the sale og ferof which by laws under the supenyeh ee, regulation ofthe Ofc ofthe Insurance Garo sion, Housing and Land Use Rega or the Bureau of Internal Revenue 'Y P24 5) Any secur issued by a bank ox iD shares of stock. a cept 9 by a trustee in Proper agjudi. its own Exempt Securities as Provided by the SEC. sane Srnec se to the foregoing any class of securities i it finde tat the enforcement of this Code with respec to snch securities is not inthe publicinterest and for the protection of investors (Sec. 9.2, SRC), Thesecuntog that are exempt from the registration requirement under the 2015 SRCARR are as follows: (1) Evidence of indebtedness issued to the BSP under its open market operations (Rule 91.21); (2) Bills of exchange arising from a bona fide sale Of goods and services that are distributed and/ or traded by banks or investment houses duly licensed by the SEC and BSP through an organized ‘market that is operated under the rules approved by the SEC (Rule 9.1.2.2); (8) Any security issued or guaranteed by mulilateral financial entities (MFE like international financial institutions, multilateral development bank, etc) established through a treaty or any other binding agreement to which the Philippines is a party or subsequently becomes a member provided that the MFE shall file an offering circular/ memoran- dum with the SEC (Rule 91.23); (4) Commercial papers that meet the following conditions: (i) sued to not more than 19 no institutional Tenders; (i) payable 10 a specie person; (iii) neither negotiable nor assign Scanned with CamScannerevtEWERON COMMERCIALLAW and held onto maturity and (ny ir encesting,P150,00,000.09 o'r, {mount as the SEC may prescribe (Rune Nighy 91.244). 14, 17. EXEMPT TRANSACTIONS transactions under the SRC ( rol. Been srement of epstation shall nate Ske sslefany security inany ofthe following rang 8 (1) At any judicial sale, oF sale by an enn ‘iminstator, guardian or receiver or insolvency ox Bankruptcy. ela {@)_ By or forthe account of a pledge holder, or sgagee or any other similar lien holder seline saps ter is hl ‘of business and not for the purpose of avoid the provisions ofthis Code, to liquidate onagh debt a security pledged in good faith as seuny for such debt. | (@) An isolated transaction in which any secusity is sold, offered for sale, subscription oF delivery by the owner thereof, or by his representative for he owner's account, sich sale of offer for sl scription o delivery not being made in the couse | of repeated and successive transactions of it ) taracter by such owner, or on his account by such representative and such owner or wep” tative not being the underwriter of such secur (©) The distribution by a corporation, active’ ‘xgaged inthe busines authorized by is ai of incorporation, of securities to its stockholées other security holders as a stock dividend & other distribution out of surplus. (5) Thesaleofcapital stock ofa corporation toi" Sockholders exclusively, where no commisstt Sr other remuneration is paid or given dit in connect sale of capital sts Connection with the sale eee TART — BUSINESS ORGAZATONS Escape GRERA NO Band “ (6 The Issuance of bonds or nots ones pon al a rape ty, where the entag oe Tih all the bonds gr nots anaee ogee fold toasingle purchaser ata cing ee Theissue and delivery of any security in 0 oma ey cay acy nen to a right of conversion enfting the Foldce t the security surrendered in exchange heute such conversion: Provided, That the Secor co surrendered has been registred under thie Code or was, when sold, exempt from the prove, of this Code, and thatthe security Koned ond delivered in exchange, if sold at the conversion price, would atthe Fime of such conversion fll Within the class of securitiesentitledtoregistaion lunder this Code. Upon such convestion, the par value of the security surrendered in sich texchange shall be deemed the price at which the securities issued and delivered in such exchange are sold. (@)_ Broker's transactions, executed upon customer's orders, on any registered exchange or oer trading market. (©) Subscriptions for shares of the capital stock of € corporation prior to the incorporation thereof or in pursuance ofan increase in its authorized capital stock under the Corporation Code, ‘when no expense is incurred, or no commission, ‘compensation of remuneration is paid or given in connection with the sale or disposition of Such securities, and only when the Paps ie soliciting, giving or taking of such sut ions sling ging ig sh as to the percentage of the capital stock of & corporation which should be subscribed before itean be registered and duly incorporated, or authorized capital increased. | (10) The exchange of securities bythe isuer wih existing security holders exclusively, wh Scanned with CamScanner‘REVIEWER ON COMMERCTALLAW commission of other remuneration i, given directly oF indirectly for soy, Pd exchange. ‘The sale of securities by an issuer to o the Philippines during any Tn 8 sag (2) Thesale of securities to any number ing qualified buyers: (Bank (ii) Registered investment house; ) Insurance company; ) Pension fund or retirement plan maintain by the Government of the Philippines or political subdivision thereof or mana a bank or other persons authorized by ty Bangko Sentral to engage in trust functions, (8) Investment company; or Othe fa, (vi) Such other person as the Commission may byrule determine as qualified buyers, onthe basis of such factors as financial sophistca: tion, net worth, knowledge, and experience infinancial and business matters, or amount of assets under management. Primary Institutional Lenders. Issuance of evi dence of indebtedness to primary institutional lenders or PIL (Examples: banks, investment hous ©, Pre-need companies, insurance companies Pawnshops, etc.) is an exempt transaction Pi Vided that the following requirements are pese™ (Rule 10.14, 2015 SRC-IRR): (1) al the evidence of indebtedness shall ® pectiated or assigned to any PIL oF Development Bank ofthe Philipines * to private development banks With their rediscounting P' a 702. Teeistration statement and refuse registration of the security PART ll —BUSINESS ORGANIZATIONS , ecustesReplatons Cone oS x» (SRC RA.Ne 8795) and Rls Las (2) in case of non-banks without w Ing cose such negate seat ment shall be though ban or nanny licensed to be an underw licensed to be an underwrite ora secutig (3) inno case shal said instru ment be negot- ated or assigned to non-qualified rose alified investors, Exempt transactions as provided by the SEC, SEC may exempt other transactions iit finds tht he requirements of registration under this Code is net necessary in the public interest or for the protection of the investors stch as by reason of the small amount involved or the limited character of the public offering (Sec. 10.2, SRC): a) Limited Public Offering. Cases when the SEC can exempt transactions are cases of Limited Public Offering, that is, cases where the covered securities should be available only to the parties or persons named in the application for exemption for a specified period (Rule 10.2.2, 2015, SRC-IRR). Example: Stock Option Plans in favor of ‘employees (See Rule 10.2.3.24, 2015 SRC-IRR), ») Application. An application for exemption ot letter-request shall be filed with the SEC (Rule 10.2.3, 2015 SRC-IRR). Any person applying for an exemption shall file with the SEC a notice identifying the exemption relied upon on such form and at such time as the Commission by rule ‘may prescribe and with such notice shall pay to the Commission a fee equivalent to 1/10 of 1% of the maximum aggregate price or issued value of the securities (Sec. 10.3, SRC). © WHAT aR sTION ANDIOR. tE THE GROUNDS FOR REVOCAT REJECTION OF THE REGISTRATION OF SECURITIES? Under Section 13 of the SRC, the SEC may reject a : 4 let, ot revoke the effectivity of a registration statement Scanned with CamScannerEMIEWERON COMMERCTAL LAW anh regtration ofthe security thereunder ay Tag by issuing an order to such effect, sett Pa hens inset finds hae 2) Thesuee 6), Haste decare inv (i) Has violated any of the provisions Cites pom ne their any onde of a a whch the fer has natn ste with the offering for which a egistratg ‘statement has been filed; =i Gi) Hasbeenois engaged orisaboutn, in fraudulent transactions; aa (Gv) Has made any false or misleading repress, tation of material facts in any frees concerning the issuer or its securities or (©) Has failed to comply with any requtemeet that the Commission may impose asacon tion fr registration ofthe security for whih the registration statement has been fier ‘Theregistration statementis on its faceincomplee or inaccurate in any material respect or inclvds ‘ay untrue statement ofa material fact oromist?. state a material fact required to be stated thee or necessary to make the statements therein nisleading: or » 9) The issuer, any officer, director or conti Fagot the issuer or person performing sit {mts tay dere en ent judicial or administrative en Plea of uly or otherwise, of an of involving moral turpitude and/or fad & ie! or sstained hy the Commis for vigenPetent judicial or administrative olations of ies, ‘commoditie> Other elt Sees, comm On We THE SRC. PART Il — BUSINESS ORGAN Secures Regulation Coy > xs (RC RA No. 095} and elt ans re THE MANIPULATIVE DEVI oo UOT Ho mse eo iabptha totes omen soe 2) *Matched orders” — By enesingan onder or ners forthe purchase or sale of suk secuty wig Knowledge that a simultaneous oer ode sultant the same siz time and pi fe sale or purchase of any such secant Raver whe entered by of forthe same or diferent Gt Cli ing) partes or 3) “Market rigging or jiggling” — By performing similar act where there is no change in beneficial ownership. }) ‘The manipulative practice can be committed by any Person, including broker dealers, associated persons or salesman of broker dealers, who bid, offer or dealin Securities for such purpose (Rules 24.1.2 and 24.1.3, 2015 SRC-IRR). Other Manipulative Conducts include the following: 2, *Painting the Tape” —tisoe ofthe aes hat {s in the nature of engaging in a series of transac tions in securities that are reported publicly to give the impression of activity or price movement in a Security (Rule 24.1.5.1, 2015 SRC-IRR). 2) “Marking the Close” — buying and selling securi- ties atthe cose ofthe market i an effort toate the closing price of the security (Rule 4.1.5.2, 2015 SRC- ARR). 3) “tiype and Dump” — engaging in buying activity at increasingly higher prices and then selling secur Scanned with CamScannera 8 sex ONCONMERCIALLAW ihe markt athe higher prices of, cegoeering the Float” — taking advany, oie of cic In the ah by cnt raed side and exploiting market gor the uch shortages ina way as tocreateanige ; Diseminating false oF misleading inform rough medi, including the Internet, or anya ines to move the price of a security ina dive! favorable toa position held ora transaction, octet alone or with others, a Series of transaction ig secures that: 1) Raises their pric to induce the purchase ofa sey. ri, whether of the same or a different clase ie sane issuer or of controlling, controlled, or com rmoaly controled company by others; 2) Depresses their price to induce the sale of ascii, whether ofthe same o a diferent class ofthe sane isuer or ofa controlling, controlled, or comely conirolled company by others; or 3) Grates active trading to induce such a purchase Sle through manipulative devices such as mast ing the cose, painting the tape, squeezing the fst ype and dump, boiler room operations ands similar devices, Ee alte o disteinate information that bie Le Seeuiy listed in an Exchange will ori likey ‘xfallbecause of manipulative market operations 2 sree ote etsons conducted for the purpose of 8h Biter the price of the security for the purPes' ' the purchase or sale of such security. br ‘ eal misleading statement with espe Lobeiee ett he knew or had reasonable inc ef oF mistending, forthe PUPS “de nan ichanpes ME of any security 1 9 fic BUSINES ORGANZA PART Scan Regen eae ” (oA Ne B00) an a ag effect, cither alone ot with o 9 Te eactions for the purchase ado aged inan Exchange for the purpose ooo oe Srstabillzing the price of such security uncer s Sfiwed by this Code orby rules ofthe Congo No person shall use or employ, in connection withthe e purchase oF sale of say secur any ‘manipulative or tceptive device or contrivance, Neier chal aero, Sate be effected nor any stop-loss order be merccinn connection with the purchase rsaleof any security except in accordance with eich rules and regulation a he Commission may prescribe as necessary or appropriate in the public interest or forthe protection of investors, DEFINE “PUT,” “CALL,” AND “STRADDLE.” WHAT IS THE RULE REGARDING THESE THREE PRACTICES IN THE SRC? 2) “Put” isa transferable option or offer to deliver a given rnumber of shares of stock at a stated price at any given time during a stated period. “Cal” is transferable option to buy a specified number of shares at a stated price. “Straddle” is a combination of put and cal. 1b). TheSRC prohibits members ofan Exchange from directly or indirectly indorsing or guaranteeing the performance of put call, or straddle, thers, any series of sale of any security, |. SHORT SALE M41. Definition. Short sale includes the following: 2) any sale of a security which the seller does not own; or 2) any sale which is consummated by the delivery of a security borrowed by or for the account of the seller with the commitment of the seller or securities borrower to return or deliver said securities or their equivalent to the lender on a determined or determinable future time (Rule 24.2-2.1, 2015 SRC-IRR). Scanned with CamScanner2 [REVIEWERON COMMERCTAL LAW ibitions. There is no absolute prohi Toe xcept in the following instances, "on, Directors, officers oF principal sha 2D Grpotetion cannot make ashort gi 22 of, ofthe corporation in which he sage a ex pancpl shareholder, ecto 2) Whenever the SEC, mati proprio mendaon of the Exchange, pratee’ atte ch or ee lh Se den prope forthe protection ofthenge seanemeacngyetitecr herr ing is necessary of appropriate in fee interest (Rule 2622.10, 2015 SECHRE)* PO ENUMERATE THE ACTS THAT ARE CONSIDERED wy. LAWFUL WITH RESPECT TO THE PURCHASE AND galt OF SECURES. Under Section 26 ofthe SRC, it shall be unlawful for any person, directly or indirectly, in connection with the purds corsaleofany securities to: 4) Employ any device, scheme, or artifice to defraud; ) Obtain money or property by means of any unit Sutemet ofa material fat of any omislon Sat ater fact necessary in order to make the ates Bade inthe light ofthe circumstances under whist = were made not misleading or ©) Engage in any act, transact fb ‘act, transaction, practice or course of tessich operates or would operate asa rad ord ‘pon any person, WHOIS AN INSIDER? aie rats: (a) the issuer; (b) a director oF of ‘ontoling (he 8B similar functions) of, of 4 tionship te 4 2 Person whose relation! othe issuer gives or gave him 2054 Seiten eo et Waa? he publics (€) a government PI of an exchange, clearing age" pe ip ox saleregulatory organi Formation about an issuer ora security ues Jralable to the public: ot (e) @ person wi ton by ides 1301 Bo, PART — BUSINESS ORCAs {Seat Repitans ag ~ (RCRA.N. S79 ond ay Who has access to material ot generally 0 leas such jis pnmuniaion fom any ofthe frepegh (1995, 2013 Bar). What are the duties ofan insider when eis ding securities? It shall be unlawful for an insider to sellor security ofthe issuer, while in peseon set information with respect tothe suet o the sexy that is not generally available to the public walcd, (4984, 1994, 2008, and 2012 Bar) a) The insider proves that the information was not gained from such relationship; or b) Ifthe other party selling to or buying from the ister (or his agent) is identified, the insider proves: () that he disclosed the information tothe other party, or i) that he had reason to believe that the other party otherwise is also in possession ofthe information resumption: A purchase orale of secu ofthe issuer made by an insider defined in Subseclon 38 ‘or such insider's spouse or relatives by affinity of consanguinity with the second degen of ommorrlaw shall be presumed o have ben eee ‘hile inposcsion of ater non pebbtnfomation ‘teaneacied afer such idormation cameltoe but prior to dscemiaton of such nomaton othe public and the lapse of a reasonable time forthe market ‘absorb such information: Prd, hee That is Presumption shal be rebutted upon a showing bythe Purchaser or seller hathewasnotawareofhematil ‘non-public information at the time of the purchase or wae ata ator tformation— nas. at may result in a change in the! —— of any ofthe Lowers secu ov may poetly affect the investment decision of the inve (Wate 3.1.12 2015 SRCARR). Scanned with CamScanner1405. What are the prohibitions imposed REVIEWERON COMMERCIAL LAW. nok, Whatis material non-public information? ‘An information is “material non, its ot ben generally disclosed to ely Mould likely afect the market price of Pant Ber being diseminated to the pubic.) lope ofa reasonable time for the marker Be information or ©) would be conse sO8 abe person important under the circuyge) * IRdeuming couse of acon wheter aS orhold security od ea regarding material non-public information? S*" Xe shall be unlawful for any insider to am. smunicate material non-public information abou g, issuer or the security to any person who, by vite ofthe communication, becomes an insider where insider communicating the information knows or hs reason to believe that such person will likely bay o sella security ofthe issuer while in the possession ef such information, 1396, Unlawful acts involving insiders in connection with tender offer. Tt shall be unlawful for any (other than the tender offeror) who isin possenion ofa mated onpubli information relating to such tender of © buy or sell the securities of the issuer that are sought De Sought by such tender offer if such pest rows or has reason to believe that the information ® farPublicand hasbeen acquired directly orindieeY fom the tender offeror, those acting on is behall: a rae sts sought oo Be sought DIS SRR, MY sider of such issuer (Rule PARTII— BUSINESS ORGANI € Suis Regan ONS GRC RA No} and ee yyy sey and pri Fut shares of stock) of such sue tt Ses ike af Tes than sc mothe wea nat Peto was acquired in good faith n ony ky 4. pevoaly ere an recoverable by the inser ere intention of holding the securly pete oy not repurchaing the secuny Sel et exceeding si months (Se, Shek Every person who is diely o indie te beneficial owner of more than 10% of any dase of any equity security ina pubic sey (Sec. 23.1, SRC). ® a ‘The purpose isto prevent the unfair use of infor: ‘mation which may have been obtained by such ‘beneficial owner, director, or ofier by reason of his relationship tothe issuer (Sec, 23.2, SRC). A suit to recover such profit may be instituted before the Regional Trial Court by the issuer, or by the owner of any security of the isuerin the name and in behalf ofthe issuer ifthe issuer shall fail or refuse to bring such suit within 60 days after request or shall fil diligently to prosecute the same thereafter, but no such suit shall be brought more than two yeas after the date such [profit was realized. HOWEVER, this rule shall not bbe construed to cover any transaction where such beneficial owner was not such both a the time of the purchase and sale, or the sale and purchase, ofthe security involved, or any transaction or transactions which the Commission by and regulations may exempt a8 not compre hhended within the purpose of tis subse (Sec. 23.2, SRC). an, = ‘wing Profits (1994 Bar) i Bete Pate tle on insider trading provides SEROFFER js meas lic "cover short swing profits. This Py, ™4OL. What is Tender Offer— Tender offer means 2 Public ""Y Profit realized by any beneficial announced intention by a person ating alone oF Scanned with CamScannerevTEWER ON COMMERCIALLAW with other persons (hereinafter conten) 20 acquit eqUIY Security fy pany 2012 Ba Poke “ated offers an offer By the acquis 9A eckholders of a public company je8 Pm weer their shares therein on the terme, ine afl. Tender fri n place we porty sharcholders against an utes the share value of thei a thy gives tbe minority shareholders the gens tit the company under reasonable terms, pr? them the opportunity to sll their shares at same prc as those ofthe majority src (CEMCO Holdings, Ine. v. National Life noes? Company, Iie, GR. No. 171815, August, 200 )_ Public Company means any corporation with class of equity securities listed on an Exchange er with assets in excess of P50,000,000.00 and having 200 or more holders, and 200 of which are hol ing at least 100 shares of a class ofits equity se ries fed Prot ‘402. When tender offer is mandatory (2010 Bar). 2) Filing of a Declaration with the SEC is Necer sary — if any person or group of persons acing in concert, intends to acquire 15% of equity sec ‘ities in a public company within a period of 2 ‘months (Rule 19.2.1, 2015 SRC-IRR). Required to (1) Disclose the Intention and tomake Tender Offer FOR THE PERCENTAGE SOUGHT to all Holders of such on : any person or of persons ‘concert, who intends B acuire 35% cor more ot the OUTSTANDING voting, share or such Of, ‘ing voting shares that are sufficient ©, 'NTROL of the board in a public comp" 1 one ot more transactions within a pesiod ‘months (Rule 18.22, 2015 SRC-IRR)- » ° d ee) PAR Il — BUSINESS ORGAN C Scien eps oaTONS be (SRE RA No-P nd Rang Note: If the tender offer is the aggregate amount of seco atthe close ofthe tender ofr ately distributed. s over subscribed, ities tobe acquired Shall proportion Required to Make Tender Ofer ‘VOTING shares. Any person or, acting in concert, who intends to acquire 32 we more of the outstanding voting shies or cach outstanding voting shares that are sutfcient to gain control of the board in a public compeny DIRECTLY from one or more shareholders shall bbe required to make a tender offer for ALL THE OUTSTANDING VOTING SHARES, The sale ‘of shares pursuant to the private transaction ot block sale shall not be completed prior to the closing and completion ofthe tender offer (Rule 19.24, 2015 SRC-IRR). for Outstanding -Broup of persons, Required to Make Tender Offer for all Outstanding Equity Shares. If any acquisition of even less than 35% would result in ownership of lover51% ofthe total outstanding equity securities ‘ofa publiccompany, the acquirer shall be required to make a tender offer forall 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 thied party. The acquirer in such a tender offer shall be required to accept any and all securities thus tendered (Rule 19.25, 2015 SRC-IRR). When NOT REQUIRED to make tender ofer — when any person or group of persons 288 in concert, who intends to acquire 357 &f more of the outstanding voting shares 0° Si outstanding voting shaves that are s gain control of the board in a through the xchange tang erson or group of Ps [ Ecquies the ror inder through a block sale if Scanned with CamScanner_pgEWERON COMMERCIAL LAW ‘after acquisition through the Exchan fail to acquire their tay tradi eG VOTING shares eg on is togain contro of the board icy aon, Exempt rom Mandatory Tender Ofer Regis M08 ‘Themandatory tender offer requiremeny, apply othe following: purchase of shares from the unissueg 0 font provided that the acquisition wi nc fon. oF more ownership of shana peat purchaser, 2) any purchase of shares from an in. ) bazed capital stock, cre 3) purchase in connection with foredosye procedings involving a duly constituted pip ‘or security arrangement where the acquistion’s made by the debtor or creditor; 4) purchases in connection with privatization Undertakenby the government ofthe Philippines 5) purchases in connection with corporate rehubi tation under court supervision; purchases through an open market at the pret ing matket price; and 2) merger or consolidation. Obligations of person making a tender offer 4) Make an announcement of his intention if, ewspaper of general circulation, priot #° commencement ofthe offer; ¥) Atleast two business days prior to the date oft ‘mmencement ofthe tender offer 1) Hlewith he SEC a required form ‘offer (SEC Form 19-1) including a theo (and any amendments e2" Prescribed fing fes; and shal 1405. Direct and Indirect Acqui PARTI — BUSINESS ORGANZA Secures Repultons Cade 3 (RCRA.No. 6799) and Red ay 2) Hand deliver a copy of all exhibits and ameosenh €)_Reportthe results ofthe tendetoferby fing wi Barer te gn after the termination ofthe tender ote poearg the final amendments to the form.” ition Ownership acquisition means both init What ede one ese ot power of control. The bottom line of the law is to give theshareholder ofthe publiccompany the opportunity to decide whether or not to sellin connection with a transfer of control. Thus, the rules apply even if one will acquire the shares in the corporation thet owns the shares of a public company (including subsidiary). Example: X Corp., owns 61% of the oustanding shares in B, a public company. The tender offer rules apply if there will be a sale of the controlling shares in X Corp. (CEMCO Holdings, Inc.» National Life Insurance Company, In, supra). ‘8. PROXY SOLICITATION a » 9 ‘TheSRC likewise regulates proxy solictationby requiring the Issuer to transmit (1) an Information Sateent, ) Proxy Form prescribed by the SEC under the SRC-RR and (3) Management report prescribed under Rule 204 of the 2015 SRC-IRR, to every security holder ofthe class entitled to vote a least 15 days prior tothe meeting. the Preliminary copies ofthe Information Statement and Proxy Form shall be submited to the SEC before sending same to security holders. roxy oF Proxy solicitation means: (1) any request for PrO>y Authorization; (2) any request to executor notIDESECU, °r to revoke, a proxy authorization Scanned with CamScanner_REviEWERON COMMERCIAL LAW also includes furnishing ofa for, 2 Stn i a ony ances reasonably calculated t0 result in precy tm, sefpotingerrer0eton Of @ Proxy (Rul 9p sy, ‘SRCARR): as 16 WARONTRAONG ac The cates FARAUSES IOUS BY advancing gy sca prc with the Broker one Fort arorblance de. tending a -main purpose is to give the government an Fada ducing the aggregate amount of fesse credit msources which can be directed by speculators the stock market and out of other more desirable wos commerce and industry (Abacus Securities Cor.» Arey GR No, 160016, February 27, 2006) 8) Broker Dealer means any entity that buys or sells see rites for its own and customers’ account and who shat ‘oe registered with the SEC pursuant to Section 28 of SRC. 166. Prohibitions 2) A Broker Dealer shall not extend creit 1 customer in an amount that exceeds 50% oft Curent market va of the Security at he St of the transaction. In no event shall new ot additional credit be extended into an acount ® ‘Which th equity is less than P50,000.00. ¥) The margin maintained in a margin acount stomer shal be no less than 25% of the come ‘market value ofall securities “long” inthe aco 1nd 30% ofthe current market value of = ‘hort’ in the account. * ©) Mandatory Close-out Rule. When thet £5 insuficency of margin, a call for ad Daren shal be issued promptly by th Reale to the customer. call for initial fy shall be satsied within five business 4°%° ee Sateen Rear mos the date the insuffcieney is crea maintenance margin shah ‘hours after the call is. issued “ ‘he partes may be considered i por 360 late the lniatins on mann vee? Uoerates the purchases of iy caste Ie feroming ts Sgn anernc he, ios Oat Rule and without requiing the tere eee cash before embarking on trading na oo broker violated the Taw at its own perl. Heo cannot complain or fling toctain eta es i dim fr later tansactons. (abc Sean Amp it) ed Act Sed iin 9 1, VOLATIONS OF SRC ‘All complaints for any violation of the Code and its implementing rules and regulations shouldbe fied with the SEC. Where the complaint i criminal in nature, the SEC shall Indors the complaint to the DO} for preliminary investigation and prosecution. (Sec. 53.1, SRC; Babierav, Paglnan, eal, GR No, 168380, February 8, 2007). D. PHILIPPINE COMPETITION ACT (R.A. No. 10667) 1. POLICIES AND RATIONALE. 4) With the Phil Competition Act (PCA for short) the State aims to: (1) Promote mare fen) i he Aectonof goodsandseries 2) segurtconpatis conditions; (3) Competition — Promote entrepreneurial srry ncounge testes ise terol development/transfer and enhance productivity; (4) Promote the right of choice of consumers. The view is re competition results in more meat gt oo, See er and better products and services. On the oer hands o> competitive acts result in lesser goods and servis MCP et prices and poorer services and lower qual Products, b) Scanned with CamScanner