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Commonwealth Act 83 (Securities Act) approved on October 26, 1936 first law governing the securities market; it is from the awareness of the problem on the growth of unscrupulous fly-bynight corporations; patterned after the U.S. Securities Act of 1933 and U.S. Securities Exchange Act of 1934
B.P. Blg. 178 – Revised Securities Act of 1982 R.A. No. 8799 – Revised Regulation Code
Declaration of State Policy
The Code focuses on the following regulatory activities in the securities field: 1. “DISCLOSURE” Statute. Registration process by which a corporation or issuer offers and sells its securities to the public. The basic purpose of registration under the Code is to assure the availability of adequate reliable information about the issuer and securities which are offered to the public. it can only insists that the issuer makes a full disclosure of all material facts.
2. REPORTING REQUIREMENTS. Assuring that there is a continuous flow of disclosures and information about the securities and issuer whose securities are traded. 3. “ANTI-FRAUD” PROVISIONS. Applicable not only to price manipulations, but also to trading by insiders on the basis of non-public information, and to various kinds of misstatements or misrepresentations by corporate management and others. 4. SELF-REGULATION”. Regulations on market participants assuring that they do not take advantage of their superior experience and access to overreach their non-professional customers.
To have faith is to be sure of the things we hope for, to be certain of the things we cannot see – Hebrews 11
transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. or other mineral rights – interests in mineral or mining rights are normally issued certificates of participation or interest in the production thereof. and its surplus profits. SANCTIONS. 4. - Securities includes the following: 1. Certificates of interest or participation – these are interest in a profit sharing agreement providing for a participation in the profit of a business venture by the participants of the agreement. and upon dissolution to share in those assets that remain after all debts have been paid. Equity Securities – shares of stocks. 3.interest or right which the owner. Fractional undivided interests in oil. and at a stated rate of interest. An SPE means either a “Special Purpose Corporation” (SPC) – a juridical person created in accordance with the To have faith is to be sure of the things we hope for.a contract. 2. gas. Asset-backed securities – these are securities issued by a Special Purpose Entity (SPE). 5. 2. to be certain of the things we cannot see – Hebrews 11 . as well as civil liability and/or damages to investors injured by such violations. the repayment of which shall be derived from the cash flow of assets in accordance with the plan. Sanctions against those who violate the provisions of the Code. and in the dissolution. in all of its assets remaining after the payment of its debts. Debt Securities – requires the issuer to repay the principal amount loaned to it by fixed maturity date. Investment Contracts . A presumption that a contract is an investment contract arises whenever a person seeks to use the money of others on the promise of profits. 2 general forms of traditional securities: 1. who is the shareholder or stockholder. represent ownership right in a corporation. has in the management of the corporation.5. Share of stock. surplus profits. Section 3 - Definition of Terms Securities may be written or electronic. such as right to participate in the management.
debt instruments or similar instruments issued by a special purpose vehicle company incorporated pursuant to provisions of RA. and upon liquidation of the company. index of prices or rates. on or before a predetermined date. called the expiry date.Non-Proprietary share or certificate – evidence of interest or privilege over a certain property of a corporation in view of the amount paid by the holder for the said share/certificate. 6. The term includes. 9182 (Special Purpose Vehicle). to be certain of the things we cannot see – Hebrews 11 . . foreign exchange rate. security price. Investments unit instruments (IUIs) – these are participation certificates. called the exercise or strike price. WARRANTS – are rights to subscribe or purchase new shares or existing share in a company on or before a predetermined date. which can only be extended in accordance with the SEC rules and regulations and/or the Exchange rules. but not the obligation. or a “Special Purpose Trust” – which means a trust administered by an entity duly licensed to perform trust functions under the General Banking Law. a holder of a proprietary share shall have proportionate ownership right over its assets. which can only be extended by the SEC upon stockholder’s approval. organized primarily invest in or acquire non-performing assets (NPAs) of financial institutions. 7. a credit rating or credit index. 8. It requires no initial or little net investment relative to other types of contracts that have similar responses to changes in market conditions. To have faith is to be sure of the things we hope for. called the expiry date. commodity price. to buy or to sell an underlying security at a predetermined price. No. but also to dividends or earnings of said company . and created solely for the purpose of securitization and to which the seller makes a true and absolute sale of assets. or similar variable or underlying factor. but not limited to the following: OPTIONS – these are contracts that give the buyer the right.securitization and to which the seller makes a true and absolute sale of assets. Derivative – is a financial instrument whose value changes in response to the change in a specified interest rate. Proprietary or non-proprietary share or certificate – is an evidence of interest or participation or privilege in a corporation which not only entitles the holder to enjoy the use of a specific property.
11. delegate any of its functions to any of its departments. or staff member. It includes bonds and notes. decision or action of any of its departments. may review any order. or staff member. Bill of Exchange – is an unconditional order in writing addressed by one person to another. 10. offices. motu propio or upon a petition filed by an interested party. notice of the meeting shall be given to all Commissioners and the presence of 3 Commissioners shall constitute a quorum. but not limited to the following: . alter and supplement any rule or regulation. lien or pledge of security. to be certain of the things we cannot see – Hebrews 11 . In such cases. requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. .9. resolution. Debentures are obligations or notes representing indebtedness. - - To have faith is to be sure of the things we hope for. A bond is a security supported by a mortgage on a corporate property. for purposes of efficiency.Short-Term commercial paper – means an evidence of indebtedness of any person with a maturity of 365 days or less. but not ordinarily secured by any specific mortgage. individual Commissioner. Evidence of indebtedness – are written representation of debt securities or obligations of corporations such as. individual Commissioner. The SEC. Special meetings may also be called as often as maybe necessary by the Chairperson or upon the request of 3 commissioners. except its review or appellate authority and its power to adopt. Section 4 - Administrative Agency The SEC holds regular meetings at least once a week on a day and time fixed by it. 12. offices. The SEC may. Trust Certificates – is a form of obligation issued as a security for the repayment of the money or property held by the trustee. Certificates of deposit for future subscriptions – these are evidences of money placed as security for the issuances of future subscriptions.Long-Term commercial paper – means an evidence of indebtedness of any person with maturity of more than 365 days. signed by the person giving it.
♥ Similar responsibility shall apply for the disclosure of information. decision or any document evidencing the action taken which is the subject of the review. The SEC may motu propio conduct hearings in the exercise of its regulatory power. The SEC may take cognizance of the complaint and the proceedings therein partaking of the nature of an administrative determination. ♥ Violation of the Code or who are guilty of negligence. if the case requires decision or resolution of a violation or conflict brought about in connection with the performance of a regulatory function. in the execution of their duties owe their undivided loyalty to the SEC and shall observe the highest standards of honesty. Powers and Functions of the Commission Section 5 - SEC has the incidental power to conduct administrative hearings. nor grant recovery of investments.2 of the Amended SRC Implementing Rules and Regulations. to be certain of the things we cannot see – Hebrews 11 .- The petition for review shall be filed with the Office of the General Counsel within 15 days from receipt of the order. abuse or acts of malfeasance or fail to exercise extraordinary diligence in the performance of their duties shall be held liable for any loss or injury suffered by the Commission or other institutions as a result of such violation. officers and employees are provided under SRC Rule 6. and make decisions in the course of the performance of their regulatory and law enforcement functions. resolution. discussion or resolution of the Commission of a confidential in nature. but it cannot award damages. and implead its officers for criminal violations of securities laws before the Department of Justice. such as suspension or revocation of its license. including the chairperson. Thus. officers and employees of the SEC. use of such personal information for personal gain or to the detriment of the government. then it is one for the SEC to decide for the best interest of the public. At most SEC can impose administrative sanctions. negligence. The rules of conduct for commissioners. abuse. or failure to exercise extraordinary diligence. issuance of a cease and desist order. integrity and good faith in the performance of their duties. malfeasance. the Commission or third parties. - - Section 6 - Indemnification and Responsibilities of Commissioners The Commissioners. - To have faith is to be sure of the things we hope for.
magazine or printed reading material which is distributed within the Philippines or any part thereof. means a random or indiscriminate offering of securities in general to anyone who will buy. or ♥ Distribution and/or making available flyers. unless such securities are duly registered pursuant to Sections 8 and 12 of the Code. to be certain of the things we cannot see – Hebrews 11 . or other communication is not deemed an offer sale in violation of Section 8 of the Code if it is published or transmitted to any person after a registration statement has been filed and To have faith is to be sure of the things we hope for. The institutional strengthening of the SEC includes the transfer of its quasijudicial function to the regular courts. whether solicited or unsolicited. except of a class exempt under section 9 of the Code or unless sold in any transaction exempt under section 10 and the rules there under. ♥ Advertisement or announcement in any radio or television or any online or e-mail system. and the registration statement has been declared effective by the SEC. shall be sold or distributed by any person or entity in the Philippines. letter.Section 7 - Reorganization The SEC is now authorized to reorganize itself. ♥ Presentation in any public or commercial place. advertisement. streamline its structure and operations. brochures or any offering material in a public or commercial place. - CHAPTER III REGISTRATION OF SECURITIES Section 8 Requirement of Registration of Securities No securities. for purposes of registration under the Code. circular. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to e a public offering: ♥ Publication in any newspaper. upgrade its human resource component and increase the compensation for the personnel and exempts the SEC from coverage of the Salary Standardization Law. “Public Offering” of shares. - - - A notice. or mailing the same to prospective purchasers.
under Section 10 (2) of the Code. As a GR. Under new regulatory framework. Registration under the new Code gives more emphasis to full disclosure as the principal method of investors protection intended to provide adequate and accurate disclosure of materials facts concerning the issuer and the securities it proposes to offer and sell. the SEC no longer passes upon judgment on the investment merit of an issue but leaves it to the investor to make a decision on whether or not to buy the shares on the basis of disclosure of material facts concerning the company and the securities sold. “Public distribution” refers to the sale of securities to a least 20 persons or enterprises. sale to more than such number of persons may be exempted by the SEC from registration if the registration thereof is not necessary in the public interest and for the protection of the investors by reason of the small amount involved or the limited character of the public offering. However. to be certain of the things we cannot see – Hebrews 11 . The only standard which must be met when registering securities is adequate and accurate disclosure of required material facts covering the company and the securities it proposes to sell. unless it is shown that the intention is to treat the payment merely as advances in anticipation of future increase of capital stock. “Offered for sale or distribution” in the provision covers the act of accepting future subscription deposits. The present law now enforces a “full disclosure” approach of regulating public offerings. Government Issues To have faith is to be sure of the things we hope for. Acceptance of subscription deposits is indicative that the amount paid therefore was accepted as payment of an offer to sell securities. are both filed and in effect. but the same should be booked as “liability” in the financial statement of the company.contains any or all of the information required in the SRC Implementing Rules and Regulations. Material information/fact means any fact/ information that could result in a change in the market price or value in any of the issuer’s securities or would potentially affect the investment decision of an investor. securities are prohibited from being offered and sold within the Philippines. unless a registration statement and a prospectus covering the securities executed ad established in accordance with the requirements and procedures laid down under SRC rules 8 and 12 of the Amended SRC Implementing Rules and Regulations. - - - - - - Section 9 Exempt Securities 1.
otherwise. The philosophy behind the exemption is that the issuance of securities by banking institutions is already supervised and regulated by the BSP. 4. except their own shares “Except their own shares” is added to clarify that only customary or traditional banking activities are exempt from SEC registration. and investors need protection with respect to the public offering and trading of those shares no less than with respect to the shares of other issuers. are not actually regulated by the concerned government agency. Sale of securities which are under the regulation of the Office of the Insurance Commission. and therefore are presumed to be already adequately regulated by that office. but only the creditors of the issuer who are seeking full or partial payment of their claims. or Bureau of Internal Revenue. 2. to be certain of the things we cannot see – Hebrews 11 . Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body The exemption for certificates issued to creditors by a receiver or trustee in a rehabilitation/ insolvency proceedings does not affect the general public. investors are deemed adequately protected. as far as trading their shares are concerned. they should be required t be registered under the Code. under the SEC jurisdiction. in the event the securities which are supposed to be regulated by any of the above-mentioned government offices. Bank share are not exempted as they are significant segments of the trading market in securities. Bank issues. The new Code now puts the banks. it would be unregulated leaving the investors without any protection. 3. 5. Issuance by foreign governments The SEC may prescribe rules for disclosure with respect to offerings of securities by foreign governments as investors need disclosures to these offerings of securities. Although bank securities are still exempt from registration. bank-owned shares no longer enjoy the same privileges.- These are issued and sold by the government over which a particular government agency exercises regulatory or supervisory care. thereby. Housing and Land Regulatory Board. - To have faith is to be sure of the things we hope for. It is construed that.
5. b. The discretionary power under subsection 9 (2) of the Code to grant exemption gives the SEC the power to exempt other securities. 3. while bank’s own shares of stock would be registered and regulated by the SEC. The sale is made by the owner thereof. Isolated transaction. Section 10 Exempt Transactions What is exempt from the registration requirements are the “transactions” and not the “securities” themselves. ♥ Exemptive relief is not available to an issuer or securities who is not considered as an owner thereof. Judicial sale of securities made pursuant to judgment rendered by a court. ♥ For the transaction to be considred isolated. the SEC shall no longer grant exemptions from registration of the same class. and c. Series of 2000: once a class of shares are registered. The transaction is not made in the course of repeated and successive transactions of a like character. if appropriate under existing circumstances. The following transactions are specifically exempted under this section: 1. 4. 2. to be certain of the things we cannot see – Hebrews 11 . whether authorized by a decree of the court or by a power of sale contained in the mortgaged agreement. but shall require an amended registration statement so that all the issues of that class shall be considered registered. the following conditions must be present: a. Stock dividends declaration ♥ Stock dividends are exempt from registration because they are generally not given for value and thus do not constitute a sale.- The BSP would only regulate debt securities issued by bans. ♥ SEC Resolution No. The said owner is not the underwriter of the security. Sale of foreclosed securities in order to obtain satisfaction of a mortgage out of the proceeds. To have faith is to be sure of the things we hope for.
(conversion of preferred shares or warrants to common shares upon maturity) 8. ♥ Exemption is now available for brokers executing customer orders even though solicited. ♥ This is intended to allow ordinary after market trading to occur among investors through brokers and to restrict he registration requirements to primary offerings by issuers directly or through underwriters. 12. 9. Broker’s transactions. 11. ♥ They are called qualified buyers because they are institutional investors who are presumed to know the risks of investing in the To have faith is to be sure of the things we hope for. 10. Transaction pursuant to a right of conversion.5. ♥ Exemption of sales of capital stock of a corporation to its own stockholders exclusively. section 8 and 12 of the Code shall apply notwithstanding the exemption of their issuance. Sales of shares to stockholders not underwritten. to be certain of the things we cannot see – Hebrews 11 . 6. Pre-incorporation subscription or subscription to a capital increase. Issuance f bands to a single purchaser ♥ It is exempt because it s of limited character as it involves only one investor 7. where no commission or other remuneration is paid or given in connection with the sale of such capital stock is a recognition that it is a common practice for companies in the Philippines to sell small amounts of shares to its stockholders to raise capital.Private placements. ♥ Means the sale of securities by an issuer to not more than 19 persons during any 12 month period and if the buyer(s) falling under this exemption resell the securities to more than 19 investors.Sale to qualified buyers. unless such succeeding sale shall qualify as an exempt transaction.Exchange of securities by the issuer with its existing security holders exclusively. where no commission or remuneration is paid or given in connection with the transaction.
A presumption that an exemption is not available may arise from the failure to file a notice.securities market. - Section 12 Procedure for Registration of Securities 1. ♥ The applicability of the exemption should depend on whether the class of persons to whom the securities are being offered needs protection of the law. rights and interests. of a sworn registration statement with respect to such securities. any person claiming an exemption under this Section has the burden. articles. in such form and containing such information and documents as the Commission shall prescribe.1 shall be registered through the filing by the issuer in the main office of the Commission. small or limited offerings. if challenged. to be certain of the things we cannot see – Hebrews 11 . ♥ Under the SEC’s rule making power. as one of their major business activities is to invest in securities. commodity options and commodity leverage or margin contracts. ♥ Unless a confirmation that such exemption is available is applied fro. such as. Section 11 Commodity Future Contracts “Commodity futures contract” – a contract providing for the making or taking delivery at a prescribed time in the future of a specific quantity and quality of a commodity or the cash value thereof. it is contemplated that the SEC would adopt exemptions for sales to accredited investors. of establishing that the exemption is available. including any group or index of any of the foregoing. and includes standardized contracts having the indicia of commodities futures. offers to acquire the stocks of closely held companies certain types of mergers and reorganizations where the number of shareholders or other considerations do no warrant registration. whether they have access to the kind of information which registration would disclose and whether they do not intend to redistribute the securities. such as offerings to key employees of the issuer. To have faith is to be sure of the things we hope for. All securities required to be registered under Subsection 8. “commodity” – means any goods. which is customarily offset prior to the delivery date. service. in which commodity interests contracts are presently or in the future dealt in.
especially foreign and local ownership. . Notice of the filing of the registration statement shall be immediately published by the issuer. its comptroller. including written information from an expert. principal accounting officer. shall be furnished to interested parties at such reasonable charge as the Commission may prescribe. photostatic or otherwise. 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 also be filed. among others. The Commission shall prescribe by rule diminishing fees in inverse proportion to the value of the aggregate price of the offering. once a week for two (2) consecutive weeks. or may require additional information or documents. -Where the registration statement includes shares to be sold by selling shareholders. as well as the papers attached thereto are open to inspection at the Commission during business hours. the Commission shall declare the registration statement effective or rejected. and copies thereof.It may dispense with any such requirement. Reciting that a registration statement for the sale of such security has been filed. at its own expense. in two (2) newspapers of general circulation in the Philippines. by rule. 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. its corporate secretary or persons performing similar functions accompanied by a duly verified resolution of the board of directors of the issuer corporation. depending on the necessity thereof or their applicability to the class of securities sought to be registered. or by such later date to which the issuer has consented. 2. or in such other manner as the Commission by rule shall prescribe. -The registration statement shall be signed by the issuer’s executive officer. to be certain of the things we cannot see – Hebrews 11 . and all securities..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.The Commission may require the registration statement to contain such information or documents as it may. its principal operating officer. Upon filing of the registration statement. To have faith is to be sure of the things we hope for. prescribe. its principal financial officer. . on the mix of ownership. and that the aforesaid registration statement. shall include. the effect of the securities issue on ownership. unless the applicant is allowed to amend the registration statement as provided in Section 14 hereof. 3.The information required for the registration of any kind. . Within forty-five (45) days after the date of filing of the registration statement. 4.
must act on the registration statement. A declaration of insolvency at any time should not serve as a bar to registration. Only companies that have been declared insolvent by a court may be refused registration. If the violation of law is not material and therefore does not require disclosure. Section 15 Suspension of Registration The suspension should be reserve for significant problems or where fraudulent sales are occurring.5. The Commission shall enter an order declaring the registration statement to be effective if it finds that the registration statement together with all the other papers and documents attached thereto. - Section 14 Amendments to the Registration Statement The SEC is empowered to review each situation to determine whether investor are adequately protected by the amendment. not every claim of violation of the law should be a ground for rejection or revocation of a 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. To have faith is to be sure of the things we hope for. Any untrue statement of fact or omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading shall constitute fraud. The Commission may impose such terms and conditions as may be necessary or appropriate for the protection of the investors. The filing of amendments to a registration statement restarts the clock with respect to the 45 day period between filing and the time when the SEC. Also. is on its face complete and that the requirements have been complied with. 6. under Sec. Section 13 Rejection and Revocation of Registration of Securities. it should not be a basis for revocation. An insolvent company should not be denied the opportunity to seek capitol if it discloses fully its financial condition. 12 of the Code. to be certain of the things we cannot see – Hebrews 11 . Upon effectivity of the registration statement. The Code gives the SEC the authority to refuse to permit a registration statement to become effective or revoke the effectivity on any ground enumerated in the provision. The only violations the SEC should undertake to determine ae those committed in connection with the offering.
it shall conduct a hearing upon the issuance of an order of suspension.While the SEC is empowered to summarily suspend the registration of securities for the interest of the public. to be certain of the things we cannot see – Hebrews 11 . To have faith is to be sure of the things we hope for.
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