LAW ON OTHER BUSINESS

TRANSACTIONS
MODULE 1- SECURITIES AND
REGULATIONS CODE (SRC)
SECURITIES REGULATION CODE
(R.A. 8799)- BLUE SKY LAW
 SRC
 Securities Regulation, Act #2581
Blue chip is stock in a corporation with a national
reputation for quality, reliability, and the ability to
operate profitably in good times and bad.

 Securities act, BP 178, 1982

 SECURITIES REGULATION CODE (R.A. 8799)-
August 8, 2000
Financial Market

 Capital market
 equity capital market
 debt capital market

 Non capital market

Purposes of the SRC

 For the protection of the investing public

 Development of the capital markets
SEC, Regulatory Trust of the SRC

The body administering the SRC is the SEC.

1. Registration of securities
2. Reportorial requirements
3. Regulation of securities professionals
4. Regulation of the exchanges, PSEX, stock exchange and PDEX,
dealing exchange.
SECURITIES REGULATION CODE - STATE
POLICY (PURPOSE)
What is the nature of the Securities Regulation Code (SRC)?

 The SRC is enacted to protect the public from unscrupulous

promoters, who stake business or venture claims which have really no
basis, and sell shares or interests therein to investors.
 SECURITIES REGULATION CODE - STATE
POLICY (PURPOSE) before you can sell securities, they have to be registered first to be scrutinized

The law protects the public as follows:

1. The law requires full disclosure of information to the public regarding the
securities that are being offered and the issuers, including the filing of and
approval of the registration statement and the approval of the prospectus.
2. A continuing duty to regularly submit material information to the SEC.
3. Close monitoring of the securities and other circumstances that may affect the
same as well as the per sons involved including brokers, issuers, the exchange
itself, etc. in order to ensure compliance with pertinent laws and regulations.
4. Prohibiting and penalizing different fraudulent practices and transactions.
5. Providing the SEC with powers and functions.
DEFINITION OF TERMS

1. Securities are share, participation or interests in a corporation or

in a commercial enterprise or profit-making venture and evidenced by
a certificate, contract, instrument, whether written or electronic in
character . It includes:
a. shares of stocks, bonds, debentures, notes, evidences of
indebtedness, asset-backed securities;
b. investment contracts, certificates of interest or participation in
a profit sharing agreement, certificates of deposit for a future
subscription;
c. fractional undivided interests in oil, gas or other mineral rights;
d. derivatives like option and warrants;
DEFINITION OF TERMS

Cont’d.
It includes:

e. certificates of assignments, certificates of participation, trust

certificates, voting trust certificates or similar instruments;
f. proprietary or non-proprietary membership certificates in
corporations; and other instruments as may in the future be
determined by the Commission.
g. Other instruments as may in the future be determined by the
Commission.
DEFINITION OF TERMS
2. Issuer is the originator, maker, obligor, or creator of the
security.
3. Broker is a person engaged in the business of buying and
selling securities for the account of others.
4. Dealer means any person who buys and sells securities
for his/her own account in the ordinary course of business.
5. Clearing Agency is any person who acts as intermediary
in making deliveries upon payment to effect settlement in
securities transactions.
DEFINITION OF TERMS
6. Exchange is an organized marketplace or facility that brings
together buyers and sellers and executes trades of securities
and/or commodities.
7. Pre-Need Plans are contracts which provide for the
performance of future services or the payment of future
monetary consideration s at t he time of actual need, for
which planholders 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.
DEFINITION OF TERMS
8. Promoter is a person who, acting alone or with others,
takes initiative in founding and organizing the business or
enterprise of the issuer and receives consideration
therefore.
9. Prospectus is the document made by or on behalf of an
issuer, underwriter or dealer to sell or offer securities for
sale to the public through a registration statement filed
with the Commission.
10. Registration statement is the application for the
registration of securities required to be filed with the
Commission.
DEFINITION OF TERMS
11. Uncertificated security is a security evidenced by
electronic or similar records.
12. Underwriter is a person who guarantees on a firm
commitment and/or declared best effort basis the
distribution and sale of securities of any kind by another
company.
13. Investment contracts -a contract, transaction or scheme
(collectively “contract”) whereby a person invests his
money i n a common enterprise and is led to expect profits
primarily from the efforts of others.
DEFINITION OF TERMS
14. Derivatives - financial investment, including options and
warrants whose value depends on the interest in or
performance of an underlying security, but which does not
require any investment of principal in the underlying
security.
15. Options are contracts that give the buyer the right, but
not the obligation, to buy or sell an underlying security at a
predetermined price, called the exercise or strike price, on
or before a predetermined date, called the expiry date,
which can only be extended in accordance with Exchange
rules.
16. Call options are rights to buy.
17. Put options are rights to sell.
 DEFINITION OF TERMS
18. 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, which can only be extended in accordance with Exchange
rules. Warrants generally have a longer exercise period than options.
19. Commodity futures contract means a contract providing for the
making or taking delivery at a prescribed time in t he 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 t he indicia of commodities futures,
commodity options and commodity leverage, or margin contracts.
20. Commodity means any goods, articles, services, rights and
interests, including any group or index of any of the foregoing, in which
commodity interests contracts are presently or in the future dealt in..
DEFINITION OF TERMS
21. Put is a transferable option or offer to deliver a
given number of shares of stock at a stated price at
any given time during a stated period.
22. Call is transferable option to buy a specified
number of shares at a stated price.
23. Straddle is a combination put and call.
DEFINITION OF TERMS
24. Insider means
(a) the issuer;
(b) a director or officer (or person performing similar functions) of, or
a person controlling the issuer;
(c) a person whose relationship or former relationship to the issuer
gives or gave him access t o material information about the issuer or
the security that is not generally available to the public;
(d) a government employee, or director, or officer of an exchange,
clearing ag ency and/or self-regulatory organization who has access to
material information about an issuer or a security t hat is not generally
available to the public; or
(e) a person who learns such information by a communication from
any of the foregoing insiders.
DEFINITION OF TERMS
may alam ka na hindi alam ng public/prospective investors
25. Material non-public information
An information is “material non-public” 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 b e considered by a reasonable person important
under the circumstances in determining his course of action
whether to buy, sell or hold a security.
SECURITES TO BE REGISTERED
What are 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, instrument, whether written or electronic in
character.
 It includes:
1. Equity instruments – Shares of stock, certificates of interest or
participation in a profit sharing agreement, certificates of deposit for a
future subscription, proprietary or non‐proprietary membership
certificates in corporations
2. Investments instruments – Investment contracts, fractional undivided
interests in oil, gas, or other mineral rights
3. Debt instruments – bonds, debentures, notes, evidence of indebtedness,
asset‐backed securities
SECURITES TO BE REGISTERED
What are securities?
4. Derivatives – options( call and put) and warrants
5. Trust instruments – Certificates of assignments, certificates
of participation, trust certificates, voting trust certificates or
similar instruments;
6. Future – Other instruments as may in the future be
determined by the SEC.
Investment contracts
An investment contract is defined in the Amended Implementing Rules
and Regulations of R.A. No. 8799 as a “contract, transaction or
scheme (collectively ‘contract’) whereby a person invests his money
in a common enterprise and is led to expect profits primarily from the
efforts of others.”[

Howey Test, it requires a transaction, contract, or scheme whereby a

person
(1) makes an investment of money,
(2) in a common enterprise,
(3) with the expectation of profits,
(4) to be derived solely from the efforts of others.[22]
 SECURITES TO BE REGISTERED
What is registration with regard to securities?
 It is the disclosing to the SEC of all material and
relevant information about the issuer of the security.

Why is registration of securities mandated?

 Its purpose is to inform the public for them to be able
to make good business judgment. It is the filing of
registration statement.
 SECURITES TO BE REGISTERED
What is the rule with regard to registration of securities?
GR: No security can be sold or offered for sale or distribution within
the Philippines unless accompanied by a registration statement filed
with and approved by the SEC.
XPN:
1. Exempt securities
2. Securities sold in exempt transactions.

What are the effects of non‐registration?

The issuer would be penalized. Issuers of securities not registered
shall be subject criminal, civil and administrative charges.
Securities Market Professionals
Who are the securities market professionals as classified by the
SRC?
They are the broker, dealer, associated person of a broker or
dealer, and a salesman.
Broker- A person engaged in the business of buying and selling
securities for the account of others.
Dealer- Any person who buys and sells securities for his/her own
account in the ordinary course of business.
 Securities Market Professionals

Who are the securities market professionals as classified by the SRC?

They are the broker, dealer, associated person of a broker or dealer, and a
salesman.
Associated person of a broker or dealer- He is an employee of a broker or
dealer who directly exercises control of supervisory authority but does not
include a salesman, or an agent, or a person, whose functions are solely
clerical or ministerial.
Salesman - He is a natural person, employed as such, or as an agent, by a
dealer, issuer or broker to buy and sell securities; but for the purpose of
registration, shall not include any employee of an issuer whose compensation is
not determined directly or indirectly on sales of securities of the issuer.
Securities Market Professionals
Are security market professionals required to be
registered?

 Yes. No broker shall sell any securities unless he is

registered with the SEC (Sec. 19, Revised Securities
Act) (Nicolas vs. CA, et al., G.R. No. 12285, Mar. 27,
1998)
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES
1. Transactions intended to create active trading:
a. Wash Sale – engaging in transaction in which there is no genuine change in
the actual ownership of a security
b. Matched Sale – There is a change of ownership in the securities by entering
an order for the purchase/sale of security with the knowledge that a
simultaneous order 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.
c. Similar transactions where there is no change of beneficial ownership.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
Q: Suppose A is the owner of several inactive securities. To create an
appearance of active trading for such securities, A connives with B by which A
will offer for sale some of his securities and B will buy them at a certain fixed
price, with the understanding that although there would be an apparent sale,
A will retain the beneficial ownership thereof.
Is the arrangement lawful?
If the sale materializes, what is it called?

 No. The arrangement is not lawful. It is an artificial manipulation of the price

of securities. This is prohibited by the Securities Regulation Code.
 If the sale materializes, it is called a wash sale or simulated sale. (2001 Bar
Question)
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES

2. Engaging in transactions which induce price to

increase or decrease:
a. Marking the close – buying and selling securities at
the close of the market to alter the closing price of the
security.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES

b. Painting the tape – engaging in a series of

transactions in securities that are reported publicly to
give the impression of activity or price movement in a
security.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES

2. Engaging in transactions which induce price to increase or

decrease:
c. Squeezing the float – refers to taking advantage of a shortage
of securities in the market by controlling the demand side and
exploiting market congestion during such shortages in a way to
create artificial prices.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES

2. Engaging in transactions which induce price to

increase or decrease:
d. Hype and dump – engaging in buying activity at
increasingly higher prices and then selling securities
in the market at the higher prices.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
MANIPULATION OF SECURITY PRICES

2. Engaging in transactions which induce price to increase or

decrease:
e. Boiler room operations – the use of high pressure sale tactics to
promote purchase and sale of securities
f. Daisy chain – it refers to a series of purchase and sales of the
same issue at successively higher prices by the same group of people
with the purpose of manipulating prices are drawing unsuspecting
investors into the market leaving them defrauded of their money
and securities.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING

What is Short Selling?

 It is the selling of shares which the seller does not
actually own or possess and therefore he cannot, himself,
supply the delivery.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING

FRAUDULENT TRANSACTIONS
What are considered fraudulent transactions?

 Obtaining money or property by means of any untrue statement of a material

fact
 Engaging in any act, transaction, practice or course of business, which
operates as a fraud or deceit upon any person.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
INSIDER TRADING
What is insider trading?
 A purchase or sale made by an insider or his relative within the second
degree shall be presumed to be effected while in possession of material
non‐public information if transacted after such information came into
existence but prior to the public dissemination of such information, and
lapse of reasonable time for the market to absorb such information.
Who is an insider?
 A person in possession of corporate information not generally available
to the public.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
INSIDER TRADING
What is the prohibition imposed on insiders regarding material non-public
information?

 Sec. 27.3 of the Securities Regulation Code states that: “It shall be unlawful
for any insider to communicate material non-public 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.”
Rule 27 - Insider Trading
27.1. 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.
Rule 27 - Insider Trading
27.1. cont’d.
A purchase or sale of a security of the issuer made by
 an insider defined in Section 3.8 of the Code, 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.
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
Who may be an insider? I DO-R-G-T TIPPEEE
1. The issuer
2. A director or officers of or a person controlling the issuer
3. A person whose relationship or former relationship to the issuer gives
him access to material information about the issuer or the security that
is not generally available to the public
4. A government employee, or director , or officer of an exchange,
clearing agency and/or self‐regulatory organization who has access to
material information about an issuer or a security that is not generally
available to the public; or
5. Constructive Insider – A person who learns such information by a
communication from any of the foregoing insiders. (Sec. 3.8)
 Illustrative example:
 Grand Gas Corporation, a publicly listed company, discover
after extensive drilling a rich deposit of natural gas along
the coast of Antique. For five (5) months, the company did
not disclose the discovery so that it could quietly and
cheaply acquire neighboring land and secure mining rights to
them. Between the discovery and the disclosure of the
information to the Securities and Exchange Commission, all
the directors and key officers of the company bought shares
in the company at very low prices. After the disclosure the
share prices went up. The directors and officer sold their
shares at huge profits.
Illustrative example:
What provision of the Securities Regulation Code (SRC) did
they violate, if any? Explain. (4%) (Bar exams, 2008)
Assuming that the employees of the establishment handling
the printing work of Grand Gas Corporation saw the
exploration reports which were mistakenly sent to their
establishment together with other materials to be printed.
They too bought shares in the company at low prices and later
sold them at huge profits. Will they be liable for violation of
the SRC? Why? (3%)
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
What are the other prohibited acts in an non‐public information relating to such
insider trading? tender offer to transact securities
covered by the tender offer.
It shall be unlawful:
3. For the tender offeror, or those acting in
1. For an insider to communicate material
his behalf, the issuer of securities
non‐public information about the issuer
covered by the tender offer, and any
or the security to any person who
insider, to communicate material
thereby becomes an insider, where
non‐public information relating to the
original insider communicating knows or
tender offer which would likely result in
has reason to believe that such person
violation of prohibition of the insider
will likely buy or sell on the basis of such
from trading.
information
2. For any person, other than the tender
offeror, who is in possession of material
 PROHIBITIONS ON FRAUD,
MANIPULATIONS AND INSIDER TRADING
When is information “material non‐public”?
If:
1. Information about the issuer or the security which 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

2. 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 (Sec. 27.2)
PROTECTION OF INVESTORS

What are the provisions in the SRC intended to protect the

investors?

1. Tender Offer Rule

2. Rules on proxy solicitation
3. Disclosure rule
PROTECTION OF INVESTORS
TENDER OFFER RULE protection of minority

What is a tender offer?

Publicly declared intention to buy securities of public companies given
to all stockholders by:
1. Filing with the SEC a declaration to that effect, and paying the filing
fee.
2. Furnishing the issuer a statement containing the information
required of the issuers as SEC may prescribe, including subsequent
or additional materials.
3. Publishing all requests or invitations for tender, or materials making
a tender offer or requesting or inviting letters of such security.

A publicly announced intention by a person acting alone or in concert

with others to acquire equity securities of a public company.
PROTECTION OF INVESTORS
TENDER OFFER RULE

Note: It is also defined as an offer by the acquiring person to

stockholders of a public company for them to tender their
shares on the terms specified in the offer. acquire equity
securities of a public company.
PROTECTION OF INVESTORS
TENDER OFFER RULE
What is the purpose of tender offer?
 Tender offer is in place to protect the interest of minority
stockholders of a target company against any scheme that
dilutes the share value of the investments. It affords such
minority shareholders the opportunity to withdraw or exit
from the company under reasonable terms, a chance to
sell their shares at the same price as those of the majority
stockholders.
PROTECTION OF INVESTORS
MANDATORY TENDER OFFER
WHEN Tender Offer is Mandatory:
the Implementing rules and regulations of the SRC provides:
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 Commission..

Note: Tender offer applies to both direct and indirect acquisition.

PROTECTION OF INVESTORS
MANDATORY TENDER OFFER
WHEN Tender Offer is Mandatory:
the Implementing rules and regulations of the SRC provides:
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 are 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.
Note: Tender offer applies to both direct and indirect acquisition.
PROTECTION OF INVESTORS
MANDATORY TENDER OFFER
WHEN Tender Offer is Mandatory:
the Implementing rules and regulations of the SRC provides:
3. The person intends to acquire equity shares of a public company that
would result in ownership of more than 50% of the total outstanding
equity securities of a public company.

Note: Tender offer applies to both direct and indirect acquisition.

PROTECTION OF INVESTORS
MANDATORY TENDER OFFER
WHEN Tender Offer is Mandatory:
 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. (19.2.5.
revised IRR)
PROTECTION OF INVESTORS
MANDATORY TENDER OFFER

The acquirer shall be required to make a tender offer for all the
outstanding equity securities to all remaining SH 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 any and
all securities thus tendered.
Exemptions from the Mandatory Tender
Offer Requirement
 Unless the acquisition of equity securities is intended to circumvent
or defeat the objectives of the tender offer rules, the mandatory
tender offer requirement shall not apply to the following:
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 ofthe board
2. The purchase of newly issued shares from unissued capital stock
3. In connection with foreclosure proceeding involving a duly
constituted pledge or security arrangement where the acquisition is
made by the debtor or creditor
Exemptions from the Mandatory Tender
Offer Requirement
 Unless the acquisition of equity securities is intended to circumvent
or defeat the objectives of the tender offer rules, the mandatory
tender offer requirement shall not apply to the following:

4. Purchases in connection with 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.
UNLAWFUL AND PROHIBITED ACTS
What are the unlawful and prohibited acts relating to tender offers?

It shall be unlawful for any person to:

1. Make any untrue statement of a material fact or omit to state any
material fact necessary in order to make statements made not
misleading, and
2. Engage in any fraudulent, deceptive, or manipulative acts or
practices in connection with any tender offer or request or
invitation for tenders, or any solicitation of security holders in
opposition to or in favor of any such offer, request, or invitation.
PUBLIC COMPANY
What may be considered as a public company?

1. Those listed on an exchange; or

2. Those with assets in excess of 50M pesos
and having 200 shareholders owning at
least 100 shares each.
(3.1.16, Revised IRR, SRC)
Other Rules on MTO
1. Solicitation, recommendation, acceptance and rejection
related to the securities tendered shall be governed by the
SEC and PSE rules.
2. Securities tendered may be withdrawn by the offeror within
60 days from date of original offer.
3. Securities shall be distributed pro rata in case there are more
persons bound or willing to take up the offered securities.
4. In case there is an increase in the consideration for securities
tendered before expiration of the offer, the other holders of
the securities who were already paid up shall also be paid with
the additional consideration thereof.
RULES ON PROXY SOLICITATION

1. Proxies must be issued and proxy solicitation must be

made in accordance with rules and regulations to be
issued by the Commission;
2. Proxies must be in writing, signed by the stockholder
or his duly authorized representative and filed before
the scheduled meeting with the corporate secretary.
3. Unless otherwise provided in the proxy, it shall be valid
only for the meeting for which it is intended. No proxy
shall be valid and effective for a period longer than five
(5) years at one time.
 RULES ON PROXY SOLICITATION

4. No broker or dealer shall give any proxy, consent or

authorization, in respect of any security carried for the account
of a customer, to a person other than the customer, without the
express written authorization of such customer.
5. A broker or dealer who holds or acquires the proxy for at least
ten per centum (10%) or such percentage as the Commission
may prescribe of the outstanding share of the issuer, shall submit
a report identifying the beneficial owner within ten (10) days
after such acquisition, for its own account or customer, to the
issuer of the security, to the Exchange where the security is
traded and to the Commission. (Sec. 20)
RULES ON PROXY SOLICITATION
What are the requisites for valid proxy solicitation?

1. It must be in writing
2. It must be signed by the stockholder or his duly authorized representative
3. It must be filed before the scheduled meeting with the corporate secretary
(Sec. 20)

Note: The proxy shall be valid only for the meeting for which it is intended.
No proxy shall be valid and effective for a period longer than 5 years at one
time.
RULES ON PROXY SOLICITATION
Q: What are the rules on proxy solicitation with regard to broker or
dealer?
1. No broker or dealer shall give any proxy, consent or authorization, in
respect of any security carried for the account of a customer, to a person
other than the customer, without the express written authorization of
such customer.
2. A broker or dealer who holds or acquires the proxy for at 10% or such
percentage as the Commission may prescribe of the outstanding share of
the issuer, shall submit a report identifying the beneficial owner within
10 days after such acquisition, for its own account or customer, to the
issuer of the security, to the Exchange where the security is traded and
to the Commission. (Sec. 20)
DISCLOSURE RULE/ (Reportorial
Requirements)
1. Issuers:
a. Within 135 days, after the end of the issuer’s fiscal year, an annual
report which shall include, a balance sheet, profit and loss statement
and statement of cash flows, for such last fiscal year, certified by an
independent certified public accountant, and a management discussion
and analysis of results of operations;
b. Other periodical reports for interim fiscal periods and current reports
on significant developments of the issuer (Sec. 17)
 DISCLOSURE RULE/ (Reportorial
Requirements)
Persons Acquiring Securities:
If the issuer is one that has to make a report, any person who acquires directly or indirectly
the beneficial ownership of more than 5% of such class, or in excess of such lesser per centum
as the Commission may prescribe, shall, within 10 days after such acquisition or such
reasonable time as fixed by the Commission, submit to the issuer of the security, to the
Exchange where the security is traded, and to the Commission a sworn statement containing:
a. His personal circumstances
b. The nature of such beneficial ownership
c. If the purpose was to acquire control of the business, any plans the recipient may have
affecting a major change in the business
e. The number of shares beneficially owned, and the number of shares for which there is a
right to acquire
f. granted to such person or his associates
g. Information as to any agreement with a third person regarding the securities (Sec. 18)
END